TWIN Twin Disc Inc

Wisconsin	001-7635	39-0667110
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock (No Par Value)	TWIN	The NASDAQ Stock Market LLC

(d)

Exhibits.

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EXHIBIT NUMBER	DESCRIPTION
1.1*	Credit Agreement By and Among Twin Disc, Incorporated, Twin Disc Canada Holdings Ltd., Kobelt Manufacturing Co. Ltd., and Bank of Montreal, dated February 14, 2025.
1.2	Fifth Amended and Restated Revolving Note By and Among Twin Disc, Incorporated, Kobelt Manufacturing Co., Ltd. and Bank of Montreal
1.3	Assignment and Assumption of Revolving Loan Note Between BMO Bank, N.A. and Bank of Montreal
1.4	Second Amended and Restated Term Note By and Among Twin Disc, Incorporated, Kobelt Manufacturing Co., Ltd. and Bank of Montreal
1.5	Assignment and Assumption of Term Loan Note Between BMO Bank, N.A. and Bank of Montreal
1.6	Assignment of and Amendment to Security Agreement By and Among BMO Bank, N.A., Bank of Montreal, and Twin Disc, Incorporated
1.7	Assignment of and Amendment to IP Security Agreement By and Among BMO Bank, N.A., Bank of Montreal, Twin Disc, Incorporated, and Kobelt Manufacturing Co. Ltd.
1.8	Assignment of and Amendment to Pledge Agreement By and Among BMO Bank, N.A., Bank of Montreal, and Twin Disc, Incorporated
1.9*	Assignment of and Amendment to Perfection Certificate By and Among BMO Bank, N.A., Bank of Montreal, Twin Disc, Incorporated, and Kobelt Manufacturing Co. Ltd.
1.10	Assignment of and Amendment to Assignment as to Liens and Encumbrances By and Among BMO Bank, N.A., Bank of Montreal, and Twin Disc, Incorporated
1.11	Assignment of and Amendment to Negative Pledge Agreement By and Among BMO Bank, N.A., Bank of Montreal, and Twin Disc, Incorporated
1.12	Collateral Assignment of Rights Under Purchase Agreement By and Among Twin Disc, Incorporated, Twin Disc Canada Holdings Ltd., and Bank of Montreal
99.1	Press Release, Dated February 18, 2025
99.2*	Share Purchase Agreement Among Kobelt Manufacturing Co. Ltd., Twin Disc Canada Holdings Ltd., Twin Disc, Incorporated, the Shareholders of Kobelt Manufacturing Co. Ltd., and Mark Chesley, dated February 14, 2025
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

Date: February 18, 2025	Twin Disc, Incorporated
	/s/ Jeffrey S. Knutson
	Jeffrey S. Knutson
	Vice President-Finance, Chief Financial Officer, Treasurer & Secretary

Exhibit 1.1

 

Execution Version

 

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Credit Agreement

 

 

 

dated as of February 14, 2025,

 

 

 

among

 

 

 

Twin Disc, Incorporated,

 

(from the Closing Date until the consummation of Kobelt Amalgamation)

Twin Disc Canada Holdings Ltd.,

 

(after the consummation of the Kobelt Acquisition and Kobelt Amalgamation)

Kobelt Manufacturing Co. Ltd.,

 

 

 

and

 

 

 

Bank of Montreal

 

 

 

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Table of Contents

 

SECTION 1.	DEFINITIONS; INTERPRETATION.	1
Section 1.1	Definitions.	1
Section 1.2	Interpretation.	34
Section 1.3	Change in Accounting Principles.	34
Section 1.4	Interest Rates (US).	34
Section 1.5	Interest Rates (Canadian).	35
SECTION 2.	THE CREDIT FACILITIES.	35
Section 2.1	Term Loan Commitment.	35
Section 2.2	Revolving Credit Commitment; Foreign Currencies Sublimit.	36
Section 2.3	Letters of Credit.	36
Section 2.4	Applicable Interest Rates.	38
Section 2.5	Minimum Borrowing Amounts; Maximum SOFR Loans.	40
Section 2.6	Manner of Borrowing Loans and Designating Applicable Interest Rates.	40
Section 2.7	Maturity of Loans.	42
Section 2.8	Prepayments.	42
Section 2.9	Default Rate.	45
Section 2.10	Evidence of Indebtedness.	45
Section 2.11	Fees.	46
Section 2.12	Place and Application of Payments.	46
Section 2.13	Commitment Terminations.	47
Section 2.14	Sweep to Loan Arrangement.	47
Section 2.15	Effect of Benchmark Transition Event (SOFR).	48
Section 2.16	Effect of Benchmark Transition Event (CORRA).	49
Section 2.17	Nature and Extent of Each Borrower’s Liability.	51
SECTION 3.	CHANGE IN CIRCUMSTANCES.	52
Section 3.1	Withholding Taxes.	52
Section 3.2	Documentary Taxes.	53
Section 3.3	Funding Indemnity.	53
Section 3.4	Change of Law; Illegality.	53
Section 3.5	Inability to Determine Rates.	54
Section 3.6	Increased Cost and Reduced Return.	55
Section 3.7	Lending Offices.	57
Section 3.8	Discretion of Bank as to Manner of Funding.	57
SECTION 4.	CONDITIONS PRECEDENT.	57
Section 4.1	Initial Credit Event.	57

 

 

Section 4.2	All Credit Events.	59
SECTION 5.	REPRESENTATIONS AND WARRANTIES.	60
Section 5.1	Organization and Qualification.	60
Section 5.2	Subsidiaries.	61
Section 5.3	Authority and Validity of Obligations.	61
Section 5.4	Margin Stock.	62
Section 5.5	Financial Reports.	62
Section 5.6	No Material Adverse Change.	62
Section 5.7	Full Disclosure.	62
Section 5.8	Trademarks, Franchises, and Licenses.	63
Section 5.9	Governmental Authority and Licensing.	63
Section 5.10	Good Title.	63
Section 5.11	Litigation and Other Controversies.	63
Section 5.12	Taxes.	63
Section 5.13	Approvals.	63
Section 5.14	Affiliate Transactions.	64
Section 5.15	Investment Company.	64
Section 5.16	ERISA and Canadian Pension Plan Matters.	64
Section 5.17	Compliance with Laws.	64
Section 5.18	Sanctions; Anti-Money Laundering Laws and Anti-Corruption Laws.	65
Section 5.19	Other Agreements.	65
Section 5.20	Solvency.	66
Section 5.21	No Default.	66
Section 5.22	No Broker Fees.	66
SECTION 6.	AFFIRMATIVE COVENANTS.	66
Section 6.1	Maintenance of Business.	66
Section 6.2	Maintenance of Properties.	66
Section 6.3	Taxes and Assessments.	66
Section 6.4	Insurance.	66
Section 6.5	Financial Reports.	67
Section 6.6	Inspection.	69
Section 6.7	ERISA.	69
Section 6.8	Compliance with Laws.	70
Section 6.9	Compliance with Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions.	71
Section 6.10	Formation of Subsidiaries.	71
Section 6.11	Use of Proceeds; Margin Stock; Bank Accounts.	72
Section 6.12	Guaranties and Collateral.	72
Section 6.13	Maintenance of Accounts.	73
Section 6.14	Post-Closing Delivery (Stock Certificates).	73
Section 6.15	Post-Kobelt Amalgamation Deliveries	73

 

 

SECTION 7.	NEGATIVE COVENANTS.	74
Section 7.1	Borrowings and Guaranties.	74
Section 7.2	Liens.	76
Section 7.3	Investments, Acquisitions, Loans and Advances.	78
Section 7.4	Mergers, Amalgamations, Consolidations and Sales.	79
Section 7.5	Maintenance of Subsidiaries.	80
Section 7.6	Dividends and Certain Other Restricted Payments.	81
Section 7.7	Burdensome Contracts With Affiliates.	81
Section 7.8	No Changes in Fiscal Year.	81
Section 7.9	Change in the Nature of Business.	81
Section 7.10	No Restrictions.	81
Section 7.11	Subordinated Debt.	82
Section 7.12	Financial Covenants.	82
Section 7.13	Anti-Corruption Laws	83
Section 7.14	Canadian Pension Plans.	83
SECTION 8.	EVENTS OF DEFAULT AND REMEDIES.	83
Section 8.1	Events of Default.	83
Section 8.2	Non Bankruptcy Defaults.	85
Section 8.3	Bankruptcy Defaults.	85
Section 8.4	Collateral for Undrawn Letters of Credit.	86
SECTION 9.	MISCELLANEOUS.	86
Section 9.1	No Waiver, Cumulative Remedies.	86
Section 9.2	Non-Business Days.	86
Section 9.3	Survival of Representations.	87
Section 9.4	Survival of Indemnity and Certain Other Provisions.	87
Section 9.5	Notices.	87
Section 9.6	Counterparts; Digital Copies.	87
Section 9.7	Successors and Assigns.	88
Section 9.8	Amendments, etc.	88
Section 9.9	Headings.	88
Section 9.10	Costs and Expenses; Indemnification.	89
Section 9.11	Set off.	90
Section 9.12	Entire Agreement.	90
Section 9.13	Governing Law.	90
Section 9.14	Severability of Provisions.	90
Section 9.15	Excess Interest.	90
Section 9.16	Construction.	91
Section 9.17	Submission to Jurisdiction; Waiver of Venue; Service of Process.	91
Section 9.18	Waiver of Jury Trial.	92
Section 9.19	USA Patriot Act and Canadian Anti-Money Laundering.	93
Section 9.20	Time is of the Essence.	93
Section 9.21	Confidentiality.	93
Section 9.22	Customary Advertising Material.	94
Section 9.23	Judgment Currency.	94

 

  

CREDIT AGREEMENT

 

This Credit Agreement is entered into as of February 14, 2025, by and among Twin Disc, Incorporated, a Wisconsin corporation (“TDI”), from the Closing Date until the consummation of the Kobelt Amalgamation, Twin Disc Canada Holdings Ltd., a company incorporated under the laws of British Columbia (“Kobelt Purchaser”) and immediately after giving effect to the Kobelt Acquisition and the Kobelt Amalgamation (as such terms are defined below), Kobelt Manufacturing Co. Ltd., a company amalgamated under the laws of British Columbia as a result of the Kobelt Amalgamation (“Canadian Borrower” and, together with TDI and Kobelt Purchaser, each individually and collectively, “Borrower”), jointly and severally, and Bank of Montreal (“Bank”). All capitalized terms used herein without definition shall have the meanings ascribed thereto in Section 1.1.

 

PRELIMINARY STATEMENTS

 

A.         TDI and BMO Bank N.A. (formerly known as BMO Harris Bank N.A.), an Affiliate of Bank, previously entered into that certain Credit Agreement, dated as of June 29, 2018 (the “2018 Credit Agreement”), whereby BMO Bank N.A. extended credit facilities to Borrower.

 

B.         TDI has requested, and Bank has agreed, to refinance the credit facilities extended by BMO Bank N.A. under the 2018 Credit Agreement and finance additional credit facilities, all on the terms and conditions of this Agreement.

 

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

 

SECTION 1.    DEFINITIONS; INTERPRETATION.

 

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

 

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

 

“Acquisition” and “Acquisitions” means, each and collectively, the Katsa Acquisition and the Kobelt Acquisition.

 

“Adjusted Term CORRA” means, for purposes of any calculation, the rate per annum equal to (a) Term CORRA for such calculation plus (b) the Term CORRA Adjustment; provided that if Adjusted Term CORRA as so determined shall ever be less than the Floor, then Adjusted Term CORRA shall be deemed to be the Floor.

 

“Adjusted Term SOFR” mean with respect to any tenor, the per annum rate equal to the sum of (i) Term SOFR plus (ii) of 0.11448% (11.448 basis points) for one-month, 0.26161% (26.161 basis points) for three-month, and 0.42826% (42.826 basis points) for six-months.

 

“Affiliate” means any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, another Person. A Person shall be deemed to control another Person for purposes of this definition if such Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of the other Person, whether through the ownership of voting securities, common directors, trustees or officers, by contract or otherwise; provided that, in any event for purposes of this definition, any Person that owns, directly or indirectly, 5% or more of the securities having the ordinary voting power for the election of directors or governing body of a corporation or 5% or more of the partnership or other ownership interest of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person.

 

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

 

“Agreement as to Liens and Encumbrances” means the Agreement as to Liens and Encumbrances referenced in Exhibit B of the Negative Pledge Agreement, dated as of April 22, 2016, between TDI and Bank, as assigned to BMO Bank N.A. pursuant to, and amended by, the Assignment of and Amendment to Agreement as to Liens and Encumbrances, dated as June 29, 2018, among TDI, Bank and BMO Bank N.A., and as assigned to Bank pursuant to, and amended by, the Assignment of and Amendment to Agreement as to Liens and Encumbrances, dated as of the date hereof, among TDI, Bank and BMO Bank N.A. and as the same may hereafter be amended, modified, supplemented or restated from time to time.

 

“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to a Loan Party or any of their Subsidiaries from time to time concerning or relating to bribery or corruption including the Foreign Corrupt Practices Act of 1977, as amended, and the Corruption of Foreign Public Officials Act (Canada), as amended.

 

“Anti-Money Laundering Laws” means any and all laws, statutes, regulations or obligatory government orders, decrees, ordinances or rules applicable to a Loan Party or its Subsidiaries related to terrorism financing or money laundering, including any applicable provision of the Patriot Act, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), Part II.1 of the Criminal Code (Canada), regulations promogulated pursuant to the Special Economic Measures Act (Canada), and the United Nations Act (Canada), and any similar law enacted in any of the United States, Canada, or any other jurisdiction applicable to the Loan Parties and their Affiliates after the date of this Agreement

 

“Applicable Margin” means, with respect to Loans, Reimbursement Obligations, and the commitment/facility fees and letter of credit fees payable under Section 2.11, until the first Pricing Date, the rates per annum shown opposite Level III below, and thereafter from one Pricing Date to the next the Applicable Margin means the rates per annum determined in accordance with the following schedule:

 

 

Level	Total Funded Debt/EBITDA Ratio for Such Pricing Date	Applicable Margin for (i) Revolving Loans and (ii) Letter of Credit Fee shall be:	Applicable Margin for Term Loans shall be:	Applicable Margin for Commitment/Facility Fee shall be:
I	Greater than or equal to 3.25 to 1.00	3.50%	3.625%	0.30%
II	Less than 3.25 to 1.00, but greater than or equal to 2.50 to 1.00	3.00%	3.125%	0.25%
III	Less than 2.50 to 1.00, but greater than or equal to 1.50 to 1.00	2.50%	2.625%	0.20%
IV	Less than 1.50 to 1.00	2.00%	2.125%	0.15%

 

For purposes hereof, the term “Pricing Date” means, for any fiscal quarter of Borrower ending on or after March 28, 2025, the date on which Bank is in receipt of Borrower’s most recent financial statements (and, in the case of the year-end financial statements, audit report) for the fiscal quarter then ended, pursuant to Section 6.5. The Applicable Margin shall be established based on the Total Funded Debt/EBITDA Ratio for the most recently completed fiscal quarter and the Applicable Margin established on a Pricing Date shall remain in effect until the next Pricing Date. If Borrower has not delivered its financial statements by the date such financial statements (and, in the case of the year-end financial statements, audit report) are required to be delivered under Section 6.5, until such financial statements and audit report are delivered, the Applicable Margin shall be the highest Applicable Margin (i.e., Level I shall apply). If Borrower subsequently delivers such financial statements before the next Pricing Date, the Applicable Margin established by such late delivered financial statements shall take effect from the date of delivery until the next Pricing Date. In all other circumstances, the Applicable Margin established by such financial statements shall be in effect from the Pricing Date that occurs immediately after the end of the fiscal quarter covered by such financial statements until the next Pricing Date. Each determination of the Applicable Margin made by Bank in accordance with the foregoing shall be conclusive and binding on Borrower absent manifest error. Notwithstanding the foregoing, Bank may, in its discretion, increase the Applicable Margin on any type of Loan by two percent (2%) per annum during the existence of an Event of Default.

 

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

 

“Assumed Indebtedness” means Indebtedness of a Person which is (a) in existence at the time such Person becomes a Subsidiary of Borrower or (b) is assumed in connection with an investment in or acquisition of such Person, and in each case, has not been incurred or created by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Subsidiary of Borrower.

 

“Authorized Representative” means those persons shown on the list of officers provided by Borrower pursuant to Section 4.1 or on any update of any such list provided by Borrower to Bank, or any further or different officers of Borrower so named by any Authorized Representative of Borrower in a written notice to Bank.

 

 

“Availability” means the lesser of: (a) the Revolving Credit Commitment minus the aggregate outstanding principal amount of Revolving Loans and L/C Obligations; and (b) the Borrowing Base minus the aggregate outstanding principal amount of Revolving Loans and L/C Obligations.

 

“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement or (y) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 2.15(d).

 

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

 

“Base Rate” means, for any day, the rate per annum equal to the greatest of: (a) the rate of interest announced or otherwise established by Bank from time to time as its prime commercial rate as in effect on such day, with any change in the Base Rate resulting from a change in said prime commercial rate to be effective as of the date of the relevant change in said prime commercial rate (it being acknowledged and agreed that such rate may not be Bank’s best or lowest rate), and (b) the sum of (i) the rate determined by Bank to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the rates per annum quoted to Bank at approximately 10:00 a.m. (or as soon thereafter as is practicable) on such day (or, if such day is not a Business Day, on the immediately preceding Business Day) by two or more Federal funds brokers selected by Bank for sale to Bank at face value of Federal funds in the secondary market in an amount equal or comparable to the principal amount for which such rate is being determined, plus (ii) 1/2 of 1%, and (c) the sum of (i) Adjusted Term SOFR for a one-month tenor in effect on such day plus (ii) 1%. Any change in the Base Rate due to a change in the prime rate, the quoted federal funds rates or Term SOFR, as applicable, shall be effective from and including the effective date of the change in such rate. If the Base Rate is being used as an alternative rate of interest pursuant to Sections 3.5 or 2.15, then the Base Rate shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above, provided that if Base Rate as determined above shall ever be less than the Floor, then Base Rate shall be deemed to be the Floor. The Base Rate shall be calculated on an actual day/365/366-day basis and payable quarterly in arrears.

 

“Benchmark” means, initially, the Term SOFR Reference Rate; provided that if a Benchmark Transition Event has occurred with respect to the Term SOFR Reference Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.15.

 

 

“Benchmark Replacement” means, either of the following to the extent selected by Bank in its unilateral discretion,

 

(a)         the sum of Daily Simple SOFR plus 0.11448% (11.448 basis points); or

 

(b)         the sum of: (i) the alternate benchmark rate that has been selected by Bank and Borrower giving due consideration to (A) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (B) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities and (ii) the related Benchmark Replacement Adjustment.

 

If the Benchmark Replacement as determined pursuant to clause (a) or (b) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.

 

“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, 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 Bank and Borrower giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for Dollar-denominated syndicated credit facilities.

 

“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:

 

(a)         in the case of clause (a) or (b) 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 administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); or

 

(b)         in the case of clause (c) of the definition of “Benchmark Transition Event”, the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative; provided, that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.

 

For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).

 

 

“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:

 

(a)         a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);

 

(b)         a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the FRB, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or

 

(c)         a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative.

 

For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).

 

“Benchmark Unavailability Period” means the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.15 and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.15.

 

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

 

 

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

 

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

 

(a)    85% of the then outstanding unpaid amount of Eligible Receivables; plus

 

(b)    the lesser of:

 

(i)    (A) $40,000,000 for each fiscal month ending on or prior to August 31, 2025, (B) $35,000,000 for each fiscal month ending on or prior to August 31, 2026, and (C) $32,500,000 for each fiscal month ending thereafter, and

 

(ii)    (A) 60% of the value (computed at the lower of market or cost using the last-in/first-out method of inventory valuation applied in accordance with GAAP) of Eligible Inventory for each fiscal month ending on or prior to August 31, 2025, (B) 55% of the value (computed at the lower of market or cost using the last-in/first-out method of inventory valuation applied in accordance with GAAP) of Eligible Inventory for each fiscal month ending on or prior to February 28, 2026, and (C) 50% of the value (computed at the lower of market or cost using the last-in/first-out method of inventory valuation applied in accordance with GAAP) of Eligible Inventory for each fiscal month ending thereafter;

 

(c)    minus Priority Payables at that time;

 

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

 

“Borrowing Base Certificate” means the certificate in the form of Exhibit B hereto, or in such other form acceptable to Bank, to be delivered to Bank pursuant to Sections 4.2 and 6.5.

 

“Business Day” means any day (other than a Saturday or Sunday) on which banks are not authorized or required to close in Milwaukee, Wisconsin or Toronto, Ontario, as applicable.

 

"Canadian Benchmark" means, initially, the Term CORRA Reference Rate; provided that if a Canadian Benchmark Transition Event has occurred with respect to the Term CORRA Reference Rate or the then-current Canadian Benchmark, then "Canadian Benchmark" means the applicable Canadian Benchmark Replacement to the extent that such Canadian Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.1.6(a).

 

 

“Canadian Benchmark Available Tenor” means, as of any date of determination and with respect to the then-current Canadian Benchmark, as applicable, (x) if such Canadian Benchmark is a term rate, any tenor for such Canadian Benchmark (or component thereof) that is or may be used for determining the length of an Interest Period or (y) otherwise, any payment period for interest calculated with reference to such Canadian Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Canadian Benchmark pursuant to this Agreement, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Canadian Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 2.1.6(d).

 

“Canadian Benchmark Relevant Governmental Body” means the Bank of Canada, or a committee officially endorsed or convened by the Bank of Canada, or any successor thereto.

 

“Canadian Benchmark Replacement” means, with respect to any Canadian Benchmark Transition Event,

 

(a)    where a Canadian Benchmark Transition Event has occurred with respect to Term CORRA Reference Rate, Daily Compounded CORRA; and

 

(b)    where a Canadian Benchmark Transition Event has occurred with respect to a Canadian Benchmark other than the Term CORRA Reference Rate, the sum of: (i) the alternate benchmark rate that has been selected by Bank giving due consideration to (A) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Canadian Benchmark Relevant Governmental Body or (B) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Canadian Benchmark for Canadian Dollar-denominated bilateral credit facilities and (ii) the related Canadian Benchmark Replacement Adjustment.

 

If the Canadian Benchmark Replacement as determined pursuant to clause (a) or (b) above would be less than the Floor, the Canadian Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.

 

“Canadian Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Canadian Benchmark with a Canadian Benchmark Unadjusted Benchmark Replacement, 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 Bank giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Canadian Benchmark with the applicable Canadian Benchmark Unadjusted Benchmark Replacement by the Canadian Benchmark Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Canadian Benchmark with the applicable Canadian Benchmark Unadjusted Benchmark Replacement for Canadian Dollar-denominated bilateral credit facilities at such time.

 

 

“Canadian Benchmark Replacement Conforming Changes” means, with respect to the use or administration of a Canadian Benchmark or the use, administration, adoption or implementation of any Canadian Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Prime Rate,” the definition of “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 requests for Loans or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Sections 3.3 and other technical, administrative or operational matters) that Bank decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by Bank in a manner substantially consistent with market practice (or, if Bank decides that adoption of any portion of such market practice is not administratively feasible or if Bank determines that no market practice for the administration of any such rate exists, in such other manner of administration as Bank decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).

 

“Canadian Benchmark Replacement Date” means a date and time determined by Bank, which date shall be no later than the earliest to occur of the following events with respect to the then-current Canadian Benchmark:

 

(a)    in the case of clause (a) or (b) of the definition of “Canadian 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 administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Canadian Benchmark Available Tenors of such Canadian Benchmark (or such component thereof); or

 

(b)    in the case of clause (c) of the definition of “Canadian Benchmark Transition Event,” the first date on which such Canadian Benchmark (or the published component used in the calculation thereof) has been determined and announced by the regulatory supervisor for the administrator of such Canadian Benchmark (or such component thereof) to be non-representative; provided that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if any Canadian Benchmark Available Tenor of such Canadian Benchmark (or such component thereof) continues to be provided on such date.

 

For the avoidance of doubt, the “Canadian Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Canadian Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Canadian Benchmark Available Tenors of such Canadian Benchmark (or the published component used in the calculation thereof).

 

 

“Canadian Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Canadian Benchmark:

 

(a)    a public statement or publication of information by or on behalf of the administrator of such Canadian Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Canadian Benchmark Available Tenors of such Canadian Benchmark (or such component thereof), permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Canadian Benchmark Available Tenor of such Canadian Benchmark (or such component thereof);

 

(b)    a public statement or publication of information by the regulatory supervisor for the administrator of such Canadian Benchmark (or the published component used in the calculation thereof), the Bank of Canada, an insolvency official with jurisdiction over the administrator for such Canadian Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Canadian Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Canadian Benchmark (or such component), which states that the administrator of such Canadian Benchmark (or such component) has ceased or will cease to provide all Canadian Benchmark Available Tenors of such Canadian Benchmark (or such component thereof) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Canadian Benchmark Available Tenor of such Canadian Benchmark (or such component thereof); or

 

(c)    a public statement or publication of information by the regulatory supervisor for the administrator of such Canadian Benchmark (or the published component used in the calculation thereof) announcing that all Canadian Benchmark Available Tenors of such Canadian Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative.

 

For the avoidance of doubt, a “Canadian Benchmark Transition Event” will be deemed to have occurred with respect to any Canadian Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Canadian Benchmark Available Tenor of such Canadian Benchmark (or the published component used in the calculation thereof).

 

“Canadian Benchmark Unadjusted Benchmark Replacement” means the applicable Canadian Benchmark Replacement excluding the related Canadian Benchmark Replacement Adjustment.

 

“Canadian Benchmark Unavailability Period” means, the period (if any) (a) beginning at the time that a Canadian Benchmark Replacement Date has occurred if, at such time, no Canadian Benchmark Replacement has replaced the then-current Canadian Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.1.6(a) and 2.1.6(b) ending at the time that a Canadian Benchmark Replacement has replaced the then-current Canadian Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.1.6.

 

 

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

 

“Canadian Borrowing” means a Borrowing of Canadian Loans.

 

“Canadian Confirmation of Security” shall mean an assumption and confirmation agreement executed and delivered by the Canadian Borrower immediately upon the consummation of the Kobelt Amalgamation, to and in favour of Bank, whereby, among other things, (i) Canadian Borrower acknowledges, confirms and agrees that all of the obligations of Kobelt Purchaser to Bank incurred prior to the Kobelt Amalgamation, whether direct, indirect or contingent and howsoever and wheresoever incurred arising pursuant to, or in respect of, this Agreement or any other Loan Document, are the obligations of Canadian Borrower to Bank; (ii) Canadian Borrower acknowledges, confirms and agrees that the Canadian Security Agreement and any other Loan Documents which grants a security interest in favour of Bank, in each case, executed and delivered by Kobelt Purchaser shall continue in full force and effect as continuing security for the Obligations, whether incurred in the name of Kobelt Purchaser or Canadian Borrower or otherwise and whether incurred prior to or subsequent to the Kobelt Amalgamation, and that the security interests created by the Canadian Security Agreement or such other Loan Documents, in each case, shall charge the property of Canadian Borrower in accordance with the terms thereof; and (iii) Canadian Borrower affirms that this Agreement and each other Loan Document to which Kobelt Purchaser was a party is a legal, valid and binding obligation, enforceable against Canadian Borrower in accordance with its terms.

 

“Canadian Dollars” and “CDN$” each means the lawful currency of Canada.

 

“Canadian Defined Benefit Pension Plan” means any Canadian Pension Plan which contains a “defined benefit provision” as defined in subsection 147.1(1) of the Income Tax Act (Canada), or any replacement or successor section of such legislation which refers to “defined benefit provisions”.

 

“Canadian Insolvency Legislation” means, collectively, the Bankruptcy and Insolvency Act (Canada), the Winding-up and Restructuring Act (Canada), the Companies’ Creditors Arrangement Act (Canada), the Winding up and Restructuring Act (Canada), the debt and/or securities reorganization provisions of the Business Corporations Act (British Columbia) or any other comparable and applicable Canadian provincial or legislation, and any other bankruptcy, insolvency, restructuring, liquidation, winding-up, corporate, restructuring, winding-up or similar laws of Canada, any province or territory thereof, in each case, as amended from time to time and includes all regulations thereunder.

 

“Canadian IP Security Agreement” means that certain Canadian Intellectual Property Security Agreement to be executed and delivered, following the Kobelt Acquisition and Kobelt Amalgamation, by the Canadian Borrower to and in favor of Bank, and as the same may hereafter be amended, modified, supplemented or restated from time to time.

 

 

“Canadian Loan” means a loan to the Canadian Borrower denominated in Canadian Dollars, which may be borrowed in the form of a Canadian Prime Rate Loan, Term CORRA Loan or, following a Canadian Benchmark Transition Event in accordance with Section 2.16, Daily Compounded CORRA Loan, and which shall include Overdrafts from time to time advanced by Bank.

 

“Canadian Loan Party” means any Loan Party that is organized, incorporated, amalgamated or continued under the laws of Canada or any province or territory thereof, and, for certainty, includes (i) as of the Closing Date prior to the Kobelt Acquisition, the Kobelt Purchaser, and (ii) following the Kobelt Acquisition and Kobelt Amalgamation, the Canadian Borrower.

 

“Canadian Pension Plan” means each “registered pension plan” (as such term is defined in the Income Tax Act (Canada)) and any pension plan that is subject to federal or provincial pension standards legislation in Canada (including, without limitation, a Canadian defined benefit plan) that is sponsored, established, maintained or contributed to by any Loan Party for its Canadian employees or former employees, or in respect of which any Loan Party, any Affiliate of a Loan Party or any Subsidiary of a Loan Party has any actual or contingent liability or obligation, but shall not include the Canada Pension Plan as maintained by the Government of Canada or the Québec Pension Plan as maintained by the government of Québec.

 

“Canadian Prime Rate” means, on any particular date of determination, the greater of the following: (i) the rate of interest announced from time to time by Bank as its reference rate then in effect for determining rates of interest on Canadian Dollar loans to its commercial customers in Canada and designated as its prime rate, and (ii) one (1) month Term CORRA plus 1.00% per annum; provided, that, if the Canadian Prime Rate shall ever be less than the Floor, it shall be deemed to be equal to the Floor. Any change in the Canadian Prime Rate announced by Bank shall take effect at the opening of business on the day specified in the public announcement of such change. Each determination of the Canadian Prime Rate by Bank shall be conclusive and binding, absent manifest error.

 

“Canadian Prime Rate Loan” means a Loan made by Bank to the Borrower denominated in Canadian Dollars, pursuant to which the Canadian Prime Rate is the applicable rate of interest.

 

“Canadian Security Agreement” means that certain Canadian Security Agreement, dated as of the date hereof, by Kobelt Purchaser and, following the Kobelt Acquisition and Kobelt Amalgamation, the Canadian Borrower to and in favor of Bank, as amended, supplemented, modified or extended from time to time.

 

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

 

 

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

 

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

 

“Cash Collateralize” means to pledge and deposit with or deliver to Bank, as collateral for L/C Obligations, cash to be held in a Collateral Account, or, if Bank shall agree in its sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to Bank, in an amount equal to 105% of the aggregate L/C Obligations (or such greater amount as Bank may determine is necessary to pay the face amount thereof plus all fees and expenses expected to accrue with respect to all outstanding Letters of Credit through the expiration date of such Letters of Credit).

 

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

 

“Change Date” means, initially the first day of the first calendar month following the Closing Date and, thereafter, the first day of every calendar month occurring after the date thereof until the next Change Date.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (i) the adoption or taking effect of any law, rule, regulation or treaty, (ii) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (iii) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States, Canadian or foreign regulatory authorities (including, without limitation, The Office of the Superintendent of Financial Institutions (Canada)), in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“Change of Control” means an event or series of events by which:

 

(a)    any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of Borrower 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 Rules 13d-4 and 13d-6 under the Exchange Act, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire (such right, an “option right”), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 50% or more of the equity interests of Borrower on a fully-diluted basis (and taking into account all such equity interests that such person or group has the right to acquire pursuant to any option right); or

 

 

(b)    during any period of 27 consecutive months, a majority of the members of the board of directors or other equivalent governing body of Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or

 

(c)    Borrower shall fail to own and control, beneficially and of record (directly or indirectly), the percentage of issued and outstanding equity interests of each of its Subsidiaries as set forth on Schedule 5.2, except where such failure is the result of a transaction permitted under the Loan Documents.

 

“Closing Date” means the date of this Agreement or such later Business Day upon which each condition described in Section 4.1 shall be satisfied or waived in a manner acceptable to Bank in its discretion.

 

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

 

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

 

“Collateral Account” means a separate collateral account maintained with, held in the name of, and subject to the exclusive dominion and control of, Bank for the purpose of holding assets as security for, and for application by Bank (to the extent available) to, the reimbursement of any payment under any Letter of Credit then or thereafter made by Bank, and to the payment of the unpaid balance of other Obligations.

 

“Collateral Assignment of Rights under Purchase Documents” means the Collateral Assignment of Rights under the Purchase Documents, dated as of the date hereof, by TDI and Kobelt Purchaser in favor of Bank, and consented to by the Kobelt Sellers in the Kobelt Purchase Documents, as amended, supplemented, modified or extended from time to time.

 

“Collateral Documents” means the Security Agreement, the Canadian Security Agreement, the IP Security Agreement, the Canadian IP Security Agreement, the Guarantor Security Agreement, the Perfection Certificate, the Negative Pledge Agreement, the Agreement as to Liens and Encumbrances, the Pledge Agreement, the Collateral Assignment of Rights under the Purchase Agreement, the Landlord Waivers and all other mortgages, deeds of trust, security agreements, pledge agreements, assignments, financing statements and other documents as shall from time to time secure or relate to the Obligations, the Hedging Liability or any part thereof.

 

 

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

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.).

 

“Communications” means this Agreement, any Loan Document and any document, amendment, waiver, forbearance, approval, consent, information, notice, certificate, request, statement, disclosure or authorization related to any Loan Document (including any Assignment and Acceptance).

 

“Conforming Changes” means with respect to either the use or administration of Term 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”), the timing and frequency of determining rates and making payments of interest, the timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 3.3, and other technical, administrative or operational matters) that Bank decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by Bank in a manner substantially consistent with market practice (or, if Bank decides that adoption of any portion of such market practice is not administratively feasible or if Bank determines that no market practice for the administration of any such rate exists, in such other manner of administration as Bank decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents) and Bank has or will apply such changes to Bank’s other similar situated commercial customers.

 

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

 

“CORRA” means the Canadian Overnight Repo Rate Average administered and published by the Bank of Canada (or any successor administrator).

 

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

 

“Daily Compounded CORRA” means, for any day, CORRA with interest accruing on a compounded daily basis, with the methodology and conventions for this rate (which will include compounding in arrears with a lookback period as determined by Bank in its sole discretion) being established by Bank in accordance with the methodology and conventions for this rate selected or recommended by the Canadian Relevant Governmental Body for determining compounded CORRA for business loans; provided that if Bank decides that any such convention is not administratively feasible for Bank, then Bank may establish another convention in its reasonable discretion; and provided further that if the administrator has not provided or published CORRA and a Canadian Benchmark Replacement Date with respect to CORRA has not occurred, then, in respect of any day for which CORRA is required, references to CORRA will be deemed to be references to the last provided or published CORRA; and provided that if Daily Compounded CORRA as so determined shall be less than the Floor, then Daily Compounded CORRA shall be deemed to be the Floor.

 

 

“Daily Compounded CORRA Loan” means a Loan in Canadian Dollars bearing interest based on Daily Compounded CORRA which, for certainty, shall only be available following a Canadian Benchmark Transition Event in accordance with Section 2.16.

 

“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by Bank in accordance with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for bilateral business loans; provided, that if Bank decides that any such convention is not administratively feasible for Bank, then Bank may establish another convention in its reasonable discretion.

 

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

 

“Designated Jurisdiction” means, at any time, any country, region or territory which is itself the subject or target of any Sanctions.

 

“Disposition” means the sale, lease, conveyance or other disposition of Property, other than sales or other dispositions expressly permitted under Sections 7.4(a), 7.4(b), 7.4(f), 7.4(h) or 7.4(j).

 

“Dollar Equivalent” means, on any date of determination, (a) with respect to any amount in U.S. Dollars, such amount, (b) with respect to any amount in Euros, the equivalent in U.S. Dollars of such amount, determined by Bank using the Exchange Rate with respect to Euros at the time in effect for such amount, and (c) with respect to any amount in Canadian Dollars, the equivalent in U.S. Dollars of such amount, determined by Bank using the Exchange Rate with respect to Canadian Dollars at the time in effect for such amount.

 

“Domestic Subsidiary” means a Subsidiary that is neither a Foreign Subsidiary nor Twin Disc (Far East) Ltd.

 

“EBITDA” means, with reference to any period for any Person, Net Income of such Person for such period plus all amounts deducted in arriving at such Net Income amount in respect of (a) Interest Expense for such period, (b) federal, state, provincial, territorial and local income taxes for such period, (c) depreciation of fixed assets and amortization of intangible assets for such period, (d) restructuring charges for such period, (e) impairment charges for such period, (f) non-cash stock compensation for such period, (g) fair market value work-in-process adjustments for such period, (h) extraordinary gain related to the sale of the facility in Nivelles, Belgium, (i) non-cash write down of boat management system inventory, (j) any loss or gain on sale of assets in the ordinary course of business and non-recurring and extraordinary expenses and income, (k) pro-forma EBITDA related to the Katsa Acquisition and the Kobelt Acquisition will be permitted in the sole discretion of Bank, (l) one-time, non-recurring reasonable and documented non-capitalized transaction expenses and closing fees related to the Katsa Acquisition, as reviewed and reasonably approved by Bank, incurred during such period (provided, that such transaction expenses included under this clause (l) shall not exceed $600,000 in the aggregate), and (m) one-time, non-recurring reasonable and documented non-capitalized transaction expenses and closing fees related to the Kobelt Acquisition, as reviewed and reasonably approved by Bank, incurred during such period (provided, that such transaction expenses included under this clause (m) shall not exceed $600,000 in the aggregate).

 

 

“Electronic Record” means a record created, generated, sent, communicated, received, or stored by electronic means.

 

“Electronic Signature” means an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the Electronic Record.

 

“Eligible Inventory” means any raw materials or finished goods inventory of Borrower (other than packaging, crating and supplies inventory but specifically including sub-assembly inventory) which:

 

(a)    is an asset of such Person to which it has good and marketable title, is freely assignable, and is subject to a perfected, first priority Lien in favor of Bank free and clear of any other Liens except as permitted by Section 7.2;

 

(b)    is located in the United States of America at a Permitted Collateral Location as set forth in (and as defined in) the Security Agreement and, in the case of any location not owned by such Person, which is at all times subject to a lien waiver agreement from such landlord or other third party to the extent required by, and in form and substance satisfactory to, Bank;

 

(c)    is not so identified to a contract to sell that it constitutes a Receivable;

 

(d)    is not obsolete or slow moving, and is of good and merchantable quality free from any defects which might adversely affect the market value thereof;

 

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

 

(f)    in the case of finished goods inventory, was produced pursuant to binding and existing purchase orders therefor to which such Person has title;

 

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

 

 

(h)    if in transit, is between locations of Loan Parties or between locations of a Loan Party (or Loan Parties) and processors or vendors (excluding work-in-process) in the ordinary course of business.

 

“Eligible Receivables” means any Receivable of Borrower which:

 

(a)    arises out of the sale of finished goods inventory delivered to and accepted by, or out of the rendition of services fully performed and accepted by, the Account Debtor on such Receivable, does not represent a pre-billed Receivable or a progress billing, and is net of any deposits made by or for the account of the relevant Account Debtor;

 

(b)    is payable in U.S. Dollars or Canadian Dollars and the Account Debtor on such Receivable is located within the United States of America or Canada or, if such right has arisen out of the sale of such goods shipped to, or out of the rendition of services to, an Account Debtor located in any other country, such right is either (i) secured by a valid and irrevocable transferable letter of credit issued by a lender reasonably acceptable to Bank for the full amount thereof or (ii) secured by an insurance policy on terms, and issued by EXIM Bank or another insurer, satisfactory to Bank (which in any event shall insure not less than ninety percent (90%) of the face amount of such Receivable and shall be subject to such deductions as are acceptable to Bank), and in each case which has been assigned or transferred to Bank in a manner acceptable to Bank;

 

(c)    is the valid, binding and legally enforceable obligation of the Account Debtor obligated thereon and such Account Debtor is not (i) a Subsidiary or an Affiliate of Borrower, (ii) a shareholder, director, officer or employee of Borrower or any Subsidiary, (iii) the United States of America or Canada, or any state, province, or political subdivision thereof, or any department, agency or instrumentality of any of the foregoing, unless the Assignment of Claims Act or any similar state, provincial, or local statute, as the case may be, is complied with to the satisfaction of Bank, (iv) a debtor under any proceeding under the United States Bankruptcy Code, as amended, any Canadian Insolvency Legislation or any other comparable bankruptcy or insolvency law, or (v) an assignor for the benefit of creditors;

 

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

 

(e)    is an asset of such Person to which it has good and marketable title, is freely assignable, and is subject to a perfected, first priority Lien in favor of Bank free and clear of any other Liens except as permitted by Section 7.2;

 

(f)    is not owing from an Account Debtor who is also a creditor or supplier of such Person, and is not subject to any offset, counterclaim or other defense with respect thereto;

 

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

 

(h)    is evidenced by an invoice to the Account Debtor dated not more than five (5) Business Days subsequent to the shipment date of the relevant inventory or completion of performance of the relevant services and is issued on ordinary trade terms requiring payment within 60 days of invoice date;

 

 

(i)    is not unpaid more than 90 days after the original invoice date or 60 days after the original due date, whichever comes first;

 

(j)    is not owed by an Account Debtor who is obligated on Receivables more than 25% of the aggregate unpaid balance of which have been past due for longer than the relevant period specified in subsection (i) above unless Bank has approved the continued eligibility thereof;

 

(k)    would not cause the total Eligible Receivables owing from the Account Debtor and its Affiliates to exceed 25% of all Receivables;

 

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

 

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

 

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

 

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

 

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

 

“EURIBO Rate” means, with respect to any Loan denominated in Euros and for any Interest Period, the EURIBO Screen Rate at approximately 11:00 a.m. Brussels time, two (2) Business Days prior to the commencement of such Interest Period.

 

 

“EURIBO Screen Rate” means, for any day and time, with respect to any Loan denominated in Euros and for any Interest Period, the euro interbank offered rate administered by the European Money Markets Institute (or any other person which takes over the administration of such rate) for euro for the relevant period displayed on page EURIBOR01 of the Reuters screen (or any replacement Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Reuters. If such page or service ceases to be available, Bank may specify another page or service displaying the relevant rate after consultation with the Company. If the EURIBO Screen Rate as so determined would be less than the Floor, such rate shall be deemed to be the Floor.

 

“Euro” and “€” means the lawful currency of the European Union.

 

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

 

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

 

“Event of Default” means any event or condition identified as such in Section 8.1.

 

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

 

“Exchange Rate” means on any day, for purposes of determining the Dollar Equivalent of any currency other than U.S. Dollars, the rate at which such other currency may be exchanged into U.S. Dollars at the time of determination on such day using Bank’s spot rate for the purchase of the applicable amount of such currency. In the absence of such a buying rate on that date, the Exchange Rate shall be determined by using such rate as Bank may select in its sole discretion, consistent with Bank’s customary practice for commercial loans being administered by it.

 

“Excluded Swap Obligation” means any Swap Obligation of any Borrower or any Subsidiary (other than the direct counterparty of such Swap Obligation) if, and to the extent that, all or a portion of the Guaranty of such Borrower or Subsidiary of, or the grant by such Borrower or Subsidiary of a security interest to secure, such Swap Obligation (or any Guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Borrower’s or Subsidiary’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time the Guaranty of such Borrower or Subsidiary 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.

 

 

“Fixed Charge Coverage Ratio” means, for any period of determination, the ratio of (a) EBITDA less unfinanced capital expenditures to (b) the sum of principal payments, dividends, repurchases and other restricted payments, cash taxes, and cash interest expense for the applicable period.

 

“Floor” means the rate per annum of interest equal to 0.00%.

 

“Foreign Currency and “Foreign Currencies” means, each and collectively, Euros and Canadian Dollars.

 

“Foreign Currencies Loan Sublimit” means an amount equal to the lesser of (a) the amount in Euros and/or Canadian Dollars, as applicable, that is equal to the Dollar Equivalent of $25,000,000, and (b) the Revolving Credit Commitment. The Foreign Currencies Loan Sublimit is part of, and not in addition to, the Revolving Credit Commitment. Notwithstanding the foregoing, at any given time, the amount of Loans to be advanced under the Foreign Currencies Loan Sublimit to Borrower in (i) Euros, shall not exceed the Dollar Equivalent of $25,000,000, minus the Dollar Equivalent of the amount of outstanding Loans made to the Borrower in Canadian Dollars at such time, and (ii) Canadian Dollars, shall not exceed the Dollar Equivalent of $25,000,000, minus the Dollar Equivalent of the amount of outstanding Loans made to Borrower in Euros at such time. For purposes of clarity, the amount of Loans advanced in Euros and Canadian Dollars, taken together, at any given time shall not exceed the Dollar Equivalent of $25,000,000.

 

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

 

“FRB” means the Board of Governors of the Federal Reserve System of the United States.

 

“Funds Transfer and Deposit Account Liability” means the liability of Borrower or any Subsidiary owing to Bank, or any Affiliates of Bank, arising out of (a) the execution or processing of electronic transfers of funds by automatic clearing house transfer, wire transfer or otherwise to or from deposit accounts of Borrower and/or any Subsidiary now or hereafter maintained with Bank or its Affiliates, (b) the acceptance for deposit or the honoring for payment of any check, draft or other item with respect to any such deposit accounts, and (c) any other deposit, disbursement, and cash management services afforded to Borrower or any Subsidiary by Bank or its Affiliates.

 

 

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

 

“Governmental Authority” means the government of the United States of America, Canada or any other nation, or of any political subdivision thereof, whether state, provincial, territorial or local, and any agency, ministry, department, 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).

 

“Guarantor” and “Guarantors” each is defined in Section 6.12(a).

 

“Guaranty” and “Guaranties” each is defined in Section 6.12(a).

 

“Hazardous Material” means any substance, chemical, compound, product, solid, gas, liquid, waste, byproduct, pollutant, contaminant or material which is hazardous or toxic, and includes (a) asbestos, polychlorinated biphenyls and petroleum (including crude oil or any fraction thereof) and (b) any material classified or regulated as “hazardous” or “toxic” or words of like import pursuant to an Environmental Law.

 

“Hazardous Material Activity” means any activity, event or occurrence involving a Hazardous Material, including the manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, Release, threatened Release, abatement, removal, remediation, handling of or corrective or response action to any Hazardous Material.

 

“Hedging Liability” means the liability of any Borrower or any Guarantor to Bank, or any Affiliates of Bank, in respect of any interest rate, foreign currency, and/or commodity swap, exchange, cap, collar, floor, forward, future or option agreement, or any other similar interest rate, currency or commodity hedging arrangement, as such Borrower or such Guarantor, as the case may be, may from time to time enter into with Bank or its Affiliates; provided, that Hedging Liability shall not include Excluded Swap Obligations.

 

“Illegality Notice” has the meaning specified in Section 3.4.

 

“Indebtedness for Borrowed Money” means for any Person (without duplication) (a) all indebtedness created, assumed or incurred in any manner by such Person representing money borrowed (including by the issuance of debt securities), (b) all indebtedness for the deferred purchase price of property or services (other than trade accounts payable arising in the ordinary course of business), (c) all indebtedness secured by any Lien upon Property of such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness, (d) all Capitalized Lease Obligations of such Person, (e) all obligations of such Person on or with respect to letters of credit, bankers’ acceptances and other extensions of credit whether or not representing obligations for borrowed money, (f) all Hedging Liability of such Persons, and (g) all Funds Transfer and Deposit Account Liability.

 

 

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

 

“Interest Payment Date” means (a) with respect to any Loan accruing interest at the Base Rate and any Canadian Prime Rate Loan, the last day of every calendar month and on the maturity date, (b) with respect to any Eurodollar Loan, the last day of each Interest Period with respect to such Eurodollar Loan and on the maturity date and, if the applicable Interest Period is longer than three (3) months, on each day occurring every three (3) months after the commencement of such Interest Period, and (c) as to any SOFR Loan, any Term CORRA Loan or any Daily Compounded CORRA Loan, the last day of each Interest Period therefor and, in the case of any Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at three month intervals after the first day of such Interest Period, and on the maturity date; provided that, as to any such Loan, (i) if any such date would be a day other than a Business Day, such date shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such date shall be the next preceding Business Day and (ii) the Interest Payment Date with respect to any Borrowing that occurs on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in any applicable calendar month) shall be the last Business Day of any such succeeding applicable calendar month.

 

“Interest Period” means the period commencing on the date a Borrowing of SOFR Loans, Eurodollar Loans, Term CORRA Loans or Daily Compounded CORRA Loans is advanced, continued, or created by conversion and ending on the numerically corresponding day in the calendar month that is one, three or, for SOFR Loans and Eurodollar Loans only, six months thereafter, as specified in the applicable borrowing request or interest election request, provided, that:

 

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

 

ii.    no Interest Period with respect to any portion of the Term Loan shall extend beyond a date on which Borrower is required to make a scheduled payment of principal on the Term Loan, unless the aggregate principal amount of the Term Loan that is a SOFR Loans with Interest Periods expiring on or before such date equals or exceeds the principal amount to be paid on the Term Loan on such payment date;

 

iii.    whenever the last day of any Interest Period would otherwise be a day that is not a Business Day, the last day of such Interest Period shall be extended to the next succeeding Business Day, provided that, if such extension would cause the last day of an Interest Period for a Borrowing of SOFR Loans, Term CORRA Loans or Daily Compounded CORRA Loans to occur in the following calendar month, the last day of such Interest Period shall be the immediately preceding Business Day;

 

 

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

 

v.    in the case of a continuation of a Term CORRA Loan or Daily Compounded CORRA Loan, the last day of each Interest Period shall also be the first day of the next Interest Period; and

 

vi.    no tenor that has been removed from this definition pursuant to Section 2.15 or Section 2.16 below shall be available for specification in such Borrowing Request or Interest Election Request.

 

“IP Security Agreement” means that certain Intellectual Property Security Agreement, dated April 22, 2016, between TDI and Bank, as assigned by Bank to BMO Bank N.A. pursuant to, and amended by, the Assignment of and Amendment to IP Security Agreement, dated as June 29, 2018, among TDI, Bank and BMO Bank N.A., as further assigned by BMO Bank N.A. to Bank pursuant to, and amended by, the Assignment of and Amendment to IP Security Agreement, dated as of the date hereof, among TDI, Bank and BMO Bank N.A., and as the same may hereafter be amended, modified, supplemented or restated from time to time.

 

“Katsa Acquisition” means the acquisition by TD Finland Holding Oy, a Subsidiary of TDI, of all of the issued and registered shares of Katsa Oy from Timo Salli and Jouko Salli, pursuant to the Katsa Purchase Documents.

 

“Katsa Purchase Documents” means (a) that certain Sale and Purchase Agreement, dated as of March 5, 2024, by and among TD Finland Holding Oy, a Subsidiary of Borrower, and Timo Salli and Jouko Salli (the “Katsa Purchase Agreement”), and (b) the Parent Company Guarantee, dated as of March 5, 2024, by Borrower to and in favor of Timo Salli and Jouko Salli, to guarantee the payment of the Purchase Price under the Katsa Purchase Agreement (the “Parent Guarantee”), together with all of the respective agreements, documents and material closing certificates executed and delivered in connection therewith.

 

“Kobelt Acquisition” means the acquisition by Kobelt Purchaser of all of the issued and outstanding shares of Kobelt Target from the Kobelt Sellers pursuant to the Kobelt Purchase Documents.

 

“Kobelt Amalgamation” means the amalgamation of the Kobelt Purchaser and the Kobelt Target with the company resulting from such amalgamation being the Canadian Borrower.

 

 

“Kobelt Purchase Documents” means that certain Share Purchase Agreement, dated as of February 14, 2025, by and among Kobelt Purchaser, TDI, Kobelt Target, the Kobelt Sellers and Mark Chesley, together with all of the respective agreements, documents and material closing certificates executed and delivered in connection therewith.

 

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

 

“Kobelt Sellers” means the “Sellers” as defined in the Kobelt Purchase Documents.

 

“Kobelt Target” means Kobelt Manufacturing Co. Ltd., a company formed under the laws of the Province of British Columbia.

 

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

 

“L/C Sublimit” means $4,000,000, as reduced pursuant to the terms hereof.

 

“Landlord Waivers” means the landlord subordination agreements in form and substance satisfactory to Bank received from each lessor of real property to any Borrower with respect to real property leased by any Borrower.

 

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

 

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

 

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

 

“Loan” means any Revolving Loan or Term Loan, whether outstanding as a SOFR Loan, Eurodollar Loan, Canadian Prime Rate Loan, Term CORRA Loan, Daily Compounded CORRA Loan or otherwise, each of which is a “type” of Loan hereunder, and which shall include all Canadian Loans (including Overdrafts).

 

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

 

“Loan Party” and “Loan Parties” means, each and collectively, Borrower and each Guarantor.

 

 

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

 

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

 

“Negative Pledge Agreement” means the Negative Pledge Agreement executed by TDI on April 22, 2016, recorded on June 22, 2016 as Document No. 2437708 with the Racine County Register of Deeds, in favor of Bank, as assigned by Bank to BMO Bank N.A. pursuant to, and amended by, the Assignment of and Amendment to Negative Pledge Agreement, dated as of June 29, 2018, recorded on August 29, 2018 as Document No. 2502213 with the Racine County Register of Deeds, among TDI, Bank and BMO Bank N.A., as further assigned by BMO Bank N.A. to Bank pursuant to, and amended by, the Assignment of and Amendment to Negative Pledge Agreement, dated as of the date hereof, among TDI, Bank and BMO Bank N.A., and as the same may hereafter be amended, modified, supplemented or restated from time to time.

 

“Net Cash Proceeds” means, as applicable, (a) with respect to any Disposition by a Person, cash and cash equivalent proceeds received by or for such Person’s account, net of (i) reasonable direct costs relating to such Disposition and (ii) sale, use or other transactional taxes paid or payable by such Person as a direct result of such Disposition, (b) with respect to any Event of Loss of a Person, cash and cash equivalent proceeds received by or for such Person’s account (whether as a result of payments made under any applicable insurance policy therefor or in connection with condemnation proceedings or otherwise), net of reasonable direct costs incurred in connection with the collection of such proceeds, awards or other payments, and (c) with respect to any offering of equity securities of a Person or the issuance of any Indebtedness for Borrowed Money by a Person, cash and cash equivalent proceeds received by or for such Person’s account, net of reasonable legal, underwriting, and other fees and expenses incurred as a direct result thereof.

 

“Net Income” means, with reference to any period for any Person, the net income (or net loss) of such Person for such period computed on a consolidated basis in accordance with GAAP; provided that there shall be excluded from Net Income (a) the net income (or net loss) of such Person accrued prior to the date it becomes a Subsidiary of, or has merged into or consolidated with, Borrower or another Subsidiary, and (b) the net income (or net loss) of such Person (other than a Subsidiary) in which Borrower or any of its Subsidiaries has an equity interest in, except to the extent of the amount of dividends or other distributions actually paid to Borrower or any of its Subsidiaries during such period.

 

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

 

“Obligations” means all obligations of Borrower to pay principal and interest on the Loans, all Reimbursement Obligations owing under the Applications, all Hedging Liability, all Funds Transfer and Deposit Account Liability, all fees and charges payable hereunder, and all other indebtedness, liabilities and payment obligations of Borrower or any of its Subsidiaries arising under or in relation to any Loan Document, in each case whether now existing or hereafter arising, due or to become due, direct or indirect, absolute or contingent, and howsoever evidenced, held or acquired; provided, that the Obligations shall not include Excluded Swap Obligations.

 

 

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

 

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

 

“Overdraft” means Obligations of the Canadian Borrower to Bank arising in connection with all amounts debited to all overdraft accounts established by the Canadian Borrower with Bank (in Canadian Dollars or U.S. Dollars, as the case may be) including, without limitation, all cheques, transfers, withdrawals, interest, costs, charges and fees debited to such accounts. Overdrafts shall be deemed Canadian Loans for purposes hereof.

 

“Patriot Act” means the USA Patriot Act (Title III of Pub. L. 107 56 (signed into law October 26, 2001)).

 

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

 

“Perfection Certificate” means that certain Perfection Certificate, dated April 22, 2016, delivered by Borrower in favor of Bank, as assigned by Bank to BMO Bank N.A. pursuant to, and amended by, the Assignment of and Amendment to Perfection Certificate, dated as of June 29, 2018, among Borrower, Bank and BMO Bank N.A., as further assigned by BMO Bank N.A. to Bank pursuant to, and amended by, the Assignment of and Amendment to Perfection Certificate, dated as of the date hereof, among Borrower, Bank and BMO Bank N.A., and as the same may hereafter be amended, modified, supplemented or restated from time to time.

 

“Person” means an individual, partnership, corporation, limited liability company, unlimited liability company, trust company, association, trust, unincorporated organization, sole proprietorship or any other entity or organization, including a government or agency or political subdivision thereof.

 

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

 

“Pledge Agreement” means that certain Pledge Agreement, dated April 22, 2016, among TDI, Guarantors and Bank of Montreal, as assigned by Bank to BMO Bank N.A. pursuant to, and amended by, the Assignment of and Amendment to Pledge Agreement, dated as of June 29, 2018, among TDI, Bank and BMO Bank N.A., as further assigned by BMO Bank N.A. to Bank pursuant to, and amended by, the Assignment of and Amendment to Pledge Agreement, dated as of the date hereof, among TDI, Bank and BMO Bank N.A., and as the same may hereafter be amended, modified, supplemented or restated from time to time.

 

 

“Post-Kobelt Amalgamation Deliveries” shall mean the following duly executed documents and related deliverables dated as of the date of the Kobelt Amalgamation, in each case, in form and substance satisfactory to Bank:

 

i.    a copy of the filed articles of amalgamation and certificate of amalgamation of Canadian Borrower;

 

ii.    a Canadian Confirmation of Security by the Canadian Borrower to and in favor of Bank;

 

iii.    the Canadian IP Security Agreement by the Canadian Borrower to and in favor of Bank;

 

iv.    a supplement to the IP Security Agreement by the Canadian Borrower in favor of Bank;

 

v.    an amendment to the Pledge Agreement to add the Equity Interest of Canadian Borrower owned by TDI;

 

vi.    delivery by TDI of share certificates representing 100% of the issued and outstanding Equity Interests of Canadian Borrower, together with corresponding stock transfer powers of attorney;

 

vii.    each document (including, without limitation, any UCC and PPSA financing statement or financing change statement and insurance certificate(s) in respect of the insurance policies maintained by the Canadian Borrower in accordance with the terms and conditions set out in Section 6.4) required by this Agreement, any Loan Document, any related agreement or under applicable law or reasonably requested by Bank to be filed, registered or recorded in order to create, in favor of Bank, a first ranking Lien in or upon all of the present and after acquired property, assets and undertaking of Kobelt Target of Canadian Borrower which, in each case, shall have been properly executed and delivered for each jurisdiction in which the filing, registration or recordation thereof is so required or reasonably requested;

 

viii.    a certificate of an authorized officer of Canadian Borrower attaching (A) the constating documents of Canadian Borrower; (B) the resolutions of the board of directors of Canadian Borrower authorizing the execution, delivery and performance of this Agreement, the Canadian Security Agreement, the Canadian IP Security Agreement, the IP Security, the Canadian Confirmation of Security and any other applicable Loan Document to which it is a party and any related agreements; and (C) a certificate as to the incumbency and signatures of the officers and directors of Canadian Borrower executing the Canadian Confirmation of Security and any other applicable Loan Document;

 

 

ix.    a post-Kobelt Amalgamation legal opinion in respect of Canadian Borrower, together with a certificate of good standing of Canadian Borrower; and

 

x.    such other deliveries as reasonably requested by Bank.

 

“PPSA” means the Personal Property Security Act (British Columbia) and similar legislation in each province or territory in Canada including, without limitation, the Civil Code in the Province of Quebec, together with all rules, regulations and interpretations thereunder, as in effect from time to time, to be applied in connection with the issue, perfection, enforcement, validity or effect of security interests.

 

“Priority Payable” means at any time, any amount due and payable at such time by a Loan Party which is secured by a Lien or statutory right or claim in favour of a Governmental Authority which ranks or is capable of ranking prior to or pari passu with the Liens created by the Collateral Documents in respect of any Property including, without limitation, amounts due and payable for wages, vacation pay, termination and severance pay, employee deductions (including income, withholding, social security and other employment taxes), sales tax, excise tax, tax payable pursuant to Part IX of the Excise Tax Act (Canada) (net of GST input credits), workers compensation, municipal taxes, government royalties, pension fund obligations, overdue rents or taxes, and other statutory or other claims that have priority over or may rank pari passu with such Liens created by the Collateral Documents.

 

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

 

“Purchase Documents” means, collectively, the Katsa Purchase Documents and the Kobelt Purchase Documents.

 

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

 

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

 

“Reimbursement Obligation” means the obligation of Borrower to reimburse Bank for all drawings under a Letter of Credit.

 

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migration, dumping, or disposing into the indoor or outdoor environment, including the abandonment or discarding of barrels, drums, containers, tanks or other receptacles containing or previously containing any Hazardous Material.

 

 

“Relevant Governmental Body” means the FRB and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the FRB and/or the Federal Reserve Bank of New York, or any successor thereto.

 

“Revolving Credit Commitment” means the obligation of Bank to make Revolving Loans and to issue Letters of Credit hereunder in an aggregate principal or face amount at any one time outstanding not to exceed $50,000,000 (inclusive of the Foreign Currencies Loan Sublimit and L/C Sublimit).

 

“Revolving Credit Termination Date” means April 1, 2027, or such earlier date on which the Revolving Credit Commitment is terminated in whole pursuant to Section 2.13, Section 8.2 or Section 8.3.

 

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

 

“Revolving Note” is defined in Section 2.10(c).

 

“S&P” means Standard & Poor’s Ratings Services Group, a division of The McGraw Hill Companies, Inc.

 

“Sanctioned Person” means, at any time,(a) is the subject or target of any Sanctions (b) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC (including the OFAC SDN List), the United States Department of State, the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom, the government of Canda (including Global Affairs Canada, Canada Border Services Agency and Public Safety Canada) or any other relevant Governmental Authority or sanctions authority, (c) any Person located, organized or resident in a Designated Jurisdiction or (d) any Person owned or controlled by any such Person or Persons described in clauses (a), (b) or (c) above.

 

“Sanctions” means all economic or financial sanctions, sectoral sanctions, secondary sanctions or trade embargoes imposed, administered or enforced from time to time by the United States government (including those administered by OFAC or the United States Department of State), the European Union (including any European Union member state), the United Kingdom (including His Majesty’s Treasury), Canada (including Global Affairs Canada, Canada Border Services Agency and Public Safety Canada), the United Nations Security Council, and any other relevant sanctions or export control authority;

 

“Security Agreement” means that certain Security Agreement, dated April 22, 2016, between TDI and Bank, as assigned by Bank to BMO Bank N.A. pursuant to, and amended by, the Assignment of and Amendment to Security Agreement, dated as of June 29, 2018, among Borrower, Bank and BMO Bank N.A., as further assigned by BMO Bank N.A. to Bank pursuant to, and amended by, the Assignment of and Amendment to Security Agreement, dated as of the date hereof, among Borrower, Bank and BMO Bank N.A., and as the same may hereafter be amended, modified, supplemented or restated from time to time.

 

 

“SOFR” means a rate 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 Loan” means a Loan bearing interest based on Adjusted Term SOFR, other than pursuant to clause (c) of the definition of “Base Rate.”

 

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

 

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

 

“Swap Obligation” means, with respect to Borrower, 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.

 

“Sweep to Loan Arrangement” means a cash management arrangement established by Borrower with Bank, as depositary, pursuant to which Bank is authorized (a) to make advances of Revolving Loans hereunder, the proceeds of which are deposited by Bank into a designated account of Borrower maintained at Bank, and (b) to accept as prepayments of Revolving Loans hereunder proceeds of excess targeted balances held in such designated account at Bank, which cash management arrangement is subject to such agreement(s) and on such terms acceptable to Bank.

 

“Tangible Net Worth” means, for any Person and at any time the same is to be determined, the difference between total assets (excluding intangibles) and total liabilities of such Person, total assets (excluding intangibles) and total liabilities each to be determined in accordance with GAAP.

 

“Term CORRA Adjustment” means, for any calculation with respect to a Term CORRA Loan, a percentage per annum set forth in the table below that corresponds to the applicable Interest Period therefor:

 

Interest Period	Percentage
One (1) month	0.29547%
Three (3) months	0.32138%

 

 

“Term CORRA Administrator” means Candeal Benchmark Administration Services Inc., TSX Inc., or any successor administrator.

 

“Term CORRA Loan” means a Loan in Canadian Dollars bearing interest based on Adjusted Term CORRA.

 

“Term CORRA” means, for any calculation with respect to a Term CORRA Loan, the Term CORRA Reference Rate for a tenor comparable to the applicable Interest Period on the day (such day, the “Periodic Term CORRA Determination Day”) that is two (2) Business Days prior to the first day of such Interest Period, as such rate is published by the Term CORRA Administrator; provided, however, that if as of 1:00 p.m. (Toronto time) on any Periodic Term CORRA Determination Day the Term CORRA Reference Rate for the applicable tenor has not been published by the Term CORRA Administrator and a Benchmark Replacement Date with respect to the Term CORRA Reference Rate has not occurred, then Term CORRA will be the Term CORRA Reference Rate for such tenor as published by the Term CORRA Administrator on the first preceding Business Day for which such Term CORRA Reference Rate for such tenor was published by the Term CORRA Administrator so long as such first preceding Business Day is not more than three (3) Business Days prior to such Periodic Term CORRA Determination Day.

 

“Term CORRA Reference Rate” means the forward-looking term rate based on CORRA.

 

“Term Loan” is defined in Section 2.1(a) and, as so defined, includes a SOFR Loan, which is a “type” of Term Loan hereunder.

 

“Term Loan Commitment” means the obligation of Bank to make the Term Loan on the Closing Date in the principal amount of $15,000,000.

 

“Term Loan Termination Date” means April 1, 2027, or such earlier date on which the Term Loan Commitment is terminated in whole pursuant to Section 8.2 or 8.3.

 

“Term Note” is defined in Section 2.10(c).

 

“Term SOFR” means, for the applicable tenor, the Term SOFR Reference Rate on the day (such day, the “Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to (a) in the case of SOFR Loans, the first day of such applicable Interest Period, or (b) with respect to Base Rate, such day of determination of the Base Rate, in each case as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Term SOFR Determination Day, provided, that if Term SOFR determined as provided above shall ever be less than the Floor, then Term SOFR shall be deemed to be the Floor.

 

 

“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by Bank in its reasonable discretion).

 

“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.

 

“Total Funded Debt” means, at any time the same is to be determined for any Person, the sum (but without duplication) of (a) all Indebtedness for Borrowed Money of such Person at such time, and (b) all Indebtedness for Borrowed Money of any other Person which is directly or indirectly guaranteed by such Person or which such Person has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which such Person has otherwise assured a creditor against loss.

 

“Total Funded Debt/EBITDA Ratio” means, as of any date, the ratio of Total Funded Debt of Borrower and its Subsidiaries as of such date to EBITDA of Borrower and its Subsidiaries for the period of four fiscal quarters then ended.

 

“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.

 

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

 

“Unused Revolving Credit Commitment” means, at any time, the difference between the Revolving Credit Commitment then in effect and the aggregate outstanding principal amount of Revolving Loans and L/C Obligations.

 

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

 

“U.S. Government Securities Business Day” means any day except for (i) a Saturday, (ii) a Sunday or (iii) 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.

 

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

 

 

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

 

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

 

Section 1.2    Interpretation. The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined. The words “hereof”, “herein”, and “hereunder” and words of like import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The term “Borrower” may mean either TDI or Canadian Borrower, or both entities, as the context of the statement implies. All references to time of day herein are references to Milwaukee, Wisconsin, time unless otherwise specifically provided. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, it shall be done in accordance with GAAP except where such principles are inconsistent with the specific provisions of this Agreement.

 

Section 1.3    Change in Accounting Principles. If, after the date of this Agreement, there shall occur any change in GAAP from those used in the preparation of the financial statements referred to in Section 5.5 and such change shall result in a change in the method of calculation of any financial covenant, standard or term found in this Agreement, either Borrower or Bank may by notice to the other require that Borrower and Bank negotiate in good faith to amend such covenants, standards, and terms so as equitably to reflect such change in accounting principles, with the desired result being that the criteria for evaluating the financial condition of Borrower and its Subsidiaries shall be the same as if such change had not been made. No delay by Borrower or Bank in requiring such negotiation shall limit their right to so require such a negotiation at any time after such a change in accounting principles. Until any such covenant, standard, or term is amended in accordance with this Section 1.3, financial covenants shall be computed and determined in accordance with GAAP in effect prior to such change in accounting principles. Without limiting the generality of the foregoing, Borrower shall neither be deemed to be in compliance with any financial covenant hereunder nor out of compliance with any financial covenant hereunder if such state of compliance or noncompliance, as the case may be, would not exist but for the occurrence of a change in accounting principles after the date hereof.

 

Section 1.4    Interest Rates (US). Bank does not warrant or accept responsibility for, and shall not have any liability with respect to (a) the continuation of, administration of, submission of, calculation of or any other matter related to the Benchmark, any component definition thereof or rates referred to in the definition thereof, or any alternative, successor or replacement rate thereto (including any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Benchmark Replacement) will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, the Benchmark or any other Benchmark prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Conforming Changes. Bank and its affiliates or other related entities may engage in transactions that affect the calculation of the Benchmark, any alternative, successor or replacement rate (including any Benchmark Replacement) and/or any relevant adjustments thereto, in each case, in a manner adverse to Borrower. Bank may select information sources or services in its reasonable discretion to ascertain the Benchmark or any other Benchmark, in each case pursuant to the terms of this Agreement, and shall have no liability to Borrower or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.

 

 

Section 1.5    Interest Rates (Canadian). Bank does not warrant or accept responsibility for, and shall not have any liability with respect to (a) the continuation of, administration of, submission of, calculation of or any other matter related to the Canadian Prime Rate, Term CORRA, Daily Compounded CORRA, or Adjusted Term CORRA or any component definition thereof or rates referred to in the definitions thereof, or any alternative, successor or replacement rate thereto (including any Canadian Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Canadian Benchmark Replacement) will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, the Canadian Prime Rate, Term CORRA, Daily Compounded CORRA, or Adjusted Term CORRA or any other Canadian Benchmark prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Canadian Conforming Changes. Bank and its affiliates or other related entities may engage in transactions that affect the calculation of the Canadian Prime Rate, Term CORRA, Daily Compounded CORRA, Adjusted Term CORRA, any alternative, successor or replacement rate (including any Canadian Benchmark Replacement) or any relevant adjustments thereto, in each case, in a manner adverse to Borrower. Bank may select information sources or services in its reasonable discretion to ascertain the Canadian Prime Rate, Term CORRA, Daily Compounded CORRA, Adjusted Term CORRA or any other Canadian Benchmark, in each case pursuant to the terms of this Agreement, and shall have no liability to Borrower or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.

 

SECTION 2.  THE CREDIT FACILITIES.

 

Section 2.1    Term Loan Commitment. On or about March 4, 2019, Bank’s Affiliate, BMO Bank N.A., made a loan (the “Term Loan”) in U.S. Dollars to TDI in the original principal amount of $20,000,000, at which time the original Term Loan Commitment (i.e., $20,000,000) expired. As of the Closing Date, the outstanding principal amount of the Term Loan is $8,500,000.00. On the Closing Date, in connection with and after giving effect to the assignment of the Term Loan from BMO Bank N.A. to Bank on the Closing Date, Bank agrees to make an additional advance on the Term Loan to TDI in the amount of $6,500,000.00. After giving effect to such additional principal advance on the Term Loan, the aggregate outstanding principal amount of the Term Loan on the Closing Date will be equal to the Term Loan Commitment (i.e., $15,000,000), and such Term Loan shall be subject to all of the terms and conditions set forth in this Agreement. After giving effect to such additional principal advance on the Term Loan, no amount repaid or prepaid on the Term Loan may be borrowed again.

 

 

Section 2.2    Revolving Credit Commitment; Foreign Currencies Sublimit. Subject to the terms and conditions hereof, Bank agrees to make a loan or loans (individually a “Revolving Loan” and collectively the “Revolving Loans”) to TDI, in U.S. Dollars, Euros and/or Canadian Dollars, and to the Canadian Borrower, in Canadian Dollars, from time to time on a revolving basis up to the amount of the Revolving Credit Commitment (or the Foreign Currencies Loan Sublimit, as applicable), subject to any reductions thereof pursuant to the terms hereof, before the Revolving Credit Termination Date. The Dollar Equivalent of the sum of the aggregate principal amount of Revolving Loans and L/C Obligations at any time outstanding shall not exceed the lesser of (a) the Revolving Credit Commitment in effect at such time and (b) the Borrowing Base as then determined and computed. In addition to the foregoing, (i) the Dollar Equivalent of the sum of the aggregate principal amount of Revolving Loans borrowed in Foreign Currencies at any time outstanding shall not exceed the Foreign Currencies Loan Sublimit, (ii) the Dollar Equivalent of the sum of the aggregate principal amount of Revolving Loans borrowed in Euros at any time outstanding shall not exceed the Foreign Currencies Loan Sublimit, minus the amount of any Canadian Loans outstanding under the Foreign Currencies Loan Sublimit at such time, and (iii) the Dollar Equivalent of the sum of the aggregate principal amount of Revolving Loans borrowed in Canadian Dollars at any time outstanding shall not exceed the Foreign Currencies Loan Sublimit, minus the amount of any Eurodollar Loans outstanding under the Foreign Currencies Loan Sublimit at such time. Bank shall determine the Dollar Equivalent of any Borrowing denominated in a Foreign Currency as of each date a Borrowing is requested by Borrower using the Exchange Rate for such applicable Foreign Currency in relation to U.S. Dollars that is in effect on the date of determination. As provided in Section 2.6, Borrower may elect that each Borrowing of Revolving Loans be SOFR Loans, Eurodollar Loans, Term CORRA Loans and/or Canadian Prime Rate Loans; provided that (A) any Borrowing of Revolving Loans in Euros shall be Eurodollar Loans, and (B) any Borrowing of Revolving Loans in Canadian Dollars shall be Term CORRA Loans or Canadian Prime Rate Loans. Revolving Loans may be repaid and the principal amount thereof reborrowed before the Revolving Credit Termination Date, subject to the terms and conditions hereof.

 

Section 2.3    Letters of Credit. General Terms. Subject to the terms and conditions hereof, as part of the Revolving Credit Commitment, Bank shall issue standby and commercial letters of credit (each a “Letter of Credit”) for the account of Borrower in an aggregate undrawn face amount up to the L/C Sublimit. Each Letter of Credit shall constitute usage of the Revolving Credit Commitment. For purposes of this Agreement, a Letter of Credit shall be deemed outstanding as of any time in an amount equal to the maximum amount which could be drawn thereunder under any circumstances and over any period of time plus any unreimbursed drawings then outstanding with respect thereto. If and to the extent any Letter of Credit expires or otherwise terminates without having been drawn upon, the availability under the Revolving Credit Commitment shall to such extent be reinstated. Each Letter of Credit issued hereunder shall expire not later than the earlier of (i) 12 months from the date of issuance (or be cancelable not later than 12 months from the date of issuance and each renewal) and (ii) the Revolving Credit Termination Date. Each Letter of Credit issued hereunder shall be payable in U.S. Dollars, conform to the general requirements of Bank for the issuance of a standby or commercial letter of credit, as the case may be, as to form and substance, and be a letter of credit which Bank may lawfully issue. For avoidance of doubt, for purposes of this Section 2.3, the term “Borrower” shall only include TDI, not the Canadian Borrower.

 

 

(b)    Applications. At the time Borrower requests a Letter of Credit to be issued (or prior to the first issuance of a Letter of Credit in the case of a continuing application), Borrower shall execute and deliver to Bank an application for such Letter of Credit in the form then customarily prescribed by Bank (individually an “Application” and collectively the “Applications”). Subject to the other provisions of this Section, the obligation of Borrower to reimburse Bank for drawings under a Letter of Credit shall be governed by the Application for such Letter of Credit. Notwithstanding anything contained in any Application to the contrary: (i) Borrower shall pay fees in connection with each Letter of Credit as set forth in Section 2.11, (ii) except as otherwise provided in Section 2.8, unless an Event of Default exists, Bank will not call for the funding by Borrower of any amount under a Letter of Credit before being presented with a drawing thereunder, and (iii) if Bank is not timely reimbursed for the amount of any drawing under a Letter of Credit on the date such drawing is paid, Borrower’s obligation to reimburse Bank for the amount of such drawing shall bear interest (which Borrower hereby promises to pay) from and after the date such drawing is paid at a rate per annum equal to the sum of the Applicable Margin plus the Base Rate from time to time in effect (computed on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed).

 

(c)    Obligations Absolute. Borrower’s obligation to reimburse L/C Obligations as provided in subsection (b) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement and the relevant Application under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by Bank under a Letter of Credit against presentation of a draft or other document that does not strictly comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, Borrower’s obligations hereunder. Bank shall have no liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of Bank; provided that the foregoing shall not be construed to excuse Bank from liability to Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by Borrower to the extent permitted by applicable law) suffered by Borrower that are caused by Bank’s fraud, willful misconduct, recklessness or failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of bad faith, reckless disregard or willful misconduct on the part of Bank (as finally determined by a court of competent jurisdiction), Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

 

 

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

 

(e)    Letters of Credit Issued for Other Loan Parties. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a non-Borrower Loan Party, Borrower shall be obligated to reimburse Bank hereunder for any and all drawings under such Letter of Credit. Borrower hereby acknowledges that the issuance of Letters of Credit for the account of such Loan Party inures to the benefit of Borrower, and that Borrower’s business derives substantial benefits from the businesses of such or other Loan Party

 

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

 

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

 

(c)    Term CORRA Loans.

 

(i)     Each Term CORRA Loan made or maintained by Bank shall bear interest during each Interest Period it is outstanding (computed, notwithstanding any provision to the contrary in this Agreement (including the use of the term “per annum”), on the basis of a year of 365 or 366 days, as the case may be, and the actual days elapsed) on the unpaid principal amount thereof from the date such Loan is advanced or continued, or created by conversion, until maturity (whether by acceleration or otherwise) at a rate per annum equal to the sum of the Applicable Margin plus Adjusted Term CORRA applicable to such Interest Period, accruing daily and payable by Borrower in arrears on each Interest Payment Date and at maturity (whether by acceleration or otherwise).

 

 

(ii)    Borrower acknowledges that the ability of Bank to maintain or provide any Term CORRA Loan and/or to charge interest on any Term CORRA Loan at Adjusted Term CORRA, is and will be subject to any applicable Law which may prohibit or restrict or limit such loans and/or such interest. Each Borrower agrees that Bank shall have the right to comply with any such requirements and, if Bank determines it to be necessary as a result of such requirement or a change to such requirement, Bank may convert any Term CORRA Loan to a Canadian Prime Rate Loan or require immediate repayment of all Term CORRA Loans, including accrued interest thereon and all applicable breakage costs.

 

(d)    Daily Compounded CORRA Loans.

 

(i)    Each Daily Compounded CORRA Loan (which, for certainty, shall only be available following a Canadian Benchmark Transition Event in accordance with Section 2.16) made or maintained by Bank shall bear interest during each Interest Period it is outstanding (computed, notwithstanding any provision to the contrary in this Agreement (including the use of the term “per annum”), on the basis of a year of 365 or 366 days, as the case may be, and the actual days elapsed) on the unpaid principal amount thereof from the date such Loan is advanced or continued, or created by conversion, until maturity (whether by acceleration or otherwise) at a rate per annum equal to the sum of the Applicable Margin plus Daily Compounded CORRA applicable to such Interest Period, accruing daily and payable by Borrower in arrears on each Interest Payment Date and at maturity (whether by acceleration or otherwise).

 

(ii)    Borrower acknowledges that the ability of Bank to maintain or provide any Daily Compounded CORRA Loan and/or to charge interest on any Daily Compounded CORRA Loan at Daily Compounded CORRA, is and will be subject to any applicable Law which may prohibit or restrict or limit such loans and/or such interest. Borrower agrees that Bank shall have the right to comply with any such requirements and, if Bank determines it to be necessary as a result of such requirement or a change to such requirement, Bank may convert any Daily Compounded CORRA Loan to a Prime Rate Loan or require immediate repayment of all Daily Compounded CORRA Loans, including accrued interest thereon and all applicable breakage costs.

 

(e)    Canadian Prime Rate Loans. Each Canadian Prime Rate Loan shall bear interest (computed on the basis of a year of 365 days or 366 days in the case of a leap year as the case may be, and the actual days elapsed) on the unpaid principal amount thereof from the date such Loan is advanced until maturity (whether by acceleration or otherwise) at a rate per annum equal to the sum of the Applicable Margin plus the Canadian Prime Rate from time to time in effect, calculated daily and payable in arrears by Borrower on each Interest Payment Date and at maturity (whether by acceleration or otherwise.

 

 

(f)    Rate Determinations. Bank shall determine each interest rate applicable to the Loans and the Reimbursement Obligations hereunder, and its determination thereof shall be conclusive and binding except in the case of manifest error. In connection with the use or administration of Term SOFR, Bank will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document. Bank will promptly notify Borrower of the effectiveness of any Conforming Changes in connection with the use or administration of Term SOFR. In connection with the use, administration adoption or implementation of Canadian Benchmark Replacement, Bank will have the right to make Canadian Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Canadian Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document. Bank will promptly notify Borrower and Bank of the effectiveness of any Canadian Conforming Changes in connection with the use or administration of Adjusted Term CORRA or Daily Compounded CORRA.

 

(g)    Interest Act (Canada). For the purposes of the Interest Act (Canada), whenever any interest or fee under this Agreement is calculated using a rate based on a period other than a calendar year, such rate determined pursuant to such calculation, when expressed as an annual rate, is equivalent to such rate as determined multiplied by the actual number of days in the calendar year in which the period for which such interest or fee is payable (or compounded) ends and divided by the number of days comprising such other period.

 

Section 2.5    Minimum Borrowing Amounts; Maximum SOFR Loans.

 

Each Borrowing of Eurodollar Loans, SOFR Loans, Term CORRA Loans or Daily Compounded CORRA Loans advanced, continued or converted shall be in an amount equal to the Dollar Equivalent of $1,000,000 or such greater amount which is an integral multiple of $100,000. Without Bank’s consent, there shall not be more than ten (10) Borrowings, in the aggregate, of Eurodollar Loans, SOFR Loans and Term CORRA Loans outstanding hereunder at any one time.

 

Section 2.6    Manner of Borrowing Loans and Designating Applicable Interest Rates.

 

(a)    Notice to Bank. Borrower shall give notice to Bank by no later than 1:00 p.m.: (i) at least three (3) Business Days before the date on which Borrower requests Bank to advance a Borrowing of Eurodollar Loans, (ii) at least one (1) Business Day before the date on which Canadian Borrower requests Bank to advance a Borrowing of Canadian Prime Rate Loans, (iii) at least three (3) Business Day before the date on which Borrower requests Bank to advance a Borrowing of Term CORRA Loans or Daily Compounded CORRA Loans (which, for certainty, shall only be available following a Canadian Benchmark Transition Event in accordance with Section 2.16) and (iv) on the date Borrower requests Bank to advance a Borrowing of SOFR Loans. The Loans included in each Borrowing shall bear interest initially at the type of rate specified in such notice of a new Borrowing. Thereafter, subject to the terms and conditions hereof, Borrower may from time to time elect to change or continue the type of interest rate borne by each Borrowing or, subject to the minimum amount requirement for each outstanding Borrowing set forth in Section 2.5, a portion thereof, as follows: (A) if such Borrowing is of Eurodollar Loans, on the last day of the Interest Period applicable thereto, Borrower may continue part or all of such Borrowing as Eurodollar Loans or convert part or all of such Borrowing into SOFR Loans, (B) if such Borrowing is of SOFR Loans, on any Business Day, Borrower may convert all or part of such Borrowing into Eurodollar Loans for an Interest Period or Interest Periods specified by Borrower, (C) if such Borrowing is of Canadian Prime Rate Loans, on any Business Day, Borrower may convert all or part of such Borrowing into Term CORRA Loans for an Interest Period or Interest Periods specified by Borrower or (D) if such Borrowing is of Term CORRA Loans, on the last day of the Interest Period applicable thereto, Borrower may continue part or all of such Borrowing as a Canadian Prime Rate Loans or convert part or all of such Borrowing into a Canadian Prime Rate Loan. Borrower shall give all such notices requesting the advance, continuation or conversion of a Borrowing to Bank by telephone, telecopy, or other telecommunication device acceptable to Bank (which notice shall be irrevocable once given and, if by telephone, shall be promptly confirmed in writing), in a form acceptable to Bank. Notice of the continuation of a Borrowing of Eurodollar Loans or CORRA Loans for an additional Interest Period or of the conversion of part or all of a Borrowing into Eurodollar Loans or CORRA Loans must be given by no later than 1:00 p.m. at least three (3) Business Days before the date of the requested continuation or conversion. All such notices concerning the advance, continuation or conversion of a Borrowing shall specify the date of the requested advance, continuation or conversion of a Borrowing (which shall be a Business Day), the amount of the requested Borrowing to be advanced, continued or converted, the type of Loans to comprise such new, continued or converted Borrowing and, if such Borrowing is to be comprised of Eurodollar Loans or CORRA Loans, the Interest Period applicable thereto. No Borrowing of Eurodollar Loans or CORRA Loans shall be advanced, continued, or created by conversion if any Default or Event of Default then exists. Borrower agrees that Bank may rely on any such telephonic, telecopy or other telecommunication notice given by any person Bank in good faith believes is an Authorized Representative without the necessity of independent investigation, and in the event any such notice by telephone conflicts with any written confirmation such telephonic notice shall govern if Bank has acted in reliance thereon.

 

 

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

 

 

Section 2.7    Maturity of Loans. Term Loan. In addition to the monthly interest payments required under Section 2.4, TDI shall make principal payments on the Term Loan in installments on the last day of each March, June, September and December in each year, commencing with the calendar quarter ending March 31, 2025, with the amount of each such principal installment to be equal to $750,000 per quarter, it being agreed that a final payment comprised of all principal and interest then outstanding on the Term Loan shall be due and payable on the Term Loan Termination Date.

 

(b)    Revolving Loans. Each Revolving Loan, both for principal and interest then outstanding, shall mature and be due and payable by Borrower on the Revolving Credit Termination Date.

 

Section 2.8    Prepayments. Optional Prepayments. Borrower may prepay in whole or in part (but, if in part, then: (i) in an amount not less than $500,000, and (ii) in an amount such that the minimum amount required for a Borrowing pursuant to Section 2.5 and 2.7 remains outstanding) any Borrowing of Loans at any time upon three (3) Business Days prior notice by Borrower to Bank, such prepayment to be made by the payment of the principal amount to be prepaid and, in the case of any Loans, accrued interest thereon to the date fixed for prepayment plus any amounts due Bank under Section 3.3. Any Loan bearing interest based on the Base Rate or the Canadian Prime Rate may be prepaid in whole or in part at any time without penalty on the same day in which Borrower provides Bank written notice of Borrower’s intent to prepay such Loan.

 

(b)    Mandatory Prepayments.

 

(i)    If Borrower or any Subsidiary shall at any time or from time to time make or agree to make a Disposition or shall suffer an Event of Loss with respect to any Property, then Borrower shall promptly notify Bank of such proposed Disposition or Event of Loss (including the amount of the estimated Net Cash Proceeds to be received by Borrower or such Subsidiary in respect thereof) and, promptly upon receipt by Borrower or such Subsidiary of the Net Cash Proceeds of such Disposition or Event of Loss, Borrower shall prepay the Obligations in an aggregate amount equal to 100% of the amount of all such Net Cash Proceeds; provided that (x) so long as no Default or Event of Default then exists, this subsection shall not require any such prepayment with respect to Net Cash Proceeds received on account of an Event of Loss so long as such Net Cash Proceeds are applied to replace or restore the relevant Property in accordance with the relevant Collateral Documents, (y) this subsection shall not require any such prepayment with respect to Net Cash Proceeds received on account of Dispositions during any fiscal year of Borrower not exceeding $250,000 in the aggregate so long as no Default or Event of Default then exists, and (z) in the case of any Disposition not covered by clause (y) above, so long as no Default or Event of Default then exists, if Borrower states in its notice of such event that Borrower or the relevant Subsidiary intends to reinvest, within 90 days of the applicable Disposition, the Net Cash Proceeds thereof in assets similar to the assets which were subject to such Disposition, then Borrower shall not be required to make a mandatory prepayment under this subsection in respect of such Net Cash Proceeds to the extent such Net Cash Proceeds are actually reinvested in such similar assets with such 90 day period. Promptly after the end of such 90 day period, Borrower shall notify Bank whether Borrower or such Subsidiary has reinvested such Net Cash Proceeds in such similar assets, and, to the extent such Net Cash Proceeds have not been so reinvested, Borrower shall promptly prepay the Obligations in the amount of such Net Cash Proceeds not so reinvested. The amount of each such prepayment shall be applied first to the outstanding Term Loans until paid in full and then to the Revolving Loans; provided that proceeds relating to Eligible Inventory and Eligible Receivables then included in the Borrowing Base shall first be applied to the Revolving Loans. If Bank so requests, all proceeds of such Disposition or Event of Loss shall be deposited with Bank (or its agent) and held by it in the Collateral Account to be disbursed to or at Borrower’s direction for application to or reimbursement for the costs of replacing, rebuilding or restoring such Property.

 

 

(ii)    If after the Closing Date Borrower or any Subsidiary shall issue new equity securities (whether common or preferred stock or otherwise), other than equity securities issued in connection with the exercise of employee stock options, Borrower shall promptly notify Bank of the estimated Net Cash Proceeds of such issuance to be received by or for the account of Borrower or such Subsidiary in respect thereof. Promptly upon receipt by Borrower or such Subsidiary of Net Cash Proceeds of such issuance, Borrower shall prepay the Obligations in an aggregate amount equal to 100% of the amount of such Net Cash Proceeds. Each such prepayment shall be applied in such amounts and to such Obligations as agreed to by Borrower and Bank. Borrower acknowledges that its performance hereunder shall not limit the rights and remedies of Bank for any breach of Section 7.5 (Maintenance of Subsidiaries) or Section 8.1(i) (Change of Control) hereof or any other terms of the Loan Documents.

 

(iii)    If after the Closing Date Borrower or any Subsidiary shall issue any Indebtedness for Borrowed Money, other than Indebtedness for Borrowed Money expressly permitted by Section 7.1, Borrower shall promptly notify Bank of the estimated Net Cash Proceeds of such issuance to be received by or for the account of Borrower or such Subsidiary in respect thereof. Promptly upon receipt by Borrower or such Subsidiary of Net Cash Proceeds of such issuance, Borrower shall prepay the Obligations in an aggregate amount equal to 100% of the amount of such Net Cash Proceeds. Each such prepayment shall be applied in such amounts and to such Obligations as agreed to by Borrower and Bank. Borrower acknowledges that its performance hereunder shall not limit the rights and remedies of Bank for any breach of Section 7.1 or any other terms of the Loan Documents.

 

(iv)    If after the Closing Date Borrower or any Subsidiary shall issue any Subordinated Debt, Borrower shall promptly notify Bank of the estimated Net Cash Proceeds of such issuance to be received by or for the account of Borrower or such Subsidiary in respect thereof. Promptly upon receipt by Borrower or such Subsidiary of Net Cash Proceeds of such issuance, Borrower shall prepay the Obligations in an aggregate amount equal to 100% of the amount of such Net Cash Proceeds. Each such prepayment shall be applied in such amounts and to such Obligations as agreed to by Borrower and Bank. Borrower acknowledges that its performance hereunder shall not limit the rights and remedies of Bank for any breach of Section 7.1 or any other terms of the Loan Documents.

 

 

(v)    Borrower shall, on each date the Revolving Credit Commitment is reduced pursuant to Section 2.13, prepay the Revolving Loans and, if necessary, Cash Collateralize the L/C Obligations by the amount, if any, necessary to reduce the sum of the aggregate principal amount of Revolving Loans and L/C Obligations then outstanding to the amount to which the Revolving Credit Commitment has been so reduced.

 

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

 

(vii)    If at any time the Dollar Equivalent of the sum of the aggregate principal amount of the total Revolving Loans in Euros exceeds the Euro Sublimit, Borrower shall immediately and without notice or demand pay over the amount of the excess to Bank as and for a mandatory prepayment on such Obligations, with each such prepayment to be applied to the Revolving Loans until paid in full or the Euro Sublimit is no longer exceeded.

 

(viii)    Unless Borrower otherwise directs, prepayments of Loans under this Section 2.8(b) shall be applied first to the Term Loan until paid in full and then to the Revolving Loans (with a concurrent permanent reduction of the Revolving Commitment); provided that the proceeds from the divestiture of the real property located at 1328 Racine Street, Racine, Wisconsin 53403 shall be permitted to first be applied to the Revolving Loans outstanding. Each prepayment of Loans under this Section 2.8(b) shall be made by the payment of the principal amount to be prepaid and, in the case of any Term Loans, accrued interest thereon to the date of prepayment together with any amounts due Bank under Section 3.3.

 

(c)    Any amount of Revolving Loans paid or prepaid before the Revolving Credit Termination Date may, subject to the terms and conditions of this Agreement, be borrowed, repaid and borrowed again. No amount of the Term Loans paid or prepaid may be reborrowed, and, in the case of any partial prepayment, such prepayment shall be applied to the remaining amortization payments on the relevant Loans in the inverse order of maturity.

 

(d)    If, due to exchange rate fluctuations, the aggregate principal amount of Revolving Loans (determined in U.S. Dollars with all Loans in Canadian Dollars being converted to the Equivalent Amount in U.S. Dollars) at any time outstanding exceeds the applicable Commitment then in effect, Borrower shall, upon the written request of Bank, prepay the Revolving Loans, or Term Loan, as applicable, in an amount equal to such excess (the "Currency Excess Amount"):

 

(i)    Within three (3) Business Days of such request if the Currency Excess Amount is greater than or equal to 3% of the applicable Commitment; and

 

 

(ii)    On the last day of the fiscal quarter in which such request is provided if the Currency Excess Amount is less than 3% of the applicable Commitment, so long as such Currency Excess Amount continues to exist on such date.

 

Section 2.9    Default Rate. Notwithstanding anything to the contrary contained herein, if any Loan or any part thereof is not paid when due (whether by lapse of time, acceleration, or otherwise), or at the election of Bank upon notice to Borrower during the existence of any other Event of Default, Borrower shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all Loans and Reimbursement Obligations, and letter of credit fees at a rate per annum equal to:

 

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

 

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

 

(c)    for any Term CORRA Loan, the sum of 2.0% plus the Applicable Margin plus the Adjusted CORRA from time to time in effect;

 

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

 

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

 

(f)    for any Letter of Credit, the sum of 2.0% plus the letter of credit fee due under Section 2.11 with respect to such Letter of Credit.

 

Section 2.10    Evidence of Indebtedness. Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of Borrower hereunder, including the amounts of principal and interest payable and paid to Bank from time to time hereunder.

 

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

 

(c)    Bank may request that the Loans be evidenced by a promissory note or notes in the forms of Exhibit A-1 (in the case of its Term Loan and referred to herein as a “Term Note”), or Exhibit A-2 (in the case of its Revolving Loans and referred to herein as a “Revolving Note”), as applicable (the Term Notes and Revolving Notes being hereinafter referred to collectively as the “Notes” and individually as a “Note”). In such event, Borrower shall execute and deliver to Bank a Note payable to Bank or its registered assigns in the amount of the relevant Term Loan or Revolving Credit Commitment, as applicable.

 

 

Section 2.11    Fees.

 

(a)     Revolving Credit Commitment Fee. Borrower shall pay to Bank a commitment fee at the rate per annum equal to the Applicable Margin (computed on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed) on the average daily Unused Revolving Credit Commitment. Such commitment fee shall be payable quarterly in arrears on the last day of each March, June, September, and December in each year (commencing on the first such date occurring after the date hereof) and on the Revolving Credit Termination Date, unless the Revolving Credit Commitment is terminated in whole on an earlier date, in which event the commitment fee for the period to the date of such termination in whole shall be paid on the date of such termination.

 

(b)    Reserved.

 

(c)    Letter of Credit Fees. On the last day of each March, June, September, and December in each year (commencing on the first such date occurring after the date hereof) to and including, and on, the Revolving Credit Termination Date, Borrower shall pay to Bank a letter of credit fee at the Applicable Margin (computed on the basis of a year of 360 days and the actual number of days elapsed) for Revolving Loans that are SOFR Loans or Eurodollar Loans on the daily average face amount of Letters of Credit outstanding during the preceding calendar quarter. In addition to such letter of credit fee, Borrower further agrees to pay to Bank issuance fees, for each issuance, equal to 0.125% per annum of the face amount of such Letter of Credit, and such processing, transaction and other fees and charges as Bank from time to time customarily imposes in connection with any issuance, amendment, cancellation, negotiation, and/or payment of letters of credit and drafts drawn thereunder.

 

(d)    Closing Fee. Borrower shall pay to Bank on the date hereof a non-refundable closing fee in the amount of $11,500.

 

(e)    Audit Fees. Borrower shall pay to Bank charges for audits of the Collateral performed by Bank or its agents or representatives in such amounts as Bank may from time to time request (Bank acknowledging and agreeing that such charges shall be computed in the same manner as it at the time customarily uses for the assessment of charges for similar collateral audits); provided, that in the absence of any Default and Event of Default, Borrower shall not be required to pay Bank for more than one (1) such audit per calendar year.

 

 

Section 2.12    Place and Application of Payments. All payments of principal, interest, fees, and all other Obligations payable under the Loan Documents shall be made to Bank at its office at 790 North Water Street, Milwaukee, Wisconsin (or at such other place as Bank may specify) no later than 1:00 p.m. on the date any such payment is due and payable. Payments received by Bank after 1:00 p.m. shall be deemed received as of the opening of business on the next Business Day. All such payments shall be made in U.S. Dollars, Euros or Canadian Dollars, as applicable, in immediately available funds at the place of payment, without set off or counterclaim and without reduction for, and free from, any and all present or future taxes, levies, imposts, duties, fees, charges, deductions, withholdings, restrictions, and conditions of any nature imposed by any government or any political subdivision or taxing authority thereof (but excluding any taxes imposed on or measured by the net income of Bank). All payments shall be applied (a) first, towards payment of interest and fees then due hereunder and under the other Loan Documents, (b) second, to the payment of principal on the Loans, unpaid Reimbursement Obligations, together with amounts to be held by Bank as collateral security for any outstanding L/C Obligations and Hedging Liability (provided that funds from, and proceeds of Collateral owned by, any Person directly or indirectly liable for a Swap Obligation and that was not an “eligible contract participant” as defined in the Commodity Exchange Act at the time such Swap Obligation was incurred may not be used to satisfy such Swap Obligation), and (c) third, to the payment of all other unpaid Obligations and all other indebtedness, obligations, and liabilities of each Borrower and its Subsidiaries secured by the Loan Documents (provided that funds from, and proceeds of Collateral owned by, any Person directly or indirectly liable for a Swap Obligation and that was not an “eligible contract participant” as defined in the Commodity Exchange Act at the time such Swap Obligation was incurred may not be used to satisfy such Swap Obligation) to be allocated pro rata in accordance with the aggregate unpaid amounts owing to each holder thereof. Unless Borrower otherwise directs, principal payments shall be applied first to the relevant Adjusted Term SOFR portion until payment in full thereof, with any balance applied to the relevant Eurodollar portion in the order in which their Interest Periods expire. Borrower hereby irrevocably authorizes Bank to (i) charge from time to time any of Borrower’s deposit accounts with Bank and/or (ii) make Revolving Loans from time to time hereunder (and any such Revolving Loan may be made by Bank hereunder without regard to the provisions of Section 4 hereof), in each case for payment of any Obligation then due and payable (whether such Obligation is for interest then due on a Loan, a Reimbursement Obligation or otherwise); provided that Bank shall not be under any obligation to charge any such deposit account or make any such Revolving Loan under this Section, and Bank shall incur no liability to Borrower or any other Person for its failure to do so.

 

Section 2.13    Commitment Terminations. Optional Revolving Credit Terminations. Borrower shall have the right at any time and from time to time, upon five (5) Business Days prior written notice to Bank (or such shorter period of time agreed to by Bank), to reduce or terminate the Revolving Credit Commitment without premium or penalty and in whole or in part, any partial reduction or termination to be in an amount not less than $5,000,000; provided that the Revolving Credit Commitment may not be reduced to an amount less than the sum of the aggregate principal amount of Revolving Loans and L/C Obligations then outstanding. Any reduction or termination of the Revolving Credit Commitment below the L/C Sublimit then in effect shall reduce the L/C Sublimit by a like amount.

 

(b)    Mandatory Revolving Credit Termination. If at any time Net Cash Proceeds or other amounts remain after the prepayment of the Term Loans in full pursuant to Section 2.8(b)(i), (ii), (iii), or (iv), the Revolving Credit Commitment shall be reduced by an amount equal to 100% of such excess.

 

(c)    Any termination of the Commitments pursuant to this Section 2.13 may not be reinstated.

 

 

Section 2.14    Sweep to Loan Arrangement.

 

Notwithstanding any provision herein to the contrary (including, without limitation, the provisions in Sections 2.5 and 2.8 above), so long as a Sweep to Loan Arrangement is in effect, and subject to the terms and conditions thereof, Revolving Loans may be advanced and prepaid hereunder notwithstanding any notice, minimum amount, or funding and payment location requirements hereunder for any advance of Revolving Loans or for any prepayment of any Revolving Loans. The making of any such Revolving Loans shall otherwise be subject to the other terms and conditions of this Agreement. All Revolving Loans advanced or prepaid pursuant to such Sweep to Loan Arrangement shall be SOFR Loans with an Interest Period of approximately one (1) calendar month, commencing on the first Business Day of the then current calendar month to but excluding the first Business Day of the immediately succeeding calendar month. Bank shall have the right in its sole discretion to suspend or terminate the making and/or prepayment of Revolving Loans pursuant to such Sweep to Loan Arrangement with notice to Borrower (which may be provided on a same-day basis), whether or not any Default or Event of Default exists. Bank shall not be liable to Borrower or any other Person for any losses directly or indirectly resulting from events beyond Bank’s reasonable control, including any interruption of communications or data processing services or legal restriction or for any special, indirect, consequential or punitive damages in connection with any Sweep to Loan Arrangement.

 

Section 2.15    Effect of Benchmark Transition Event (SOFR).

 

Notwithstanding anything to the contrary herein or in any other Loan Document

 

(a)         Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Loan Document, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior any setting of the then-current Benchmark, then (x) if a Benchmark Replacement is determined in accordance with clause (1) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document and (y) if a Benchmark Replacement is determined in accordance with clause (2) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to Borrower without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a monthly basis.

 

(b)         Benchmark Replacement Conforming Changes. In connection with the use, administration, adoption or implementation of a Benchmark Replacement, Bank will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.

 

 

(c)         Notice; Standards for Decisions and Determinations. Bank will promptly notify Borrower of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement. Bank will promptly notify Borrower of the removal or reinstatement of any tenor of a Benchmark pursuant to Section 2.15. Any determination, decision or election that may be made by Bank pursuant to this Section 2.15, 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 or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 2.15.

 

(d)    Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including the Term SOFR Reference Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by Bank in its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative, then Bank may modify the definition of “Interest Period” (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not or is no longer subject to an announcement that is or will not be representative for a Benchmark (including a Benchmark Replacement), then Bank may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.

 

(e)    Benchmark Unavailability Period. Upon Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, Borrower may revoke any pending request for a SOFR Borrowing of, conversion to or continuation of SOFR Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to a Loan bearing interest at the Base Rate. During a Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of Base Rate based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of Base Rate.

 

 

Section 2.16    Effect of Benchmark Transition Event (CORRA).

 

Notwithstanding anything to the contrary in this Agreement or in any other Loan Document:

 

(a)    Canadian Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Loan Document, if a Canadian Benchmark Transition Event and its related Canadian Benchmark Replacement Date have occurred prior any setting of the then-current Canadian Benchmark, then (x) if a Canadian Benchmark Replacement is determined in accordance with clause (a) of the definition of "Canadian Benchmark Replacement" for such Canadian Benchmark Replacement Date, such Canadian Benchmark Replacement will replace such Canadian Benchmark for all purposes hereunder and under any Loan Document in respect of such Canadian Benchmark setting and subsequent Canadian Benchmark settings without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document and (y) if a Canadian Benchmark Replacement is determined in accordance with clause (b) of the definition of "Canadian Benchmark Replacement" for such Canadian Benchmark Replacement Date, such Canadian Benchmark Replacement will replace such Canadian Benchmark for all purposes hereunder and under any Loan Document in respect of any Canadian Benchmark setting at or after 5:00 p.m. (Toronto time) on the fifth (5th) Business Day after the date that notice of such Canadian Benchmark Replacement is provided to Borrower without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document. If the Canadian Benchmark Replacement is Daily Compounded CORRA, all interest payments will be payable on the last day of each Interest Period.

 

(b)    Canadian Benchmark Replacement Conforming Changes. In connection with the use, administration, adoption or implementation of a Canadian Benchmark Replacement, Bank will have the right to make Canadian 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 Canadian Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.

 

(c)    Notices; Standards for Decisions and Determinations. Bank will promptly notify Borrower of (i) the implementation of any Canadian Benchmark Replacement and (ii) the effectiveness of any Canadian Benchmark Replacement Conforming Changes in connection with the use, administration, adoption or implementation of a Canadian Benchmark Replacement. Bank will notify Borrower of (x) the removal or reinstatement of any tenor of a Canadian Benchmark pursuant to Section 2.1.6(d) and (y) the commencement of any Canadian Benchmark Unavailability Period. Any determination, decision or election that may be made by Bank pursuant to this Section 2.1.6 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 or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 2.1.6.

 

 

(d)    Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Canadian Benchmark Replacement), (i) if the then-current Canadian Benchmark is a term rate (including Adjusted Term CORRA) and either (A) any tenor for such Canadian Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by Bank in its reasonable discretion or (B) the regulatory supervisor for the administrator of such Canadian Benchmark has provided a public statement or publication of information announcing that any tenor for such Canadian Benchmark is not or will not be representative, then Bank may modify the definition of “Interest Period” (or any similar or analogous definition) for any Canadian Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Canadian Benchmark (including a Canadian Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is not or will not be representative for a Canadian Benchmark (including a Canadian Benchmark Replacement), then Bank may modify the definition of “Interest Period” (or any similar or analogous definition) for all Canadian Benchmark settings at or after such time to reinstate such previously removed tenor.

 

(e)    Benchmark Unavailability Period. Upon Borrower’ receipt of notice of the commencement of a Canadian Benchmark Unavailability Period, Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Loans which are of the type of that have a rate of interest determined by reference to the then-current Canadian Benchmark, to be made, converted or continued during any Canadian Benchmark Unavailability Period and, failing that, Borrower will be deemed to have converted any such request into a request for a Borrowing of, conversion to or continuation of, (i) for a Canadian Benchmark Unavailability Period in respect of Term CORRA, Daily Compounded CORRA Loan, and (ii) for a Canadian Benchmark Unavailability Period in respect of a Canadian Benchmark other than Term CORRA, Canadian Prime Rate Loans.

 

Section 2.17    Nature and Extent of Each Borrower’s Liability.

 

(a)    Joint and Several Liability. Each Borrower agrees that it is jointly and severally liable for all Obligations and all agreements under the Loan Documents, except Excluded Swap Obligations.

 

 

(b)    Direct Liability; Separate Borrowing Availability.  Nothing contained in this Section 2.16 shall limit the liability of any Borrower to pay Loans made directly or indirectly to that Borrower (including Loans advanced to any other Borrower and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower), Obligations relating to Letters of Credit issued to support such Borrower’s business, and all accrued interest, fees, expenses and other related Obligations with respect thereto, for which such Borrower shall be primarily liable for all purposes hereunder. Bank shall have the right, at any time in its discretion, to condition Revolving Loans and Letters of Credit upon a separate calculation of borrowing availability consistent with the Borrowing Base for each Borrower and to restrict the disbursement and use of such Revolving Loans and Letters of Credit to such Borrower.

 

(c)    Joint Enterprise.  Each Borrower has requested that Bank make this credit facility available to Borrower on a combined basis, in order to finance Borrower’s business most efficiently and economically. Borrower’s business is a mutual and collective enterprise, and the successful operation of Borrower is dependent upon the successful performance of the integrated group. Borrower believes that consolidation of their credit facility will enhance the borrowing power of each Borrower and ease administration of the Revolving Loans and Term Loan, all to their mutual advantage. Borrower acknowledges that Bank’s willingness to extend credit and to administer the Collateral on a combined basis hereunder is done solely as an accommodation to Borrower and at Borrower’s request.

 

(d)    Borrower Agent.  Each Borrower hereby irrevocably appoints and designates TDI (“Borrower Agent”) as its representative and agent and attorney-in-fact for all purposes under the Loan Documents, including requests for Loans, designation of interest rates, delivery or receipt of communications and all notices, preparation and delivery of Borrowing Base and financial reports, receipt and payment of Obligations, requests for waivers, amendments or other accommodations, actions under the Loan Documents (including in respect of compliance with covenants), and all other dealings with Bank. Any notice, election, representation, warranty, agreement or undertaking by or on behalf of any Loan Party by Borrower Agent shall be deemed for all purposes to have been made by such Loan Party and shall be binding upon and enforceable against such Loan Party to the same extent as if made directly by such Loan Party and Bank shall be entitled to rely thereon. Bank may give any notice to or communication with a Borrower or other Loan Party hereunder to Borrower Agent on behalf of such Borrower or Loan Party.

 

SECTION 3.    CHANGE IN CIRCUMSTANCES.

 

Section 3.1    Withholding Taxes. Except as otherwise required by law, each payment by Borrower under this Agreement or the other Loan Documents shall be made without withholding for or on account of any present or future taxes (other than overall net income taxes on the recipient) imposed by or within the jurisdiction in which Borrower is domiciled, any jurisdiction from which Borrower makes any payment, or (in each case) any political subdivision or taxing authority thereof or therein. If any such withholding is so required, Borrower shall make the withholding, pay the amount withheld to the appropriate Governmental Authority before penalties attach thereto or interest accrues thereon, and forthwith pay such additional amount as may be necessary to ensure that the net amount actually received by Bank free and clear of such taxes (including such taxes on such additional amount) is equal to the amount that Bank would have received had such withholding not been made. If Bank pays any amount in respect of any such taxes, penalties or interest, Borrower shall reimburse Bank for that payment on demand in the currency in which such payment was made. If Borrower pays any such taxes, penalties or interest, it shall deliver official tax receipts evidencing that payment or certified copies thereof to Bank on or before the thirtieth day after payment.

 

 

Section 3.2    Documentary Taxes. Borrower agrees to pay on demand any documentary, stamp or similar taxes payable in respect of this Agreement or any other Loan Document, including interest and penalties, in the event any such taxes are assessed, irrespective of when such assessment is made and whether or not any credit is then in use or available hereunder.

 

Section 3.3    Funding Indemnity. Notwithstanding anything to the contrary contained anywhere else in this Agreement, Borrower acknowledges that advances made by Bank by way of Term CORRA Loans, Daily Compounded CORRA Loans, SOFR Loans or Eurodollar Loans may not be repaid prior to the end of the Interest Period applicable thereto. If any such Loan is repaid or converted prior to the end of the Interest Period applicable thereto (whether as a result of acceleration or otherwise) and Bank shall incur any loss, cost or expense (including any loss, cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by Bank to fund or maintain any Eurodollar Loan, SOFR Loan, Term CORRA Loan, Daily Compounded CORRA Loan or the relending or reinvesting of such deposits or amounts paid or prepaid to Bank) as a result of:

 

(i)    any payment, prepayment or conversion of a Eurodollar Loan, SOFR Loan, Term CORRA Loan or Daily Compounded CORRA Loan on a date other than the last day of its Interest Period,

 

(ii)    any failure (because of a failure to meet the conditions of Section 4 or otherwise) by Borrower to borrow or continue a Eurodollar Loan, or to convert a Loan into a Eurodollar Loan, on the date specified in a notice given pursuant to Section 2.6(a),

 

(iii)    any failure by Borrower to make any payment of principal on any SOFR Loan, Eurodollar Loan, Term CORRA Loan or Daily Compounded CORRA Loan when due (whether by acceleration or otherwise), or

 

(iv)    any acceleration of the maturity of a SOFR Loan, Eurodollar Loan, Term CORRA Loan or Daily Compounded CORRA Loan as a result of the occurrence of any Event of Default hereunder,

 

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

 

 

Section 3.4    Change of Law; Illegality. If Bank determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for Bank or its applicable lending office to make, maintain or fund Loans whose interest is determined by reference to SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR, Term SOFR, EURIBO, CORRA, the Term CORRA Reference Rate, Adjusted Term CORRA, Term CORRA or Daily Compounded CORRA or to determine or charge interest based upon SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR, Term SOFR, EURIBO, the Term CORRA Reference Rate, Adjusted Term CORRA, Term CORRA or Daily Compounded CORRA then, upon notice thereof by Bank to Borrower (an "Illegality Notice"),

 

(i)    any obligation of Bank to make SOFR Loans or Eurodollar Loans, as applicable, and any right of any Borrower to continue SOFR Loans and/or Eurodollar Loans, as applicable, shall be suspended until Bank notifies Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of an Illegality Notice, Borrower shall, if necessary to avoid such illegality, upon demand from Bank, prepay or, if applicable, convert all SOFR Loans or Eurodollar Loans, as applicable, to Loans bearing interest at the Base Rate (the interest rate on which such Loans shall, if necessary to avoid such illegality, be determined by Bank without reference to clause (c) of the definition of "Base Rate"), on the last day of the Interest Period therefor, if Bank may lawfully continue to maintain such SOFR Loans to such day, or immediately, if Bank may not lawfully continue to maintain such SOFR Loans to such day. Upon any such prepayment or conversion, Borrower shall also pay accrued interest on the amount so prepaid or converted, together with any additional amounts required pursuant to Section 3.3; and

 

(ii)    any obligation of Bank to make Daily Compounded CORRA Loans or Term CORRA Loans, and any right of any Borrower to continue Daily Compounded CORRA Loans or Term CORRA Loans or to convert Canadian Prime Rate Loans to Daily Compounded CORRA Loans or Term CORRA Loans, shall be suspended, and (b) the interest rate on which Canadian Prime Rate Loans shall, if necessary to avoid such illegality, be determined by Bank without reference to clause (ii) of the definition of "Canadian Prime Rate", in each case until Bank notifies Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of an Illegality Notice, Borrower shall, if necessary to avoid such illegality, upon demand from Bank, prepay or, if applicable, convert all Daily Compounded CORRA Loans or Term CORRA Loans to Canadian Prime Rate Loans (the interest rate on which Canadian Prime Rate Loans shall, if necessary to avoid such illegality, be determined by Bank without reference to clause (ii) of the definition of "Canadian Prime Rate"), on the last day of the Interest Period therefor, if Bank may lawfully continue to maintain such Daily Compounded CORRA Loans or Term CORRA Loans to such day, or immediately, if Bank may not lawfully continue to maintain such Daily Compounded CORRA Loans or Term CORRA Loans to such day. Upon any such prepayment or conversion, Borrower shall also pay accrued interest on the amount so prepaid or converted, together with any additional amounts required pursuant to Section 3.3.

 

Section 3.5    Inability to Determine Rates. Subject to Section 2.15, if, on or prior to the first day of any Interest Period for any Borrowing of SOFR Loans:

 

(a)    Bank determines (which determination shall be conclusive and binding absent manifest error) that “Adjusted Term SOFR”, “Adjusted Term CORRA” or “Daily Compounded CORRA”, as applicable, cannot be determined pursuant to the definition thereof, or

 

 

(b)    Bank determines that (i) for any reason in connection with any request for a SOFR Loan, a Term CORRA Loan, a Daily Compounded CORRA or a conversion thereto or a continuation thereof that Adjusted Term SOFR, Adjusted Term CORR or Daily Compounded CORRA, as applicable, for any requested Interest Period with respect to a proposed SOFR Loan, Term CORRA Loan or Daily Compounded CORRA Loan does not adequately and fairly reflect the cost to Bank of making and maintaining such Loan or (ii) that the making or funding of SOFR Loans, Term CORRA Loan or Daily Compounded CORRA Loan has become impracticable, or

 

(c)    a Benchmark Transition Event or Canadian Benchmark Transition Event has occurred and a Benchmark Replacement or Canadian Benchmark Replacement, as applicable, has not yet been chosen and implemented by Bank in accordance with Section 2.15 or Section 2.16,

 

then Bank shall forthwith give notice thereof to Borrower. Upon notice thereof by Bank to Borrower, any obligation of Bank to make SOFR Loans, Term CORRA Loans or Daily Compounded CORRA Loans, as applicable, and any right of Borrower to continue SOFR Loans, Term CORRA Loans or Daily Compounded CORRA Loans or to convert Prime Rate Loans to Term CORRA Loans or Daily Compounded CORRA Loans shall be suspended (to the extent of the affected SOFR Loans, Term CORRA Loans, Daily Compounded CORRA Loans or affected Interest Periods) until Bank revokes such notice. Upon receipt of such notice, (i) (x) Borrower may revoke any pending request for a borrowing of, conversion to or continuation of SOFR Loans, Term CORRA Loans or Daily Compounded CORRA Loans, as applicable, (to the extent of the affected SOFR Loans, Term CORRA Loans, Daily Compounded CORRA Loans or affected Interest Periods) (y) in respect of Term CORRA Loans, Borrower may elect to convert any such request into a request for a Borrowing of or conversion to Daily Compounded CORRA Loans; or, failing such revocation or election, (z) Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to Canadian Prime Rate Loans, in the amount specified therein and (ii) (x) in respect of Term CORRA Loans, Borrower may elect to convert any outstanding affected Term CORRA Loans at the end of the applicable Interest Period, into Daily Compounded CORRA Loans, and (y) otherwise, or failing that, Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to Canadian Prime Rate Loans, in the amount specified therein and (iii) any outstanding affected SOFR Loans will be deemed to have been converted into Base Rate Loans at the end of the applicable Interest Period. Upon any such conversion, Borrower shall also pay accrued interest on the amount so converted, together with any additional amounts required pursuant to Section 3.3.

 

Section 3.6    Increased Cost and Reduced Return. If, on or after the date hereof, any Change in Law shall:

 

(iii)    impose, modify or deem applicable any reserve (including pursuant to regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, special, supplemental or other marginal reserve requirement) with respect to eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D)), 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, Bank (or its lending branch);

 

 

(iv)    shall subject Bank (or its lending branch) to any tax, duty or other charge with respect to its Eurodollar Loans, SOFR Loans, Term CORRA Loans, Daily Compounded CORRA Loans, its Notes, its Letter(s) of Credit, or its participation in any thereof, any Reimbursement Obligations owed to it or its obligation to make Eurodollar Loans, SOFR Loans Term CORRA Loans or Daily Compounded CORRA Loans, issue a Letter of Credit, or to participate therein, or shall change the basis of taxation of payments to Bank of the principal of or interest on its Eurodollar Loans, SOFR Loans, Term CORRA Loans, Daily Compounded CORRA Loans, Letter(s) of Credit, or participations therein or any other amounts due under this Agreement or any other Loan Document in respect of its Eurodollar Loans, SOFR Loans, Term CORRA Loans, Daily Compounded CORRA Loans, Letter(s) of Credit, any participation therein, any Reimbursement Obligations owed to it, or its obligation to make Eurodollar Loans, SOFR Loans, Term CORRA Loans, Daily Compounded CORRA Loans, or issue a Letter of Credit, or acquire participations therein (except for changes in the rate of tax on the overall net income of Bank imposed by jurisdiction in which Bank’s principal executive office or lending branch is located); or

 

(v)    impose on Bank any other condition, cost or expense affecting this Agreement, SOFR Loans, Term CORRA Loans or Daily Compounded CORRA Loans made by Bank therein;

 

and the result of any of the foregoing is to increase the cost to Bank (or its lending branch) of making or maintaining any Eurodollar Loan, SOFR Loan, Term CORRA Loans or Daily Compounded CORRA Loans, issuing or maintaining a Letter of Credit, or participating therein, or to reduce the amount of any sum received or receivable by Bank (or its lending branch) under this Agreement or under any other Loan Document with respect thereto, by an amount deemed by Bank to be material, then, within 15 days after demand by Bank, Borrower shall be obligated to pay to Bank such additional amount or amounts as will compensate Bank for such increased cost or reduction.

 

(c)    If, after the date hereof, Bank shall have determined that any Change in Law has had the effect of reducing the rate of return on Bank’s capital as a consequence of its obligations hereunder to a level below that which Bank could have achieved but for such Change in Law (taking into consideration Bank’s policies with respect to capital adequacy) by an amount deemed by Bank to be material, then from time to time, within 15 days after demand by Bank, Borrower shall pay to Bank such additional amount or amounts as will compensate Bank for such reduction.

 

(d)    A certificate of Bank claiming compensation under this Section 3.6 and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive absent manifest error. In determining such amount, Bank may use any reasonable averaging and attribution methods.

 

 

Section 3.7    Lending Offices. Bank may, at its option, elect to make its Loans hereunder at the branch, office or affiliate specified on the appropriate signature page hereof for each type of Loan available hereunder or at such other of its branches, offices or affiliates as it may from time to time elect. To the extent reasonably possible, Bank shall designate an alternative branch or funding office with respect to its Eurodollar Loans to reduce any liability of Borrower to Bank under Section 3.6 or to avoid the unavailability of Eurodollar Loans under Section 3.5, so long as such designation is not otherwise disadvantageous to Bank.

 

Section 3.8    Discretion of Bank as to Manner of Funding. Notwithstanding any other provision of this Agreement, Bank shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder with respect to Eurodollar Loans shall be made as if Bank had actually funded and maintained each Eurodollar Loan through the purchase of deposits in the interbank eurodollar market having a maturity corresponding to such Loan’s Interest Period, and, in the case of any Eurodollar Loan, bearing an interest rate equal to EURIBO for such Interest Period.

 

SECTION 4.    CONDITIONS PRECEDENT.

 

Section 4.1    Initial Credit Event. The obligation of Bank to participate in any initial Credit Event hereunder is subject to satisfaction or waiver by Bank of the following conditions precedent:

 

(a)    Bank shall have received each of the following, in each case (i) duly executed by all applicable parties, (ii) dated a date satisfactory to Bank and (iii) in form and substance satisfactory to Bank:

 

(i)    this Agreement duly executed by Borrower and Bank;

 

(ii)    duly executed Notes of Borrower dated the date hereof and otherwise in compliance with the provisions of Section 2.10;

 

(iii)    the Assignment of and Amendment to Security Agreement, the Assignment of and Amendment to IP Security Agreement, the Assignment of and Amendment to Pledge Agreement, the Assignment of and Amendment to Perfection Certificate, the Collateral Assignment of Rights under Purchase Documents, the Assignment of and Amendment to Negative Pledge Agreement, the Assignment of and Amendment to Agreement as Liens and Encumbrances and each of the other Collateral Documents required by Bank, together with (A) UCC financing statements to be filed against TDI, as debtor, in favor of Bank, as secured party, (B) PPSA financing statement to be filed against Canadian Borrower and Kobelt Purchaser, as debtors, in favor of Bank, as secured party (C) patent, trademark, industrial design and copyright collateral agreements to the extent requested by Bank, and (D) deposit account, securities account, and commodity account control agreements to the extent requested by Bank;

 

 

(iv)    copies of TDI’s and Kobelt Purchaser’s articles of incorporation and bylaws (or comparable organizational documents) and any amendments thereto, certified in each instance by its Secretary or Assistant Secretary;

 

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

 

(vi)    such documents and certifications as Bank may reasonably require to evidence that TDI, Kobelt Purchaser and Kobelt Target are validly existing, in good standing or active status (as applicable), and qualified to engage in business in its jurisdiction of organization and in any other jurisdiction in which the nature of TDI and Kobelt Purchaser’s business requires such qualification;

 

(vii)    a list of Borrower’s Authorized Representatives;

 

(viii)    a pro forma Borrowing Base Certificate in the form attached hereto as Exhibit B showing the computation of the Borrowing Base in reasonable detail as of the close of business on February 14, 2025, after giving effect to the Kobelt Acquisition;

 

(ix)    financing statement, tax, and judgment lien search results against the Property of Borrower and each Guarantor, evidencing the absence of Liens on its Property except as permitted by Section 7.2;

 

(x)     pay off and lien release or amendment letters from secured creditors of Kobelt Target and Kobelt Sellers (as defined in the Kobelt Purchase Document) setting forth, among other things, the total amount of indebtedness outstanding and owing to them (or outstanding letters of credit issued for the account of TDI and/or Kobelt Target) (collectively, the “Payoff Amount”) and containing a confirmation that upon receipt of the Payoff Amount that (i) all indebtedness, liabilities and obligations have been satisfied in full, (ii) all Liens have been discharged and released (in the case of the Kobelt Sellers, only Liens on the “Purchased Shares” as defined in the Kobelt Purchase Document), (iii) all loan, guarantee and security documents delivered by the Kobelt Target are terminated and released, (iv) they shall cause to be delivered to Bank UCC amendment or termination statements and PPSA financing change statements or full discharges of any financing statements registered against the Kobelt Target and the Kobelt Sellers (but in the case of the Kobelt Sellers, only to the extent any such financing statements perfect a security interest the “Purchased Shares” as defined in the Kobelt Purchase Document), together with any other lien amendment or release instruments necessary to amend or release their Liens on the assets of Kobelt Target (including the discharges of Intellectual Property Security Agreements to be filed with the applicable governmental offices in which Lien filings were made, and termination notices for any bank account control agreements) or the “Purchased Shares” (as defined in the Kobelt Purchase Document); and (v) the return of any physical Collateral (including share certificates);

 

 

(xi)    evidence reasonably satisfactory to Bank that all indebtedness to creditors referenced in the preceding paragraph has been (or concurrently with the initial Borrowing will be) paid in full, and that all agreements and instruments governing indebtedness and that all Liens securing such indebtedness have been (or concurrently with the initial Borrowing will be) terminated or amended.

 

(xii)    a favorable written opinion of counsel to TDI and Kobelt Purchaser;

 

(xiii)    evidence satisfactory to Bank that all due diligence with respect to TDI, Kobelt Purchaser and Kobelt Target has been completed, including confirmatory third-party due diligence consisting of a third-party due diligence report, quality of earnings, a legal and tax review, an industry and technology review, inventory appraisal, management background checks, an insurance review, and customer and supplier calls, all conducted by firms acceptable to Bank;

 

(xiv)    five-year projected financial statements for Borrower and a closing balance sheet for Borrower adjusted to give effect to the Kobelt Acquisition in form and substance previously provided to Bank;

 

(xv)    complete, signed copies of the Kobelt Purchase Documents;

 

(xvi)    the Post-Kobelt Amalgamation Deliveries (other than the certificate and articles of amalgamation and a certificate of good standing of the Canadian Borrower, each of which shall be delivered to Bank as soon as possible upon receipt) delivered in escrow to be released from escrow automatically and with no further action by any party hereto upon the Canadian Borrower providing satisfactory evidence to Bank of the consummation of the Kobelt Amalgamation, which the Canadian Borrower shall provide forthwith upon completion of same; and

 

(xvii)    such other agreements, instruments, documents, certificates, and opinions as Bank may reasonably request.

 

(b)    Bank shall have received the initial fees called for by Section 2.11, together with all other fees, costs and expenses required to be paid by Borrower at or before closing;

 

(c)    The capital and organizational structure of Borrower and its Subsidiaries shall be satisfactory to Bank; and

 

(d)    After giving effect to the Kobelt Acquisition, each initial Credit Event, payment of all fees and expenses in connection therewith, and any payables stretched beyond their customary payment practices, the Availability shall be at least $5,000,000.00.

 

Section 4.2    All Credit Events. The obligation of Bank to participate in any Credit Event (including any initial Credit Event) hereunder is subject to the following conditions precedent:

 

 

(a)    each of the representations and warranties set forth herein and in the other Loan Documents shall be and remain true and correct in all respect (or in all material respect if such representation or warranty is not by its terms already qualified as to materiality) as of said time, except to the extent the same expressly relate to an earlier date, in which case such representations and warranties shall be and remain true and correct in all respect (or in all material respect if such representation or warranty is not by its terms already qualified as to materiality) as of such earlier date;

 

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

 

(c)    in the case of a Borrowing, Bank shall have received the notice required by Section 2.6; in the case of the issuance of any Letter of Credit, Bank shall have received a duly completed Application for such Letter of Credit together with any fees called for by Section 2.11; and, in the case of an extension or increase in the amount of a Letter of Credit, Bank shall have received a written request therefor in a form acceptable to Bank together with fees called for by Section 2.11;

 

(d)    after giving effect to such Credit Event, the sum of the aggregate principal amount of Revolving Loans and L/C Obligations at any time outstanding shall not exceed the lesser of (i) the Revolving Credit Commitment in effect at such time and (ii) the Borrowing Base, and the Loans borrowed in a Foreign Currency shall not exceed the Foreign Currencies Sublimit; and

 

(e)    such Credit Event shall not violate any order, judgment or decree of any court or other authority or any provision of law or regulation applicable to Bank (including Regulation U of the Board of Governors of the Federal Reserve System) as then in effect.

 

Each request for a Borrowing hereunder and each request for the issuance of, increase in the amount of, or extension of the expiration date of, a Letter of Credit shall be deemed to be a representation and warranty by Borrower on the date on such Credit Event as to the facts specified in subsections (a) through (e) of this Section; provided that Bank may continue to make advances under the Revolving Credit Commitment, in the sole discretion of Bank, notwithstanding the failure of Borrower to satisfy one or more of the conditions set forth above and any such advances so made shall not be deemed a waiver of any Default or Event of Default or other condition set forth above that may then exist. Subject to the foregoing, prior to Bank making the Term Loan and additional advances hereunder for the purpose consummating the acquisition contemplated by the Purchase Documents, Bank shall have received confirmation from the Notary (as defined in the Purchase Agreement) or Borrower that all conditions precedent set forth in the Purchase Agreement have been satisfied by the parties thereto.

 

SECTION 5.    REPRESENTATIONS AND WARRANTIES.

 

Borrower represents and warrants to Bank as follows:

 

Section 5.1    Organization and Qualification. TDI is (a) duly organized, validly existing, and in active status as a corporation under the laws of the State of Wisconsin, (b) has full and adequate power to own its Property and conduct its business as now conducted, and (c) is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying, except, with respect to this clause (c), where the failure to do so could not reasonably be expected to have a Material Adverse Effect. Canadian Borrower is (i) duly organized, validly existing, and in good standing under the laws of the province of British Columbia, Canada, (ii) has full and adequate power and capacity to own its Property and conduct its business as now conducted, and (iii) is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying, except, with respect to this clause (iii), where the failure to do so could not reasonably be expected to have a Material Adverse Effect

 

 

Section 5.2    Subsidiaries. Each Subsidiary (a) is duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it is organized, (b) has full and adequate power to own its Property and conduct its business as now conducted, and (c) is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying, except, with respect to this clause (c), where the failure to do so could not reasonably be expected to have a Material Adverse Effect. Schedule 5.2 hereto identifies each Subsidiary, the jurisdiction of its organization, the percentage of issued and outstanding shares of each class of its capital stock or other equity interests owned by Borrower and the other Subsidiaries and, if such percentage is not 100% (excluding directors’ qualifying shares as required by law), a description of each class of its authorized capital stock and other equity interests and the number of shares of each class issued and outstanding. All of the outstanding shares of capital stock and other equity interests of each Subsidiary are validly issued and outstanding and fully paid and non-assessable and all such shares and other equity interests indicated on Schedule 5.2 as owned by Borrower or another Subsidiary are owned, beneficially and of record, by Borrower or such Subsidiary free and clear of all Liens other than the Liens granted in favor of Bank pursuant to the Collateral Documents. There are no outstanding commitments or other obligations of any Subsidiary to issue, and no options, warrants or other rights of any Person to acquire, any shares of any class of capital stock or other equity interests of any Subsidiary.

 

Section 5.3    Authority and Validity of Obligations. Borrower has full right and authority to enter into this Agreement and the other Loan Documents executed by it, to make the borrowings herein provided for, to grant to Bank the Liens described in the Collateral Documents executed by Borrower, and to perform all of its obligations hereunder and under the other Loan Documents executed by it. Each Subsidiary has full right and authority to enter into the Loan Documents executed by it, to guarantee the Obligations or Hedging Liability, to grant to Bank the Liens described in the Collateral Documents executed by such Person, and to perform all of its obligations under the Loan Documents executed by it. The Loan Documents delivered by Borrower and its Subsidiaries have been duly authorized, executed, and delivered by such Persons and constitute valid and binding obligations of Borrower and its Subsidiaries enforceable against them in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors’ rights generally (including, without limitation, Canadian Insolvency Legislation) and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law); and this Agreement and the other Loan Documents do not, nor does the performance or observance by Borrower or any Subsidiary of any of the matters and things herein or therein provided for, (a) contravene or constitute a default under any provision of law or any judgment, injunction, order or decree binding upon Borrower or any Subsidiary or any provision of the organizational documents (e.g., charter, certificate or articles of incorporation and bylaws, certificate or articles of association and operating agreement, partnership agreement, or other similar organizational documents) of Borrower or any Subsidiary, (b) conflict with, contravene or constitute a default under any material indenture or agreement of or affecting Borrower or any Subsidiary or any of their Property, or (c) result in the creation or imposition of any Lien on any Property of Borrower or any Subsidiary other than the Liens granted in favor of Bank pursuant to the Collateral Documents.

 

 

Section 5.4    Margin Stock. Neither Borrower nor any Subsidiary is engaged, principally or as one of its important activities, in the business of purchasing or carrying margin stock or in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Loan or any other extension of credit made hereunder will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock. Margin stock (as hereinabove defined) constitutes less than 25% of the assets of Borrower and its Subsidiaries which are subject to any limitation on sale, pledge or other restriction hereunder.

 

Section 5.5    Financial Reports. The consolidated balance sheet of Borrower and its Subsidiaries as of June 30, 2024, and the related consolidated statements of income, retained earnings and cash flows of Borrower and its Subsidiaries for the fiscal year then ended, and accompanying notes thereto, which financial statements are accompanied by the audit report of an independent public accountant reasonably acceptable to Bank, and the unaudited interim consolidated balance sheet of Borrower and its Subsidiaries as at September 27, 2024, and the related consolidated statements of income, retained earnings and cash flows of Borrower and its Subsidiaries for the three (3) months then ended, heretofore furnished to Bank, fairly present the consolidated financial condition of Borrower and its Subsidiaries as at said dates and the consolidated results of their operations and cash flows for the periods then ended in conformity with GAAP applied on a consistent basis. Neither Borrower nor any Subsidiary has contingent liabilities which are material to it other than as indicated on such financial statements or, with respect to future periods, on the financial statements furnished pursuant to Section 6.5.

 

Section 5.6    No Material Adverse Change. Since on or about September 30, 2024, there has been no change in the condition (financial or otherwise) or business prospects of Borrower or any Subsidiary except those occurring in the ordinary course of business, none of which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.

 

Section 5.7    Full Disclosure. The statements and information furnished to Bank in connection with the negotiation of this Agreement and the other Loan Documents and the commitments by Bank to provide all or part of the financing contemplated hereby do not contain any untrue statements of a material fact or omit a material fact necessary to make the statements contained herein or therein not misleading, Bank acknowledging that as to any projections furnished to Bank, Borrower only represents that the same were prepared on the basis of information and estimates Borrower believed to be reasonable.

 

 

Section 5.8    Trademarks, Franchises, and Licenses. Borrower and Guarantors own, possess, or have the right to use all necessary patents, licenses, franchises, trademarks, trade names, trade styles, copyrights, industrial designs, trade secrets, know how, and confidential commercial and proprietary information to conduct their businesses as now conducted, without known conflict with any patent, license, franchise, trademark, trade name, trade style, copyright, industrial design or other proprietary right of any other Person.

 

Section 5.9    Governmental Authority and Licensing. Borrower and its Subsidiaries have received all licenses, permits, and approvals of all Governmental Authorities, if any, necessary to conduct their businesses, in each case except where the failure to obtain or maintain the same could not reasonably be expected to have a Material Adverse Effect. No investigation or proceeding is pending or, to the knowledge of Borrower, threatened, before or by any Governmental Authority that could reasonably be expected to have a Material Adverse Effect.

 

Section 5.10    Good Title. Borrower and Guarantors have good and defensible title (or valid leasehold interests) to their assets as reflected on the most recent consolidated balance sheet of Borrower and its Subsidiaries furnished to Bank (except for sales of assets in the ordinary course of business), subject to no Liens other than such thereof as are permitted by Section 7.2.

 

Section 5.11    Litigation and Other Controversies. There is no litigation or governmental or arbitration proceeding or labor controversy pending, nor to the knowledge of Borrower threatened, against Borrower or any Guarantor or any of their Property which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

Section 5.12    Taxes. All tax returns required to be filed by Borrower or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes, assessments, fees, and other governmental charges upon Borrower or any Subsidiary or upon any of its Property, income or franchises, which are shown to be due and payable in such returns, have been paid, except such taxes, assessments, fees and governmental charges, if any, as are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and as to which adequate reserves established in accordance with GAAP have been provided. Borrower does not know of any proposed additional tax assessment against it or its Subsidiaries for which adequate provisions in accordance with GAAP have not been made on their accounts. Adequate provisions in accordance with GAAP for taxes on the books of Borrower and each Subsidiary have been made for all open years, and for its current fiscal period.

 

Section 5.13    Approvals. No authorization, consent, license or exemption from, or filing or registration with, any court or Governmental Authority, nor any approval or consent of any other Person, is or will be necessary to the valid execution, delivery or performance by Borrower or any Guarantor of any Loan Document, except for such approvals which have been obtained prior to the date of this Agreement and remain in full force and effect.

 

 

Section 5.14    Affiliate Transactions. Neither Borrower nor any Subsidiary is a party to any contracts or agreements with any of its Affiliates (other than with Wholly-owned Subsidiaries) on terms and conditions which are less favorable to Borrower or such Subsidiary than would be usual and customary in similar contracts or agreements between Persons not affiliated with each other.

 

Section 5.15    Investment Company. Neither Borrower nor any Subsidiary is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

Section 5.16    ERISA and Canadian Pension Plan Matters.

 

(a)     Borrower and each other member of its Controlled Group has fulfilled its obligations under the minimum funding standards of and is in compliance in all material respects with ERISA and the Code to the extent applicable to it and has not incurred any liability to the PBGC or a Plan under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. Neither Borrower nor any Subsidiary has any contingent liabilities with respect to any post-retirement benefits under a Welfare Plan, other than liability for continuation coverage described in article 6 of Title I of ERISA.

 

(b)    The Canadian Borrower does not sponsor, contribute to or administer any Canadian Defined Benefit Pension Plans. Except as could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, (i) all obligations of the Canadian Borrower (including fiduciary, contribution, funding, investment and administration obligations) required to be performed in connection with any Canadian Pension Plan and any funding agreements therefor under the terms thereof and applicable statutory and regulatory requirements, have been performed in a timely and proper fashion, and (ii) there have been no improper withdrawals or applications of the assets of any Canadian Pension Plan. There are no outstanding material disputes concerning the assets or liabilities of any Canadian Pension Plan.

 

Section 5.17    Compliance with Laws.

 

(a)    Borrower and its Subsidiaries are in compliance with the requirements of all federal, state, provincial, territorial and local laws, rules and regulations applicable to or pertaining to their Property or business operations (including the Occupational Safety and Health Act of 1970, the Americans with Disabilities Act of 1990, and laws and regulations establishing quality criteria and standards for air, water, land and toxic or hazardous wastes and substances), except for any such noncompliance that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

 

(b)    Without limiting the representations and warranties set forth in Section 5.17(a) above, except for such matters, individually or in the aggregate, which could not reasonably be expected to result in a Material Adverse Effect and except as set forth on Schedule 5.17(b), Borrower represents and warrants that: (i) Borrower and its Subsidiaries, and each of the Premises, comply in all material respects with all applicable Environmental Laws; (ii) Borrower and its Subsidiaries have obtained all governmental approvals required for their operations and each of the Premises by any applicable Environmental Law; (iii) Borrower and its Subsidiaries have not, and Borrower has no knowledge of any other Person who has, caused any Release, threatened Release or disposal of any Hazardous Material at, on, about, or off any of the Premises in any material quantity and, to the knowledge of Borrower, none of the Premises are adversely affected by any Release, threatened Release or disposal of a Hazardous Material originating or emanating from any other property; (iv) none of the Premises contain and have contained any: (A) underground storage tank, (B) material amounts of asbestos containing building material, (C) landfills or dumps, (D) hazardous waste management facility as defined pursuant to RCRA or any comparable state law, or (E) site on or nominated for the National Priority List promulgated pursuant to CERCLA or any state remedial priority list promulgated or published pursuant to any comparable state law; (v) Borrower and its Subsidiaries have not used a material quantity of any Hazardous Material and have conducted no Hazardous Material Activity at any of the Premises; (vi) Borrower and its Subsidiaries have no material liability for response or corrective action, natural resource damage or other harm pursuant to CERCLA, RCRA or any comparable state law; (vii) Borrower and its Subsidiaries are not subject to, have no notice or knowledge of and are not required to give any notice of any Environmental Claim involving Borrower or any Subsidiary or any of the Premises, and there are no conditions or occurrences at any of the Premises which could reasonably be anticipated to form the basis for an Environmental Claim against Borrower or any Subsidiary or such Premises; (viii) none of the Premises are subject to any, and Borrower has no knowledge of any imminent restriction on the ownership, occupancy, use or transferability of the Premises in connection with any (A) Environmental Law or (B) Release, threatened Release or disposal of a Hazardous Material; and (ix) there are no conditions or circumstances at any of the Premises which pose an unreasonable risk to the environment or the health or safety of Persons.

 

Section 5.18    Sanctions; Anti-Money Laundering Laws and Anti-Corruption Laws.

 

(a)    None of the Loan Parties, any of their Subsidiaries, any director, officer or employee of any Loan Party or any of their Subsidiaries, nor, to the knowledge of Borrower, any agent or representative of any Loan Party or any of their Subsidiaries, is a Sanctioned Person or currently the subject or target of any Sanctions.

 

(b)    The Loan Parties, each of their Subsidiaries, each of the Loan Parties’ and their Subsidiaries’ respective directors, officers and employees, and, to the knowledge of Borrower, each of the Loan Parties’ and their Subsidiaries’ respective agents and representatives, is in compliance with all applicable Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions.

 

(c)    The Loan Parties and their Subsidiaries have instituted and maintain in effect policies and procedures reasonably designed to ensure compliance by the Loan Parties, their Subsidiaries, and the Loan Parties’ and their Subsidiaries’ respective directors, officers, employees and agents with all applicable Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions.

 

Section 5.19    Other Agreements. Neither Borrower nor any Guarantor is in default under the terms of any covenant, indenture or agreement of or affecting such Person or any of its Property, except for any such default that could not reasonably be expected to have a Material Adverse Effect.

 

 

Section 5.20    Solvency. Borrower and its Subsidiaries are solvent, able to pay their debts as they become due, and have sufficient capital to carry on their business and all businesses in which they are about to engage.

 

Section 5.21    No Default. No Default or Event of Default has occurred and is continuing.

 

Section 5.22    No Broker Fees. No broker’s or finder’s fee or commission will be payable with respect hereto or any of the transactions contemplated hereby; and Borrower hereby agrees to indemnify Bank against, and agree that they will hold Bank harmless from, any claim, demand, or liability for any such broker’s or finder’s fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable attorneys’ fees) arising in connection with any such claim, demand, or liability.

 

SECTION 6.    AFFIRMATIVE COVENANTS.

 

So long as all or any portion of the Commitments remains outstanding or any Obligations hereunder remain outstanding, Borrower agrees that:

 

Section 6.1    Maintenance of Business. Borrower shall, and shall cause each Subsidiary to, preserve and maintain its existence, except as otherwise provided in Section 7.4(c)-(e). Borrower shall, and shall cause each Subsidiary to, preserve and keep in force and effect all licenses, permits, franchises, approvals, patents, trademarks, trade names, trade styles, copyrights, industrial designs and other proprietary rights necessary to the proper conduct of its business, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

Section 6.2    Maintenance of Properties. Borrower shall, and shall cause each Subsidiary to, maintain, preserve, and keep its property, plant, and equipment in good repair, working order and condition (ordinary wear and tear excepted), and shall from time to time make all needful and proper repairs, renewals, replacements, additions, and betterments thereto so that at all times the efficiency thereof shall be fully preserved and maintained, in each case except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

Section 6.3    Taxes and Assessments. Borrower shall duly pay and discharge, and shall cause each Subsidiary to duly pay and discharge, all taxes, rates, assessments, fees, and governmental charges upon or against it or its Property, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves are provided therefor.

 

 

Section 6.4    Insurance. Borrower shall insure and keep insured, and shall cause each Subsidiary to insure and keep insured, with good and responsible insurance companies, all insurable Property owned by it which is of a character usually insured by Persons similarly situated and operating like Properties against loss or damage from such hazards and risks (including flood insurance (to the extent it can be obtained) with respect to any improvements on real Property consisting of building or parking facilities in an area designated by a governmental body as having special flood hazards), and in such amounts, as are insured by Persons similarly situated and operating like Properties, but in no event at any time in an amount less than the replacement value of the Collateral. Borrower shall also maintain, and shall cause each Subsidiary to maintain, insurance with respect to the business of Borrower and its Subsidiaries, covering commercial general liability, statutory worker’s compensation and occupational disease, statutory structural work act liability, and business interruption and such other risks with good and responsible insurance companies, in such amounts and on such terms as Bank shall reasonably request, but in any event as and to the extent usually insured by Persons similarly situated and conducting similar businesses. Borrower shall in any event maintain insurance on the Collateral to the extent required by the Collateral Documents. All such policies of insurance shall contain satisfactory lender's loss payable endorsements, naming Bank as a loss payee, first mortgagee assignee or additional insured, as appropriate, as its interest may appear, and showing only such other loss payees, assignees and additional insureds as are satisfactory to Bank. The property insurance policies of the Canadian Borrower shall include a standard mortgage clause approved by the Insurance Bureau of Canada. Each policy of insurance or endorsement shall contain a clause requiring the insurer to make best efforts to give not less than 30 days' prior written notice to Bank in the event of cancellation of the policy for any reason whatsoever and a clause specifying that the interest of Bank shall not be impaired or invalidated by any act or neglect of Borrower, any of its Subsidiaries, or the owner of the premises or Property or by the occupation of the premises for purposes more hazardous than are permitted by said policy. Borrower shall deliver to Bank (a) (i) with respect to TDI and its property, on the date of this Agreement, and (ii) with respect to the Canadian Borrower and its property, within thirty (30) days after the date of this Agreement, and at such other times as Bank shall reasonably request and/or upon any renewal or material modifications to any such insurance, certificates evidencing the maintenance of insurance required hereunder, (b) prior to the termination of any such policies, certificates evidencing the renewal thereof, and (c) promptly following request by Bank, copies of all insurance policies of Borrower and its Subsidiaries. Borrower also agrees to deliver to Bank, promptly as rendered, true copies of all reports made in any reporting forms to insurance companies.

 

Section 6.5    Financial Reports. Borrower shall, and shall cause each Subsidiary to, maintain a standard system of accounting in accordance with GAAP and shall furnish to Bank and its duly authorized representatives such information respecting the business and financial condition of Borrower and each Subsidiary as Bank may reasonably request; and without any request, shall furnish to Bank:

 

(a)    as soon as available, and in any event no later than 30 days after the last day of each calendar month, a Borrowing Base Certificate showing the computation of the Borrowing Base in reasonable detail as of the close of business on the last day of such month, together with an accounts receivable and accounts payable aging and inventory reports, prepared by Borrower and certified to by its chief financial officer or another officer of Borrower acceptable to Bank;

 

(b)    as soon as available, and in any event no later than 40 days after the last day of each fiscal quarter of Borrower, including the fiscal quarter ending on the last day of the fiscal year of Borrower, a copy of the consolidated and consolidating balance sheet of Borrower and its Subsidiaries as of the last day of such period and the consolidated and consolidating statements of income, retained earnings, and cash flows of Borrower and its Subsidiaries for the fiscal quarter and the fiscal year-to-date period then ended, each in reasonable detail showing in comparative form the figures for the corresponding date and period in the previous fiscal year, prepared by Borrower in accordance with GAAP and certified to by its chief financial officer or such other officer acceptable to Bank;

 

 

(c)    as soon as available, and in any event no later than 90 days after the last day of each fiscal year of Borrower, a copy of the consolidated and consolidating balance sheet of Borrower and its Subsidiaries as of the close of such period and the consolidated and consolidating statements of income, retained earnings, and cash flows of Borrower and the Subsidiaries for such period, and accompanying notes thereto, each in reasonable detail showing in comparative form the figures for the previous fiscal year, accompanied by an unqualified opinion thereon of a firm of independent public accountants of recognized national standing, selected by Borrower and satisfactory to Bank, to the effect that the financial statements have been prepared in accordance with GAAP and present fairly in accordance with GAAP the consolidated financial condition of Borrower and the Subsidiaries as of the close of such fiscal year and the results of their operations and cash flows for the fiscal year then ended and that an examination of such accounts in connection with such financial statements has been made in accordance with generally accepted auditing standards and, accordingly, such examination included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances;

 

(d)    as soon as available, and in any event no later than 45 days after the last day of each fiscal quarter of Borrower, including the fiscal quarter ending on the last day of the fiscal year of Borrower, a written certificate in the form attached hereto as Exhibit C signed by the chief financial officer of Borrower or another officer of Borrower acceptable to Bank to the effect that to the best of such officer’s knowledge and belief no Default or Event of Default has occurred during the period covered by such statements or, if any such Default or Event of Default has occurred during such period, setting forth a description of such Default or Event of Default and specifying the action, if any, taken by Borrower or any Subsidiary to remedy the same. Such certificate shall also set forth the calculations supporting such statements in respect of Section 7.12 (Financial Covenants).

 

(e)    with each of the financial statements delivered pursuant to subsection (c) above, the written statement of the accountants who certified the audit report thereby required that in the course of their audit they have obtained no knowledge of any Default or Event of Default, or, if such accountants have obtained knowledge of any such Default or Event of Default, they shall disclose in such statement the nature and period of the existence thereof;

 

(f)    as soon as available, and in any event no later than 30 days after the end of each fiscal year of Borrower, a copy of Borrower’s consolidated and consolidating business plan for the following fiscal year, such business plan to show Borrower’s projected consolidated and consolidating revenues, expenses and balance sheet on a quarter by quarter/month by month basis, such business plan to be in reasonable detail prepared by Borrower and in form satisfactory to Bank (which shall include a summary of all assumptions made in preparing such business plan);

 

 

(g)    as soon as available, but in any event within 30 days after the end of each calendar month from, (i) reconciliations of all Borrower’s Accounts as shown on the month-end Borrowing Base Certificate for the immediately preceding month to Borrower’s accounts receivable agings, to Borrower’s general ledger and to Borrower’s most recent financial statements, (ii) accounts payable agings, (iii) reconciliations of Borrower’s Inventory as shown on Borrower’s perpetual inventory, to Borrower’s general ledger and to Borrower’s financial statements and (iv) Inventory status reports, all with supporting materials as Bank shall reasonably request;

 

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

 

(i)    promptly after the sending or filing thereof, copies of each financial statement, report, notice or proxy statement sent by Borrower or any Subsidiary to its stockholders or other equity holders, and copies of each regular, periodic or special report, registration statement or prospectus (including all Form 10 K, Form 10 Q and Form 8 K reports) filed by Borrower or any Subsidiary with any securities exchange or the Securities and Exchange Commission or any successor agency;

 

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

 

(k)    promptly after knowledge thereof shall have come to the attention of any responsible officer of Borrower, written notice of (i) any threatened or pending litigation or governmental or arbitration proceeding or labor controversy against Borrower or any Subsidiary or any of their Property which, if adversely determined, could reasonably be expected to have a Material Adverse Effect or (ii) the occurrence of any Default or Event of Default hereunder.

 

Section 6.6    Inspection. Borrower shall, and shall cause each Subsidiary to, permit Bank and its duly authorized representatives and agents to visit and inspect any of its Property, corporate books, and financial records, to examine and make copies of its books of accounts and other financial records, and to discuss its affairs, finances, and accounts with, and to be advised as to the same by, its officers, employees and independent public accountants (and by this provision Borrower hereby authorizes such accountants to discuss with Bank the finances and affairs of Borrower and its Subsidiaries) at such reasonable times and intervals as Bank may designate; provided, that in the absence of any Default and Event of Default, Bank shall not perform, or cause to be performed, more than one (1) such exam per calendar year.

 

Section 6.7    ERISA. Borrower shall, and shall cause each Subsidiary to, promptly pay and discharge all obligations and liabilities arising under ERISA of a character which if unpaid or unperformed could reasonably be expected to result in the imposition of a Lien against any of its Property. Borrower shall, and shall cause each Subsidiary to, promptly notify Bank of: (a) the occurrence of any reportable event (as defined in ERISA) with respect to a Plan, (b) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor, (c) its intention to terminate or withdraw from any Plan, and (d) the occurrence of any event with respect to any Plan which would result in the incurrence by Borrower or any Subsidiary of any material liability, fine or penalty, or any material increase in the contingent liability of Borrower or any Subsidiary with respect to any post retirement Welfare Plan benefit.

 

 

(b)         Canadian Borrower shall, and shall cause each other Loan Party to, promptly pay and discharge all obligations and liabilities arising in respect of each Canadian Pension Plan of a character which if unpaid or unperformed could reasonably be expected to result in the imposition of a Lien against any of its Property, save and except statutory deemed trusts or similar Liens in respect of contributions required to be made, or withheld and remitted, by a Loan Party to a Canadian Pension Plan that are (i) not yet due; or (ii) overdue but immaterial and the result of an inadvertent error, provided that such contributions are remitted no later than thirty (30) days after the Loan Party becomes aware of such error. Canadian Borrower shall, and shall cause each other Loan Party to, promptly notify Bank of any of the following that would result, or that could reasonably be expected to result, in a material wind-up funding deficiency or withdrawal liability: (A) the termination of any Canadian Defined Benefit Pension Plan, (B) receipt of any notice from a Governmental Authority of its intention to seek termination of any Canadian Defined Benefit Pension Plan or appointment of a trustee therefor, (C) its intention to terminate or withdraw from any Canadian Defined Benefit Pension Plan, and (D) the occurrence of any event with respect to any Canadian Defined Benefit Pension Plan in the incurrence by Borrower or any other Loan Party of any material liability, fine or penalty.

 

Section 6.8    Compliance with Laws.

 

(a)    Borrower shall, and shall cause each Subsidiary to, comply in all respects with the requirements of all federal, state, provincial, territorial and local laws, rules, regulations, ordinances and orders applicable to or pertaining to its Property or business operations, except where any such non- compliance, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect or result in a Lien upon any of its Property.

 

(b)    Without limiting the agreements set forth in Section 6.8(a) above, Borrower shall, and shall cause each Subsidiary to, at all times, do the following to the extent the failure to do so, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect: (i) comply in all material respects with, and maintain each of the Premises in compliance in all material respects with, all applicable Environmental Laws; (ii) require that each tenant and subtenant, if any, of any of the Premises or any part thereof comply in all material respects with all applicable Environmental Laws; (iii) obtain and maintain in full force and effect all material governmental approvals required by any applicable Environmental Law for operations at each of the Premises; (iv) cure any material violation by it or at any of the Premises of applicable Environmental Laws; (v) not allow the presence or operation at any of the Premises of any (A) landfill or dump or (B) hazardous waste management facility or solid waste disposal facility as defined pursuant to RCRA or any comparable state law; (vi) not manufacture, use, generate, transport, treat, store, release, dispose or handle any Hazardous Material at any of the Premises except in the ordinary course of its business and in de minimis amounts; (vii) within ten (10) Business Days notify Bank in writing of and provide any reasonably requested documents upon learning of any of the following in connection with Borrower or any Subsidiary or any of the Premises: (A) any material liability for response or corrective action, natural resource damage or other harm pursuant to CERCLA, RCRA or any comparable state law; (B) any material Environmental Claim; (C) any material violation of an Environmental Law or material Release, threatened Release or disposal of a Hazardous Material; (D) any restriction on the ownership, occupancy, use or transferability arising pursuant to any (x) Release, threatened Release or disposal of a Hazardous Material or (y) Environmental Law; or (E) any environmental, natural resource, health or safety condition, which could reasonably be expected to have a Material Adverse Effect; (viii) conduct at its expense any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any material Release, threatened Release or disposal of a Hazardous Material as required by any applicable Environmental Law, (ix) abide by and observe any restrictions on the use of the Premises imposed by any Governmental Authority as set forth in a deed or other instrument affecting Borrower’s or any Subsidiary’s interest therein; (x) promptly provide or otherwise make available to Bank any reasonably requested environmental record concerning the Premises which Borrower or any Subsidiary possesses or can reasonably obtain; and (xi) perform, satisfy, and implement any operation or maintenance actions required by any Governmental Authority or Environmental Law, or included in any no further action letter or covenant not to sue issued by any Governmental Authority under any Environmental Law.

 

 

Section 6.9    Compliance with Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions.

 

(a)    Borrower shall at all times comply with the requirements of all Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions applicable to Borrower and shall cause each other Loan Party and each of its and their respective Subsidiaries to comply with the requirements of all Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions applicable to such Persons.

 

(b)    Borrower shall provide Bank (i) any information regarding Borrower, each other Loan Party, and each of their respective owners, Affiliates, and Subsidiaries necessary for Bank to comply with all applicable Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions; subject however, in the case of Affiliates, to Borrower’s ability to provide information applicable to them and (ii) without limiting the foregoing, notification of any change in the information provided in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners identified therein.

 

(c)    Borrower will maintain in effect and enforce policies and procedures reasonably designed to ensure compliance by the Loan Parties, their Subsidiaries, and the Loan Parties’ and their Subsidiaries’ respective directors, officers, employees and agents with applicable Anti-Corruption Laws, Anti Money-Laundering Laws and Sanctions.

 

Section 6.10    Formation of Subsidiaries. Promptly upon the formation or acquisition of any Subsidiary (but in no event later than 30 days after such formation or acquisition), Borrower shall provide Bank notice thereof and timely comply with the requirements of Section 6.12 (at which time Schedule 5.2 shall be deemed amended to include reference to such Subsidiary). Except for Foreign Subsidiaries existing on the Closing Date and identified on Schedule 5.2 or any Foreign Subsidiary acquired pursuant to the Kobelt Acquisition, Borrower shall not, nor shall it permit any Subsidiary to, form or acquire any Foreign Subsidiary.

 

 

Section 6.11    Use of Proceeds; Margin Stock; Bank Accounts. Borrower shall use (a) the Revolving Loans extended under this Agreement solely to pay for a portion of the consideration payable in connection with the Kobelt Acquisition (including reasonable costs and expenses related thereto), to refinance existing Indebtedness for Borrowed Money, including proceeds used to finance a portion of the Katsa Acquisition, for Capital Expenditures, for its general working capital purposes and for such other general corporate purposes as are consistent with all applicable laws, and (b) the Term Loan extended under this Agreement solely to pay for a portion of the total consideration paid in connection with the Kobelt Acquisition (including reasonable costs and expenses related thereto) and to refinance existing Indebtedness for Borrowed Money that was used to finance a portion of the acquisition of Veth Propulsion Holding, B.V. Neither Borrower nor any Subsidiary will engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock or in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Loan or any other extension of credit made hereunder will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock. Borrower shall at all times maintain all of its deposit and operating accounts of any kind with Bank or its Affiliates.

 

Section 6.12    Guaranties and Collateral. (a)       Guaranties.     The payment and performance of the Obligations and Hedging Liability shall at all times be guaranteed by each direct and indirect Domestic Subsidiary of Borrower pursuant to one or more guaranty agreements in form and substance acceptable to Bank (as the same may be amended, restated, supplemented, or otherwise modified from time to time individually a “Guaranty” and collectively the “Guaranties” and each such Domestic Subsidiary executing and delivering a Guaranty being referred to herein as a “Guarantor” and collectively the “Guarantors”).

 

(b)    Collateral. The Obligations and Hedging Liability shall be secured by valid, perfected, and enforceable Liens on all right, title, and interest of Borrower and each Guarantor in all of their accounts, chattel paper, instruments, documents, general intangibles, letter of credit rights, supporting obligations, deposit accounts, investment property, inventory, equipment, fixtures, commercial tort claims and certain other personal Property, whether now owned or hereafter acquired or arising, and all proceeds thereof; provided, that, unless otherwise required by Bank during the existence of any Event of Default, Liens on the Voting Stock of a Foreign Subsidiary, which, if granted, would cause a material adverse effect on Borrower’s federal income tax liability, shall be limited to 65% of the total outstanding Voting Stock of such Foreign Subsidiary. Borrower acknowledges and agrees that the Liens on the Collateral shall be valid and perfected first priority Liens except as permitted by Section 7.2, subject, however, to the proviso appearing at the end of the preceding sentence, in each case pursuant to one or more Collateral Documents from such Persons, each in form and substance satisfactory to Bank.

 

(c)    Reserved.

 

(d)    Further Assurances. Borrower agrees that it shall, and shall cause each Subsidiary to, from time to time at the request of Bank, execute and deliver such documents and do such acts and things as Bank may reasonably request in order to provide for or perfect or protect Bank’s Liens on the Collateral.

 

 

Section 6.13    Maintenance of Accounts.

 

Each of TDI and Canadian Borrower agree that they shall, during the remaining term of this Agreement, maintain their (a) primary depository accounts and all treasury services related to such Borrower’s collection and disbursement accounts at Bank or its Affiliates and (b) primary commercial card program at Bank or its Affiliates.

 

Section 6.14    Post-Closing Delivery (Stock Certificates).

 

Within 30 days after the Closing Date, Borrower will deliver (or cause BMO Bank N.A. to deliver) to Bank original stock certificates or other similar instruments or securities representing all of the issued and outstanding shares of capital stock or other equity interests in each of the entities being pledged as of the Closing Date which are currently held by BMO Bank N.A., and (ii) stock powers for the Collateral consisting of the stock or other equity interest in each entity being pledged, executed in blank and undated, which are currently held by BMO Bank N.A. If such stock certificates are not timely delivered to Bank as a result of a delay caused by BMO Bank N.A., failure to timely deliver such certificates shall not be an Event of Default under this Agreement and the foregoing time period for delivery shall be extended as long as is necessary for BMO Bank N.A. to deliver such certificates.

 

Section 6.15    Post-Kobelt Amalgamation Deliveries

 

Within two (2) Business Days following the Closing Date (as may be extended in writing by Bank in its sole discretion acting reasonably), the Canadian Borrower shall either:

 

(a)    provide satisfactory evidence to Bank of the consummation of the Kobelt Amalgamation at which point the Post-Kobelt Amalgamation Deliveries shall be automatically released from escrow and with no further action from any party hereunder; or

 

(b)    cause Kobelt Target to become a Loan Party hereunder by causing Kobelt Target to execute and deliver to and in favor of Bank, in each case, in form and substance satisfactory to Bank, the following documents and deliverables:

 

(i)    an unlimited and unconditional guarantee of the Obligations and Hedging Liability (the “Kobelt Target Guaranty”);

 

(ii)    a supplement to the Canadian Security Agreement granting a security interest in all of its present and after acquired property, assets and undertaking;

 

(iii)    the Canadian IP Security Agreement;

 

(iv)    a supplement to the IP Security Agreement;

 

 

(v)    delivery by Kobelt Purchaser of share certificates representing 100% of the issued and outstanding Equity Interests of Kobelt Target, together with corresponding stock transfer powers of attorney;

 

(vi)    each document (including, without limitation, any UCC and PPSA financing statement or financing change statement and insurance certificate(s) in respect of the insurance policies maintained by Kobelt Target in accordance with the terms and conditions set out in Section 6.4) required by this Agreement, any Loan Document, any related agreement or under applicable law or reasonably requested by Bank to be filed, registered or recorded in order to create, in favor of Bank, a first ranking Lien in or upon all of the present and after acquired property, assets and undertaking of Kobelt Target which, in each case, shall have been properly executed and delivered for each jurisdiction in which the filing, registration or recordation thereof is so required or reasonably requested;

 

(vii)    a certificate of an authorized officer of Kobelt Target attaching (A) the constating documents of Kobelt Target; (B) the resolutions of the board of directors of Kobelt Target authorizing the execution, delivery and performance of the Kobelt Target Guaranty, the supplement to the Canadian Security Agreement, the Canadian IP Security Agreement, the supplement to the IP Security, and any other applicable Loan Document to which it is a party and any related agreements; and (C) a certificate as to the incumbency and signatures of the officers and directors of Kobelt Target executing the Loan Documents;

 

(viii)    a legal opinion in respect of Kobelt Target, together with a certificate of good standing of Kobelt Target; and

 

(ix)    such other deliveries as reasonably requested by Bank.

 

SECTION 7.    NEGATIVE COVENANTS.

 

So long as all or any portion of the Commitments remains outstanding or any Obligations hereunder remain outstanding, Borrower agrees that, unless otherwise permitted by Bank in writing:

 

Section 7.1    Borrowings and Guaranties. Borrower shall not, nor shall it permit any Loan Party or Subsidiary to, issue, incur, assume, create or have outstanding any Indebtedness for Borrowed Money, or incur liabilities for interest rate, currency, or commodity cap, collar, swap, or similar hedging arrangements, or be or become liable as endorser, guarantor, surety or otherwise for any debt, obligation or undertaking of any other Person, or otherwise agree to provide funds for payment of the obligations of another, or supply funds thereto or invest therein or otherwise assure a creditor of another against loss, or apply for or become liable to the issuer of a letter of credit which supports an obligation of another, or subordinate any claim or demand it may have to the claim or demand of any other Person; provided that the foregoing shall not restrict nor operate to prevent:

 

(a)    the Obligations of Borrower and its Subsidiaries owing to Bank under the Loan Documents and other indebtedness and obligations of such Persons owing to Bank;

 

 

(b)    indebtedness outstanding on the date hereof and listed on Schedule 7.1(b), which Indebtedness exceeds $50,000 for any single obligation and, in the aggregate, obligations totaling $300,000 or more for any Loan Party;

 

(c)    indebtedness at or below $50,000 for any single obligation and, in the aggregate, obligations totaling $300,000 or less for any Loan Party (such indebtedness does not include the indebtedness otherwise permitted in this Section 7.1);

 

(d)    (i) the Parent Guarantee in connection with the Katsa Acquisition, and (ii) the Guaranties of any Loan Party in respect of Indebtedness for Borrowed Money otherwise permitted hereunder; provided, that any Guaranty permitted hereunder that is subordinated to the Obligations shall be subordinated to the Obligations on substantially the same terms as such Subordinated Indebtedness;

 

(e)    purchase money indebtedness and Capitalized Lease Obligations of the Loan Parties in an amount not to exceed $10,000,000 in the aggregate at any one time outstanding;

 

(f)    the Hedging Liability of Borrower and its Subsidiaries, along with any other obligations of Borrower or any Subsidiary arising out of interest rate, foreign currency, and commodity hedging agreements entered into with financial institutions in connection with bona fide hedging activities in the ordinary course of business and not for speculative purposes;

 

(g)    indebtedness arising in the ordinary course of business in connection with treasury management and commercial credit card, merchant card and purchase or procurement card services;

 

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

 

(i)    Assumed Indebtedness of Borrower in an aggregate principal amount not to exceed $1,000,000 at any time outstanding;

 

(j)    indebtedness with respect to the deferred purchase price for any acquisition permitted by Section 7.3 (including, for avoidance of doubt, the earn out contemplated under the Purchase Documents for the Acquisition); provided, that such indebtedness does not require the payment in cash of principal (other than in respect of working capital adjustments) prior to the Revolving Credit Termination Date, has a maturity which extends beyond the Revolving Credit Termination Date, and is subordinated to the Obligations on terms reasonably acceptable to Bank;

 

(k)    indebtedness of Foreign Subsidiaries in an aggregate principal amount at any time outstanding not to exceed 5% of the total consolidated assets of Borrower and its Subsidiaries as of the end of the most recently ended fiscal year of Borrower;

 

(l)    indebtedness from time to time owing by any Subsidiary to Borrower in the ordinary course of business;

 

 

(m)    unsecured Indebtedness for Borrower Money of (A) any Loan Party owing to any other Loan Party or any Subsidiary that is not a Loan Party, (B) any Subsidiary that is not a Loan Party owing to any other Subsidiary that is not a Loan Party and (C) any Subsidiary that is not a Loan Party owing to any Loan Party; provided , that any such Indebtedness for Borrowed Money described in this clause which is owing to a Loan Party, shall (1) to the extent the aggregate principal amount thereof is in excess of $500,000.00, be evidenced by promissory notes in form and substance satisfactory to Bank and pledged to Bank on terms acceptable to it, (2) be permitted under Section 7.3(h)(iv) or (k), and (3) not be forgiven or otherwise discharged for any consideration other than payment in full in cash unless Bank otherwise consents; and

 

(n)    other unsecured Indebtedness for Borrowed Money having a stated maturity date no earlier than 91 days following the Revolving Credit Termination Date and not exceeding $10,000,000 in the aggregate in any fiscal year of Borrower, if (i) (A) no Default has occurred and is continuing or would result from such Indebtedness for Borrowed Money, (B) such Indebtedness for Borrowed Money is evidenced by a subordination agreement in form and substance satisfactory to Bank and on terms acceptable to it; and (ii) at least ten (10) Business Days prior to each such incurrence, Borrower has delivered a certificate to Bank demonstrating compliance with (A) above.

 

Section 7.2    Liens. Borrower shall not, nor shall it permit any Subsidiary to, create, incur or permit to exist any Lien of any kind on any Property owned by any such Person; provided that the foregoing shall not apply to nor operate to prevent:

 

(a)    Liens at or below $150,000 for any single Lien and, in the aggregate, Liens totaling $500,000 or less for any Loan Party (such Liens do not include Liens otherwise permitted in this Section 7.2);

 

(b)    Liens existing on the date hereof and listed on Schedule 7.2(b), which Liens exceed $150,000 per Lien and, in the aggregate, exceed $500,000 per Loan Party, and any renewals or extensions thereof, provided, that (i) the property covered thereby is not changed, (ii) the amount secured or benefited thereby is not increased from the amount outstanding on the date of renewal or extension, (iii) the direct or any contingent obligor with respect thereto is not changed; and (iv) any renewal or extension of the obligations secured or benefited thereby is otherwise permitted under Section 7.1(b);

 

(c)    Liens arising by statute in connection with worker’s compensation, unemployment insurance, old age benefits, social security obligations, taxes, assessments, statutory obligations or other similar charges (other than Liens arising under ERISA), good faith cash deposits in connection with tenders, contracts or leases to which Borrower or any Subsidiary is a party or other cash deposits required to be made in the ordinary course of business; provided in each case that the obligation is not for borrowed money and that the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves have been established therefor;

 

 

(d)    mechanics’, workmen’s, materialmen’s, landlords’, carriers’ or other similar Liens arising in the ordinary course of business with respect to obligations which are not overdue for a period of more than 30 days or which are being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest;

 

(e)    judgment liens and judicial attachment liens not constituting an Event of Default under Section 8.1(g) and the pledge of assets for the purpose of securing an appeal, stay or discharge in the course of any legal proceeding;

 

(f)    Liens arising in the ordinary course of business on deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety bonds (other than bonds related to judgments or litigation), performance bonds and other obligations of a like nature, in each case, incurred in the ordinary course of business;

 

(g)    Liens on equipment of Borrower or any Subsidiary created solely for the purpose of securing indebtedness permitted by Section 7.1(e), representing or incurred to finance the purchase price of such Property; provided that no such Lien shall extend to or cover other Property of Borrower or such Subsidiary other than the respective Property so acquired, and the principal amount of indebtedness secured by any such Lien shall at no time exceed the purchase price of such Property, as reduced by repayments of principal thereon;

 

(h)    any interest or title of a lessor under any operating lease;

 

(i)    Liens securing Indebtedness permitted under Section 7.1(j); provided, that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness for Borrowed Money and (ii) the Indebtedness for Borrowed Money secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition;

 

(j)    Liens securing Assumed Indebtedness of the Loan Parties permitted pursuant to Section 7.1(i); provided, that (i) such Liens do not at any time encumber any property other than property of the Subsidiary acquired, or the property acquired, and proceeds thereof in connection with such Assumed Indebtedness and shall not attach to any assets of the Loan Parties theretofore existing or (except for any such proceeds) which arise after the date thereof and (ii) the Assumed Indebtedness and other secured Indebtedness of the Loan Parties secured by any such Lien does not exceed the fair market value of the property being acquired in connection with such Assumed Indebtedness;

 

(k)    Liens on assets of Foreign Subsidiaries of Borrower securing Indebtedness for Borrowed Money of such Foreign Subsidiaries permitted pursuant to clause (k) of Section 7.1;

 

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

 

 

(m)    Liens in favor of customs and revenue authorities imposed by Law to secure payment of customs duties in connection with the importation of goods and arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest;

 

(n)    Special tool builders’ or similar liens arising by operation of law; and

 

(o)    Liens granted in favor of Bank pursuant to the Collateral Documents.

 

Section 7.3    Investments, Acquisitions, Loans and Advances.  Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly, make, retain or have outstanding any investments (whether through purchase of stock or obligations or otherwise) in, or loans or advances to (other than for travel advances and other similar cash advances made to employees in the ordinary course of business), any other Person, or acquire all or any substantial part of the assets or business of any other Person or division thereof; provided that the foregoing shall not apply to nor operate to prevent:

 

(a)    investments in direct obligations of the United States of America or of any agency or instrumentality thereof whose obligations constitute full faith and credit obligations of the United States of America, provided that any such obligations shall mature within one year of the date of issuance thereof;

 

(b)    investments in commercial paper rated at least P-1 by Moody’s and at least A-1 by S&P maturing within one year of the date of issuance thereof;

 

(c)    investments in certificates of deposit issued by Bank or by any United States commercial bank having capital and surplus of not less than $100,000,000 which have a maturity of one year or less;

 

(d)    investments in repurchase obligations with a term of not more than 7 days for underlying securities of the types described in subsection (a) above entered into with any bank meeting the qualifications specified in subsection (c) above, provided all such agreements require physical delivery of the securities securing such repurchase agreement, except those delivered through the Federal Reserve Book Entry System;

 

(e)    investments in money market funds that invest solely, and which are restricted by their respective charters to invest solely, in investments of the type described in the immediately preceding subsections (a), (b), (c), and (d) above;

 

(f)    loans and advances to officers, directors and employees of the Loan Parties and Subsidiaries made in the ordinary course of business in an aggregate amount at any one time outstanding not to exceed $100,000;

 

(g)    investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and investments received in satisfaction or partial satisfaction thereof from financially troubled Account Debtors to the extent reasonably necessary in order to prevent or limit loss;

 

 

(h)    Borrower’s investments in its Subsidiaries outstanding on the date hereof, (ii) additional Investments by Borrower and its Subsidiaries in Loan Parties, (iii) additional Investments by Subsidiaries of Borrower that are not Loan Parties in other Subsidiaries that are not Loan Parties, and (iv) so long as no Default has occurred and is continuing or would result from such investment, additional investments by the Loan Parties in Subsidiaries that are not Loan Parties in an aggregate amount invested from the date hereof not to exceed $250,000;

 

(i)    intercompany advances made from time to time from Borrower to any one or more Subsidiaries in the ordinary course of business;

 

(j)    investments arising in connection with the Acquisitions or with any other acquisition permitted by this Section 7.3;

 

(k)    other investments, loans, and advances in addition to those otherwise permitted by this Section 7.3 in an amount not to exceed $2,000,000 in the aggregate in any fiscal year of Borrower (as calculated to include any acquisitions permitted under this Section 7.3 during such fiscal year), so long as (i) when consummated, no Default has occurred and is continuing or would result from such Investment and (ii) at least ten (10) Business Days prior to each such investment, Borrower has delivered a certificate to Bank demonstrating compliance with (i) above; and

 

(l)    Guaranties permitted by Section 7.1.

 

In determining the amount of investments, acquisitions, loans, and advances permitted under this Section 7.3, investments and acquisitions shall always be taken at the original cost thereof (regardless of any subsequent appreciation or depreciation therein), and loans and advances shall be taken at the principal amount thereof then remaining unpaid.

 

Section 7.4    Mergers, Amalgamations, Consolidations and Sales.  Borrower shall not, nor shall it permit any Subsidiary to, be a party to any merger, amalgamation or consolidation, or sell, transfer, lease or otherwise dispose of all or any part of its Property, including any disposition of Property as part of a sale and leaseback transaction, or in any event sell or discount (with or without recourse) any of its notes or accounts receivable; provided that this Section 7.4 shall not apply to nor operate to prevent:

 

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

 

(b)    the sale, transfer, lease or other disposition of Property of Borrower and its Subsidiaries to one another in the ordinary course of its business;

 

(c)    any Subsidiary of Borrower may merge, amalgamate or consolidate with or liquidate or dissolve into a Loan Party; provided, that, (i) the Loan Party shall be the continuing or surviving Person, and (ii) in the case of any merger of a Loan Party and a Subsidiary Guarantor, such Loan Party shall be the continuing or surviving Person;

 

 

(d)    in connection with an acquisition permitted under Section 7.3, any Subsidiary of a Loan Party may merge with or into or consolidate with any other Person or permit any other Person to merge with or into or consolidate with it; provided, that, (i) the Person surviving such merger or the amalgamated entity resulting from such amalgamation shall be a Wholly-Owned Subsidiary of a Loan Party and (ii) in the case of any such merger or amalgamation to which any Loan Party is a party, such Loan Party is the surviving Person or the amalgamated entity resulting from such amalgamation be a Loan Party;

 

(e)    any Subsidiary that is not a Loan Party may merge into or amalgamate with any other Subsidiary that is not a Loan Party; provided, that, when any Wholly-Owned Subsidiary is merging or amalgamating with another Subsidiary that is not wholly-owned, the Wholly-Owned Subsidiary shall be the continuing or surviving Person;

 

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

 

(g)    the sale, transfer or other disposition of any tangible personal property that, in the reasonable business judgment of Borrower or its Subsidiary, has become obsolete or worn out, and which is disposed of in the ordinary course of business, so long as (i) no Event of Default has occurred and is continuing at the time of such disposition, (ii) the aggregate fair market value or a book value, whichever is more, of such property does not exceed $500,000 in any twelve-month period and (iii) all proceeds thereof are applied in accordance with Section 2.8(b);

 

(h)    dispositions that constitute (i) an investment permitted under Section 7.3, (ii) a Lien permitted under Section 7.2, (iii) a merger, amalgamation, dissolution, consolidation or liquidation permitted under this Section 7.4, or (iv) a Restricted Payment permitted under Section 7.6;

 

(i)    dispositions that result from a casualty or condemnation in respect of such property or assets and is not otherwise an Event of Default so long as all proceeds thereof are applied in accordance with Section 2.8(b); and

 

(j)    the sale, transfer, lease or other disposition of Property of Borrower or any Subsidiary (including any disposition of Property as part of a sale and leaseback transaction) aggregating for Borrower and its Subsidiaries, so long as (i) no Event of Default has occurred and is continuing at the time of such disposition and (ii) the fair market value of all such assets disposed of, whether individually or in a series of related transactions, does not exceed $500,000 in the aggregate in any fiscal year of Borrower.

 

Section 7.5    Maintenance of Subsidiaries.  Borrower shall not assign, sell or transfer, nor shall it permit any Subsidiary to issue, assign, sell or transfer, any shares of capital stock or other equity interests of a Subsidiary; provided that the foregoing shall not operate to prevent (a) Liens on the capital stock or other equity interests of Subsidiaries granted to Bank pursuant to the Collateral Documents, (b) the issuance, sale, and transfer to any person of any shares of capital stock of a Subsidiary solely for the purpose of qualifying, and to the extent legally necessary to qualify, such person as a director of such Subsidiary, and (c) any transaction permitted by Section 7.4(c)-(e) above.

 

 

Section 7.6    Dividends and Certain Other Restricted Payments.  Borrower shall not, nor shall it permit any Subsidiary to, (a) declare or pay any dividends on or make any other distributions in respect of any class or series of its capital stock or other equity interests (other than dividends or distributions payable solely in its capital stock or other equity interests), or (b) directly or indirectly purchase, redeem, or otherwise acquire or retire any of its capital stock or other equity interests or any warrants, options, or similar instruments to acquire the same (collectively referred to herein as “Restricted Payments”); provided, that in each case (except Section 7.6(a)) so long as no Default or Event of Default shall have occurred and be continuing (both before or as a result of the making of such Restricted Payment):

 

(a)    each Subsidiary may make Restricted Payments, directly or indirectly, to Borrower;

 

(b)    Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common equity interests of such Person;

 

(c)    Borrower may repurchase shares tendered by employees to satisfy tax withholding obligations on awards of equity compensation, so long as such repurchases are completed in the ordinary course of business and do not exceed $2,000,000, in the aggregate, in any fiscal year of Borrower; and

 

(d)    Borrower shall be permitted to make other Restricted Payments provided in Borrower’s financial forecasts from time to time in the form of cash dividends, distributions, purchases, redemptions or other acquisitions of or with respect to shares of its common stock or other common equity interests in an aggregate amount in any fiscal year of Borrower not to exceed $5,000,000.

 

Section 7.7    Burdensome Contracts With Affiliates.  Borrower shall not, nor shall it permit any Subsidiary to, enter into any contract, agreement or business arrangement with any of its Affiliates (other than with Wholly-owned Subsidiaries) on terms and conditions which are less favorable to Borrower or such Subsidiary than would be usual and customary in similar contracts, agreements or business arrangements between Persons not affiliated with each other.

 

Section 7.8    No Changes in Fiscal Year.  The fiscal year of Borrower ends on June 30 of each year; and Borrower shall not change its fiscal year from its present basis.

 

Section 7.9    Change in the Nature of Business.  Borrower shall not, nor shall it permit any Subsidiary to, engage in any business or activity if as a result the general nature of the business of Borrower or any Subsidiary would be changed in any material respect from the general nature of the business engaged in by it as of the Closing Date.

 

Section 7.10    No Restrictions.  Except pursuant to this Agreement and the other Loan Documents, Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of Borrower or any Subsidiary to: (a) pay dividends or make any other distribution on any Subsidiary’s capital stock or other equity interests owned by Borrower or any other Subsidiary, (b) pay any indebtedness owed to Borrower or any other Subsidiary, (c) make loans or advances to Borrower or any other Subsidiary, (d) transfer any of its Property to Borrower or any other Subsidiary, or (e) guarantee the Obligations and/or grant Liens on its assets to Bank as required by the Loan Documents.

 

 

Section 7.11    Subordinated Debt.  Borrower shall not, nor shall it permit any Subsidiary to, (a) amend or modify any of the terms or conditions relating to Subordinated Debt, (b) make any voluntary prepayment of Subordinated Debt or effect any voluntary redemption thereof, or (c) make any payment on account of Subordinated Debt which is prohibited under the terms of any instrument or agreement subordinating the same to the Obligations. Notwithstanding the foregoing, Borrower may agree to a decrease in the interest rate applicable thereto or to a deferral of repayment of any of the principal of or interest on the Subordinated Debt beyond the current due dates therefor.

 

Section 7.12    Financial Covenants.

 

(a)    Total Funded Debt/EBITDA Ratio. As of the last day of each fiscal quarter of Borrower, commencing with the fiscal quarter ending on or about December 31, 2024, Borrower shall not permit the Total Funded Debt/EBITDA Ratio to be greater than 3.50 to 1.00 for such fiscal quarter.

 

(b)    Tangible Net Worth. Borrower shall at all times maintain Tangible Net Worth of Borrower and its Subsidiaries determined on a consolidated basis in an amount not less than (i) $110,684,000 plus (ii) 50% of Net Income for each fiscal year of Borrower ending on June 30, 2025 and thereafter for which such Net Income is a positive amount (i.e., there shall be no reduction to the minimum amount of Tangible Net Worth required to be maintained hereunder for any fiscal year of Borrower in which Net Income is less than zero).

 

(c)    Minimum Fixed Charge Coverage Ratio. Borrower shall not permit the Fixed Charge Coverage Ratio calculated on a trailing 12-month basis as of the last day of each calendar quarter, commencing with the trailing 12-month period ending on or about December 31, 2024, to be less than 1.10 to 1.00.

 

 

Section 7.13    Anti-Corruption Laws. Borrower will not request any Loan or issuance of a Letter of Credit, and Borrower shall not use, and shall ensure that its Subsidiaries and Affiliates, and its or their respective directors, officers, employees and agents not use, the proceeds of any Loan or Letter of Credit, directly or indirectly, (a) 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 Anti-Corruption Laws, (b) to fund, finance or facilitate any activities, business or transaction of or with any Sanctioned Person or in any Designated Jurisdiction, or (c) in any other manner that would result in the violation of any Sanctions applicable to any party hereto.

 

Section 7.14    Canadian Pension Plans.

 

(a) No Loan Party shall maintain, contribute, sponsor or have any liability with respect to any Canadian Defined Benefit Plan, and (b) No Loan Party shall take any action (including the enactment of any corporate resolution) to terminate or wind up (in whole or in part) any Canadian Pension Plan that would reasonably be expected to result in a Material Adverse Effect.

 

SECTION 8.    EVENTS OF DEFAULT AND REMEDIES.

 

Section 8.1    Events of Default.  Any one or more of the following shall constitute an “Event of Default” hereunder:

 

(a)    default in the payment when due of all or any part of any Obligation payable by Borrower hereunder or under any other Loan Document (whether at the stated maturity thereof or at any other time provided for in this Agreement), or default shall occur in the payment when due of any other indebtedness or obligation (whether direct, contingent or otherwise) of Borrower owing to Bank, and such default continues for three (3) days after such payment is due; provided that Borrower shall not have the benefit of using such 3-day cure period for any principal payments due and owing to Bank;

 

(b)    default in the observance or performance of any covenant set forth in Sections 6.1, 6.4, 6.5, 6.6, 6.11, or Article 7 or any provision in any Loan Document dealing with the use, disposition or remittance of the proceeds of Collateral or requiring the maintenance of insurance thereon, and such default continues for five (5) Business Days; provided, that Borrower may only have the benefit of using such cure period three (3) times per fiscal year;

 

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

 

(d)    any representation or warranty made herein or in any other Loan Document or in any certificate furnished to Bank pursuant hereto or thereto or in connection with any transaction contemplated hereby or thereby proves untrue in any respect (or in any material respect if such representation, warranty, certification or statement is not by its terms already qualified as to materiality) as of the date of the issuance or making or deemed making thereof;

 

 

(e)    any event occurs or condition exists (other than those described in subsections (a) through (d) above) which is specified as an event of default under any of the other Loan Documents, or any of the Loan Documents shall for any reason not be or shall cease to be in full force and effect or is declared to be null and void, or any of the Collateral Documents shall for any reason fail to create a valid and perfected first priority Lien in favor of Bank in any Collateral purported to be covered thereby except as expressly permitted by the terms thereof and except as permitted by Section 7.2, or any Subsidiary takes any action for the purpose of terminating, repudiating or rescinding any Loan Document executed by it or any of its obligations thereunder;

 

(f)    default shall occur under any Indebtedness for Borrowed Money issued, assumed or guaranteed by Borrower or any Subsidiary aggregating in excess of $500,000, or under any indenture, agreement or other instrument under which the same may be issued, and such default shall continue for a period of time sufficient to permit the acceleration of the maturity of any such Indebtedness for Borrowed Money (whether or not such maturity is in fact accelerated), or any such Indebtedness for Borrowed Money shall not be paid when due (whether by demand, lapse of time, acceleration or otherwise);

 

(g)    any judgment or judgments, writ or writs or warrant or warrants of attachment, or any similar process or processes, shall be entered or filed against Borrower or any Subsidiary, or against any of its Property, in an aggregate amount in excess of $500,000 (except to the extent fully covered by insurance as to which the insurer has been notified of such judgment and has not denied coverage), and which remains undischarged, unvacated, unbonded or unstayed for a period of 30 days;

 

(h)    Borrower or any Subsidiary, or any member of its Controlled Group, shall fail to pay when due an amount or amounts aggregating in excess of $500,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $500,000 (collectively, a “Material Plan”) shall be filed under Title IV of ERISA by Borrower or any Subsidiary, or any other member of its Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against Borrower or any Subsidiary, or any member of its Controlled Group, to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated;

 

(i)    any Change of Control shall occur;

 

(j)    Borrower or any Subsidiary shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, or any Canadian Insolvency Legislation, (ii) not pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to or acquiesce in, the appointment of a receiver, interim receiver, receiver and manager custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its Property, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, or any Canadian Insolvency Legislation, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment, restructuring, winding-up or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it (including the filing of any notice of intention or the filing of a proposal in respect thereof), (vi) take any corporate action in furtherance of any matter described in parts (i) through (v) above, or (vii) fail to contest in good faith any appointment or proceeding described in Section 8.1(k);

 

 

(k)    a custodian, receiver, interim receiver, receiver and manager, trustee, examiner, liquidator or similar official shall be appointed for Borrower or any Subsidiary, or any substantial part of any of its Property, or a proceeding described in Section 8.1(j)(v) shall be instituted against Borrower or any Subsidiary, and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 60 days; or

 

(l)    (a) the voluntary full or partial wind up of a Canadian Pension Defined Benefit Plan by any Loan Party, or any Subsidiary of a Loan Party or initiation of any action or filing to do so; (b) the institution of proceedings by any Governmental Authority to terminate in whole or in part or have a trustee appointed to administer any Canadian Defined Benefit Pension Plan; or (c) any other event or condition which would reasonably be expected to result in the termination of, winding up or partial termination of, or the appointment of trustee to administer, any Canadian Defined Benefit Pension Plan.

 

Any Event of Default occurring hereunder shall be deemed to exist and be continuing until waived by Bank, notwithstanding any actual or purported remedy or cure of the actions, facts, circumstances or conditions giving rise to such Event of Default.

 

Section 8.2    Non Bankruptcy Defaults.  When any Event of Default (other than those described in Section 8.1(j) or (k) with respect to Borrower) has occurred and is continuing, Bank may, by written notice to Borrower: (a) terminate the remaining Commitments and all other obligations of Bank hereunder on the date stated in such notice (which may be the date thereof); (b) declare the principal of and the accrued interest on all outstanding Loans to be forthwith due and payable and thereupon all outstanding Loans, including both principal and interest thereon, shall be and become immediately due and payable together with all other amounts payable under the Loan Documents without further demand, presentment, protest or notice of any kind; and (c) demand that Borrower immediately Cash Collateralize the L/C Obligations, and Borrower agrees to immediately make such payment and acknowledges and agrees that Bank would not have an adequate remedy at law for failure by Borrower to honor any such demand and that Bank shall have the right to require Borrower to specifically perform such undertaking whether or not any drawings or other demands for payment have been made under any Letter of Credit.

 

Section 8.3    Bankruptcy Defaults.  When any Event of Default described in Section 8.1(j) or (k) with respect to Borrower has occurred and is continuing, then all outstanding Loans together with all other amounts payable under the Loan Documents shall immediately become due and payable without presentment, demand, protest or notice of any kind, the obligation of Bank to extend further credit pursuant to any of the terms hereof shall immediately terminate and Borrower shall immediately Cash Collateralize the L/C Obligations, Borrower acknowledging and agreeing that Bank would not have an adequate remedy at law for failure by Borrower to honor any such demand and that Bank shall have the right to require Borrower to specifically perform such undertaking whether or not any draws or other demands for payment have been made under any of the Letters of Credit.

 

 

Section 8.4    Collateral for Undrawn Letters of Credit.  If the prepayment of the amount available for drawing under any or all outstanding Letters of Credit is required under Section 8.2 or Section 8.3 above, Borrower shall forthwith pay the amount required to be so prepaid. All such amounts prepaid shall be held by Bank in one or more separate collateral accounts (each such account, and the credit balances, properties, and any investments from time to time held therein, and any substitutions for such account, any certificate of deposit or other instrument evidencing any of the foregoing and all proceeds of and earnings on any of the foregoing being collectively called the “Collateral Account”) as security for, and for application by Bank (to the extent available) to, the reimbursement of any payment under any Letter of Credit then or thereafter made by Bank, and to the payment of the unpaid balance of all other Obligations (and to all Hedging Liability). The Collateral Account shall be held in the name of and subject to the exclusive dominion and control of Bank. If and when requested by Borrower, Bank shall invest funds held in the Collateral Account from time to time in direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America with a remaining maturity of one year or less, provided that Bank is irrevocably authorized to sell investments held in the Collateral Account when and as required to make payments out of the Collateral Account for application to amounts due and owing from Borrower to Bank; provided, that if Borrower shall have made payment of all obligations required under Section 8.2 or 8.3, so long as no Letters of Credit, Commitments, Loans or other Obligations or Hedging Liability remain outstanding, at the request of Borrower, Bank shall release to Borrower any remaining amounts held in the Collateral Account.

 

SECTION 9.    MISCELLANEOUS.

 

Section 9.1    No Waiver, Cumulative Remedies.  No delay or failure on the part of Bank in the exercise of any power or right under any Loan Document shall operate as a waiver thereof or as an acquiescence in any default, nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof or the exercise of any other power or right. The rights and remedies hereunder of Bank are cumulative to, and not exclusive of, any rights or remedies which Bank would otherwise have.

 

Section 9.2    Non-Business Days.  If any payment hereunder becomes due and payable on a day which is not a Business Day, the due date of such payment shall be extended to the next succeeding Business Day on which date such payment shall be due and payable. In the case of any payment of principal falling due on a day which is not a Business Day, interest on such principal amount shall continue to accrue during such extension at the rate per annum then in effect, which accrued amount shall be due and payable on the next scheduled date for the payment of interest.

 

 

Section 9.3    Survival of Representations.  All representations and warranties made herein or in any other Loan Document or in certificates given pursuant hereto or thereto shall survive the execution and delivery of this Agreement and the other Loan Documents, and shall continue in full force and effect with respect to the date as of which they were made as long as any credit is in use or available hereunder.

 

Section 9.4    Survival of Indemnity and Certain Other Provisions.  All indemnity provisions and other provisions relative to reimbursement to Bank of amounts sufficient to protect the yield of Bank with respect to the Loans and Letters of Credit, including, but not limited to, Sections 3.3, 3.6, and 9.10, shall survive the payment and satisfaction of all Obligations and the termination of this Agreement and the other Loan Documents, and shall remain in force beyond the expiration of any applicable statute of limitations and payment or satisfaction in full of any single claim thereunder. All such indemnity and other provisions shall be binding upon the successors and assigns of Borrower and shall inure to the benefit of each applicable Indemnitee and its successors and assigns.

 

Section 9.5    Notices.  Except as otherwise specified herein, all notices hereunder and under the other Loan Documents shall be in writing (including notice by electronic delivery) and shall be given to the relevant party at its mailing address or email address set forth below, or such other address as such party may hereafter specify by notice to the other given by courier, by United States certified or registered mail or by electronics means capable of creating a written record of such notice and its receipt. Notices under the Loan Documents shall be addressed:

 

to Borrower:   Twin Disc, Incorporated 222 East Erie Street, Suite 400 Milwaukee, WI, 53202                   Attention:     Vice President – Finance and Chief Financial Officer Telephone:    262-638-4242 Email:           knutson.jeff@twindisc.com

to Bank:   Bank of Montreal 790 North Water Street Milwaukee, Wisconsin 53202 Attention:        Mark Czarnecki, SVP Telephone:      414-765-7920 Email:             mark.czarnecki@bmo.com

 

Each such notice, request or other communication shall be effective (i) if given via email, when such email is transmitted to the email address specified in this Section and a confirmation of such email has been received by the sender, (ii) if given by mail, 5 days after such communication is deposited in the mail, certified or registered with return receipt requested, addressed as aforesaid or (iii) if given by any other means, when delivered at the addresses specified in this Section; provided that any notice given pursuant to Section 2 shall be effective only upon receipt.

 

 

Section 9.6    Counterparts; Digital Copies.  This Agreement, any Loan Document, any assignment and acceptance and any other Communication, including Communications required to be in writing, may be in the form of an Electronic Record and may be executed using Electronic Signatures.  Each of the Loan Parties and Bank agrees that any Electronic Signature of such Person on or associated with any Communication shall be valid and binding on such Person to the same extent as a manual, original signature, and that any Communication entered into by Electronic Signature, will constitute the legal, valid and binding obligation of such Person enforceable against such Person in accordance with the terms thereof to the same extent as if a manually executed original signature was delivered.   Any Communication may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Communication.  For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance of a manually signed paper Communication which has been converted into electronic form (such as scanned into PDF format), or an electronically signed Communication converted into another format, for transmission, delivery and/or retention. Bank may, at its option, create one or more copies of any Communication in the form of an imaged Electronic Record (“Electronic Copy”), which shall be deemed created in the ordinary course of such Person's business, and destroy the original paper document.  All Communications in the form of an Electronic Record, including an Electronic Copy, shall be considered an original for all purposes, and shall have the same legal effect, validity and enforceability as a paper record.  Notwithstanding anything contained herein to the contrary, Bank is not under any obligation to accept an Electronic Signature in any form or in any format unless expressly agreed to by Bank pursuant to procedures approved by it; provided, further, without limiting the foregoing, (a) to the extent Bank has agreed to accept such Electronic Signature, Bank shall be entitled to rely on any such Electronic Signature purportedly given by or on behalf of any Loan Party and without further verification and (b) upon the request of Bank, any Electronic Signature shall be promptly followed by such manually executed counterpart. Each of the Loan Parties hereby waives (i) any argument, defense or right to contest the legal effect, validity or enforceability of this Agreement, any other Loan Document or any Communication based solely on the lack of paper original copies of this Agreement, such other Loan Document or such Communication, and (ii) waives any claim against Bank and its Related Parties for any liabilities arising solely from Bank’s reliance on or use of Electronic Signatures, including any liabilities arising as a result of the failure of the Loan Parties to use any available security measures in connection with the execution, delivery or transmission of any Electronic Signature.

 

Section 9.7    Successors and Assigns.  Subject to Section 2.17 above, this Agreement shall be binding upon Borrower and its successors and assigns, and shall inure to the benefit of Bank and its successors and assigns, including any subsequent holder of any of the Obligations. Borrower may not assign any of its rights or obligations under any Loan Document without the written consent of Bank.

 

Section 9.8    Amendments, etc.  Except as provided in Sections 2.15 and 2.16 above, no amendment, modification, termination or waiver of any provision of this Agreement or of any other Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by Borrower and Bank. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances.

 

Section 9.9    Headings.  Article and Section headings used in this Agreement are for reference only and shall not affect the construction of this Agreement.

 

 

Section 9.10    Costs and Expenses; Indemnification. Borrower agrees to pay all costs and expenses of Bank in connection with the preparation, negotiation, execution, delivery, and administration of the Loan Documents, including the reasonable fees and disbursements of counsel to Bank, in connection with the preparation and execution of the Loan Documents and in connection with the transactions contemplated hereby or thereby, and any amendment, waiver or consent related thereto, whether or not the transactions contemplated herein are consummated, together with any fees and charges suffered or incurred by Bank in connection with periodic environmental audits, fixed asset appraisals, title insurance policies, collateral filing fees and lien searches. Borrower agrees to pay to Bank all costs and expenses incurred or paid by Bank, including reasonable attorneys’ fees and disbursements and court costs, in connection with any Default or Event of Default hereunder or in connection with the enforcement of any of the Loan Documents (including all such costs and expenses incurred in connection with any proceeding under the United States Bankruptcy Code involving Borrower or any Subsidiary as a debtor thereunder). Borrower further agrees to indemnify Bank, and any security trustee therefor, their respective Affiliates, and each of their respective directors, officers, employees, agents, advisors, and consultants (each such Person being called an “Indemnitee”) against all losses, claims, damages, penalties, judgments, liabilities and expenses (including all reasonable fees and disbursements of counsel for any such Indemnitee and all reasonable expenses of litigation or preparation therefor, whether or not the Indemnitee is a party thereto, or any settlement arrangement arising from or relating to any such litigation) which any of them may pay or incur arising out of or relating to any Loan Document or any of the transactions contemplated thereby or the direct or indirect application or proposed application of the proceeds of any Loan or Letter of Credit, other than those which arise from the bad faith, reckless disregard or willful misconduct of the party claiming indemnification. Borrower, upon demand by Bank at any time, shall reimburse Bank for any legal or other expenses (including all reasonable fees and disbursements of counsel for any such Indemnitee) incurred in connection with investigating or defending against any of the foregoing (including any settlement costs relating to the foregoing) except if the same is directly due to the bad faith, reckless disregard or willful misconduct of the party to be indemnified. To the extent permitted by applicable law, Borrower shall not assert or cause any Subsidiary to assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or the other Loan Documents or any agreement or instrument contemplated hereby or thereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.

 

(b)    Borrower unconditionally agrees to forever indemnify, defend and hold harmless, and covenants not to sue for any claim for contribution against, each Indemnitee for any damages, costs, loss or expense, including, response, remedial or removal costs and all fees and disbursements of counsel for any such Indemnitee, arising out of any of the following: (i) any presence, release, threatened release or disposal of any hazardous or toxic substance or petroleum by Borrower or any Subsidiary or otherwise occurring on or with respect to its Property (whether owned or leased), (ii) the operation or violation of any Environmental Law, whether federal, state, provincial, territorial or local, and any regulations promulgated thereunder, by Borrower or any Subsidiary or otherwise occurring on or with respect to its Property (whether owned or leased), (iii) any claim for personal injury or property damage in connection with Borrower or any Subsidiary or otherwise occurring on or with respect to its Property (whether owned or leased), and (iv) the inaccuracy or breach of any environmental representation, warranty or covenant by Borrower or any Subsidiary made herein or in any other Loan Document evidencing or securing any Obligations or setting forth terms and conditions applicable thereto or otherwise relating thereto, except for damages arising from the bad faith, reckless disregard or willful misconduct of the relevant Indemnitee.

 

 

Section 9.11    Set off.  In addition to any rights now or hereafter granted under the Loan Documents or applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default, Bank and each of its affiliates is hereby authorized by Borrower at any time or from time to time, without notice to Borrower, or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured, and in whatever currency denominated, but not including trust accounts) and any other indebtedness at any time held or owing by Bank or that affiliate, to or for the credit or the account of Borrower, whether or not matured, against and on account of the Obligations of Borrower to Bank under the Loan Documents, including, but not limited to, all claims of any nature or description arising out of or connected with the Loan Documents, irrespective of whether or not (a) Bank shall have made any demand hereunder or (b) the principal of or the interest on the Loans and other amounts due hereunder shall have become due and payable pursuant to Section 8 and although said obligations and liabilities, or any of them, may be contingent or unmatured.

 

Section 9.12    Entire Agreement.  The Loan Documents constitute the entire understanding of the parties thereto with respect to the subject matter thereof and any prior agreements, whether written or oral, with respect thereto are superseded hereby.

 

Section 9.13    Governing Law.  This Agreement and the other Loan Documents (except as otherwise specified therein), and any claim, controversy, dispute or cause of action (whether in contract, tort or otherwise) based upon, arising out of or relating to this Agreement or any Loan Document, and the rights and duties of the parties hereto, shall be governed by and construed and determined in accordance with the internal laws of the State of Wisconsin.

 

Section 9.14    Severability of Provisions.  Any provision of any Loan Document that is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof or affecting the enforceability of such provision in any other jurisdiction. All rights, remedies and powers provided in this Agreement and the other Loan Documents may be exercised only to the extent that the exercise thereof does not violate any applicable mandatory provisions of law, and all the provisions of this Agreement and other Loan Documents are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement or the other Loan Documents invalid or unenforceable.

 

 

Section 9.15    Excess Interest.  Notwithstanding any provision to the contrary contained herein or in any other Loan Document, no such provision shall result in a receipt by Bank of interest at a criminal rate (as construed under the Criminal Code (Canada)) or shall require the payment or permit the collection of any amount of interest or charges in excess of the maximum amount of interest permitted by applicable law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the Loans or other obligations outstanding under this Agreement or any other Loan Document (“Excess Interest”). If any Excess Interest is provided for, or is adjudicated to be provided for, herein or in any other Loan Document, then in such event (a) the provisions of this Section shall govern and control, (b) neither Borrower nor any Guarantor or endorser shall be obligated to pay any Excess Interest, (c) any Excess Interest that Bank may have received hereunder shall, at the option of Bank, be (i) applied as a credit against the then outstanding principal amount of Obligations hereunder and accrued and unpaid interest thereon (not to exceed the maximum amount permitted by applicable law), (ii) refunded to Borrower, or (iii) any combination of the foregoing, (d) the interest rate payable hereunder or under any other Loan Document (or any fees, commissions, premiums and other amounts required to be paid to Bank which would constitute interest for purposes of the Criminal Code (Canada)) shall be automatically subject to reduction to the maximum lawful contract rate allowed under applicable usury laws including the Criminal Code (Canada) (the “Maximum Rate”), and this Agreement and the other Loan Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in the relevant interest rate, and (e) neither Borrower nor any guarantor or endorser shall have any action against Bank for any damages whatsoever arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any of the Obligations is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on the Obligations shall remain at the Maximum Rate until Bank have received the amount of interest which Bank would have received during such period on the Obligations had the rate of interest not been limited to the Maximum Rate during such period. For the purposes of the Criminal Code (Canada), any amount or rate of interest referred to in this Agreement shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term that any Loan remains outstanding on the assumption that any charges, fees or expenses that fall within the meaning of “interest” (as defined in the Criminal Code (Canada)) shall, if they relate to a specific period of time, be pro-rated over that period of time and otherwise be pro-rated over the period from date of advance to the relevant Maturity Date and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by Bank shall be conclusive for the purposes of that determination.

 

Section 9.16    Construction.   The parties acknowledge and agree that the Loan Documents shall not be construed more favorably in favor of any party hereto based upon which party drafted the same, it being acknowledged that all parties hereto contributed substantially to the negotiation of the Loan Documents. The provisions of this Agreement relating to Subsidiaries shall only apply during such times as Borrower has one or more Subsidiaries. Nothing contained herein shall be deemed or construed to permit any act or omission which is prohibited by the terms of any Collateral Document, the covenants and agreements contained herein being in addition to and not in substitution for the covenants and agreements contained in the Collateral Documents.

 

 

Section 9.17    Submission to Jurisdiction; Waiver of Venue; Service of Process.  (a)        BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF WISCONSIN SITTING IN MILWAUKEE COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE EASTERN DISTRICT OF WISCONSIN, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. 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 THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT BANK MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.

 

(b)          BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (a) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(c)          EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.5. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

Section 9.18    Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

 

Section 9.19    USA Patriot Act and Canadian Anti-Money Laundering.   Bank hereby notifies Borrower that pursuant to the requirements of the Patriot Act it is required to obtain, verify, and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow Bank to identify Borrower in accordance with that Act.

 

(b)    Borrower acknowledges that, pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) and other applicable anti-money laundering, anti-terrorist financing, government sanction and “know your client” laws (collectively, including any guidelines or orders thereunder, “Canadian AML Legislation”), Bank may be required to obtain, verify and record information regarding Borrower, any Subsidiary, their directors, authorized signing officers, direct or indirect shareholders or other Persons in control of Borrower or any Subsidiary, and the transactions contemplated hereby. Borrower shall promptly provide all such information, including supporting documentation and other evidence, as may be reasonably requested by Bank, or any prospective assignee or participant of Bank, in order to comply with any applicable Canadian AML Legislation, whether now or hereafter in existence.

 

Section 9.20    Time is of the Essence. Time is of the essence of this Agreement and each of the other Loan Documents.

 

Section 9.21    Confidentiality.  Bank agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its branches and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors to the extent any such Person has a need to know such Information (it being understood that the Persons to whom such disclosure is made will first be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as (or no less restrictive than) those of this Section, to (i) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights and obligations under this Agreement or (ii) any direct or indirect, actual or prospective party (or its Related Parties) to any swap, derivative, securitization or other transaction under which payments are to be made by reference to Borrower or any Subsidiary and its obligations, this Agreement or payments hereunder, (g) with the prior written consent of Borrower, (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (i) becomes available to Bank or any of its Affiliates on a non-confidential basis from a source other than Borrower or any Subsidiary or any of their directors, officers, employees or agents, including accountants, legal counsel and other advisors, that is not known to be subject to a confidentiality obligation to the Loan Parties, or (iii) is independently discovered or developed by a party hereto without utilizing any Information received from a Loan Party or violating the terms of this Section; or to the extent required by a potential or actual insurer or reinsurer in connection with providing insurance, reinsurance or credit risk mitigation coverage under which payments are to be made or may be made by reference to this Agreement, or (A) to rating agencies if requested or required by such agencies in connection with a rating relating to the Loans or Commitments hereunder; provided that only basic information about the pricing and structure of the transaction evidenced hereby may be disclosed pursuant to this subsection (A). For purposes of this Section, “Information” means all information received from Borrower or any of the Subsidiaries or from any other Person on behalf of Borrower or any Subsidiary relating to Borrower or any Subsidiary or any of their respective businesses, other than any such information that is available to Bank on a non-confidential basis prior to disclosure by Borrower or any of its Subsidiaries or from any other Person on behalf of Borrower or any of the Subsidiaries; provided that, in the case of information received from Borrower or any Subsidiary, or on behalf of Borrower or any Subsidiary, after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

 

Section 9.22    Customary Advertising Material.

 

Notwithstanding Section 9.21 above, the Loan Parties consent to the publication by Bank of customary advertising material (including customary “tombstone” disclosure) relating to the transactions contemplated hereby using the name, product photographs, logo or trademark of the Loan Parties.

 

Section 9.23    Judgment Currency.

 

If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or pursuant to any of the other Loan Documents in one currency into another currency, the rate of exchange used shall be the rate at which, in accordance with normal banking procedures, Bank could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of each Loan Party in respect of any such sum due from it to Bank hereunder or under any of the other Loan Documents shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement or the other Loan Document (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by Bank of any sum adjudged to be so due in the Judgment Currency, Bank may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to Bank from any Loan Party in the Agreement Currency, such Loan Party agrees and shall be required, as a separate obligation and notwithstanding any such judgment, to indemnify Bank against such loss.

 

[Signature Pages to Follow]

 

  

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

 

“Borrower”   TWIN DISC, INCORPORATED     By:______________________________ Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer   (from the Closing Date until the consummation of the Kobelt Amalgamation)   TWIN DISC CANADA HOLDINGS LTD.       By: ______________________________ Name: Title:     (following the consummation of the Kobelt Acquisition and the Kobelt Amalgamation)   KOBELT MANUFACTURING CO. LTD.       By: ______________________________ Name: Title:

 

 

“Bank”   BANK OF MONTREAL     By:______________________________ Name: Mark Czarnecki Title: Senior Vice President     By:______________________________ Name: Helen Alvarez-Hernandez Title: Managing Director

 

 

Schedule 5.2

Subsidiaries

 

Name	Jurisdiction of Organization	Percentage Ownership	Owner
Twin Disc International, S.R.L.	Belgium	99.99%	157,573 ordinary shares and 10,835 preferred shares owned by Twin Disc, Inc.; 1 ordinary share owned by John H. Batten
Twin Disc S.r.l.	Italy	100%	Twin Disc International, S.R.L
Twin Disc (Pacific) Pty. Ltd.	Australia	100%	Twin Disc, Incorporated
Twin Disc (Far East) Ltd.	Delaware (operating in Singapore and Hong Kong)	100%	Twin Disc, Incorporated
Twin Disc (Far East) Pte. Ltd	Singapore	100%	9,004,731 Shares owned by Twin Disc (Far East) Ltd.; 1 Share owned by Twin Disc, Inc.
Twin Disc (Far East) Pte. Ltd	India	100%	Twin Disc (Far East) Pte. Ltd. (the Singapore entity)
Twin Disc Power Transmission (Shanghai) Co. Ltd.	China	100%	Twin Disc (Far East) Pte. Ltd.
Twin Disc Power Transmission Private Ltd.	India	100%	1,100,500 Shares owned by Twin Disc (Far East) Pte. Ltd.; 9,900 Shares owned by Twin Disc, Inc.; 100 Shares owned by Twin Disc International, S.R.L
Twin Disc Nico Co., Ltd	Japan	66%   34%	Twin Disc, Incorporated   Hitachi

 

 

Twin Disc Japan	Japan	100%	Twin Disc, Incorporated
Rolla SP Propellers SAGL	Switzerland	100%	Twin Disc International, S.R.L
Twin Disc NL Holding B.V.	Netherlands	100%	Twin Disc, Incorporated
Veth Propulsion, B.V.	Netherlands	100%	Veth Propulsion Holding, B.V.
Veth Propulsion Holding B.V.	Netherlands	100%	Twin Disc NL Holding B.V.
TD Finland Holding Oy	Finland	100%	Twin Disc, Incorporated
Katsa Oy	Finland	100%	TD Finland Holding Oy
Twin Disc European Distribution S.R.L.	Belgian	100%	Twin Disc International S.R.L.
Twin Disc New Zealand Limited	New Zealand	100%	Twin Disc, Incorporated
Kobelt Manufacturing Co. Ltd.*	Canada	100%	Twin Disc, Incorporated

 

 

*This information is to be included and form part of Schedule 5.2 following the consummation of the Kobelt Acquisition and Kobelt Amalgamation (as those terms are defined in this Agreement).

 

 

Schedule 5.17(b)

 

Compliance with Environmental Laws

 

 

None.

 

 

Schedule 7.1(b)

 

Borrowings and Guaranties

 

Promissory Note dated as of February 14^th, 2025 from Twin Disc Canada Holdings Ltd. to Twin Disc, Incorporated in the original principal amount of $11,897,932.32*

 

 

*This information is to be included and form part of Schedule 7.1(b) following the consummation of the Kobelt Acquisition (as that term is defined in this Agreement).

 

 

Schedule 7.2(b)

 

Liens

 

 

None.

 

Exhibit 1.2

 

FIFTH AMENDED AND RESTATED REVOLVING NOTE

 

U.S. $50,000,000.00

February 14, 2025

         

For Value Received, the undersigned, Twin Disc, Incorporated, a Wisconsin corporation (“TDI”), from the Closing Date until the consummation of the Kobelt Amalgamation, Twin Disc Canada Holdings Ltd., a company incorporated under the laws of British Columbia (“Kobelt Purchaser”) and immediately after giving effect to the Kobelt Acquisition and the Kobelt Amalgamation Kobelt Manufacturing Co. Ltd., a company amalgamated under the laws of British Columbia as a result of the Kobelt Amalgamation, jointly and severally (“Canadian Borrower” and, immediately after giving effect to the Kobelt Acquisition, together with TDI and Kobelt Purchaser, each individually and collectively, “Borrower”), hereby promises to pay to Bank of Montreal (“Bank”), as successor via assignment to BMO Bank N.A. (f/k/a BMO Harris Bank N.A.), at the principal office of Bank located in Milwaukee, Wisconsin (or such other location as Bank may designate to Borrower), in immediately available funds, the principal sum of Fifty Million and No/100 Dollars ($50,000,000.00) or, if less, the aggregate unpaid principal amount of all Revolving Loans made by Bank to Borrower pursuant to the Credit Agreement (as defined below), together with interest on the principal amount of each Revolving Loan from time to time outstanding hereunder at the rates, and payable in the manner and on the dates, specified in the Credit Agreement.

 

This Fifth Amended and Restated Revolving Note (this “Note”) is one of the Revolving Notes referred to in the Credit Agreement dated as of February 14, 2025, between Borrower and Bank (as extended, renewed, amended or restated from time to time, the “Credit Agreement”), and this Note and the holder hereof are entitled to all the benefits and security provided for thereby or referred to therein, to which Credit Agreement reference is hereby made for a statement thereof.

 

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

 

All defined terms used in this Note, except terms otherwise defined herein, shall have the same meaning as in the Credit Agreement. This Note shall be governed by and construed in accordance with the internal laws of the State of Wisconsin. Borrower hereby waives demand, presentment, protest or notice of any kind hereunder.

 

This Note is an amendment and restatement of that certain Fourth Amended and Restated Revolving Note dated as of April 1, 2024, issued by BMO Bank N.A. and payable to the order of Bank, in the principal amount of $45,000,000 (the “Original Note”), and this Note is a continuation of the indebtedness evidenced by the Original Note but is limited by the face amount of this Note. This Note is not intended as and shall not be construed as a repayment, novation or refinancing of the Original Note, or the indebtedness evidenced thereby.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Note to be duly executed as of the date first above written.

 

	TWIN DISC, INCORPORATED     By: _________________________________ Name: Jeffrey Knutson Title: Vice President – Finance and Chief Financial Officer
	(from the Closing Date until the consummation of the Kobelt Amalgamation) TWIN DISC CANADA HOLDINGS LTD.     By: ______________________________ Name: Title:     (following the consummation of the Kobelt Acquisition and the Kobelt Amalgamation) KOBELT MANUFACTURING CO. LTD.     By: ______________________________ Name: Title:

 

 

Exhibit 1.3

 

ASSIGNMENT AND ASSUMPTION OF

REVOLVING LOAN NOTE

 

THIS ASSIGNMENT AND ASSUMPTION OF REVOLVING LOAN NOTE (this “Assignment”), is entered into as of February 14, 2025, by BMO Bank N.A. (f/k/a BMO Harris Bank N.A.) (“Assignor”), in favor of Bank of Montreal (“Assignee”), and is consented to by Twin Disc, Incorporated, a Wisconsin corporation (“Borrower”).

 

RECITALS

 

A.          Assignor holds a Fourth Amended and Restated Revolving Loan Note, dated April 1, 2024, from Borrower in the principal amount of Forty-Five Million Dollars ($45,000,000) (the “Note”), a copy of which is attached hereto as Exhibit A, which was executed and delivered to Bank pursuant to that certain Credit Agreement, dated June 29, 2018, by and among Borrower, Assignor and the lenders party thereto (the “2018 Credit Agreement”);

 

B.         Contemporaneously herewith, Assignee will refinance the credit facilities extended by Assignor to Borrower under the 2018 Credit Agreement, and finance additional credit facilities, including from the Closing Date until the consummation of the Kobelt Amalgamation, Twin Disc Canada Holdings Ltd., a company incorporated under the laws of British Columbia and immediately after giving effect to the Kobelt Acquisition and the Kobelt Amalgamation, Kobelt Manufacturing Co. Ltd., a company amalgamated under the laws of British Columbia as a result of the Kobelt Amalgamation (“Canadian Borrower”), as an additional Borrower thereunder, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee and Borrower (the “2025 Credit Agreement”);

 

C.         Assignor desires to assign to Assignee all of its right, title, benefits and obligations in, to and under the Note, and Assignee desires to accept such assignment.

 

NOW, THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT

 

1.          Assignment and Assumption. Assignor hereby assigns to Assignee, and Assignee hereby assumes from Assignor, all of Assignor’s rights and obligations in, to and under the Note. The assignment set forth in this Section 1 shall be without recourse to or representation or warranty (except as expressly provided in this Assignment, in the other documents executed in connection with this Assignment, or in the Note, as assigned) by Assignor.

 

2.          Assumption by Assignee. Assignee hereby assumes all of Assignor’s rights, title, benefits and obligations in, to and under the Note.

 

3.        No Termination. The parties hereto acknowledge and agree that notwithstanding any terms or conditions contained in the Note to the contrary, neither this Assignment, nor any other assignment, amendment or restatement of any other Loan Document (as defined in the 2025 Credit Agreement), shall trigger a termination of the Note.

 

 

4.         No Novation. It is the intention of the parties hereto that this Assignment not constitute a novation of the obligations under the Note and that, from and after the date hereof, the Note shall be amended hereby and all references herein to “hereunder,” “hereof,” or words of like import and all references in any Loan Documents or any documents entered into in connection therewith to the “Note” or words of like import shall mean and be a reference to the Note as assigned hereby as and as hereafter amended, supplemented, restated or renewed.

 

5.         Ratification. As hereby assigned, the Note and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.         Conflict. In the event of a conflict between the terms and conditions of this Assignment and the terms and conditions of the Note, the terms and conditions of this Assignment shall control.

 

7.         Counterparts. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the definitions given said terms in the 2025 Credit Agreement.

 

9.         Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Wisconsin without regard to its conflicts of law principles.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the date first above written.

 

	ASSIGNOR:   BMO BANK N.A.   By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President
	ASSIGNEE:   BANK OF MONTREAL     By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President     By:__________________________________ Name: Helen Alvarez-Hernandez Title: Managing Director
	Consented to by BORROWER:   TWIN DISC, INCORPORATED     By: ________________________________ Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer

 

 

Exhibit A

Copy of 2024 Revolving Loan Note

 

See attached.

 

 

 

 

 

 

 

Exhibit 1.4

 

SECOND AMENDED AND RESTATED TERM NOTE

 

U.S. $15,000,000.00

February 14, 2025,

         

For Value Received, the undersigned, Twin Disc, Incorporated, a Wisconsin corporation (“Borrower”), hereby promises to pay to Bank of Montreal (“Bank”), as successor via assignment to BMO Bank N.A. (f/k/a BMO Harris Bank N.A.), at the principal office of Bank in Milwaukee, Wisconsin (or such other location as Bank may designate to Borrower), in immediately available funds, the principal sum of Fifteen Million and No/100 Dollars ($15,000,000.00), in installments pursuant to the Credit Agreement (defined below), together with interest on the principal amount of such Term Loan from time to time outstanding hereunder at the rates, and payable in the manner and on the dates, specified in the Credit Agreement.

 

This Second Amended and Restated Term Note (this “Note”) is one of the Term Notes referred to in the Amended and Restated Credit Agreement dated as of February 14, 2025, by and between Borrower and Bank (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”), and this Note and the holder hereof are entitled to all the benefits and security provided for thereby or referred to therein, to which Credit Agreement reference is hereby made for a statement thereof.

 

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

 

All defined terms used in this Note, except terms otherwise defined herein, shall have the same meaning as in the Credit Agreement. This Note shall be governed by and construed in accordance with the internal laws of the State of Wisconsin. Borrower hereby waives demand, presentment, protest or notice of any kind hereunder.

 

This Note is an amendment and restatement of that certain Amended and Restated Term Note dated as of March 4, 2019, issued by Borrower and payable to the order of BMO Bank N.A., in the principal amount of $20,000,000 (the “Original Note”), and this Note is a continuation of the indebtedness evidenced by the Original Note. This Note is not intended as, and shall not be construed as, a repayment, novation or refinancing of the Original Note or the indebtedness evidenced thereby.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Note to be duly executed as of the date first above written.

 

	TWIN DISC, INCORPORATED     By: _________________________________ Name: Jeffrey Knutson Title: Vice President – Finance and Chief Financial Officer
	(from the Closing Date until the consummation of the Kobelt Amalgamation) TWIN DISC CANADA HOLDINGS LTD.     By: ______________________________ Name: Title:     (following the consummation of the Kobelt Acquisition and the Kobelt Amalgamation) KOBELT MANUFACTURING CO. LTD.     By: ______________________________ Name: Title:

 

 

Exhibit 1.5

 

ASSIGNMENT AND ASSUMPTION OF

TERM LOAN NOTE

 

THIS ASSIGNMENT AND ASSUMPTION OF TERM LOAN NOTE (this “Assignment”) is entered into as of February 14, 2025, by BMO Bank N.A. (f/k/a BMO Harris Bank N.A.) (“Assignor”), in favor of Bank of Montreal (“Assignee”), and is consented to by Twin Disc, Incorporated, a Wisconsin corporation (“Borrower”).

 

RECITALS

 

A.       Assignor holds an Amended and Restated Revolving Term Note, dated March 4, 2019, from Borrower in the principal amount of Twenty Million Dollars ($20,000,000) (the “Note”), a copy of which is attached hereto as Exhibit A, which was executed and delivered to Bank pursuant to that certain Credit Agreement, dated June 29, 2018, by and among Borrower, Assignor and the lenders party thereto (the “2018 Credit Agreement”);

 

B.       Contemporaneously herewith, Assignee will refinance the credit facilities extended by Assignor to Borrower under the 2018 Credit Agreement, and finance additional credit facilities, including from the Closing Date until the consummation of the Kobelt Amalgamation, Twin Disc Canada Holdings Ltd., a company incorporated under the laws of British Columbia and immediately after giving effect to the Kobelt Acquisition and the Kobelt Amalgamation, Kobelt Manufacturing Co. Ltd., a company amalgamated under the laws of British Columbia as a result of the Kobelt Amalgamation (“Canadian Borrower”), as an additional Borrower thereunder, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee and Borrower (the “2025 Credit Agreement”);

 

C.         Assignor desires to assign to Assignee all of its right, title, benefits and obligations in, to and under the Note, and Assignee desires to accept such assignment.

 

NOW, THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT

 

1.           Assignment and Assumption. Assignor hereby assigns to Assignee, and Assignee hereby assumes from Assignor, all of Assignor’s rights and obligations in, to and under the Note. The assignment set forth in this Section 1 shall be without recourse to or representation or warranty (except as expressly provided in this Assignment, in the other documents executed in connection with this Assignment, or in the Note, as assigned) by Assignor.

 

2.           Assumption by Assignee. Assignee hereby assumes all of Assignor’s rights, title, benefits and obligations in, to and under the Note.

 

3.         No Termination. The parties hereto acknowledge and agree that notwithstanding any terms or conditions contained in the Note to the contrary, neither this Assignment, nor any other assignment, amendment or restatement of any other Loan Document (as defined in the 2025 Credit Agreement), shall trigger a termination of the Note.

 

 

4.         No Novation. It is the intention of the parties hereto that this Assignment not constitute a novation of the obligations under the Note and that, from and after the date hereof, the Note shall be amended hereby and all references herein to “hereunder,” “hereof,” or words of like import and all references in any Loan Documents or any documents entered into in connection therewith to the “Note” or words of like import shall mean and be a reference to the Note as assigned hereby as and as hereafter amended, supplemented, restated or renewed.

 

5.         Ratification. As hereby assigned, the Note and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.         Conflict. In the event of a conflict between the terms and conditions of this Assignment and the terms and conditions of the Note, the terms and conditions of this Assignment shall control.

 

7.         Counterparts. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the definitions given said terms in the 2025 Credit Agreement.

 

9.         Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Wisconsin without regard to its conflicts of law principles.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the date first above written.

 

	ASSIGNOR:   BMO BANK N.A.     By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President
	ASSIGNEE:   BANK OF MONTREAL     By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President     By:__________________________________ Name: Helen Alvarez-Hernandez Title: Managing Director
	Consented to by BORROWER:   TWIN DISC, INCORPORATED     By:__________________________________ Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer

 

 

 

Exhibit A

Copy of 2019 Term Loan Note

 

See attached.

 

 

 

Exhibit 1.6

 

ASSIGNMENT OF AND AMENDMENT TO

SECURITY AGREEMENT

 

THIS ASSIGNMENT OF AND AMENDMENT TO SECURITY AGREEMENT (the “Assignment”), is entered into as of February 14, 2025, by BMO Bank N.A. (f/k/a BMO Harris Bank N.A.) (“Assignor”), in favor of Bank of Montreal (“Assignee”), and is consented to by Twin Disc, Incorporated, a Wisconsin corporation (“Debtor”).

 

RECITALS

 

A.         Pursuant to the Credit Agreement, dated April 22, 2016, by and among Debtor, Assignee and the lenders party thereto (the “2016 Credit Agreement”), Debtor and Assignee entered into that certain Security Agreement, dated as of April 22, 2016 (the “Security Agreement”), a copy of which is attached hereto as Exhibit A;

 

B.          Contemporaneously with a refinancing of the credit facilities extended by Assignor to Borrower, dated as of July 29, 2018 (the “2018 Credit Agreement”), Assignee assigned the Security Agreement to Assignor under an Assignment of and Amendment to Security Agreement (the “2018 Assignment”), a copy of which is attached hereto as Exhibit B;

 

C.          Contemporaneously herewith, Assignee will refinance the credit facilities extended by Assignor to Debtor under the 2018 Credit Agreement, and finance additional credit facilities, including to from the Closing Date until the consummation of the Kobelt Amalgamation, Twin Disc Canada Holdings Ltd., a company incorporated under the laws of British Columbia and immediately after giving effect to the Kobelt Acquisition and the Kobelt Amalgamation, Kobelt Manufacturing Co. Ltd., a company amalgamated under the laws of British Columbia as a result of the Kobelt Amalgamation (“Canadian Borrower”), as an additional Borrower thereunder, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee, Debtor, and Canadian Borrower (the “2025 Credit Agreement”);

 

D.         Assignor now desires to assign its rights and obligations as Secured Party under the Security Agreement to Assignee, and Assignee desires to accept such assignment; and

 

E.         The parties hereto also desire to amend the Security Agreement on the terms and conditions provided herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT

 

1.            Assignment and Assumption.

 

(a)         Assignor hereby assigns to Assignee, and Assignee hereby assumes from Assignor, all of Assignor’s rights and obligations as Secured Party under the Security Agreement. The assignment set forth in this Section 1(a) shall be without recourse to or representation or warranty (except as expressly provided in this Assignment, in the other documents executed in connection with this Assignment, or in the Security Agreement, as assigned and amended) by Assignor.

 

 

(b)         Assignee shall become and be a party to the Security Agreement and succeed to all of the rights and be obligated to perform all of the obligations of Secured Party under the Security Agreement.

 

(c)         In conjunction with the assignment hereunder, Assignor shall transfer and deliver to Assignee any and all Collateral, and/or evidence thereof, in Assignor’s possession. Until such time as the Collateral in Assignor’s possession is transferred to Assignee, Assignor shall hold such Collateral for the benefit of the Assignee.

 

2.            Amendments. The Security Agreement is hereby amended as follows:

 

(a)         Secured Party. The definition of “Secured Party” in the Security Agreement is hereby amended and restated to mean “Bank of Montreal.”

 

(b)         Credit Agreement. The definition of “Credit Agreement” in the Security Agreement is hereby amended and restated to mean “the Credit Agreement, dated as of February 14, 2025, by and among the Secured Party, Debtor, and Kobelt Manufacturing Co. Ltd., a federal Canadian corporation (“Canadian Borrower”), as the same may hereafter be amended, restated, supplemented or otherwise modified.”

 

3.          No Termination. The parties hereto acknowledge and agree that notwithstanding any terms or conditions contained in the Security Agreement to the contrary, neither this Assignment, nor any other assignment, amendment or restatement of any other Loan Document (as defined in the 2025 Credit Agreement), shall trigger a termination of the Security Agreement.

 

4.           No Novation. It is the intention of the parties hereto that this Assignment not constitute a novation of the obligations under the Security Agreement and that, from and after the date hereof, the Security Agreement shall be amended hereby and all references herein to “hereunder,” “hereof,” or words of like import and all references in any Loan Documents or any documents entered into in connection therewith to the “Security Agreement” or words of like import shall mean and be a reference to the Security Agreement as assigned and amended hereby as and as hereafter amended, supplemented, restated or renewed.

 

5.          Ratification. As hereby assigned and amended, the Security Agreement and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.          Conflict. In the event of a conflict between the terms and conditions of this Assignment and the terms and conditions of the Security Agreement, the terms and conditions of this Assignment shall control.

 

 

7.          Counterparts. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

8.          Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the definitions given said terms in the Security Agreement.

 

[Signature Page Follows]

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the date first above written.

 

	ASSIGNOR:   BMO BANK N.A.     By:                                                                     Name: Mark Czarnecki Title: Senior Vice President
	ASSIGNEE:   BANK OF MONTREAL     By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President     By:__________________________________ Name: Helen Alvarez-Hernandez Title: Managing Director
	Consented to by GRANTOR:   TWIN DISC, INCORPORATED     By:                                                                       Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer

 

 

Exhibit A

Copy of Security Agreement

 

See attached.

 

 

Security Agreement

 

This Security Agreement (the “Agreement”) is dated as of April 22, 2016, between TWIN DISC, INCORPORATED, a Wisconsin corporation (the “Debtor”), and BANK OF MONTREAL, a Canadian chartered bank acting through its Chicago branch (the “Administrative Agent”), as “Administrative Agent” for the secured lenders under the “Credit Agreement,” dated on even date herewith (the “Secured Party”).

 

Preliminary Statement

 

A.         The Debtor has requested that the Secured Party extend credit or otherwise make financial accommodations available to or for the account of the Debtor.

 

B.         As a condition to extending credit or otherwise making financial accommodations available to or for the account of the Debtor, the Secured Party requires, among other things, that the Debtor grant the Secured Party a security interest in the Debtor’s personal property described herein subject to the terms and conditions hereof.

 

C.         The Debtor has provided Secured Party a “Perfection Certificate” dated on even date herewith (the “Perfection Certificate”) that is incorporated into this Agreement by reference.

 

Now, Therefore, in consideration of the benefits accruing to the Debtor, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

Section 1.         Grant of Security Interest. The Debtor hereby grants to the Secured Party a lien on and security interest in, and acknowledges and agrees that the Secured Party has and shall continue to have a continuing lien on and security interest in, all of Debtor’s right, title, and interest, whether now owned or existing or hereafter created, acquired, or arising, in and to all of the following:

 

(a)         Accounts (including Health‑Care‑Insurance Receivables, if any);

 

(b)         Chattel Paper;

 

(c)         Instruments (including Promissory Notes);

 

(d)         Documents;

 

(e)         General Intangibles (including Payment Intangibles and Software, patents, trademarks, tradestyles, copyrights, and all other intellectual property rights, including all applications, registration, and licenses therefor, and all goodwill of the business connected therewith or represented thereby);

 

 

(f)         Letter‑of‑Credit Rights;

 

(g)         Supporting Obligations;

 

(h)         Deposit Accounts;

 

(i)         Investment Property (including certificated and uncertificated Securities, Securities Accounts, Security Entitlements, Commodity Accounts, and Commodity Contracts);

 

(j)         Inventory;

 

(k)         Equipment (including all software, whether or not the same constitutes embedded software, used in the operation thereof);

 

(l)         Fixtures;

 

(m)         Commercial Tort Claims (as described in the Perfection Certificate or on one or more supplements to this Agreement);

 

(n)         Rights to merchandise and other Goods (including rights to returned or repossessed Goods and rights of stoppage in transit) which is represented by, arises from, or relates to any of the foregoing;

 

(o)         Monies, personal property, and interests in personal property of the Debtor of any kind or description now held by the Secured Party or at any time hereafter transferred or delivered to, or coming into the possession, custody, or control of, the Secured Party, or any agent or affiliate of the Secured Party, whether expressly as collateral security or for any other purpose (whether for safekeeping, custody, collection or otherwise), and all dividends and distributions on or other rights in connection with any such property;

 

(p)         Supporting evidence and documents relating to any of the above‑described property, including, without limitation, computer programs, disks, tapes and related electronic data processing media, and all rights of the Debtor to retrieve the same from third parties, written applications, credit information, account cards, payment records, correspondence, delivery and installation certificates, invoice copies, delivery receipts, notes, and other evidences of indebtedness, insurance certificates and the like, together with all books of account, ledgers, and cabinets in which the same are reflected or maintained;

 

(q)         Accessions and additions to, and substitutions and replacements of, any and all of the foregoing; and

 

(r)         Proceeds and products of the foregoing, and all insurance of the foregoing and proceeds thereof;

 

 

all of the foregoing being herein sometimes referred to as the “Collateral”. All terms which are used in this Agreement which are defined in the Uniform Commercial Code of the State of Wisconsin as in effect from time to time (“UCC”) shall have the same meanings herein as such terms are defined in the UCC, unless this Agreement shall otherwise specifically provide. For purposes of this Agreement, the term "Receivables" means all rights to the payment of a monetary obligation, whether or not earned by performance, and whether evidenced by an Account, Chattel Paper, Instrument, General Intangible, or otherwise.

 

Section 2.         Obligations Hereby Secured. The lien and security interest herein granted and provided for is made and given to secure, and shall secure, the payment and performance of (a) any and all indebtedness, obligations, and liabilities of whatsoever kind and nature of the Debtor to the Secured Party (whether arising before or after the filing of a petition in bankruptcy and including, without limitation, interest which but for the filing of a petition in bankruptcy would accrue on such obligations), whether direct or indirect, absolute or contingent, due or to become due, and whether now existing or hereafter arising and howsoever held, evidenced, or acquired, and whether several, joint or joint and several, and (b) any and all expenses and charges, legal or otherwise, suffered or incurred by the Secured Party in collecting or enforcing any of such indebtedness, obligations or liabilities or in realizing on or protecting or preserving any security therefor, including, without limitation, the lien and security interest granted hereby (all of the foregoing being hereinafter referred to collectively as the “Obligations”).

 

Notwithstanding the foregoing, the term “Obligations” shall not include, and the lien and security interest herein granted and provided for by Debtor does not secure, Excluded Swap Obligations. For purposes of this Agreement:

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.).

 

“Excluded Swap Obligation” means any Swap Obligation of the Borrower if, and to the extent that, all or a portion of the guarantee of the undersigned of such Swap Obligation is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of the undersigned’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time this guaranty 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 guarantee is or becomes illegal.

 

“Swap Obligation” means any obligation of the Borrower 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.

 

 

Section 3.         Covenants, Agreements, Representations and Warranties. The Debtor hereby covenants and agrees with, and represents and warrants to, the Secured Party that:

 

(a)         The Debtor is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its organization. The Debtor shall not change its jurisdiction of organization without the Secured Party’s prior written consent. The Debtor is the sole and lawful owner of the Collateral, and has full right, power and authority to enter into this Security Agreement and to perform each and all of the matters and things herein provided for. The execution and delivery of this Security Agreement, and the observance and performance of each of the matters and things herein set forth, will not (i) contravene or constitute a default under any provision of law or any judgment, injunction, order or decree binding upon the Debtor or any provision of the Debtor’s organizational documents (e.g., charter, articles or certificate of incorporation and by‑laws, articles or certificate of formation and limited liability company operating agreement, partnership agreement, or similar organizational documents) or any covenant, indenture or agreement of or affecting the Debtor or any of its property or (ii) result in the creation or imposition of any lien or encumbrance on any property of the Debtor except for the lien and security interest granted to the Secured Party hereunder. The Debtor’s organizational registration number (if any) is 1T00778.

 

(b)         The Debtor’s chief executive office and principal place of business is at, and the Debtor keeps and shall keep all of its books and records relating to Receivables only at, 1328 Racine Street, Racine, Wisconsin 53403; and the Debtor has no other executive offices or places of business other than those listed in the Perfection Certificate. The Collateral is and shall remain in the Debtor’s possession or control at the locations listed in the Perfection Certificate (collectively, the “Permitted Collateral Locations”), except for (i) Collateral which in the ordinary course of the Debtor’s business is in transit between Permitted Collateral Locations and (ii) Collateral aggregating less than $50,000 in fair market value outstanding at any one time. If for any reason any Collateral is at any time kept or located at a location other than a Permitted Collateral Location, the Secured Party shall nevertheless have and retain a lien on and security interest therein. The Debtor owns and shall at all times own all Permitted Collateral Locations, except to the extent otherwise disclosed in the Perfection Certificate. The Debtor shall not move its chief executive office or maintain a place of business at a location other than those specified in the Perfection Certificate or permit the Collateral to be located at a location other than those specified in the Perfection Certificate, in each case without first providing the Secured Party 30 days’ prior written notice of the Debtor’s intent to do so; provided that the Debtor shall at all times maintain its chief executive office and, unless otherwise specifically agreed to in writing by the Secured Party, Permitted Collateral Locations in the United States of America and, with respect to any new chief executive office or place of business or location of Collateral, the Debtor shall have taken all action requested by the Secured Party to maintain the lien and security interest of the Secured Party in the Collateral at all times fully perfected and in full force and effect.

 

(c)         The Debtor’s legal name and jurisdiction of organization is correctly set forth in the first paragraph of this Agreement. The Debtor has not transacted business at any time during the immediately preceding five‑year period, and does not currently transact business, under any other legal names or trade names other than the prior legal names and trade names (if any) set forth in the Perfection Certificate. The Debtor shall not change its legal name or transact business under any other trade name without first giving 30 days’ prior written notice of its intent to do so to the Secured Party.

 

(d)         The Collateral and every part thereof is and shall be free and clear of all security interests, liens (including, without limitation, mechanics’, laborers’ and statutory liens), attachments, levies, and encumbrances of every kind, nature and description, whether voluntary or involuntary, except for the lien and security interest of the Secured Party therein and as otherwise provided the in Perfection Certificate. The Debtor shall warrant and defend the Collateral against any claims and demands of all persons at any time claiming the same or any interest in the Collateral adverse to the Secured Party.

 

 

(e)         The Debtor shall promptly pay when due all taxes, assessments and governmental charges and levies upon or against the Debtor or any of the Collateral, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings which prevent foreclosure or other realization upon any of the Collateral and preclude interference with the operation of the Debtor’s business in the ordinary course, and the Debtor shall have established adequate reserves therefor.

 

(f)         The Debtor shall not use, manufacture, sell, or distribute any Collateral in violation of any statute, ordinance, or other governmental requirement. The Debtor shall not waste or destroy the Collateral or any part thereof or be negligent in the care or use of any Collateral. The Debtor shall perform its obligations under any contract or other agreement constituting part of the Collateral, it being understood and agreed that the Secured Party has no responsibility to perform such obligations.

 

(g)         Subject to Sections 4(b), 6(b), 6(c), and 7(c) hereof, the Debtor shall not, without the Secured Party’s prior written consent, sell, assign, mortgage, lease or otherwise dispose of the Collateral or any interest therein.

 

(h)         The Debtor shall at all times insure the Collateral consisting of tangible personal property against such risks and hazards as other persons similarly situated insure against, and including in any event loss or damage by fire, theft, burglary, pilferage, loss in transit and such other hazards as the Secured Party may specify. All insurance required hereby shall be maintained in amounts and under policies and with insurers acceptable to the Secured Party, and all such policies shall contain loss payable clauses naming the Secured Party as loss payee as its interest may appear (and, if the Secured Party requests, naming the Secured Party as an additional insured therein) in a form acceptable to the Secured Party. All premiums on such insurance shall be paid by the Debtor. Certificates of insurance evidencing compliance with the foregoing and, at the Secured Party’s request, the policies of such insurance shall be delivered by the Debtor to the Secured Party. All insurance required hereby shall provide that any loss shall be payable to the Secured Party notwithstanding any act or negligence of the Debtor, shall provide that no cancellation thereof shall be effective until at least 30 days after receipt by the Debtor and the Secured Party of written notice thereof, and shall be satisfactory to the Secured Party in all other respects. In case of any material loss, damage to, or destruction of the Collateral or any part thereof, the Debtor shall promptly give written notice thereof to the Secured Party generally describing the nature and extent of such damage or destruction. In case of any loss, damage to or destruction of the Collateral or any part thereof, the Debtor, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for that purpose, at the Debtor’s cost and expense, shall promptly repair or replace the Collateral so lost, damaged, or destroyed. In the event the Debtor shall receive any proceeds of such insurance, the Debtor shall immediately pay over such proceeds to the Secured Party. The Debtor hereby authorizes the Secured Party, at the Secured Party’s option, to adjust, compromise and settle any losses under any insurance afforded at any time during the existence of any Event of Default or any other event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, and the Debtor does hereby irrevocably constitute the Secured Party, and each of its nominees, officers, agents, attorneys, and any other person whom the Secured Party may designate, as the Debtor’s attorneys‑in‑fact, with full power and authority to effect such adjustment, compromise and/or settlement and to endorse any drafts drawn by an insurer of the Collateral or any part thereof and to do everything necessary to carry out such purposes and to receive and receipt for any unearned premiums due under policies of such insurance. Unless the Secured Party elects to adjust, compromise or settle losses as aforesaid, any adjustment, compromise and/or settlement of any losses under any insurance shall be made by the Debtor subject to final approval of the Secured Party (regardless of whether or not an Event of Default shall have occurred) in the case of losses exceeding $250,000.00. Net insurance proceeds received by the Secured Party under the provisions hereof or under any policy of insurance covering the Collateral or any part thereof shall be applied to the reduction of the Obligations (whether or not then due); provided, however, that the Secured Party may in its sole discretion release any or all such insurance proceeds to the Debtor. All insurance proceeds shall be subject to the lien and security interest of the Secured Party hereunder.

 

 

Unless the Debtor provides the Secured Party with evidence of the insurance coverage required by this Security Agreement, the Secured Party may purchase insurance at the Debtor’s expense to protect the Secured party’s interests in the Collateral. This insurance may, but need not, protect the debtor’s interests in the Collateral. The coverage purchased by the Secured Party may not pay any claims that the Debtor makes or any claim that is made against the Debtor in connection with the Collateral. The Debtor may later cancel any such insurance purchased by the Secured Party, but only after providing the Secured Party with evidence that the Debtor has obtained insurance as required by this Security Agreement. If the Secured Party purchases insurance for the Collateral, the Debtor will be responsible for the costs of that insurance, including interest and any other charges that the Secured Party may impose 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 may be added to the Obligations secured hereby. The costs of the insurance may be more than the cost of insurance the Debtor may be able to obtain on its own.

 

(i)         The Debtor shall at all times allow the Secured Party and its representatives free access to and right of inspection of the Collateral; provided that, unless the Secured Party believes in good faith an Event of Default, or any other event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, exists, any such access or inspection shall only be required during the Debtor’s normal business hours and upon at least 48 hours’ advance written notice to the Debtor.

 

(j)         If any Collateral is in the possession or control of any of the Debtor’s agents or processors and the Secured Party so requests, the Debtor agrees to notify such agents or processors in writing of the Secured Party’s security interest therein and instruct them to hold all such Collateral for the Secured Party’s account and subject to the Secured Party’s instructions. The Debtor shall, upon the request of the Secured Party, authorize and instruct all bailees and other parties, if any, at any time processing, labeling, packaging, holding, storing, shipping or transferring all or any part of the Collateral to permit the Secured Party and its representatives to examine and inspect any of the Collateral then in such party’s possession and to verify from such party’s own books and records any information concerning the Collateral or any part thereof which the Secured Party or its representatives may seek to verify. As to any premises not owned by the Debtor wherein any of the Collateral is located, the Debtor shall, at the Secured Party’s request, cause each party having any right, title or interest in, or lien on, any of such premises to enter into an agreement (any such agreement to contain a legal description of such premises) whereby such party disclaims any right, title and interest in, and lien on, the Collateral and allows the removal of such Collateral by the Secured Party and is otherwise in form and substance acceptable to the Secured Party; provided, however, that no such agreement need be obtained with respect to any one location wherein the value of the Collateral as to which such agreement has not been obtained aggregates less than $50,000.00 at any one time.

 

 

(k)         The Debtor agrees from time to time to deliver to the Secured Party such evidence of the existence, identity and location of the Collateral and of its availability as collateral security pursuant hereto (including, without limitation, schedules describing all Receivables created or acquired by the Debtor, copies of customer invoices or the equivalent and original shipping or delivery receipts for all merchandise and other goods sold or leased or services rendered, together with the Debtor’s warranty of the genuineness thereof, and reports stating the book value of Inventory and Equipment by major category and location), in each case as the Secured Party may request. The Secured Party shall have the right to verify all or any part of the Collateral in any manner, and through any medium, which the Secured Party considers appropriate (including, without limitation, the verification of Collateral by use of a fictitious name), and the Debtor agrees to furnish all assistance and information, and perform any acts, which the Secured Party may require in connection therewith. The Debtor shall promptly notify the Secured Party of any Collateral which the Debtor has determined to have been rendered obsolete, stating the prior book value of such Collateral, its type and location.

 

(l)         The Debtor shall comply with the terms and conditions of all leases, easements, right‑of‑way agreements and other similar agreements binding upon the Debtor or affecting the Collateral or any part thereof, and all orders, ordinances, laws and statutes of any city, state or other governmental entity, department, or agency having jurisdiction with respect to the premises wherein such Collateral is located or the conduct of business thereon.

 

(m)         The Perfection Certificate contains a true, complete, and current listing of all patents, trademarks, tradestyles, copyrights, and other intellectual property rights (including all registrations and applications therefor) owned by the Debtor as of the date hereof that are registered with any governmental authority. The Debtor shall promptly notify the Secured Party in writing of any additional intellectual property rights acquired or arising after the date hereof, and shall submit to the Secured Party a supplement to the Perfection Certificate to reflect such additional rights (provided the Debtor’s failure to do so shall not impair the Secured Party’s security interest therein). The Debtor owns or possesses rights to use all franchises, licenses, patents, trademarks, trade names, tradestyles, copyrights, and rights with respect to the foregoing which are required to conduct its business. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights, and the Debtor is not liable to any person for infringement under applicable law with respect to any such rights as a result of its business operations.

 

 

(n)         The Perfection Certificate contains a true, complete and current listing of all Commercial Tort Claims held by the Debtor as of the date hereof, each described by reference to the specific incident given rise to the claim. The Debtor agrees to execute and deliver to the Secured Party a supplement to this Agreement in the form attached hereto as Schedule A, or in such other form acceptable to the Secured Party, promptly upon becoming aware of any other Commercial Tort Claim held or maintained by the Debtor arising after the date hereof (provided the Debtor’s failure to do so shall not impair the Secured Party’s security interest therein).

 

(o)         The Debtor agrees to execute and deliver to the Secured Party such further agreements, assignments, instruments, and documents and to do all such other things as the Secured Party may deem necessary or appropriate to assure the Secured Party its lien and security interest hereunder, including, without limitation, (i) such financing statements, and amendments thereof or supplements thereto, and such other instruments and documents as the Secured Party may from time to time require in order to comply with the UCC and any other applicable law, (ii) such agreements with respect to patents, trademarks, copyrights, and similar intellectual property rights as the Secured Party may from time to time require to comply with the filing requirements of the United States Patent and Trademark Office and the United States Copyright Office, and (iii) such control agreements with respect to Deposit Accounts, Investment Property, Letter‑of‑Credit Rights, and electronic Chattel Paper, and to cause the relevant depository institutions, financial intermediaries, and issuers to execute and deliver such control agreements, as the Secured Party may from time to time require. The Debtor hereby agrees that a photographic or other reproduction of this Security Agreement or any such financing statement is sufficient for filing as a financing statement by the Secured Party without notice thereof to the Debtor wherever the Secured Party in its sole discretion desires to file the same. The Debtor hereby authorizes the Secured Party to file any and all financing statements covering the Collateral or any part thereof as the Secured Party may require, including financing statements describing the Collateral as “all assets” or “all personal property” or words of like meaning. The Secured Party may order lien searches from time to time against the Debtor and the Collateral, and the Debtor shall promptly reimburse the Secured Party for all costs and expenses incurred in connection with such lien searches. In the event for any reason the law of any jurisdiction other than Wisconsin becomes or is applicable to the Collateral or any part thereof, or to any of the Obligations, the Debtor agrees to execute and deliver all such instruments and documents and to do all such other things as the Secured Party in its sole discretion deems necessary or appropriate to preserve, protect, and enforce the lien and security interest of the Secured Party under the law of such other jurisdiction. The Debtor agrees to mark its books and records to reflect the lien and security interest of the Secured Party in the Collateral.

 

 

(p)         On failure of the Debtor to perform any of the covenants and agreements herein contained, the Secured Party may, at its option, perform the same and in so doing may expend such sums as the Secured Party may deem advisable in the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, liens and encumbrances, expenditures made in defending against any adverse claims, and all other expenditures which the Secured Party may be compelled to make by operation of law or which the Secured Party may make by agreement or otherwise for the protection of the security hereof. All such sums and amounts so expended shall be repayable by the Debtor immediately without notice or demand, shall constitute additional Obligations secured hereunder and shall bear interest from the date said amounts are expended at the rate per annum (computed on the basis of a 360‑day year for the actual number of days elapsed) determined by adding 1.75% to the rate per annum from time to time announced or otherwise established by the Secured Party as its prime commercial rate with any change in such rate per annum as so determined by reason of a change in such prime commercial rate to be effective on the date of such change in said prime commercial rate (such rate per annum as so determined being hereinafter referred to as the “Default Rate”). No such performance of any covenant or agreement by the Secured Party on behalf of the Debtor, and no such advancement or expenditure therefor, shall relieve the Debtor of any default under the terms of this Security Agreement or in any way obligate the Secured Party to take any further or future action with respect thereto. The Secured Party, in making any payment hereby authorized, may do so according to any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien or title or claim. The Secured Party, in performing any act hereunder, shall be the sole judge of whether the Debtor is required to perform same under the terms of this Security Agreement. The Secured Party is hereby authorized to charge any account of the Debtor maintained with the Secured Party for the amount of such sums and amounts so expended.

 

Section 4.         Special Provisions Re: Receivables.

 

(a)         As of the time any Receivable becomes subject to the security interest provided for hereby, and at all times thereafter, the Debtor shall be deemed to have warranted as to each and all of such Receivables that all warranties of the Debtor set forth in this Security Agreement are true and correct with respect to each such Receivable; that each Receivable and all papers and documents relating thereto are genuine and in all respects what they purport to be; that each Receivable is valid and subsisting; that no such Receivable is evidenced by any Instrument or Chattel Paper unless such Instrument or Chattel Paper has theretofore been endorsed by the Debtor and delivered to the Secured Party (except to the extent the Secured Party specifically requests the Debtor not to do so with respect to any such Instrument or Chattel Paper); that no surety bond was required or given in connection with such Receivable or the contracts or purchase orders out of which the same arose; that the amount of the Receivable represented as owing is the correct amount actually and unconditionally owing, except for normal cash discounts on normal trade terms in the ordinary course of business; and that the amount of such Receivable represented as owing is not disputed and is not subject to any set‑offs, credits, deductions or countercharges other than those arising in the ordinary course of the Debtor’s business which are disclosed to the Secured Party in writing promptly upon the Debtor becoming aware thereof. Without limiting the foregoing, if any Receivable arises out of a contract with the United States of America, or any state or political subdivision thereof, or any department, agency or instrumentality of any of the foregoing, the Debtor agrees to notify the Secured Party and execute whatever instruments and documents are required by the Secured Party in order that such Receivable shall be assigned to the Secured Party and that proper notice of such assignment shall be given under the federal Assignment of Claims Act (or any successor statute) or any similar state or local statute, as the case may be.

 

 

(b)         Unless and until an Event of Default occurs which has not been waived in writing by the Secured Party, any merchandise or other goods which are returned by a customer or account debtor or otherwise recovered may be resold by the Debtor in the ordinary course of its business as presently conducted in accordance with Section 6(b) hereof; and, during the existence of any Event of Default, such merchandise and other goods shall be set aside at the request of the Secured Party and held by the Debtor as trustee for the Secured Party and shall remain part of the Secured Party’s Collateral. Unless and until an Event of Default occurs which has not been waived in writing by the Secured Party, the Debtor may settle and adjust disputes and claims with its customers and account debtors, handle returns and recoveries and grant discounts, credits and allowances in the ordinary course of its business as presently conducted for amounts and on terms which the Debtor in good faith considers advisable; and, during the existence of any Event of Default which has not been waived in writing by the Secured Party, the Debtor shall notify the Secured Party promptly of all returns and recoveries and, on the Secured Party’s request, deliver any such merchandise or other goods to the Secured Party. During the existence of any Event of Default which has not been waived in writing by the Secured Party, the Debtor shall also notify the Secured Party promptly of all disputes and claims and settle or adjust them at no expense to the Secured Party, but no discount, credit or allowance other than on normal trade terms in the ordinary course of business as presently conducted shall be granted to any customer or account debtor and no returns of merchandise or other goods shall be accepted by the Debtor without the Secured Party’s consent. The Secured Party may, at all times during the existence of any Event of Default which has not been waived in writing by the Secured Party, settle or adjust disputes and claims directly with customers or account debtors for amounts and upon terms which the Secured Party considers advisable.

 

(c)         Unless delivered to the Secured Party or its agent, all tangible Chattel Paper and Instruments shall contain a legend acceptable to the Secured Party indicating that such Chattel Paper or Instrument is subject to the security interest of the Secured Party contemplated by this Security Agreement.

 

Section 5.         Collection of Receivables.

 

(a)         Except as otherwise provided in this Security Agreement, the Debtor shall make collection of all Receivables and may use the same to carry on its business in accordance with sound business practice and otherwise subject to the terms hereof.

 

(b)         Whether or not any Event of Default has occurred which has not been waived in writing by the Secured Party and whether or not the Secured Party has exercised any or all of its rights under other provisions of this Section 5, in the event the Secured Party requests the Debtor to do so:

 

(i)         all Instruments and Chattel Paper at any time constituting part of the Receivables or any other Collateral (including any postdated checks) shall, upon receipt by the Debtor, be immediately endorsed to and deposited with the Secured Party; and/or

 

(ii)         the Debtor shall instruct all customers and account debtors to remit all payments in respect of Receivables or any other Collateral to a lockbox or lockboxes under the sole custody and control of the Secured Party and which are maintained at post office(s) in Milwaukee, Wisconsin selected by the Secured Party.

 

 

(c)         Upon the occurrence of any Event of Default which has not been waived in writing by the Secured Party or of any event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, whether or not the Secured Party has exercised any or all of its rights under other provisions of this Section 5, the Secured Party or its designee may notify the Debtor’s customers and account debtors at any time that Receivables or any other Collateral have been assigned to the Secured Party or of the Secured Party’s security interest therein, and either in its own name, or the Debtor’s name, or both, demand, collect (including, without limitation, through a lockbox analogous to that described in Section 5(b)(ii) hereof), receive, receipt for, sue for, compound and give acquittance for any or all amounts due or to become due on Receivables or any other Collateral, and in the Secured Party’s discretion file any claim or take any other action or proceeding which the Secured Party may deem necessary or appropriate to protect or realize upon the security interest of the Secured Party in the Receivables or any other Collateral.

 

(d)         Any proceeds of Receivables or other Collateral transmitted to or otherwise received by the Secured Party pursuant to any of the provisions of Sections 5(b) or 5(c) hereof may be handled and administered by the Secured Party in and through a remittance account at the Secured Party, and the Debtor acknowledges that the maintenance of such remittance account by the Secured Party is solely for the Secured Party’s convenience and that the Debtor does not have any right, title or interest in such remittance account or any amounts at any time standing to the credit thereof. The Secured Party may, after the occurrence and during the continuation of any Event of Default which has not been waived in writing by the Secured Party or of any event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, apply all or any part of any proceeds of Receivables or other Collateral received by it from any source to the payment of the Obligations (whether or not then due and payable), such applications to be made in such amounts, in such manner and order and at such intervals as the Secured Party may from time to time in its discretion determine, but not less often than once each week. The Secured Party need not apply or give credit for any item included in proceeds of Receivables or other Collateral until the Secured Party has received final payment therefor at its office in cash or final solvent credits current in Milwaukee, Wisconsin, acceptable to the Secured Party as such. However, if the Secured Party does give credit for any item prior to receiving final payment therefor and the Secured Party fails to receive such final payment or an item is charged back to the Secured Party for any reason, the Secured Party may at its election in either instance charge the amount of such item back against the remittance account or any account of the Debtor maintained with the Secured Party, together with interest thereon at the Default Rate. Concurrently with each transmission of any proceeds of Receivables or other Collateral to the remittance account, the Debtor shall furnish the Secured Party with a report in such form as the Secured Party shall require identifying the particular Receivable or other Collateral from which the same arises or relates. Unless and until an Event of Default or an event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default shall have occurred and be continuing and which has not been waived in writing by the Secured Party, the Secured Party will release proceeds of Collateral which the Secured Party has not applied to the Obligations as provided above from the remittance account from time to time promptly after receipt thereof. The Debtor hereby indemnifies the Secured Party from and against all liabilities, damages, losses, actions, claims, judgments, costs, expenses, charges and reasonable attorneys’ fees suffered or incurred by the Secured Party because of the maintenance of the foregoing arrangements; provided, however, that the Debtor shall not be required to indemnify the Secured Party for any of the foregoing to the extent they arise solely from the gross negligence or willful misconduct of the Secured Party. The Secured Party shall have no liability or responsibility to the Debtor for accepting any check, draft or other order for payment of money bearing the legend “payment in full” or words of similar import or any other restrictive legend or endorsement whatsoever or be responsible for determining the correctness of any remittance.

 

 

Section 6.         Special Provisions Re: Inventory and Equipment.

 

(a)         The Debtor shall at its own cost and expense maintain, keep and preserve the Inventory in good and merchantable condition and keep and preserve the Equipment in good repair, working order and condition, ordinary wear and tear excepted, and, without limiting the foregoing, make all necessary and proper repairs, replacements and additions to the Equipment so that the efficiency thereof shall be fully preserved and maintained.

 

(b)         The Debtor may, until an Event of Default has occurred and is continuing and which has not been waived in writing by the Secured Party and thereafter until otherwise notified by the Secured Party, use, consume and sell the Inventory in the ordinary course of its business, but a sale in the ordinary course of business shall not under any circumstance include any transfer or sale in satisfaction, partial or complete, of a debt owing by the Debtor.

 

(c)         The Debtor may, until an Event of Default has occurred and is continuing and thereafter until otherwise notified by the Secured Party, sell obsolete, worn out or unusable Equipment which is concurrently replaced with similar Equipment at least equal in quality and condition to that sold and owned by the Debtor free of any lien, charge or encumbrance other than the security interest granted hereby.

 

(d)         As of the time any Inventory or Equipment becomes subject to the security interest provided for hereby and at all times thereafter, the Debtor shall be deemed to have warranted as to any and all of such Inventory and Equipment that all warranties of the Debtor set forth in this Security Agreement are true and correct with respect to such Inventory and Equipment; that all of such Inventory and Equipment is located at a location set forth pursuant to Section 3(b) hereof; and that, in the case of Inventory, such Inventory is new and unused and in good and merchantable condition. The Debtor warrants and agrees that no Inventory is or will be consigned to any other person without the Secured Party’s prior written consent.

 

(e)         The Debtor shall at its own cost and expense cause the lien of the Secured Party in and to any portion of the Collateral subject to a certificate of title law to be duly noted on such certificate of title or to be otherwise filed in such manner as is prescribed by law in order to perfect such lien and shall cause all such certificates of title and evidences of lien to be deposited with the Secured Party.

 

 

(f)         Except for Equipment from time to time located on the real estate described in the Perfection Certificate and as otherwise disclosed to the Secured Party in writing, none of the Equipment is or will be attached to real estate in such a manner that the same may become a fixture.

 

(g)         If any of the Inventory is at any time evidenced by a document of title, such document shall be promptly delivered by the Debtor to the Secured Party except to the extent the Secured Party specifically requests the Debtor not to do so with respect to any such document.

 

Section 7.         Special Provisions Re: Investment Property and Deposits.

 

(a)         Unless and until an Event of Default has occurred and is continuing which has not been waived in writing by the Secured Party and thereafter until notified to the contrary by the Secured Party pursuant to Section 9(d) hereof:

 

(i)         the Debtor shall be entitled to exercise all voting and/or consensual powers pertaining to the Investment Property or any part thereof, for all purposes not inconsistent with the terms of this Security Agreement or any other document evidencing or otherwise relating to any Obligations; and

 

(ii)         the Debtor shall be entitled to receive and retain all cash dividends paid upon or in respect of the Investment Property.

 

(b)         All Investment Property (including all securities, certificated or uncertificated, securities accounts, and commodity accounts) of the Debtor on the date hereof is listed and identified in the Perfection Certificate. The Debtor shall promptly notify the Secured Party of any other Investment Property acquired or maintained by the Debtor after the date hereof, and shall submit to the Secured Party a supplement to reflect such additional rights (provided the Debtor’s failure to do so shall not impair the Secured Party’s security interest therein). Certificates for all certificated securities now or at any time constituting Investment Property shall be promptly delivered by the Debtor to the Secured Party duly endorsed in blank for transfer or accompanied by an appropriate assignment or assignments or an appropriate undated stock power or powers, in every case sufficient to transfer title thereto including, without limitation, all stock received in respect of a stock dividend or resulting from a split‑up, revision or reclassification of the Investment Property or any part thereof or received in addition to, in substitution of or in exchange for the Investment Property or any part thereof as a result of a merger, consolidation or otherwise. With respect to any uncertificated securities or any Investment Property held by a securities intermediary, commodity intermediary, or other financial intermediary of any kind, at the Secured Party’s request, the Debtor shall execute and deliver, and shall cause any such issuer or intermediary to execute and deliver, an agreement among the Debtor, the Secured Party, and such issuer or intermediary in form and substance satisfactory to the Secured Party which provides, among other things, for the issuer’s or intermediary’s agreement that it shall comply with entitlement orders, and apply any value distributed on account of any such Investment Property, as directed by the Secured Party without further consent by the Debtor. The Secured Party may at any time, after the occurrence of an Event of Default or an event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, cause to be transferred into its name or the name of its nominee or nominees all or any part of the Investment Property hereunder.

 

 

(c)         Unless and until an Event of Default, or an event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, has occurred and is continuing and which has not been waived in writing by the Secured Party, the Debtor may sell or otherwise dispose of any Investment Property, provided that the Debtor shall not sell or otherwise dispose of any capital stock of or other equity interests in any direct or indirect subsidiary without the prior written consent of the Secured Party. After the occurrence and during the continuation of any Event of Default which has not been waived in writing by the Secured Party or of any event or condition, which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, the Debtor shall not sell all or any part of the Investment Property without the prior written consent of the Secured Party.

 

(d)         The Debtor represents that on the date of this Security Agreement, none of the Investment Property consists of margin stock (as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System) except to the extent the Debtor has delivered to the Secured Party a duly executed and completed Form U‑1 with respect to such stock. If at any time the Investment Property or any part thereof consists of margin stock, the Debtor shall promptly so notify the Secured Party and deliver to the Secured Party a duly executed and completed Form U‑1 and such other instruments and documents reasonably requested by the Secured Party in form and substance satisfactory to the Secured Party.

 

(e)         Notwithstanding anything to the contrary contained herein, in the event any Investment Property is subject to the terms of a separate security agreement in favor of the Secured Party, the terms of such separate security agreement shall govern and control unless otherwise agreed to in writing by the Secured Party.

 

(f)         All Deposit Accounts of the Debtor on the date hereof are listed and identified (by account number and depository institution) in the Perfection Certificate. The Debtor shall promptly notify the Secured Party of any other Deposit Account opened or maintained by the Debtor after the date hereof, and shall submit to the Secured Party a supplement to reflect such additional accounts (provided the Debtor’s failure to do so shall not impair the Secured Party’s security interest therein). With respect to any Deposit Account maintained by a depository institution other than the Secured Party, and as a condition to the establishment and maintenance of any such Deposit Account, the Debtor, the depository institution, and the Secured Party shall execute and deliver an account control agreement in form and substance satisfactory to the Secured Party which provides, among other things, for the depository institution’s agreement that it will comply with instructions originated by the Secured Party directing the disposition of the funds in the Deposit Account without further consent by such Debtor.

 

 

Section 8.         Power of Attorney. In addition to any other powers of attorney contained herein, the Debtor hereby appoints the Secured Party, its nominee, and any other person whom the Secured Party may designate, as the Debtor’s attorney‑in‑fact, with full power and authority upon the occurrence and during the continuation of any Event of Default which has not been waived in writing by the Secured Party to sign the Debtor’s name on verifications of Receivables and other Collateral; to send requests for verification of Collateral to the Debtor’s customers, account debtors and other obligors; to endorse the Debtor’s name on any checks, notes, acceptances, money orders, drafts and any other forms of payment or security that may come into the Secured Party’s possession or on any assignments, stock powers, or other instruments of transfer relating to the Collateral or any part thereof; to sign the Debtor’s name on any invoice or bill of lading relating to any Collateral, on claims to enforce collection of any Collateral, on notices to and drafts against customers and account debtors and other obligors, on schedules and assignments of Collateral, on notices of assignment and on public records; to notify the post office authorities to change the address for delivery of the Debtor’s mail to an address designated by the Secured Party; to receive, open and dispose of all mail addressed to the Debtor; and to do all things necessary to carry out this Agreement. The Debtor hereby ratifies and approves all acts of any such attorney and agrees that neither the Secured Party nor any such attorney will be liable for any acts or omissions nor for any error of judgment or mistake of fact or law other than such person’s gross negligence or willful misconduct. The Secured Party may file one or more financing statements disclosing its security interest in any or all of the Collateral without the Debtor’s signature appearing thereon. The Debtor also hereby grants the Secured Party a power of attorney to execute any such financing statements, or amendments and supplements to financing statements, on behalf of the Debtor without notice thereof to the Debtor. The foregoing powers of attorney, being coupled with an interest, are irrevocable until the Obligations have been fully paid and satisfied and all agreements of the Secured Party to extend credit to or for the account of the Debtor have expired or otherwise have been terminated.

 

Section 9.         Defaults and Remedies.

 

(a)         The occurrence of any one or more of the following events shall constitute an “Event of Default” hereunder:

 

(i)         default in the payment when due (whether by demand, lapse of time, acceleration or otherwise) of the Obligations or any part thereof by the Borrower and such payment default continues for three (3) days; provided that, such three (3) day cure period shall not apply to defaults in payment of principal under the Credit Agreement; or

 

(ii)         default in the observance or performance of any covenant set forth in Sections 5(b), 7(b), or 7(f) hereof or of any provision hereof requiring the maintenance of insurance on the Collateral or dealing with the use or remittance of proceeds of Collateral; or

 

(iii)         default in the observance or performance of any other provision hereof which is not remedied within 30 days after the earlier of (a) the date on which such default shall first become known to any officer of the Debtor or (b) written notice thereof is given to the Debtor by the Secured Party; or

 

(iv)         any representation or warranty made by the Debtor herein, or in any statement or certificate furnished by it pursuant hereto, or in connection with any loan or extension of credit made to or on behalf of or at the request of the Debtor by the Secured Party, shall be false in any material respect as of the date of the issuance or making thereof; or

 

 

(v)         default in the observance or performance of any terms or provisions of any mortgage, security agreement or any other instrument or document securing any Obligations or setting forth terms and conditions applicable thereto or otherwise relating thereto, or this Security Agreement or any such other mortgage, security agreement, instrument or document shall for any reason not be or shall cease to be in full force and effect or any of the foregoing is declared to be null and void; or

 

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

 

(vii)         the Debtor makes any payment on account of the principal of or interest on any indebtedness which is prohibited under the terms of any instrument subordinating such indebtedness to any indebtedness owed to the Secured Party; or

 

(viii)         any judgment or judgments, writ or writs, or warrant or warrants of attachment, or any similar process or processes shall be entered or filed against the Debtor or against any of its property or assets and which remains unvacated, unbonded, unstayed or unsatisfied for a period of 60 days; or

 

(ix)         the Debtor shall (a) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (b) not pay, or admit in writing its inability to pay, its debts generally as they become due, (c) make an assignment for the benefit of creditors, (d) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its property, (e) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (f) take any action in furtherance of any matter described in parts (a) through (e) above, or (g) fail to contest in good faith any appointment or proceeding described in Section 9(a)(x) hereof; or

 

(x)         a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for the Debtor or any substantial part of any of its property, or a proceeding described in Section 9(a)(ix)(e) shall be instituted against the Debtor, and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 60 days; or

 

 

(xi)         any guarantor of any Obligations shall die or shall terminate, breach, repudiate or disavow its guarantee or any part thereof, or any event specified in Sections 9(a)(vi), 9(a)(viii), 9(a)(ix) or 9(a)(x) hereof shall occur with regard to said guarantor.

 

Nothing herein contained shall impair the demand character of any of the Obligations which are expressed to be payable on demand.

 

(b)         Upon the occurrence and during the continuation of any Event of Default which has not been waived in writing by the Secured Party, the Secured Party shall have, in addition to all other rights provided herein or by law, the rights and remedies of a secured party under the UCC (regardless of whether the UCC is the law of the jurisdiction where the rights or remedies are asserted and regardless of whether the UCC applies to the affected Collateral), and further the Secured Party may, without demand and without advertisement, notice, hearing or process of law, all of which the Debtor hereby waives, at any time or times, sell and deliver all or any part of the Collateral (and any other property of the Debtor attached thereto or found therein) held by or for it at public or private sale, for cash, upon credit or otherwise, at such prices and upon such terms as the Secured Party deems advisable, in its sole discretion. In addition to all other sums due the Secured Party hereunder, the Debtor shall pay the Secured Party all costs and expenses incurred by the Secured Party, including reasonable attorneys’ fees and court costs, in obtaining, liquidating or enforcing payment of Collateral or the Obligations or in the prosecution or defense of any action or proceeding by or against the Secured Party or the Debtor concerning any matter arising out of or connected with this Security Agreement or the Collateral or the Obligations, including, without limitation, any of the foregoing arising in, arising under or related to a case under the United States Bankruptcy Code (or any successor statute). Any requirement of reasonable notice shall be met if such notice is personally served on or mailed, postage prepaid, to the Debtor in accordance with Section 12(b) hereof at least 10 days before the time of sale or other event giving rise to the requirement of such notice; provided however, no notification need be given to the Debtor if the Debtor has signed, after an Event of Default has occurred and is continuing and which has not been waived in writing by the Secured Party, a statement renouncing any right to notification of sale or other intended disposition. The Secured Party shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given. The Secured Party may be the purchaser at any such sale. The Debtor hereby waives all of its rights of redemption from any such sale. The Secured Party may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, be made at the time and place to which the sale was postponed or the Secured Party may further postpone such sale by announcement made at such time and place. The Secured Party has no obligation to prepare the Collateral for sale. The Secured Party may sell or otherwise dispose of the Collateral without giving any warranties as to the Collateral or any part thereof, including disclaimers of any warranties of title or the like, and the Debtor acknowledges and agrees that the absence of such warranties shall not render the disposition commercially unreasonable.

 

 

(c)         Without in any way limiting the foregoing, upon the occurrence and during the continuation of any Event of Default which has not been waived in writing by the Secured Party, the Secured Party shall have the right, in addition to all other rights provided herein or by law, to take physical possession of any and all of the Collateral and anything found therein, the right for that purpose to enter without legal process any premises where the Collateral may be found (provided such entry be done lawfully), and the right to maintain such possession on the Debtor’s premises (the Debtor hereby agreeing to lease such premises without cost or expense to the Secured Party or its designee if the Secured Party so requests) or to remove the Collateral or any part thereof to such other places as the Secured Party may desire. Upon the occurrence and during the continuation of any Event of Default, the Secured Party shall have the right to exercise any and all rights with respect to all Deposit Accounts of the Debtor, including, without limitation, the right to direct the disposition of the funds in each Deposit Account and to collect, withdraw and receive all amounts due or to become due or payable under each such Deposit Account. Upon the occurrence and during the continuation of any Event of Default which has not been waived in writing by the Secured Party, the Debtor shall, upon the Secured Party’s demand, promptly assemble the Collateral and make it available to the Secured Party at a place designated by the Secured Party. If the Secured Party exercises its right to take possession of the Collateral, the Debtor shall also at its expense perform any and all other steps requested by the Secured Party to preserve and protect the security interest hereby granted in the Collateral, such as placing and maintaining signs indicating the security interest of the Secured Party, appointing overseers for the Collateral and maintaining Collateral records.

 

(d)         Without in any way limiting the foregoing, upon the occurrence and during the continuation of any Event of Default which has not been waived in writing by the Secured Party, all rights of the Debtor to exercise the voting and/or consensual powers which it is entitled to exercise pursuant to Section 7(a)(i) hereof and/or to receive and retain the distributions which it is entitled to receive and retain pursuant to Section 7(a)(ii) hereof, shall, at the option of the Secured Party, cease and thereupon become vested in the Secured Party, which, in addition to all other rights provided herein or by law, shall then be entitled solely and exclusively to exercise all voting and other consensual powers pertaining to the Investment Property (including, without limitation, the right to deliver notice of control with respect to any Investment Property held in a securities account or commodity account and deliver all entitlement orders with respect thereto) and/or to receive and retain the distributions which the Debtor would otherwise have been authorized to retain pursuant to Section 7(a)(ii) hereof and shall then be entitled solely and exclusively to exercise any and all rights of conversion, exchange or subscription or any other rights, privileges or options pertaining to any Investment Property as if the Secured Party were the absolute owner thereof. Without limiting the foregoing, the Secured Party shall have the right to exchange, at its discretion, any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization or other readjustment of the respective issuer thereof or upon the exercise by or on behalf of any such issuer or the Secured Party of any right, privilege or option pertaining to any Investment Property and, in connection therewith, to deposit and deliver any and all of the Investment Property with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Secured Party may determine. In the event the Secured Party in good faith believes any of the Collateral constitutes restricted securities within the meaning of any applicable securities laws, any disposition thereof in compliance with such laws shall not render the disposition commercially unreasonable.

 

 

(e)         Without in any way limiting the foregoing, upon the occurrence and during the continuation of any Event of Default which has not been waived in writing by the Secured Party, the Debtor hereby grants to the Secured Party a royalty‑free irrevocable license and right to use all of the Debtor’s patents, patent applications, patent licenses, trademarks, trademark registrations, trademark licenses, trade names, trade styles, copyrights, copyright applications, copyright licenses, and similar intangibles in connection with any foreclosure or other realization by the Secured Party on all or any part of the Collateral. The license and right granted the Secured Party hereby shall be without any royalty or fee or charge whatsoever.

 

(f)         The powers conferred upon the Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose on it any duty to exercise such powers. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession or control if such Collateral is accorded treatment substantially equivalent to that which the Secured Party accords its own property, consisting of similar type assets, it being understood, however, that the Secured Party shall have no responsibility for ascertaining or taking any action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any such Collateral, whether or not the Secured Party has or is deemed to have knowledge of such matters. This Security Agreement constitutes an assignment of rights only and not an assignment of any duties or obligations of the Debtor in any way related to the Collateral, and the Secured Party shall have no duty or obligation to discharge any such duty or obligation. The Secured Party shall have no responsibility for taking any necessary steps to preserve rights against any parties with respect to any Collateral or initiating any action to protect the Collateral against the possibility of a decline in market value. Neither the Secured Party nor any party acting as attorney for the Secured Party shall be liable for any acts or omissions or for any error of judgment or mistake of fact or law other than their gross negligence or willful misconduct.

 

(g)         Failure by the Secured Party to exercise any right, remedy or option under this Security Agreement or any other agreement between the Debtor and the Secured Party or provided by law, or delay by the Secured Party in exercising the same, shall not operate as a waiver; and no waiver by the Secured Party shall be effective unless it is in writing and then only to the extent specifically stated. The rights and remedies of the Secured Party under this Security Agreement shall be cumulative and not exclusive of any other right or remedy which the Secured Party may have.

 

Section 10.         Application of Proceeds. The proceeds and avails of the Collateral at any time received by the Secured Party after the occurrence and during the continuation of any Event of Default shall, when received by the Secured Party in cash or its equivalent, be applied by the Secured Party as follows:

 

(i)         first, to the payment and satisfaction of all sums paid and costs and expenses incurred by the Secured Party hereunder or otherwise in connection herewith, including such monies paid or incurred in connection with protecting, preserving or realizing upon the Collateral or enforcing any of the terms hereof, including reasonable attorneys’ fees and court costs, together with any interest thereon (but without preference or priority of principal over interest or of interest over principal), to the extent the Secured Party is not reimbursed therefor by the Debtor; and

 

 

(ii)         second, to the payment and satisfaction of the remaining Obligations, whether or not then due (in whatever order the Secured Party elects), both for interest and principal.

 

The Debtor shall remain liable to the Secured Party for any deficiency. Any surplus remaining after the full payment and satisfaction of the foregoing shall be returned to the Debtor or as otherwise required by applicable laws.

 

Section 11.         Continuing Agreement. This Security Agreement shall be a continuing agreement in every respect and shall remain in full force and effect until all of the Obligations, both for principal and interest, have been fully paid and satisfied and all agreements of the Secured Party to extend credit to or for the account of the Debtor have expired or otherwise have been terminated. Upon such termination of this Security Agreement, the Secured Party shall, upon the request and at the expense of the Debtor, forthwith release its security interest hereunder.

 

Section 12.         Miscellaneous.

 

(a)         This Security Agreement cannot be changed or terminated orally. All of the rights, privileges, remedies and options given to the Secured Party hereunder shall inure to the benefit of its successors and assigns, and all the terms, conditions, covenants, agreements, representations and warranties of and in this Security Agreement shall bind the Debtor and its legal representatives, successors and assigns, provided that the Debtor may not assign its rights or delegate its duties hereunder without the Secured Party’s prior written consent.

 

(b)         Except as otherwise specified herein, all notices hereunder shall be in writing (including, without limitation, notice by facsimile) and shall be given to the relevant party at its address or facsimile number set forth below (or, if no such address is set forth below, at the address of the Debtor as shown on the records of the Secured Party), or such other address or facsimile number as such party may hereafter specify by notice to the other given by courier, by United States certified or registered mail, by facsimile or by other telecommunication device capable of creating a written record of such notice and its receipt. Notices hereunder shall be delivered in accordance with the Loan Agreement.

 

(c)          In the event and to the extent that any provision hereof shall be deemed to be invalid or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court, this Security Agreement shall to such extent be construed as not containing such provision, but only as to such locations where such law or interpretation is operative, and the invalidity or unenforceability of such provision shall not affect the validity of any remaining provisions hereof, and any and all other provisions hereof which are otherwise lawful and valid shall remain in full force and effect.

 

(d)         This Security Agreement shall be deemed to have been made in the State of Wisconsin and shall be governed by, and construed in accordance with, the laws of the State of Wisconsin. The headings in this Security Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of any provision hereof.

 

 

(e)         This Security Agreement may be executed in any number of counterparts and by different parties hereto on separate counterpart signature pages, each constituting an original, but all together one and the same instrument. The Debtor acknowledges that this Security Agreement is and shall be effective upon its execution and delivery by the Debtor to the Secured Party, and it shall not be necessary for the Secured Party to execute this Security Agreement or any other acceptance hereof or otherwise to signify or express its acceptance hereof.

 

(f)         The Debtor hereby submits to the non‑exclusive jurisdiction of the United States District Court for the Eastern District of Wisconsin and of any Wisconsin state court sitting in the City of Milwaukee for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Debtor irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient form. The Debtor and the Secured Party each hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

[Signature Page to Follow]

 

  

In Witness Whereof, the Debtor has caused this Security Agreement to be duly executed and delivered as of the date and year first above written.

 

Twin Disc, Incorporated   By:         ____________________________________ Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer

 

Accepted and agreed to as of the date and year first above written.

 

Bank of Montreal   By         : ___________________________________ Name: Jason Hoefler Title: Director

 

 

 

Schedule A

 

Supplement to Security Agreement

 

This Supplement to Security Agreement (the "Supplement") is dated as of this _____ day of _____________, ____, from Twin Disc, Incorporated, a Wisconsin corporation (the “Debtor”), to Bank of Montreal, a Canadian chartered bank acting through its Chicago branch (the “Administrative Agent”), as “Administrative Agent” for the secured lenders under that certain Credit Agreement, dated as of April 22, 2016 (the “Secured Party”).

 

Preliminary Statements

 

A.         The Debtor and the Secured Party are parties to that certain Security Agreement dated as of April 22, 2016 (such Security Agreement, as the same may from time to time be amended, modified or restated, being hereinafter referred to as the “Security Agreement”). All capitalized terms used herein without definition shall have the same meanings herein as such terms are defined in the Security Agreement.

 

B.         Pursuant to the Security Agreement, the Debtor granted to the Secured Party, among other things, a continuing security interest in all Commercial Tort Claims.

 

C.         The Debtor has acquired a Commercial Tort Claim, and executes and delivers this Supplement to confirm and assure the Secured Party's security interest therein.

 

Now, Therefore, in consideration of the benefits accruing to the Debtor, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.         In order to secure payment of the Obligations, whether now existing or hereafter arising, the Debtor does hereby grant to the Secured Party a continuing lien on and security interest in the Commercial Tort Claim described below:

 

___________________________________________________________________________________________

___________________________________________________________________________________________

___________________________________________________________________________________________

 

2.         The Perfection Certificate to the Security Agreement is hereby amended to include reference to the Commercial Tort Claim referred to in Section 1 above. The Commercial Tort Claim described herein is in addition to, and not in substitution or replacement for, the Commercial Tort Claims heretofore described in and subject to the Security Agreement, and nothing contained herein shall in any manner impair the priority of the liens and security interests heretofore granted by the Debtor in favor of the Secured Party under the Security Agreement.

 

 

3.         The Debtor agrees to execute and deliver such further instruments and documents and do such further acts and things as the Secured Party may deem necessary or proper to carry out more effectively the purposes of this Supplement.

 

4.         No reference to this Supplement need be made in the Security Agreement or in any other document or instrument making reference to the Security Agreement, any reference to the Security Agreement in any of such items to be deemed a reference to the Security Agreement as supplemented hereby. The Debtor acknowledges that this Supplement shall be effective upon its execution and delivery by the Debtor to the Secured Party, and it shall not be necessary for the Secured Party to execute this Supplement or any other acceptance hereof or otherwise to signify or express its acceptance hereof.

 

5.         This Agreement shall be governed by and construed in accordance with the State of Wisconsin (without regard to principles of conflicts of law).

 

Twin Disc, Incorporated   By:      ____________________________________ Name: ______________________________ Title: _______________________________

 

  

Exhibit B

Copy of Assignment and Amendment

to Security Agreement (2018)

 

See attached.

 

 

ASSIGNMENT OF AND AMENDMENT TO

SECURITY AGREEMENT

 

THIS ASSIGNMENT OF AND AMENDMENT TO SECURITY AGREEMENT (the “Assignment”), is made on June 29, 2018, by and among BANK OF MONTREAL (“Assignor”), BMO HARRIS BANK N.A. (“Assignee”), and TWIN DISC, INCORPORATED, a Wisconsin corporation (“Debtor”).

 

RECITALS:

 

A.         Pursuant to the Credit Agreement, dated April 22, 2016, by and among Debtor, Assignor and the lenders party thereto (the “2016 Credit Agreement”), Debtor and Assignor entered into that certain Security Agreement, dated as of April 22, 2016 (the “Security Agreement”), a copy of which is attached hereto as Exhibit A;

 

B.          Contemporaneously herewith, Assignee will refinance the credit facilities extended by Assignor to Debtor under the 2016 Credit Agreement, and finance additional credit facilities, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee and Debtor (the “2018 Credit Agreement”);

 

C.         Assignor now desires to assign its rights and obligations as Secured Party under the Security Agreement to Assignee, and Assignee desires to accept such assignment; and

 

D.         The parties hereto also desire to amend the Security Agreement on the terms and conditions provided herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT:

 

1.         Assignment and Assumption.

 

(a)         Assignor hereby assigns to Assignee, and Assignee hereby assumes from Assignor, all of Assignor’s rights and obligations as Secured Party under the Security Agreement. The assignment set forth in this Section 1(a) shall be without recourse to or representation or warranty (except as expressly provided in this Assignment, in the other documents executed in connection with this Assignment, or in the Security Agreement, as assigned and amended) by Assignor.

 

(b)         Assignee shall become and be a party to the Security Agreement and succeed to all of the rights and be obligated to perform all of the obligations of Secured Party under the Security Agreement.

 

(c)         In conjunction with the assignment hereunder, Assignor shall transfer and deliver to Assignee any and all Collateral, and/or evidence thereof, in Assignor’s possession. Until such time as the Collateral in Assignor’s possession is transferred to Assignee, Assignor shall hold such Collateral for the benefit of the Assignee.

 

 

2.         Amendments. The Security Agreement is hereby amended as follows:

 

(a)         Secured Party. The definition of “Secured Party” in the Security Agreement is hereby amended and restated to mean “BMO Harris Bank N.A., a national banking association.”

 

(b)         Credit Agreement. The definition of “Credit Agreement” in the Security Agreement is hereby amended and restated to mean “the Credit Agreement, dated as of June 29, 2018, by and between the Secured Party and the Debtor, as the same may hereafter be amended, restated, supplemented or otherwise modified.”

 

3.         No Termination. The parties hereto acknowledge and agree that notwithstanding any terms or conditions contained in the Security Agreement to the contrary, neither this Assignment, nor any other assignment, amendment or restatement of any other Loan Document (as defined in the 2016 Credit Agreement), shall trigger a termination of the Security Agreement.

 

4.         No Novation. It is the intention of the parties hereto that this Assignment not constitute a novation of the obligations under the Security Agreement and that, from and after the date hereof, the Security Agreement shall be amended hereby and all references herein to “hereunder,” “hereof,” or words of like import and all references in any Loan Documents or any documents entered into in connection therewith to the “Security Agreement” or words of like import shall mean and be a reference to the Security Agreement as assigned and amended hereby as and as hereafter amended, supplemented, restated or renewed.

 

5.         Ratification. As hereby assigned and amended, the Security Agreement and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.         Conflict. In the event of a conflict between the terms and conditions of this Assignment and the terms and conditions of the Security Agreement, the terms and conditions of this Assignment shall control.

 

7.         Counterparts. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the definitions given said terms in the Security Agreement.

 

[Signatures on following page]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the date first above written.

 

	ASSIGNOR:   BANK OF MONTREAL     By:                                                                 Name: Title:
	ASSIGNEE:   BMO HARRIS BANK N.A.     By:__________________________________       Mark Czarnecki, Senior Vice President
	DEBTOR:   TWIN DISC, INCORPORATED     By: ________________________________        Jeffrey S. Knutson, Vice President –      Finance and Chief Financial Officer

 

Exhibit 1.7

 

ASSIGNMENT OF AND AMENDMENT TO

IP SECURITY AGREEMENT

 

THIS ASSIGNMENT OF AND AMENDMENT TO IP SECURITY AGREEMENT (the “Assignment”), is entered into as of [DATE, 2025], by BMO Bank N.A. (f/k/a BMO Harris Bank N.A.) (“Assignor”), in favor of Bank of Montreal (“Assignee”), and is consented to by Twin Disc, Incorporated, a Wisconsin corporation (“TDI”) and immediately after giving effect to the Kobelt Acquisition and the Kobelt Amalgamation, Kobelt Manufacturing Co. Ltd., a company amalgamated under the laws of British Columbia as a result of the Kobelt Amalgamation (“Canadian Borrower”).

 

RECITALS

 

A.         Pursuant to the Credit Agreement, dated April 22, 2016, by and among TDI, Assignee and the lenders party thereto (the “2016 Credit Agreement”), TDI and Assignee entered into that certain Intellectual Property Security Agreement, dated as of April 22, 2016 (the “IP Security Agreement”), a copy of which is attached hereto as Exhibit A;

 

B.       Contemporaneously with a refinancing of the credit facilities extended by Assignor to TDI, dated as of July 29, 2018 (the “2018 Credit Agreement”), Assignee assigned the IP Security Agreement to Assignor under an Assignment of and Amendment to IP Security Agreement (the “2018 Assignment”), a copy of which is attached hereto as Exhibit B;

 

C.         Contemporaneously herewith, Assignee will refinance the credit facilities extended by Assignor to TDI under the 2018 Credit Agreement, and finance additional credit facilities, including to Canadian Borrower, as an additional Borrower thereunder, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee, TDI, and Canadian Borrower (the “2025 Credit Agreement”);

 

D.         Assignor now desires to assign its rights and obligations as Secured Party and Bank (as defined herein) under the IP Security Agreement to Assignee, and Assignee desires to accept such assignment; and

 

E.         The parties hereto also desire to amend the IP Security Agreement on the terms and conditions provided herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT

 

1.         Assignment and Assumption.

 

(a)         Assignor hereby assigns to Assignee, and Assignee hereby assumes from Assignor, all of Assignor’s rights and obligations as Secured Party and Bank (as defined herein) under the IP Security Agreement. The assignment set forth in this Section 1(a) shall be without recourse to or representation or warranty (except as expressly provided in this Assignment, in the other documents executed in connection with this Assignment, or in the IP Security Agreement, as assigned and amended) by Assignor.

 

 

(b)         Assignee shall become and be a party to the IP Security Agreement and succeed to all of the rights and be obligated to perform all of the obligations of Secured Party and Bank under the IP Security Agreement.

 

(c)         In conjunction with the assignment hereunder, Assignor shall transfer and deliver to Assignee any and all Collateral, and/or evidence thereof, in Assignor’s possession. Until such time as the Collateral in Assignor’s possession is transferred to Assignee, Assignor shall hold such Collateral for the benefit of the Assignee.

 

2.         Amendments. The IP Security Agreement is hereby amended as follows:

 

(a)         Grantor. The definition of “Grantor” in the IP Security Agreement is hereby amended and restated to mean, collectively, Kobelt Manufacturing Co. Ltd. (“Canadian Borrower”) and Twin Disc, Incorporated (“TDI”).

 

(b)         Secured Party. The definition “Secured Parties” in the IP Security Agreement is hereby amended and restated to mean “Bank of Montreal.”

 

(c)         Bank. The definition of “Bank” shall be restated in its entirety to mean “Bank of Montreal”.

 

(d)        Credit Agreement. The definition of “Credit Agreement” in the IP Security Agreement is hereby amended and restated to mean “the Credit Agreement, dated as of [DATE, 2025], by and between Bank, and Grantor, as the same may hereafter be amended, restated, supplemented or otherwise modified.”

 

(e)         Security Agreement. The definition of “Security Agreement” in the IP Security Agreement is hereby amended and restated to mean “the Security Agreement, dated as of April 22, 2016, by and between TDI and Bank of Montreal, as assigned to and amended by that certain Assignment of and Amendment to Security Agreement, dated as of June 29, 2018, between TDI, BMO Bank N.A, as assignee, and Bank of Montreal, as assignor, and BMO Bank N.A., as assignee, and as further amended by that certain Assignment of and Amendment to Security Agreement, dated as of [DATE], 2025, between TDI, BMO Bank N.A., as assignor, and Bank of Montreal, as assignee and the Security Agreement, dated as of [DATE] between Canadian Borrower and Bank of Montreal.”

 

(f)          Schedules. All of the Schedules to the IP Security Agreement are hereby amended and restated in their entirety with those Schedules attached hereto as Exhibit C.

 

3.         No Termination. The parties hereto acknowledge and agree that notwithstanding any terms or conditions contained in the IP Security Agreement to the contrary, neither this Assignment, nor any other assignment, amendment or restatement of any other Loan Document (as defined in the 2025 Credit Agreement), shall trigger a termination of the IP Security Agreement.

 

 

4.         No Novation. It is the intention of the parties hereto that this Assignment not constitute a novation of the obligations under the IP Security Agreement and that, from and after the date hereof, the IP Security Agreement shall be amended hereby and all references herein to “hereunder,” “hereof,” or words of like import and all references in any Loan Documents or any documents entered into in connection therewith to the “IP Security Agreement” or words of like import shall mean and be a reference to the IP Security Agreement as assigned and amended hereby as and as hereafter amended, supplemented, restated or renewed.

 

5.         Ratification. As hereby assigned and amended, the IP Security Agreement and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.         Conflict. In the event of a conflict between the terms and conditions of this Assignment and the terms and conditions of the IP Security Agreement, the terms and conditions of this Assignment shall control.

 

7.         Counterparts. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the definitions given said terms in the IP Security Agreement.

 

[Signatures Page Follows]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the date first above written.

 

	ASSIGNOR:   BMO BANK N.A.     By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President
	ASSIGNEE:   BANK OF MONTREAL     By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President     By:__________________________________ Name: Helen Alvarez-Hernandez Title: Managing Director
	Consented to by GRANTOR:   TWIN DISC, INCORPORATED     By: ________________________________ Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer     (following the consummation of the Kobelt Acquisition and the Kobelt Amalgamation) KOBELT MANUFACTURING CO. LTD.       By: ______________________________ Name: Title:

 

 

Signature Page to Assignment of Amendment to IP Security Agreement]

 

Exhibit A

Copy of IP Security Agreement

 

See attached.

 

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (“IP Security Agreement”), dated as of April 22, 2016, is made by TWIN DISC, INCORPORATED, a Wisconsin corporation (the “Grantor”) in favor of BANK OF MONTREAL, a Canadian chartered bank acting through its Chicago branch (the “Administrative Agent”), as Administrative Agent for the secured parties under the Credit Agreement referred to below (the “Secured Parties”).

 

WHEREAS, Grantor has entered into a Credit Agreement, dated as of even date herewith (the “Credit Agreement”), with the Administrative Agent, the Lenders (the “Lenders”) from time to time parties thereto, and the guarantors (the “Guarantors”) from time to time parties thereto.

 

WHEREAS, as a condition precedent to the making of loans by the Lenders under the Credit Agreement, Grantor has executed and delivered to the Administrative Agent that certain Security Agreement, dated as of even date herewith, made by and between the Grantor and the Administrative Agent (the “Security Agreement”).

 

WHEREAS, under the terms of the Security Agreement, the Grantor has granted to the Administrative Agent, for the benefit of the Secured Parties, a security interest in, among other property, certain intellectual property of the Grantor, and have agreed to execute and deliver this IP Security Agreement, for recording with national, federal and state government authorities, including, but not limited to, the United States Patent and Trademark Office and the United States Copyright Office.

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor agrees with the Administrative Agent as follows:

 

1.         Grant of Security. Grantor hereby pledges and grants to the Administrative Agent for the ratable benefit of the Secured Parties a security interest in and to all of the right, title and interest of Grantor in, to and under the following, wherever located, and whether now existing or hereafter arising or acquired from time to time (the “IP Collateral”):

 

(a)         the patents and patent applications set forth in the Perfection Certificate dated contemporaneously herewith from Grantor (the “Perfection Certificate”) and all reissues, divisions, continuations, continuations-in-part, renewals, extensions and reexaminations thereof and amendments thereto (the “Patents”);

 

(b)         the trademark registrations and applications set forth in the Perfection Certificate, together with the goodwill connected with the use of and symbolized thereby and all extensions and renewals thereof (the “Trademarks”), excluding only United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant, attachment or enforcement of a security interest therein would, under applicable federal law, impair the registrability of such applications or the validity or enforceability of registrations issuing from such applications;

 

 

(c)          the copyright registrations, applications and copyright registrations and applications exclusively licensed to each Grantor set forth in the Perfection Certificate, and all extensions and renewals thereof (the “Copyrights”);

 

(d)         all rights of any kind whatsoever of such Grantor accruing under any of the foregoing provided by applicable law of any jurisdiction, by international treaties and conventions and otherwise throughout the world;

 

(e)         any and all royalties, fees, income, payments and other proceeds now or hereafter due or payable with respect to any and all of the foregoing; and

 

(f)         any and all claims and causes of action, with respect to any of the foregoing, whether occurring before, on or after the date hereof, including all rights to and claims for damages, restitution and injunctive and other legal and equitable relief for past, present and future infringement, dilution, misappropriation, violation, misuse, breach or default, with the right but no obligation to sue for such legal and equitable relief and to collect, or otherwise recover, any such damages.

 

2.         Recordation. Grantor authorizes the Commissioner for Patents, the Commissioner for Trademarks and the Register of Copyrights and any other government officials to record and register this IP Security Agreement upon request by the Administrative Agent.

 

3.         Loan Documents. This IP Security Agreement has been entered into pursuant to and in conjunction with the Security Agreement, which is hereby incorporated by reference. The provisions of the Security Agreement shall supersede and control over any conflicting or inconsistent provision herein. The rights and remedies of the Administrative Agent with respect to the IP Collateral are as provided by the Credit Agreement, the Security Agreement and related documents, and nothing in this IP Security Agreement shall be deemed to limit such rights and remedies.

 

4.         Execution in Counterparts. This IP Security Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page to this IP Security Agreement by facsimile or in electronic (i.e., "pdf" or "tif" format) shall be effective as delivery of a manually executed counterpart of this IP Security Agreement.

 

5.         Successors and Assigns. This IP Security Agreement will be binding on and shall inure to the benefit of the parties hereto and their respective successors and assigns.

 

6.         Governing Law. This IP Security Agreement and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this IP Security Agreement and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the laws of the United States and the State of Wisconsin, without giving effect to any choice or conflict of law provision or rule.

 

 

7.         Notices. All written notices and other communications required hereunder shall be sent to addresses as set forth in the Credit Agreement.

 

[Signatures on Following Page]

 

 

IN WITNESS WHEREOF, each Grantor has caused this IP Security Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

 

	TWIN DISC, INCORPORATED
	By
		Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer
	BANK OF MONTREAL, as Administrative Agent
	By
		Name: Jason Hoefler Title: Director

 

 

 

Exhibit B

Copy of Assignment and Amendment

to IP Security Agreement (2018)

 

See attached.

 

 

ASSIGNMENT OF AND AMENDMENT TO

IP SECURITY AGREEMENT

 

THIS ASSIGNMENT OF AND AMENDMENT TO IP SECURITY AGREEMENT (the “Assignment”), is made on June 29, 2018, by and among BANK OF MONTREAL (“Assignor”), BMO HARRIS BANK N.A. (“Assignee”), and TWIN DISC, INCORPORATED, a Wisconsin corporation (“Grantor”).

 

RECITALS:

 

A.         Pursuant to the Credit Agreement, dated April 22, 2016, by and among Borrower, Assignor and the lenders party thereto (the “2016 Credit Agreement”), Grantor and Assignor entered into that certain Intellectual Property Security Agreement, dated as of April 22, 2016 (the “IP Security Agreement”), a copy of which is attached hereto as Exhibit A;

 

B.          Contemporaneously herewith, Assignee will refinance the credit facilities extended by Assignor to Borrower under the 2016 Credit Agreement, and finance additional credit facilities, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee and Borrower (the “2018 Credit Agreement”);

 

C.         Assignor now desires to assign its rights and obligations as Secured Party and Bank (as defined herein) under the IP Security Agreement to Assignee, and Assignee desires to accept such assignment; and

 

D.         The parties hereto also desire to amend the IP Security Agreement on the terms and conditions provided herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT:

 

1.         Assignment and Assumption.

 

(a)         Assignor hereby assigns to Assignee, and Assignee hereby assumes from Assignor, all of Assignor’s rights and obligations as Secured Party and Bank (as defined herein) under the IP Security Agreement. The assignment set forth in this Section 1(a) shall be without recourse to or representation or warranty (except as expressly provided in this Assignment, in the other documents executed in connection with this Assignment, or in the IP Security Agreement, as assigned and amended) by Assignor.

 

(b)         Assignee shall become and be a party to the IP Security Agreement and succeed to all of the rights and be obligated to perform all of the obligations of Secured Party and Bank under the IP Security Agreement.

 

 

(c)         In conjunction with the assignment hereunder, Assignor shall transfer and deliver to Assignee any and all Collateral, and/or evidence thereof, in Assignor’s possession. Until such time as the Collateral in Assignor’s possession is transferred to Assignee, Assignor shall hold such Collateral for the benefit of the Assignee.

 

2.         Amendments. The IP Security Agreement is hereby amended as follows:

 

(a)         Secured Party. The definition “Secured Parties” in the IP Security Agreement is hereby amended and restated to mean “BMO Harris Bank N.A., a national banking association.”

 

(b)         Administrative Agent. The definition of “Administrative Agent” in the IP Security Agreement is hereby deleted in its entirety and replaced with the term “Bank” (as defined herein). It is the intention of the parties hereto that, from and after the date hereof, all references in the IP Security Agreement to the Administrative Agent shall mean and be a reference to Bank.

 

(c)         Credit Agreement. The definition of “Credit Agreement” in the IP Security Agreement is hereby amended and restated to mean “the Credit Agreement, dated as of June 29, 2018, by and between Bank and Grantor, as the same may hereafter be amended, restated, supplemented or otherwise modified.”

 

(d)         Security Agreement. The definition of “Security Agreement” in the IP Security Agreement is hereby amended and restated to mean “the Security Agreement, dated as of April 22, 2016, by and between Grantor and Bank, as assigned to and amended by that certain Assignment of and Amendment to IP Security Agreement, dated as of June 29, 2018, between Grantor, Bank and Bank of Montreal, as assignor.”

 

3.         No Termination. The parties hereto acknowledge and agree that notwithstanding any terms or conditions contained in the IP Security Agreement to the contrary, neither this Assignment, nor any other assignment, amendment or restatement of any other Loan Document (as defined in the 2016 Credit Agreement), shall trigger a termination of the IP Security Agreement.

 

4.         No Novation. It is the intention of the parties hereto that this Assignment not constitute a novation of the obligations under the IP Security Agreement and that, from and after the date hereof, the IP Security Agreement shall be amended hereby and all references herein to “hereunder,” “hereof,” or words of like import and all references in any Loan Documents or any documents entered into in connection therewith to the “IP Security Agreement” or words of like import shall mean and be a reference to the IP Security Agreement as assigned and amended hereby as and as hereafter amended, supplemented, restated or renewed.

 

5.         Ratification. As hereby assigned and amended, the IP Security Agreement and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

 

6.         Conflict. In the event of a conflict between the terms and conditions of this Assignment and the terms and conditions of the IP Security Agreement, the terms and conditions of this Assignment shall control.

 

7.         Counterparts. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the definitions given said terms in the IP Security Agreement.

 

[Signatures on following page]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the date first above written.

 

	ASSIGNOR:   BANK OF MONTREAL     By:__________________________________ Name: Title:
	ASSIGNEE:   BMO HARRIS BANK N.A.     By:__________________________________       Mark Czarnecki, Senior Vice President
	GRANTOR:   TWIN DISC, INCORPORATED     By: ________________________________        Jeffrey S. Knutson, Vice President –      Finance and Chief Financial Officer

 

 

Exhibit C

Schedules

to IP Security Agreement

 

See attached.

 

Exhibit 1.8

 

ASSIGNMENT OF AND AMENDMENT TO

PLEDGE AGREEMENT

 

THIS ASSIGNMENT OF AND AMENDMENT TO PLEDGE AGREEMENT (the “Assignment”), is entered into as of February 14, 2025, by BMO Bank N.A. (f/k/a BMO Harris Bank N.A.) (“Assignor”), in favor of Bank of Montreal (“Assignee”), and is consented to by Twin Disc, Incorporated, a Wisconsin corporation (“Pledgor”).

 

RECITALS

 

A.         Pursuant to the Credit Agreement, dated April 22, 2016, by and among Pledgor, Assignee and the lenders party thereto (the “2016 Credit Agreement”), Pledgor, Mill-Log Equipment Co., Inc, an Oregon Corporation (“Guarantor”), and Assignee entered into that certain Pledge Agreement, dated as of April 22, 2016 (the “Pledge Agreement”), a copy of which is attached hereto as Exhibit A;

 

B.         Contemporaneously with a refinancing of the credit facilities extended by Assignor to Pledgor, dated as of July 29, 2018 (the “2018 Credit Agreement”), Assignee assigned the Pledge Agreement to Assignor under an Assignment of and Amendment to Pledge Agreement (the “2018 Assignment”), a copy of which is attached hereto as Exhibit B;

 

C.          In connection with the sale of all of the substantially all of the assets of Guarantor, Assignor released all guaranties, stock powers, stock certificates and all other liens and security interests related to Guarantor in the Assignor’s possession and acknowledged that all obligations owed by Guarantor to Assignor were forever released and terminated pursuant to that Amendment No. 2 to Credit Agreement dated as of March 4, 2019 by and between Pledgor and Assignor.

 

D.          Contemporaneously herewith, Assignee will refinance the credit facilities extended by Assignor to Borrower under the 2016 Credit Agreement, and finance additional credit facilities, including from the Closing Date until the consummation of the Kobelt Amalgamation, Twin Disc Canada Holdings Ltd., a company incorporated under the laws of British Columbia and immediately after giving effect to the Kobelt Acquisition and the Kobelt Amalgamation Kobelt Manufacturing Co. Ltd., a company amalgamated under the laws of British Columbia as a result of the Kobelt Amalgamation (“Canadian Borrower”), as an additional Borrower thereunder, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee, and Pledgor, as Borrower, and Canadian Borrower (the “2025 Credit Agreement”), and such credit and other financial accommodations to Borrower;

 

E.         Assignor now desires to assign its rights and obligations as Bank (as defined herein) under the Pledge Agreement to Assignee, and Assignee desires to accept such assignment; and

 

F.         The parties hereto also desire to amend the Pledge Agreement on the terms and conditions provided herein.

 

 

NOW, THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT

 

1.         Assignment and Assumption.

 

(a)         Assignor hereby assigns to Assignee, and Assignee hereby assumes from Assignor, all of Assignor’s rights and obligations as Bank (as defined herein) under the Pledge Agreement. The assignment set forth in this Section 1(a) shall be without recourse to or representation or warranty (except as expressly provided in this Assignment, in the other documents executed in connection with this Assignment, or in the Pledge Agreement, as assigned and amended) by Assignor.

 

(b)         Assignee shall become and be a party to the Pledge Agreement and succeed to all of the rights and be obligated to perform all of the obligations of Bank under the Pledge Agreement.

 

(c)         In conjunction with the assignment hereunder, Assignor shall transfer and deliver to Assignee any and all Collateral, and/or evidence thereof, in Assignor’s possession. Until such time as the Collateral in Assignor’s possession is transferred to Assignee, Assignor shall hold such Collateral for the benefit of the Assignee.

 

2.         Amendments. The Pledge Agreement is hereby amended as follows:

 

(a)         Bank. The definition of “Bank” shall be restated in its entirety to mean “Bank of Montreal.”

 

(b)       Credit Agreement. The definition of “Credit Agreement” in the Pledge Agreement is hereby amended and restated to mean “the Credit Agreement, dated as of February 14, 2025, by and between Bank, Borrower, and Kobelt Manufacturing Co. Ltd., a federal Canadian corporation (“Canadian Borrower”), as the same may hereafter be amended, restated, supplemented or otherwise modified.”

 

(c)         Notice Address. The notice address for Bank contained in Section 10(c)(i) of the Pledge Agreement is hereby amended and restated as follows:

 

“If to the Bank at:

 

Bank of Montreal

790 North Water Street

Milwaukee, Wisconsin 53202

Attention: Mark Czarnecki, SVP

Telephone: 414-765-7920

Email: mar. czarnecki@bmo.com”

 

 

(d)         Schedule 1. Schedule 1 of the Pledge Agreement is hereby deleted in its entirety and replaced with Schedule 1 attached hereto.

 

3.         No Termination. The parties hereto acknowledge and agree that notwithstanding any terms or conditions contained in the Pledge Agreement to the contrary, neither this Assignment, nor any other assignment, amendment or restatement of any other Loan Document (as defined in the 2025 Credit Agreement), shall trigger a termination of the Pledge Agreement.

 

4.          No Novation. It is the intention of the parties hereto that this Assignment not constitute a novation of the obligations under the Pledge Agreement and that, from and after the date hereof, the Pledge Agreement shall be amended hereby and all references herein to “hereunder,” “hereof,” or words of like import and all references in any Loan Documents or any documents entered into in connection therewith to the “Pledge Agreement” or words of like import shall mean and be a reference to the Pledge Agreement as assigned and amended hereby as and as hereafter amended, supplemented, restated or renewed.

 

5.         Ratification. As hereby assigned and amended, the Pledge Agreement and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.         Conflict. In the event of a conflict between the terms and conditions of this Assignment and the terms and conditions of the Pledge Agreement, the terms and conditions of this Assignment shall control.

 

7.          Counterparts. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the definitions given said terms in the Pledge Agreement.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the date first above written.

 

	ASSIGNOR:   BMO BANK N.A.     By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President
	ASSIGNEE:   BANK OF MONTREAL     By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President     By:__________________________________ Name: Helen Alvarez-Hernandez Title: Managing Director
	Consented to by PLEDGORS:   TWIN DISC, INCORPORATED     By: ________________________________ Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer

 

 

Schedule 1

Pledged Collateral

 

 

Grantor	Entity Owned by Grantor	Percentage Interest/Number of Shares/Interests Owned by Grantor
Twin Disc, Incorporated	TD Finland holding Oy (a Finnish corporation)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc (Far East) Ltd. (a Delaware corporation operating in Singapore)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc New Zealand Limited (a New Zealand corporation)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc (Pacific) Pty. Ltd. (an Australian corporation)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc Nico Co., Ltd (a Japanese corporation)	66% owned by Twin Disc, Inc.; and 34% owned by Hitachi
Twin Disc, Incorporated	Twin Disc Japan (a Japanese corporation)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc NL Holding B.V. (a Netherlands corporation)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Kobelt Manufacturing Co. Ltd. (a Canadian corporation)*	100% owned by Twin Disc, Incorporated

 

*This information is to be included and form part of Schedule 3.01 following the consummation of the Kobelt Acquisition and Kobelt Amalgamation (as those terms are defined in the Credit Agreement).

 

 

Exhibit A

Copy of Pledge Agreement

 

See attached.

 

 

Pledge Agreement

 

This Pledge Agreement (this “Agreement”) is dated as of April 22, 2016, among TWIN DISC, INCORPORATED, a Wisconsin corporation (the “Borrower”) and MILL-LOG EQUIPMENT CO., INC., an Oregon corporation (“Mill-Log Equipment” and together with the Borrower, each individually a “Pledgor”, and individually and collectively, jointly and severally, the “Pledgors”), each with its mailing address as set forth in Section 10(c) hereof, and BANK OF MONTREAL, as “Administrative Agent” for the secured lenders (the “Secured Parties”) under the Credit Agreement referenced below dated on even date herewith (in such capacity, together with its successors and assigns in such capacity, if any, the “Agent”), with its mailing address as set forth in Section 10(c) hereof.

 

Preliminary Statements

 

A.         The Borrower has requested that the Lenders (as hereinafter defined) from time to time extend credit or otherwise make financial accommodations available to or for the account of the Borrower, including, without limitation, pursuant to the terms of that certain Credit Agreement dated as of even date herewith, among the Borrower, the financial institutions from time to time party thereto as lenders (the “Lenders”), the Agent, as the same may from time to time be amended, restated, supplemented, or otherwise modified (the “Credit Agreement”; capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Credit Agreement). Mill-Log Equipment is a Guarantor under the Credit Agreement.

 

B.         As a condition to extending credit or otherwise making financial accommodations available to or for the account of the Borrower, the Agent and the other Secured Parties each require, among other things, that each Pledgor pledge and assign to the Agent, for the ratable benefit of the Lenders and the Letter of Credit Issuer, and grant to the Agent, for the ratable benefit of the Secured Parties, a security interest in all of the Pledged Collateral (as defined below), whether now owned or hereafter acquired, to secure prompt payment and full performance of the Secured Obligations (as defined below).

 

Now, therefore, in consideration of the benefits accruing to each Pledgor, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

Section 1.          Pledge of Collateral. As collateral security for the payment, performance and observance of all of the Secured Obligations, each Pledgor hereby pledges and assigns to Agent (and its agents and designees), for the benefit of the Secured Parties, and grants to Agent (and its agents and designees), for the benefit of the Secured Parties, a continuing security interest in, all of the following property of such Pledgor, wherever located and whether now or hereafter existing and whether now owned or hereafter acquired (all being collectively referred to herein as the “Pledged Collateral”):

 

         (a)          those certain shares of capital stock or other equity interests owned beneficially and, if applicable, of record by each Pledgor listed on Schedule I attached hereto and made a part hereof (provided that the Pledged Collateral shall not include more than 65% of any voting capital stock or other voting equity interests of foreign issuers owned beneficially and, if applicable, of record by any Pledgor), and all cash, dividends, other securities, instruments, rights, and other property at any time and from time to time received or receivable in respect thereof or in exchange for all or any part thereof, including without limitation, dividends, distributions, warrants, profits, rights to subscribe, rights to return of its contribution, conversion rights, liquidating dividends, and other rights (subject to Section 7 below);

 

 

         (b)          all other property hereafter delivered to the Agent (or any agent or bailee holding on behalf of the Agent) by each Pledgor in substitution for or in addition to any of the foregoing, and all certificates and instruments representing or evidencing such other property and all cash, dividends, other securities, instruments, rights, and other property at any time and from time to time received or receivable in respect thereof or in exchange for all or any part thereof, including without limitation, dividends, distributions, warrants, profits, rights to subscribe, conversion rights, liquidating dividends, and other rights; and

 

         (c)          all Proceeds of all of the foregoing.

 

All terms which are used in this Agreement which are defined in the Uniform Commercial Code of the State of Wisconsin as in effect from time to time (“UCC”) shall have the same meanings herein as such terms are defined in the UCC, unless this Agreement shall otherwise specifically provide.

 

         Section 2.         Secured Obligations Hereby Secured. The security interest created hereby in the Pledged Collateral constitutes continuing collateral security for all of the following obligations, whether now existing or hereafter incurred (the “Secured Obligations”):

 

         (a)          the prompt payment by each Loan Party, as and when due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all amounts from time to time owing by it in respect of (i) the Obligations, and (ii) in the case of a Loan Party that is a Guarantor, all amounts from time to time owing by such Loan Party in respect of its guaranty made pursuant to Section 10 of the Credit Agreement or under any other Guaranty to which it is a party; and

 

         (b)         the due performance and observance by each Loan Party of all of its other obligations from time to time existing in respect of the Loan Documents and all documents evidencing the Obligations.

 

Section 3.          Pledged Collateral.

 

(a)          On or before June 21, 2016, all certificates or instruments representing or evidencing the Pledged Collateral must be delivered to and held by or on behalf of the Agent pursuant to this Agreement and must be in suitable form for transfer by delivery, or accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Agent. The Agent has the right, at any time after an Event of Default (as defined herein) has occurred and is continuing and which has not been waived in writing by the Agent, in its reasonable discretion and without notice to any Pledgor, to transfer to or to register any or all of the Pledged Collateral in the name of the Agent or any of its nominees. In addition, the Agent has the right at any time to exchange certificates or instruments representing or evidencing any or all of the Pledged Collateral for certificates or instruments of smaller or larger denominations.

 

(b)          Except as provided in Section 7 below, in the event that any Pledgor receives any cash, dividends, other securities, instruments, rights, or other property at any time and from time to time received or receivable in respect of any of the Pledged Collateral, or in exchange for all or any part thereof, including without limitation, dividends, distributions, warrants, profits, rights to subscribe, conversion rights, liquidating dividends, and other rights, such Pledgor acknowledges that the same will be received IN TRUST for the Agent and will immediately deliver the same to the Agent in original form of receipt, together with any stock or bond powers, assignments, endorsements, or other documents or instruments as the Agent may request to establish, protect, or perfect the Agent’s interest in respect of such Pledged Collateral.

 

 

Section 4.          Representations and Warranties. Each Pledgor represents and warrants that:

 

(a)          Such Pledgor is the sole legal, beneficial, and, if applicable, record owner of its Pledged Collateral (or, in the case of after-acquired Pledged Collateral, will be the sole such owner thereof), having good and marketable title thereto, free of all liens, security interests, encumbrances, or claims of any kind other than those in favor of the Agent under this Agreement.

         

(b)          All capital stock or other equity interests constituting such Pledgor’s Pledged Collateral: (i) have been duly authorized, are validly issued, fully-paid and non-assessable and free of preemptive rights; (ii) are not subject to any restrictions upon the voting rights or upon the transfer thereof; (iii) constitute (A) all capital stock or other equity interests of the domestic issuers, if any, of such Pledged Collateral owned beneficially and of record by such Pledgor and (B) no more than 65% of the voting capital stock or other voting equity interests of the foreign issuers of such Pledged Collateral; and (iv) include the percentages of the issued and outstanding capital stock or other equity interests as set forth on Schedule I attached hereto.

         

(c)          Without limiting any of the foregoing representations and warranties, each Pledgor represents and warrants that each of the representations and warranties set forth in the Credit Agreement and in the Security Agreement are true, correct, and complete as written.

         

(d)          No Loan Document contains any untrue statement of a material fact regarding any Pledgor or its properties, nor fails to disclose any material fact regarding any Pledgor or its properties necessary to make the statements contained therein not materially misleading. There is no fact or circumstance that any Pledgor has failed to disclose to the Agent in writing that could reasonably be expected to have a Material Adverse Effect.

         

Section 5.          Covenants. Until all of the Secured Obligations, both for principal and interest, have been fully paid and satisfied and all agreements of the Agent to extend credit to or for the account of the Borrower have expired or otherwise have been terminated, each Pledgor shall:

 

(a)          preserve and protect its Pledged Collateral;

         

(b)          not create, incur, assume, or permit to exist any liens, encumbrances, security interests, levies, assessments, or charges on or in any of its Pledged Collateral, except liens permitted by the Loan Documents;

         

(c)          except as otherwise agreed to by the Agent, not sell, encumber or otherwise dispose of or transfer any of its Pledged Collateral, or any right or interest therein, and cause any issuer not to sell, encumber, or otherwise dispose of or transfer any of its voting capital stock or other voting equity interests of foreign issuers owned beneficially and, if applicable, of record by any issuer, or any right or interest therein, and will: (i) cause the issuer(s) of its Pledged Collateral not to issue any other voting stock in addition to or in substitution for such Pledged Collateral, except to such Pledgor, or in connection with outstanding stock options or with the prior written consent of the Agent; and (ii) pledge hereunder, immediately upon such Pledgor’s acquisition (directly or indirectly) thereof, any and all additional shares of stock or other securities of the issuers of its Pledged Collateral;

         

(d)          appear in and defend, at such Pledgor’s own expense, any action or proceeding that may affect such Pledgor’s title to or the Agent’s interest in such Pledgor’s Pledged Collateral;

         

(e)          promptly pay and discharge all taxes, assessments, and governmental charges or levies imposed on such Pledgor or any of its Pledged Collateral before the same become delinquent;

         

 

(f)          procure or execute and deliver, from time to time, in form and substance satisfactory to the Agent, any stock powers, bond powers, endorsements, assignments, financing statements, estoppel certificates, or other writings deemed necessary or appropriate by the Agent to perfect, maintain, or protect the Agent’s security interest in such Pledgor’s Pledged Collateral and the priority thereof, and take such other action and deliver such other documents, instruments, and agreements pertaining to such Pledgor’s Pledged Collateral as the Agent may reasonably request to effectuate the intent of this Agreement;

         

(g)          if the Agent gives value to enable such Pledgor to acquire rights in or use of any of its Pledged Collateral, use such value only for such purpose; and

 

(h)          keep separate, accurate, and complete records of its Pledged Collateral and provide the Agent with access thereto with the right to make extracts therefrom and provide the Agent with such other information pertaining to such Pledgor’s Pledged Collateral as the Agent may reasonably request from time to time.

         

The Agent may, in its discretion at any time and from time to time, at the Pledgors’ expense, pay any amount or do any act required of any Pledgor hereunder or otherwise lawfully requested by the Agent to (i) enforce any Loan Document or collect any Secured Obligations; (ii) protect, insure, maintain, or realize upon any Pledged Collateral; or (iii) defend or maintain the validity or priority of the Agent’s Liens in any Pledged Collateral, including any payment of a judgment or any discharge of a Lien. All payments, costs, and expenses (including extraordinary expenses) of the Agent under this Section shall be jointly and severally payable by the Pledgors immediately without notice or demand, shall constitute additional Secured Obligations secured hereby, and shall bear interest from the date incurred to the date of payment thereof at the rate specified in the Credit Agreement. Any payment made or action taken by the Agent under this Section shall be without prejudice to any right to assert an Event of Default or to exercise any other rights or remedies under the Loan Documents. No payment made or action taken by the Agent under this Section shall in any way obligate the Agent to take any further or future action with respect thereto. The Agent, in making any payment hereby authorized, may do so according to any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien or title or claim and may request reimbursement thereof from any Pledgor for the amount of such sums and amounts so expended.

         

Section 6.          Authorized Action by the Agent

         

(a)          Subject to Section 7, each Pledgor hereby irrevocably appoints the Agent as its attorney-in-fact to do (but the Agent shall not be obligated to and shall not incur any liability to any Pledgor or any third party for failure to do) any act that such Pledgor is obligated by this Agreement to do, and exercise such rights and powers as such Pledgor might exercise with respect to such Pledgor’s Pledged Collateral, including without limitation, the right to:

 

(i)          collect by legal proceedings or otherwise and endorse, receive, and receipt for all payments, proceeds and other sums and property now or hereafter payable on or in respect of proceeds, and other sums and property now or hereafter payable on or in respect of such Pledged Collateral, including dividends, profits, and interest payments;

 

(ii)          enter into any extension, reorganization, deposit, merger, or consolidation agreement or other agreement pertaining to any of such Pledged Collateral, and in connection therewith, to: (A) deposit or surrender control of such Pledged Collateral thereunder; (B) accept other property in exchange therefor; and (C) do and perform such acts and things as the Agent may deem proper; and any money or property secured in exchange therefor will be applied to the Secured Obligations or held by the Agent pursuant to the provisions of this Agreement;

 

 

(iii)          protect and preserve such Pledged Collateral;

 

(iv)          transfer such Pledged Collateral to its own or its nominee’s name; and

 

(v)          make any compromise, settlement, or adjustment, and take any action the Agent deems advisable, with respect to such Pledged Collateral.

         

(b)          Each Pledgor agrees to reimburse the Agent upon demand for any costs and reasonable expenses, including reasonable attorneys’ fees, that the Agent may incur while acting as such Pledgor’s attorney-in-fact under this Agreement, all of which costs and expenses are included in the Secured Obligations and are payable upon demand. It is further agreed and understood between the parties hereto that such care as the Agent gives to the safekeeping of its own property of like kind constitutes reasonable care of each Pledgor’s Pledged Collateral when in the Agent’s possession; provided, however, that the Agent will not be required to make any presentment, demand, or protest, or give any notice and need not take any action to preserve any rights against any prior party or any other person in connection with the Secured Obligations or with respect to any Pledged Collateral.

 

(c)          All the foregoing powers authorized in this Section 6, being coupled with an interest, are irrevocable so long as any of the Secured Obligations are outstanding.

 

Section 7.          Transfer, Voting, Dividends, Etc.

 

(a)          Notwithstanding any other provision of this Agreement, so long as no Event of Default has occurred and is continuing and which has not been waived in writing by the Agent:

 

(i)          each Pledgor is entitled to exercise all voting powers pertaining to all shares of stock and other securities constituting its Pledged Collateral for all purposes not inconsistent with the terms of this Agreement;

 

(ii)          each Pledgor is entitled to receive and retain all dividends (other than shares of stock or liquidating dividends) and all interest payments payable in respect of its Pledged Collateral; provided, that such dividends or interest payments are permitted by the terms of the Credit Agreement and the other Loan Documents; and provided, further, however, that all shares of stock or property representing shares of stock or liquidating dividends or a distribution or return of capital upon or in respect of the shares of stock constituting its Pledged Collateral or resulting from a split-up, revision, or reclassification of its Pledged Collateral or received in exchange therefor, as a result of a merger, consolidation, or otherwise, must be paid or transferred directly to the Agent immediately upon receipt thereof by such Pledgor and be retained by the Agent as Pledged Collateral hereunder; and

 

(iii)          in order to permit each Pledgor to exercise such voting powers and to receive such dividends, the Agent will, if necessary and upon the written request of such Pledgor, from time to time, execute and deliver to such Pledgor appropriate proxies.

         

(b)          If any Event of Default has occurred, is continuing, is beyond all applicable cure periods and which has not been waived in writing by the Agent:

 

 

(i)          the Agent or its nominee or nominees may, if the Agent so elects by written notice to the Borrower and, without duplication, the applicable Pledgor, have the sole and exclusive right to exercise all voting powers pertaining to the shares of stock constituting such Pledgor’s Pledged Collateral, and may exercise such powers in such manner as the Agent may elect, and such Pledgor hereby grants the Agent an irrevocable proxy, coupled with an interest, to vote such shares of stock; provided, however, that such proxy will terminate upon termination of the Agent’s security interest in such Pledgor’s Pledged Collateral; and

 

(ii)          all dividends and other distributions and profits made upon or in respect of the Pledged Collateral and all interest payments must be paid directly to and be retained by the Agent as Pledged Collateral hereunder (or applied to the Secured Obligations, consistent with the terms of the Credit Agreement and the Security Agreement).

 

Section 8.          Default and Remedies

 

(a)          The occurrence and continuance of any “Event of Default” (as defined in the Credit Agreement) beyond all applicable cure periods and which has not been waived in writing by the Agent shall constitute an “Event of Default” hereunder.

 

(b)          Upon the occurrence and the continuation of any Event of Default beyond all applicable cure periods and which has not been waived in writing by the Agent, the Agent shall have, in addition to all other rights provided herein or in any other Loan Document or by law, the rights and remedies of a Agent under the UCC (regardless of whether the UCC is the law of the jurisdiction where the rights or remedies are asserted and regardless of whether the UCC applies to the affected Pledged Collateral), and further the Agent may:

 

(i)          settle, compromise, or release, on terms acceptable to the Agent, in whole or in part, any amounts owing on the Pledged Collateral, and to extend the time of payment, in the Agent’s name or in the name of any Pledgor, in respect thereof;

 

(ii)          apply to the payment of the Secured Obligations, or collect the Pledged Collateral, notwithstanding any forfeiture of interest or loss of other rights of any Pledgor against any obligor on its Pledged Collateral resulting from such action; and

 

(iii)          sell or otherwise dispose of all or any part of the Pledged Collateral in accordance with applicable law, either at public or private sale, on any broker’s board or securities exchange, in lots or in bulk, for cash, on credit, or otherwise, with or without representations or warranties, and upon such terms as are acceptable to the Agent.

 

(c)          The net cash proceeds resulting from the collection, liquidation, sale or other disposition of the Pledged collateral will be applied as set forth in Section 9.03(b) of the Credit Agreement.

 

(d)         If by reason of any prohibition contained in applicable federal securities laws, Wisconsin securities laws or other state securities laws, as now or hereafter in effect, or in any rules or regulations pertaining to any of the foregoing laws, the Agent believes in its sole judgment that it is compelled to resort to one or more private sales of shares of stock constituting Pledged Collateral to a single purchaser or a restricted group of purchasers who will be obliged to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof, each Pledgor acknowledges and agrees that private sales of such Pledged Collateral may be held notwithstanding that such sales may be at prices and on other terms less favorable to the applicable Pledgor than if such Pledged Collateral were sold at public sale. Each Pledgor further agrees that the Agent has no obligation to delay the sale of any such Pledged Collateral for the period of time necessary to permit registration of such Pledged Collateral, even if the issuer thereof would, or should, agree to register such Pledged Collateral for public sale under applicable securities laws. Each Pledgor specifically agrees that private sales made under the foregoing circumstances shall be deemed to have been made in a “commercially reasonable” manner.

 

 

(e)          Under this Section 8, the Agent is not under any duty or obligation whatsoever to collect any dividends, interest, profits, or other payments due or accruing in respect of the Pledged Collateral or to take any action to preserve rights in connection with any Pledged Collateral, including without limitation, making or giving any presentment, demands for performance, notices of non-performance, protests, notices of protest, or notices of dishonor in connection with any Pledged Collateral.

 

(f)          The Agent may deliver any Pledgor’s Pledged Collateral to such Pledgor at any time and the receipt thereof by such Pledgor will be a complete and full acquittance in respect of such Pledged Collateral so delivered, and the Agent will thereafter be discharged from any liability or responsibility therefor.

 

(g)          Remedies Cumulative; No Waiver.

 

(i)          All covenants, conditions, provisions, warranties, guaranties, indemnities, and other undertakings of each Pledgor contained in the Loan Documents are cumulative and not in derogation or substitution of each other. In particular, the rights and remedies of the Agent are cumulative, may be exercised at any time and from time to time, concurrently or in any order, and shall not be exclusive of any other rights or remedies that the Agent may have, whether under any agreement, by law, at equity, or otherwise.

 

(ii)          The failure or delay of the Agent to require strict performance by any Pledgor with any terms of the Loan Documents, or to exercise any rights or remedies with respect to Pledged Collateral or otherwise, shall not operate as a waiver thereof nor as establishment of a course of dealing. All rights and remedies shall continue in full force and effect until all of the Secured Obligations, both for principal and interest, have been fully paid and satisfied and all agreements of the Agent to extend credit to or for the account of the Borrower have expired or otherwise have been terminated. No modification of any terms of any Loan Documents (including any waiver thereof) shall be effective, unless such modification is specifically provided in a writing directed to each Pledgor and executed by the Agent, and such modification shall be applicable only to the matter specified. No waiver of any Default or Event of Default shall constitute a waiver of any other Default or Event of Default that may exist at such time, unless expressly stated. If the Agent accepts performance by any Pledgor under any Loan Document in a manner other than that specified therein, or during any Default or Event of Default, or if the Agent shall delay or exercise any right or remedy under any Loan Document, such acceptance, delay, or exercise shall not operate to waive any Default or Event of Default nor to preclude exercise of any other right or remedy.

 

         Section 9.         Application of Proceeds. The proceeds and avails of the Pledged Collateral at any time received by the Agent after the occurrence and during the continuation of any Event of Default beyond all applicable cure periods and which has not been waived in writing by the Agent shall, when received by the Agent in cash or its equivalent, be applied by the Agent as follows:

 

(i)         first, to the payment and satisfaction of all sums paid and costs and expenses incurred by the Agent hereunder or otherwise in connection herewith, including such monies paid or incurred in connection with protecting, preserving or realizing upon the Pledged Collateral or enforcing any of the terms hereof, including reasonable attorneys’ fees and court costs, together with any interest thereon (but without preference or priority of principal over interest or of interest over principal), to the extent the Agent is not reimbursed therefor by any Obligor; and

 

 

(ii)         second, to the payment and satisfaction of the remaining Secured Obligations, whether or not then due (in whatever order the Agent elects), both for interest and principal.

 

Any surplus remaining after the full payment and satisfaction of the foregoing shall be returned to the Borrower or to whomsoever the Agent reasonably determines is lawfully entitled thereto.

 

Section 10.          Miscellaneous.

 

(a)         This Pledge Agreement shall be a continuing agreement in every respect and shall remain in full force and effect until all of the Secured Obligations, both for principal and interest, have been fully paid and satisfied and all agreements of the Secured Parties to extend credit to or for the account of the Borrower have expired or otherwise have been terminated. Upon such termination of this Security Agreement, the Agent shall, upon the request and at the expense of the Borrower, forthwith release its security interest hereunder.

 

(b)          No amendment of this Agreement shall be effective unless in writing signed by the Agent and the Pledgors. All of the rights, privileges, remedies and options given to the Agent hereunder shall inure to the benefit of its successors and assigns, and all the terms, conditions, covenants, agreements, representations and warranties of and in this Agreement shall bind each Pledgor and its legal representatives, successors and assigns, provided that no Pledgor may assign its rights or delegate its duties hereunder without the Agent’s prior written consent.

 

(c)         Except as otherwise specified herein, all notices hereunder shall be in writing (including, without limitation, notice by facsimile) and shall be given to the relevant party at its address or facsimile number set forth below, or such other address or facsimile number as such party may hereafter specify by notice to the other given by courier, by United States certified or registered mail, by facsimile or by other telecommunication device capable of creating a written record of such notice and its receipt.

 

(i)         If to the Agent:	Bank of Montreal 111 West Monroe Chicago, IL 60603 Attention: Asset Based Lending Facsimile No.: (312) 765-1641
with a copy to:	Michael Best & Friedrich LLP 100 East Wisconsin Avenue, Suite 3300          Milwaukee, Wisconsin 53202 Attention: Alexander P. Fraser, Esq. Facsimile No.: (414) 271-0656 apfraser@michaelbest.com
(ii)         If to a Pledgor:	Twin Disc, Incorporated 1328 Racine Street Racine, Wisconsin 53403 Attention: Chief Financial Officer Facsimile No.: (262) 638-4481

                 

 

 

with a copy to:

von Briesen & Roper, s.c. 411 East Wisconsin Avenue, Suite 1000          Milwaukee, Wisconsin 53202 Attention: Brion Winters, Esq. Facsimile No.: (414) 238-6445 bwinters@vonbriesen.com

                 

(d)         In the event and to the extent that any provision hereof shall be deemed to be invalid or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court, this Agreement shall to such extent be construed as not containing such provision, but only as to such locations where such law or interpretation is operative, and the invalidity or unenforceability of such provision shall not affect the validity of any remaining provisions hereof, and any and all other provisions hereof which are otherwise lawful and valid shall remain in full force and effect.

 

(e)         This Agreement shall be deemed to have been made in the State of Wisconsin and shall be governed by, and construed in accordance with, the laws of the State of Wisconsin. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of any provision hereof.

 

(f)         This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterpart signature pages, each constituting an original, but all together one and the same instrument. Each Pledgor acknowledges that this Agreement is and shall be effective upon its execution and delivery to the Agent, and it shall not be necessary for the Agent to execute this Agreement or any other acceptance hereof or otherwise to signify or express its acceptance hereof. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic (e.g., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement.

 

(g)         Each Pledgor hereby submits to the non‑exclusive jurisdiction of the United States District Court for the Eastern District of Wisconsin and of any Wisconsin state court sitting in the City of Milwaukee for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each Pledgor irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient form. Each Pledgor and the Agent each hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

[Signature Page Follows]

 

  

In Witness Whereof, each Pledgor has caused this Pledge Agreement to be duly executed and delivered as of the day and year first above written.

 

TWIN DISC, INCORPORATED     By:                                                                        Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer   MILL-LOG EQUIPMENT CO., INC.     By:                                                                        Name: Dennis Hoff Title: President

 

 

Accepted and agreed to as of the day and year first above written.

 

BANK OF MONTREAL, as Administrative Agent     By:                                                                        Name: Jason Hoefler Title: Director

 

 

SCHEDULE I

 

 

Pledgor	Entity Owned by Grantor	Percentage Interest/Number of Shares/Interests Owned by Grantor
Twin Disc, Incorporated	Mill-Log Equipment Co., Inc. (an Oregon corporation)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc International, S.P.R.L. (a Belgian corporation)	157,573 Ordinary Shares owned by Twin Disc, Incorporated; 1 Ordinary Share owned by John Batten; and 10,835 Preferred Shares owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc (Pacific) Pty. Ltd. (an Australian corporation)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc (Far East) Ltd. (a Delaware corporation operating in Singapore)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc (Far East) Pte. Ltd. (a Singapore corporation)	1 Share owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc Nico Co., Ltd (a Japanese corporation)	66% owned by Twin Disc, Inc.; and 34% owned by Hitachi
Twin Disc, Incorporated	Twin Disc Japan (a Japanese corporation)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc Netherlands Holdings B.V. (a Netherlands corporation)	100% owned by Twin Disc, Incorporated
Mill-Log Equipment Co., Inc.	Mill Log Wilson Equipment (a Canadian corporation)	100% owned by Mill-Log Equipment Co., Inc.

 

 

Exhibit B

Assignment of and Amendment

to Pledge Agreement

 

 

See attached.

 

 

ASSIGNMENT OF AND AMENDMENT TO

PLEDGE AGREEMENT

 

THIS ASSIGNMENT OF AND AMENDMENT TO PLEDGE AGREEMENT (the “Assignment”), is made on June 29, 2018, by and among BANK OF MONTREAL (“Assignor”), BMO HARRIS BANK N.A. (“Assignee”), TWIN DISC, INCORPORATED, a Wisconsin corporation (“Borrower”), and MILL-LOG EQUIPMENT CO., INC., an Oregon corporation (“Guarantor” and together with Borrower, each, a “Pledgor”, and collectively, the “Pledgors”).

 

RECITALS:

 

A.         Pursuant to the Credit Agreement, dated April 22, 2016, by and among Borrower, Assignor and the lenders party thereto (the “2016 Credit Agreement”), Pledgors and Assignor entered into that certain Pledge Agreement, dated as of April 22, 2016 (the “Pledge Agreement”), a copy of which is attached hereto as Exhibit A;

 

B.          Contemporaneously herewith, Assignee will refinance the credit facilities extended by Assignor to Borrower under the 2016 Credit Agreement, and finance additional credit facilities, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee and Borrower (the “2018 Credit Agreement”), and such credit and other financial accommodations to Borrower will benefit Guarantor;

 

C.         Assignor now desires to assign its rights and obligations as Bank (as defined herein) under the Pledge Agreement to Assignee, and Assignee desires to accept such assignment; and

 

D.         The parties hereto also desire to amend the Pledge Agreement on the terms and conditions provided herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT:

 

1.         Assignment and Assumption.

 

(a)         Assignor hereby assigns to Assignee, and Assignee hereby assumes from Assignor, all of Assignor’s rights and obligations as Bank (as defined herein) under the Pledge Agreement. The assignment set forth in this Section 1(a) shall be without recourse to or representation or warranty (except as expressly provided in this Assignment, in the other documents executed in connection with this Assignment, or in the Pledge Agreement, as assigned and amended) by Assignor.

 

(b)         Assignee shall become and be a party to the Pledge Agreement and succeed to all of the rights and be obligated to perform all of the obligations of Bank under the Pledge Agreement.

 

 

(c)         In conjunction with the assignment hereunder, Assignor shall transfer and deliver to Assignee any and all Collateral, and/or evidence thereof, in Assignor’s possession. Until such time as the Collateral in Assignor’s possession is transferred to Assignee, Assignor shall hold such Collateral for the benefit of the Assignee.

 

2.         Amendments. The Pledge Agreement is hereby amended as follows:

 

(a)         Agent and Secured Parties. The defined terms “Agent” and “Secured Parties” in the Pledge Agreement are each hereby deleted in their entirety and replaced with the defined term “Bank”. The definition of “Bank” shall mean “BMO Harris Bank N.A., a national banking association.” It is the intention of the parties hereto that, from and after the date hereof, all references in the Pledge Agreement to the Agent and/or the Secured Parties shall mean and be a reference to Bank.

 

(b)        Credit Agreement. The definition of “Credit Agreement” in the Pledge Agreement is hereby amended and restated to mean “the Credit Agreement, dated as of June 29, 2018, by and between Bank and Borrower, as the same may hereafter be amended, restated, supplemented or otherwise modified.”

 

(c)         Notice Address. The notice address for Bank contained in Section 10(c)(i) of the Pledge Agreement is hereby amended and restated as follows:

 

“If to the Bank at:

 

BMO Harris Bank N.A.

777 North Water Street

Milwaukee, Wisconsin 53202

Attention: Mark Czarnecki, SVP

Telephone: 414-765-7920

Email: mar. czarnecki@bmo.com”

 

(d)         Schedule 1. Schedule 1 of the Pledge Agreement is hereby deleted in its entirety and replaced with Schedule 1 attached hereto.

 

3.         No Termination. The parties hereto acknowledge and agree that notwithstanding any terms or conditions contained in the Pledge Agreement to the contrary, neither this Assignment, nor any other assignment, amendment or restatement of any other Loan Document (as defined in the 2016 Credit Agreement), shall trigger a termination of the Pledge Agreement.

 

4.         No Novation. It is the intention of the parties hereto that this Assignment not constitute a novation of the obligations under the Pledge Agreement and that, from and after the date hereof, the Pledge Agreement shall be amended hereby and all references herein to “hereunder,” “hereof,” or words of like import and all references in any Loan Documents or any documents entered into in connection therewith to the “Pledge Agreement” or words of like import shall mean and be a reference to the Pledge Agreement as assigned and amended hereby as and as hereafter amended, supplemented, restated or renewed.

 

 

5.         Ratification. As hereby assigned and amended, the Pledge Agreement and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.         Conflict. In the event of a conflict between the terms and conditions of this Assignment and the terms and conditions of the Pledge Agreement, the terms and conditions of this Assignment shall control.

 

7.          Counterparts. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the definitions given said terms in the Pledge Agreement.

 

[Signatures on following page]

 

  

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the date first above written.

 

	ASSIGNOR:   BANK OF MONTREAL     By:__________________________________ Name: Title:
	ASSIGNEE:   BMO HARRIS BANK N.A.     By:__________________________________       Mark Czarnecki, Senior Vice President
	PLEDGORS:   TWIN DISC, INCORPORATED     By: ________________________________        Jeffrey S. Knutson, Vice President –      Finance and Chief Financial Officer     MILL-LOG EQUIPMENT CO., INC.     By: ________________________________        Dennis D. Hoff, President

 

 

Schedule 1

Pledged Collateral

 

Pledgor	Entity Owned by Grantor	Percentage Interest/Number of Shares/Interests Owned by Grantor
Twin Disc, Incorporated	Mill-Log Equipment Co., Inc. (an Oregon corporation)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc International, S.P.R.L. (a Belgian corporation)	157,573 Ordinary Shares owned by Twin Disc, Incorporated; 1 Ordinary Share owned by John Batten; and 10,835 Preferred Shares owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc (Pacific) Pty. Ltd. (an Australian corporation)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc (Far East) Ltd. (a Delaware corporation operating in Singapore)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc (Far East) Pte. Ltd. (a Singapore corporation)	1 Share owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc Nico Co., Ltd (a Japanese corporation)	66% owned by Twin Disc, Inc.; and 34% owned by Hitachi
Twin Disc, Incorporated	Twin Disc Japan (a Japanese corporation)	100% owned by Twin Disc, Incorporated
Twin Disc, Incorporated	Twin Disc NL Holdings B.V. (a Netherlands corporation)	100% owned by Twin Disc, Incorporated
Mill-Log Equipment Co., Inc.	Mill Log Wilson Equipment (a Canadian corporation)	100% owned by Mill-Log Equipment Co., Inc.

 

Exhibit 1.9

 

ASSIGNMENT OF AND AMENDMENT TO

PERFECTION CERTIFICATE

 

THIS ASSIGNMENT OF AND AMENDMENT TO PERFECTION CERTIFICATE (this “Assignment”), is entered into as of February 14, 2025, by BMO Bank N.A. (f/k/a BMO Harris Bank N.A.) (“Assignor”), in favor of Bank of Montreal (“Assignee”), and is consented to by Twin Disc, Incorporated, a Wisconsin corporation (“TDI”) and immediately after giving effect to the Kobelt Acquisition and the Kobelt Amalgamation Kobelt Manufacturing Co., Ltd., a company amalgamated under the laws of British Columbia as a result of the Kobelt Amalgamation, jointly and severally (“Canadian Borrower”, together with TDI, each individually and collectively, “Borrower”).

 

RECITALS

 

A.         Pursuant to the Credit Agreement, dated April 22, 2016, by and among TDI, Assignee and the lenders party thereto (the “2016 Credit Agreement”), Grantors delivered that certain Perfection Certificate, dated as of April 22, 2016 (the “Perfection Certificate”), in favor of Assignee, a copy of which is attached hereto as Exhibit A;

 

B.          Contemporaneously with a refinancing of the credit facilities extended by Assignor to TDI, dated as of July 29, 2018 (the “2018 Credit Agreement”), Assignee assigned the Perfection Certificate to Assignor under an Assignment and Amendment to Perfection Certificate (the “2018 Assignment”), a copy of which is attached hereto as Exhibit B;

 

C.          Contemporaneously herewith, Assignee will refinance the credit facilities extended by Assignor to TDI under the 2018 Credit Agreement, and finance additional credit facilities, including to Canadian Borrower as an additional Borrower thereunder, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee and Borrower (the “2025 Credit Agreement”);

 

D.         Assignor now desires to assign its rights and obligations as Bank (as defined herein) under the Perfection Certificate to Assignee, and Assignee desires to accept such assignment; and

 

E.         The parties hereto also desire to amend the Perfection Certificate on the terms and conditions provided herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

 

AGREEMENT

 

1.         Assignment and Assumption.

 

(a)         Assignor hereby assigns to Assignee, and Assignee hereby assumes from Assignor, all of Assignor’s rights and obligations as Bank (as defined herein) under the Perfection Certificate. The assignment set forth in this Section 1(a) shall be without recourse to or representation or warranty (except as expressly provided in this Assignment, in the other documents executed in connection with this Assignment, or in the Perfection Certificate, as assigned and amended) by Assignor.

 

 

(b)         Assignee shall become and be a party to the Perfection Certificate and succeed to all of the rights and be obligated to perform all of the obligations of Bank under the Perfection Certificate.

 

(c)         In conjunction with the assignment hereunder, Assignor shall transfer and deliver to Assignee any and all Collateral, and/or evidence thereof, in Assignor’s possession. Until such time as the Collateral in Assignor’s possession is transferred to Assignee, Assignor shall hold such Collateral for the benefit of the Assignee.

 

2.         Amendments. The Perfection Certificate is hereby amended as follows:

 

(a)          Bank. The definition of “Bank” shall be restated in its entirety to mean “Bank of Montreal.”

 

(b)       Company. The defined term “Company” in the Perfection Certificate is hereby amended and restated to mean, collectively, “Twin Disc, Incorporated, a Wisconsin corporation,” and “Kobelt Manufacturing Co., Ltd., a company amalgamated under the laws of British Columbia as a result of the Kobelt Amalgamation”.

 

(c)         Credit Agreement. The definition of “Credit Agreement” in the Perfection Certificate is hereby amended and restated to mean “the Credit Agreement, dated as of February 14, 2025, by and between Bank and Company, as the same may hereafter be amended, restated, supplemented or otherwise modified.”

 

(d)         Ordinary Course of Business. The definition of “Ordinary Course of Business” in the Perfection Certificate shall mean “the ordinary course of business of the Company and its Subsidiaries, consistent with past practices and undertaken in good faith.”

 

(e)         Equity Interests. The definition of “Equity Interests” in the Perfection Certificate shall mean “with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profits interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trusts interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

 

(f)       Indebtedness. The defined term “Indebtedness” in the Perfection Certificate is hereby deleted in its entirety and replaced with the term “Indebtedness for Borrowed Money”. The definition of “Indebtedness for Borrower Money” shall refer to the definition in the Credit Agreement. It is the intention of the parties hereto that, from and after the date hereof, all references in the Perfection Certificate to Indebtedness shall mean and be a reference to Indebtedness for Borrowed Money.

 

(g)         Excluded Deposit Accounts. The defined term “Excluded Deposit Accounts” in the Perfection Certificate shall mean “(a) deposit accounts the balance of which consists exclusively of (i) withheld income taxes and federal, state or local employment taxes required to be paid to the Internal Revenue Service or state or local government agencies with respect to employees of any Loan Party or (ii) amounts required to be paid over to an employee benefit plan pursuant to DOL Reg. Sec. 2510.3 102 on behalf of or for the benefit of employees of any Loan Party, (b) all segregated deposit accounts constituting (and the balance of which consists solely of funds set aside in connection with) payroll accounts, trust accounts, and accounts dedicated to the payment of accrued employee benefits, medical, dental and employee benefits claims to employees of any Loan Party, (c) zero balance disbursement accounts and (d) other deposit accounts maintained in the Ordinary Course of Business containing cash amounts that do not exceed at any time $25,000 for any such account and $50,000 in the aggregate for all such accounts under this clause (d).”

 

(h)         Guarantor. The Perfection Certificate is hereby amended to remove any and all references to “Guarantor”.

 

(i)       Intellectual Property. The defined term “Intellectual Property” in the Perfection Certificate shall mean “all past, present and future: trade secrets, know-how and other proprietary information; trademarks, uniform resource locations (URLs), internet domain names, service marks, sound marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and the goodwill of the business relating thereto and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights (including copyrights for computer programs) and copyright registrations or applications for registrations which have heretofore been or may hereafter be issued throughout the world and all tangible property embodying the copyrights, unpatented inventions (whether or not patentable); patent applications and patents; industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, records, writings, computer rapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; the right to sue for all past, present and future infringements of any of the foregoing; all other intellectual property; and all common law and other rights through the world in and to all of the foregoing.”

 

(j)         Material Contracts. The defined term “Material Contracts” in the Perfection Certificate shall mean “any agreement or arrangements to which a Loan Party or Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a material contract under any securities laws applicable to such Loan Party, including the Securities Act of 1933; (b) for which breach, termination, nonperformance or failure to renew could reasonable be expected to have a Material Adverse Effect; or (c) that relates to subordinated indebtedness, or to Indebtedness for Borrowed Money, in an aggregate amount of $500,000 or more.”

 

 

(k)       Commercial Tort Claims. The defined term “Commercial Tort Claims” in the Perfection Certificate shall have the same meanings as the definition of the Uniform Commercial Code of the State of Wisconsin as in effect from time to time.

 

(l)       Schedules. The Schedules to the Perfection Certificate are hereby amended and restated in their entirety and replaced with the Schedules attached hereto as Exhibit C.

 

3.         No Termination. The parties hereto acknowledge and agree that notwithstanding any terms or conditions contained in the Perfection Certificate to the contrary, neither this Assignment, nor any other assignment, amendment or restatement of any other Loan Document (as defined in the 2025 Credit Agreement), shall trigger a termination of the Perfection Certificate.

 

4.         No Novation. It is the intention of the parties hereto that this Assignment not constitute a novation of the obligations under the Perfection Certificate and that, from and after the date hereof, the Perfection Certificate shall be amended hereby and all references herein to “hereunder,” “hereof,” or words of like import and all references in any Loan Documents or any documents entered into in connection therewith to the “Perfection Certificate” or words of like import shall mean and be a reference to the Perfection Certificate as assigned and amended hereby as and as hereafter amended, supplemented, restated or renewed.

 

5.         Ratification. As hereby assigned and amended, the Perfection Certificate and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.         Conflict. In the event of a conflict between the terms and conditions of this Assignment and the terms and conditions of the Perfection Certificate, the terms and conditions of this Assignment shall control.

 

7.         Counterparts. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the definitions given said terms in the Perfection Certificate.

 

[Signature Page Follows]

 

  

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the date first above written.

 

	ASSIGNOR:   BMO BANK N.A.     By: ________________________________ Name: Mark Czarnecki Title: Senior Vice President
	ASSIGNEE:   BANK OF MONTREAL     By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President     By:__________________________________ Name: Helen Alvarez-Hernandez Title: Managing Director
	Consented to by BORROWER:   TWIN DISC, INCORPORATED     By: ________________________________ Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer   (following the consummation of the Kobelt Acquisition and the Kobelt Amalgamation) KOBELT MANUFACTURING CO. LTD.       By: ______________________________ Name: Title:

 

[Signature Page to Assignment of and Amendment to Perfection Certificate]

 

Exhibit A

Copy of Perfection Certificate

 

See attached.

 

[Exhibit A to Assignment of and Amendment to Perfection Certificate]

 

---

 

PERFECTION CERTIFICATE

 

Dated as of April 22, 2016,

 

from

 

TWIN DISC, INCORPORATED,

(the “Company”)

 

and

 

MILL-LOG EQUIPMENT CO., INC.,

as Grantor,

 

to and in favor of

 

BANK OF MONTREAL,

as Administrative Agent

 

 

---

 

 

 

 

Schedules

 

1.01         Identifying Information

1.02         Prior Names

1.03         Equity Ownership

 

2.01         Collateral Record Locations

2.02         Owned Real Property

2.03         Leased Real Property

2.04         Bailee Locations

 

3.01         Pledged Equity

3.02         Pledged Indebtedness

3.03         Deposit Accounts; Securities Accounts

 

4.01         Patents

4.02         Trademarks

4.03         Copyrights

 

5.01         Indebtedness Agreements

5.02         Material Contracts

5.03         Acknowledgment and Agreements

 

6.01         Commercial Tort Claims

6.02         Titled Vehicles

6.03         Governmental Licenses

6.04         Taxes

6.06         Letters of Credit

 

 

PERFECTION CERTIFICATE

 

This PERFECTION CERTIFICATE dated as of April 22, 2016 (this “Certificate”), is delivered pursuant to the Credit Agreement dated as of even date herewith (the “Credit Agreement”), by and between BANK OF MONTREAL, as administrative agent (in such capacity, “Administrative Agent”) for the Lenders, TWIN DISC, INCORPORATED, a Wisconsin corporation (the “Company) and MILL-LOG EQUIPMENT CO., INC., an Oregon corporation (“Guarantor”, and together with the Company, collectively, the “Grantors” and each a “Grantor”).

 

Reference is made to that certain Credit Agreement, dated as of the date hereof (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Credit Agreement), among the Company and the other Loan Parties party thereto, BANK OF MONTREAL and the other financial institutions from time to time party thereto, as lenders (the “Lenders”), and the Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement.

 

Each Grantor hereby certifies to Administrative Agent and each other Lender as follows, as of the date hereof, after giving effect to the consummation of the transactions contemplated by the Loan Documents to be consummated on the Closing Date:

 

ARTICLE I
GRANTOR INFORMATION; LIEN SEARCH;
FINANCING STATEMENTS

 

1.01    Identifying Information. Schedule 1.01 hereto sets forth the following information for each Grantor:

 

(a)    its exact legal name, as such name appears in its certificate or articles of incorporation;

 

(b)    its type of organization (i.e. corporation, limited liability company, limited partnership, etc.);

 

(c)    its jurisdiction of organization or formation;

 

(d)    its organizational identification number, if any, issued by the jurisdiction of organization or formation; and

 

(e)    its Federal Taxpayer Identification Number.

 

1.02    Prior Names. Except as set forth in Schedule 1.02 hereto, during the five-year period ending on the date of this Certificate, each Grantor:

 

(a)    has not changed its legal name, identity or organizational structure (including by merger or consolidation with any other Person) or conducted business under any other name (including tradename or similar appellations);

 

(b)    has not acquired any assets from any other Person other than Inventory and Equipment in the Ordinary Course of Business from persons in the business of selling such goods.

 

1.03    Equity Ownership. Schedule 1.03 sets forth the owner of outstanding Equity Interests of the Loan Parties and the percentage of the outstanding Equity Interests owned of each such Loan Party.

 

 

ARTICLE II
COLLATERAL LOCATIONS

 

2.01    Collateral Records. Schedule 2.01 sets forth the chief executive office of each Grantor and each other location where each Grantor maintains its books or records relating to any material portion of the Collateral, including Accounts and General Intangibles.

 

2.02    Owned Real Property. Schedule 2.02 hereto sets forth the following information for each parcel of real property owned by each Grantor: (a) its street address, (b) the county in which the real estate records for such property are located, (c) a brief description of its current use, (d) a good faith estimate of its current fair market value, and (e) whether all or a portion of such property has been leased to any other Person.

 

2.03    Leased Real Property. Schedule 2.03 hereto sets forth the following information for each parcel of real property leased to or by each Grantor: (a) its street address, (b) the county in which the real estate records for such property are located, (c) a brief description of its current use, (d) the name of the lessor, and (e) whether all or a portion of such property has been subleased to any other Person.

 

2.04    Bailee Locations. Schedule 2.04 sets forth any locations, other than any owned or leased real property locations identified on Schedules 2.02 and 2.03, where each Grantor maintains any Inventory or Equipment including, for each location: (a) the name of the Person in business at such location, (b) its street address, (c) a brief description of the type of location (i.e. warehouse, bailee, processor, etc.), and (d) a good faith estimate of the current fair market value of the Inventory and Equipment at such location.

 

2.05    Landlord Agreements. Landlord waivers have been delivered to Administrative Agent in respect of each location identified on Schedule 2.03 to the extent required by the Credit Agreement, in each case each duly executed by the landlord for such location and each Grantor.

 

ARTICLE III
INVESTMENTS

 

3.01    Pledged Equity.

 

(a)          Schedule 3.01 hereto sets forth a list of all the issued and outstanding capital stock, partnership interests, limited liability company membership interests or other Equity Interests in (1) Guarantor; and (2) any first-tier non-U.S. subsidiary with a majority of the Equity Interests therein owned by the Company or the Guarantor.

 

(b)    To the extent required by the Credit Agreement, the certificated securities evidencing such Equity Interests owned by each Grantor, together with a stock power duly executed in blank by each Grantor, have been delivered to Administrative Agent.

 

3.02    Pledged Indebtedness.

 

(a)          Schedule 3.02 hereto sets forth a list of all Indebtedness for borrowed money and all promissory notes and debt securities payable or due to each Grantor by or from any other Person.

 

(b)    The Instruments and other Documents evidencing such Indebtedness of each Grantor, have been delivered to Administrative Agent.

 

3.03    Deposit Accounts. Schedule 3.03 hereto sets forth a true and correct list of deposit accounts (except Excluded Deposit Accounts) maintained by each Grantor, including (a) the name and address of the depositary institution or securities intermediary, as the case may be, (b) the type of account, and (c) the account number.

 

 

3.04    Account Control Agreements. Control agreements have been delivered to Administrative Agent in respect of each deposit account identified on Schedule 3.03 to the extent required pursuant to the Credit Agreement, in each case duly executed by each Grantor and the depositary institution at which such accounts are maintained.

 

ARTICLE IV
INTELLECTUAL PROPERTY

 

4.01    Patents. Schedule 4.01 hereto sets forth all of Twin Disc, Incorporated’s patents (and all applications therefor) and patent licenses, including the registration number of each patent owned by Twin Disc, Incorporated and each patent owned by any other Person for which Grantor has a patent license from such other Person. Guarantor has no patents or patent licenses.

 

4.02    Trademarks. Schedule 4.02 hereto sets forth all of Twin Disc, Incorporated’s registered trademarks (and all applications therefore) and trademark licenses (other than non-exclusive software licenses granted by or to Grantors in the ordinary course of business), including the registration number of each trademark owned by Twin Disc, Incorporated and each trademark owned by any other Person for which Twin Disc, Incorporated has a trademark license from such other Person, and whether such trademarks have been licensed or sublicensed to any other Person. Guarantor has no registered trademarks or trademark licenses.

 

4.03    Copyrights. Schedule 4.03 hereto sets forth all of each Grantor’s registered copyrights (and applications therefore) and copyright licenses, including the name of the registered owner and the registration number of each copyright or copyright license owned by each Grantor and each copyright owned by any other Person for which each Grantor has a copyright license from such other Person, and whether such copyrights have been licensed or sublicensed to any other Person.

 

4.04    Intellectual Property Security Agreement. An IP Security Agreement has been delivered to Administrative Agent for the Intellectual Property described on Schedule 4.01 and 4.02, to the extent required by the Credit Agreement, in each case each duly executed by each Grantor.

 

ARTICLE V
MATERIAL AGREEMENTS

 

5.01    Indebtedness. Schedule 5.01 hereto sets forth a list of all of the agreements in respect of any outstanding Indebtedness of each Grantor as of the Closing Date required to be disclosed on Schedule 8.01 of the Credit Agreement.

 

5.02    Material Contracts. Schedule 5.02 hereto sets forth a list of all of the Material Contracts to which each Grantor is a party (other than any agreements relating to Indebtedness described on Schedule 5.01, real property leases identified on Schedule 2.03 or any Intellectual Property licenses identified on Schedule 4.01, 4.02 or 4.03).

 

5.03    Acknowledgement and Agreements. Acknowledgement and agreements have been delivered to Administrative Agent in respect of each Material Contract to which each Grantor is a party requiring an acknowledgement, agreement or consent with respect to the transactions contemplated by the Credit Agreement, each of which is listed on Schedule 5.03 hereto, duly executed by each Grantor party thereto and each other party to such agreement.

 

 

ARTICLE VI
MISCELLANEOUS

 

6.01    Commercial Tort Claims. Schedule 6.01 hereto sets forth a description of each Commercial Tort Claim held by each Grantor asserting a material claim for monetary damages.

 

6.02    Motor Vehicles. Schedule 6.02 hereto sets forth a list of all titled vehicles (including any trailers and aircraft) owned by each Grantor, including: (a) the type and model of the vehicle, (b) the vehicle identification number and (c) the street address where such vehicle is customarily stored when not in use.

 

6.03    Governmental Licenses. Schedule 6.03 hereto sets forth a description of each license from a Governmental Authority which is material to the conduct of the business of each Grantor as conducted on the date hereof or as proposed to be conducted.

 

6.04    Taxes. Schedule 6.04 sets forth a description of any pending issues and audits of any of each Grantor with any federal, state, local or foreign tax authorities.

 

6.05    Compliance Matters. Each Grantor has delivered to Administrative Agent (a) a copy of all material compliance reports filed and correspondence regarding any active or pending investigation or enforcement action with any state, federal, local or foreign regulatory agencies and (b) all material correspondence, if any, alleging violation of or requesting compliance by each Grantor with laws, regulations, etc. or requests for information pursuant to interstate commerce laws, antitrust laws, securities laws, worker safety laws (OSHA), etc.

 

6.06    Letters of Credit. Schedule 6.06 lists all letters of credit in favor of each Grantor supporting or otherwise issued with respect to any of the Collateral, including the maximum face amount thereof, any amounts drawn thereunder, the issuing bank thereof and a brief description of the purpose thereof.

 

 

[Remainder of page intentionally left blank.]

 

 

IN WITNESS WHEREOF, the undersigned have duly executed this Certificate on and as of the date first above written.

 

	TWIN DISC, INCORPORATED
	By:
		Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer
	MILL-LOG EQUIPMENT CO., INC.
	By:
		Name: Dennis Hoff Title: President

 

 

Exhibit B

Copy of Assignment and Amendment

to Perfection Certificate (2018)

 

See attached.

 

 

ASSIGNMENT OF AND AMENDMENT TO

PERFECTION CERTIFICATE

 

THIS ASSIGNMENT OF AND AMENDMENT TO PERFECTION CERTIFICATE (the “Assignment”), is made on June 29, 2018, by and among BANK OF MONTREAL (“Assignor”), BMO HARRIS BANK N.A. (“Assignee”), TWIN DISC, INCORPORATED, a Wisconsin corporation (“Borrower”), and MILL-LOG EQUIPMENT CO., INC., an Oregon corporation (“Guarantor” and together with Borrower, each, a “Grantor”, and collectively, the “Grantors”).

 

RECITALS:

 

A.         Pursuant to the Credit Agreement, dated April 22, 2016, by and among Borrower, Assignor and the lenders party thereto (the “2016 Credit Agreement”), Grantors delivered that certain Perfection Certificate, dated as of April 22, 2016 (the “Perfection Certificate”), in favor of Assignor, a copy of which is attached hereto as Exhibit A;

 

B.          Contemporaneously herewith, Assignee will refinance the credit facilities extended by Assignor to Borrower under the 2016 Credit Agreement, and finance additional credit facilities, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee and Borrower (the “2018 Credit Agreement”), and such credit and other financial accommodations to Borrower will benefit Guarantor;

 

C.         Assignor now desires to assign its rights and obligations as Bank (as defined herein) under the Perfection Certificate to Assignee, and Assignee desires to accept such assignment; and

 

D.         The parties hereto also desire to amend the Perfection Certificate on the terms and conditions provided herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT:

 

1.         Assignment and Assumption.

 

(a)         Assignor hereby assigns to Assignee, and Assignee hereby assumes from Assignor, all of Assignor’s rights and obligations as Bank (as defined herein) under the Perfection Certificate. The assignment set forth in this Section 1(a) shall be without recourse to or representation or warranty (except as expressly provided in this Assignment, in the other documents executed in connection with this Assignment, or in the Perfection Certificate, as assigned and amended) by Assignor.

 

(b)         Assignee shall become and be a party to the Perfection Certificate and succeed to all of the rights and be obligated to perform all of the obligations of Bank under the Perfection Certificate.

 

 

(c)         In conjunction with the assignment hereunder, Assignor shall transfer and deliver to Assignee any and all Collateral, and/or evidence thereof, in Assignor’s possession. Until such time as the Collateral in Assignor’s possession is transferred to Assignee, Assignor shall hold such Collateral for the benefit of the Assignee.

 

2.         Amendments. The Perfection Certificate is hereby amended as follows:

 

(a)         Administrative Agent. The defined term “Administrative Agent” in the Perfection Certificate is hereby deleted in its entirety and replaced with the defined term “Bank”. The definition of “Bank” shall mean “BMO Harris Bank N.A., a national banking association.” It is the intention of the parties hereto that, from and after the date hereof, all references in the Perfection Certificate to the Administrative Agent shall mean and be a reference to Bank.

 

(b)         Credit Agreement. The definition of “Credit Agreement” in the Perfection Certificate is hereby amended and restated to mean “the Credit Agreement, dated as of June 29, 2018, by and between Bank and Borrower, as the same may hereafter be amended, restated, supplemented or otherwise modified.”

 

3.         No Termination. The parties hereto acknowledge and agree that notwithstanding any terms or conditions contained in the Perfection Certificate to the contrary, neither this Assignment, nor any other assignment, amendment or restatement of any other Loan Document (as defined in the 2016 Credit Agreement), shall trigger a termination of the Perfection Certificate.

 

4.         No Novation. It is the intention of the parties hereto that this Assignment not constitute a novation of the obligations under the Perfection Certificate and that, from and after the date hereof, the Perfection Certificate shall be amended hereby and all references herein to “hereunder,” “hereof,” or words of like import and all references in any Loan Documents or any documents entered into in connection therewith to the “Perfection Certificate” or words of like import shall mean and be a reference to the Perfection Certificate as assigned and amended hereby as and as hereafter amended, supplemented, restated or renewed.

 

5.         Ratification. As hereby assigned and amended, the Perfection Certificate and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.         Conflict. In the event of a conflict between the terms and conditions of this Assignment and the terms and conditions of the Perfection Certificate, the terms and conditions of this Assignment shall control.

 

7.         Counterparts. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the definitions given said terms in the Perfection Certificate.

 

[Signatures on following page]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the date first above written.

 

	ASSIGNOR:   BANK OF MONTREAL     By:__________________________________ Name: Title:
	ASSIGNEE:   BMO HARRIS BANK N.A.     By:__________________________________       Mark Czarnecki, Senior Vice President
	GRANTORS:   TWIN DISC, INCORPORATED     By: ________________________________        Jeffrey S. Knutson, Vice President –      Finance and Chief Financial Officer     MILL-LOG EQUIPMENT CO., INC.     By: ________________________________        Dennis D. Hoff, President

 

 

Exhibit C

Schedules

to Perfection Certificate

 

See attached.

 

Exhibit 1.10

 

ASSIGNMENT OF AND AMENDMENT TO

AGREEMENT AS TO LIENS AND ENCUMBRANCES

 

THIS ASSIGNMENT OF AND AMENDMENT TO AGREEMENT AS TO LIENS AND ENCUMBRANCES (the “Assignment”), is entered into as of February 14, 2025, by BMO Bank N.A. (f/k/a BMO Harris Bank N.A.) (“Assignor”), in favor of Bank of Montreal (“Assignee”), and is consented to by Twin Disc, Incorporated, a Wisconsin corporation (“Borrower”).

 

RECITALS

 

A.         Pursuant to the Credit Agreement, dated April 22, 2016, by and among Borrower, Assignee and the lenders party thereto (the “2016 Credit Agreement”), Borrower and Assignee entered into that certain Agreement as to Liens and Encumbrances, dated as of April 22, 2016 (the “Agreement”), a copy of which is attached hereto as Exhibit A;

 

B.          Contemporaneously with a refinancing of the credit facilities extended by Assignor to Borrower, dated as of July 29, 2018 (the “2018 Credit Agreement”), Assignee assigned the Agreement as to Liens and Encumbrances to Assignor under an Assignment of and Amendment to Agreement as to Liens and Encumbrances (the “2018 Assignment”), a copy of which is attached hereto as Exhibit B;

 

C.          Contemporaneously herewith, Assignee will refinance the credit facilities extended by Assignor to Borrower under the 2018 Credit Agreement, and finance additional credit facilities, including from the Closing Date until the consummation of the Kobelt Amalgamation, Twin Disc Canada Holdings Ltd., a company incorporated under the laws of British Columbia and immediately after giving effect to the Kobelt Acquisition Kobelt Manufacturing Co. Ltd., a company amalgamated under the laws of British Columbia as a result of the Kobelt Amalgamation (“Canadian Borrower”), as an additional Borrower thereunder, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee, Borrower, and Canadian Borrower (the “2025 Credit Agreement”);

 

D.         Assignor now desires to assign its rights and obligations as Bank (as defined herein) under the Agreement to Assignee, and Assignee desires to accept such assignment; and

 

E.         The parties hereto also desire to amend the Agreement on the terms and conditions provided herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT

 

1.         Assignment and Assumption.

 

(a)         Assignor hereby assigns to Assignee, and Assignee hereby assumes from Assignor, all of Assignor’s rights and obligations as Bank (as defined herein) under the Agreement. The assignment set forth in this Section 1(a) shall be without recourse to or representation or warranty (except as expressly provided in this Assignment, in the other documents executed in connection with this Assignment, or in the Agreement, as assigned and amended) by Assignor.

 

 

(b)         Assignee shall become and be a party to the Agreement and succeed to all of the rights and be obligated to perform all of the obligations of Bank under the Agreement.

 

(c)         In conjunction with the assignment hereunder, Assignor shall transfer and deliver to Assignee any and all Collateral, and/or evidence thereof, in Assignor’s possession. Until such time as the Collateral in Assignor’s possession is transferred to Assignee, Assignor shall hold such Collateral for the benefit of the Assignee.

 

2.         Amendments. The Agreement is hereby amended as follows:

 

(a)         Bank. The definition of “Bank” shall be restated in its entirety to mean “Bank of Montreal.”

 

(b)         Credit Agreement. The definition of “Credit Agreement” in the Agreement is hereby amended and restated to mean “the Credit Agreement, dated as of February 14, 2025, by and between Bank, Borrower, and Kobelt Manufacturing Co. Ltd., a federal Canadian corporation (“Canadian Borrower”), as the same may hereafter be amended, restated, supplemented or otherwise modified.”

 

(c)         Negative Pledge. The definition of “Negative Pledge” in the Agreement is hereby amended and restated to mean “the Negative Pledge Agreement, dated as of April 22, 2016 and recorded as Document No. 2437708 in the Racine County Register of Deeds Office, by Borrower in favor of Bank of Montreal, as assigned to and amended by that certain Assignment of and Amendment to Negative Pledge Agreement, dated as of June 29, 2018 and recorded as Document No. 2502213 in the Racine County Register of Deeds Office, between Borrower, Bank of Montreal, as assignor, and BMO Bank N.A., as assignee, and as further amended by that certain Assignment of and Amendment to Negative Pledge Agreement, dated as of February 14, 2025, between Borrower, BMO Bank N.A., as assignor, and Bank of Montreal, as assignee.”

 

3.         No Termination. The parties hereto acknowledge and agree that notwithstanding any terms or conditions contained in the Agreement to the contrary, neither this Assignment, nor any other assignment, amendment or restatement of any other Loan Document (as defined in the 2016 Credit Agreement), shall trigger a termination of the Agreement.

 

4.         No Novation. It is the intention of the parties hereto that this Assignment not constitute a novation of the obligations under the Agreement and that, from and after the date hereof, the Agreement shall be amended hereby and all references herein to “hereunder,” “hereof,” or words of like import and all references in any Loan Documents or any documents entered into in connection therewith to the “Agreement” or words of like import shall mean and be a reference to the Agreement as assigned and amended hereby as and as hereafter amended, supplemented, restated or renewed.

 

 

5.         Ratification. As hereby assigned and amended, the Agreement and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.         Conflict. In the event of a conflict between the terms and conditions of this Assignment and the terms and conditions of the Agreement, the terms and conditions of this Assignment shall control.

 

7.         Counterparts. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the definitions given said terms in the Agreement.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the date first above written.

 

	ASSIGNOR:   BMO BANK N.A.     By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President
	ASSIGNEE:   BANK OF MONTREAL     By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President     By:__________________________________ Name: Helen Alvarez-Hernandez Title: Managing Director
	Consented to by BORROWER:   TWIN DISC, INCORPORATED     By: ________________________________ Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer

 

 

 

Exhibit A

Copy of Agreement as to Liens and Encumbrances

 

See attached.

 

 

AGREEMENT AS TO LIENS AND ENCUMBRANCES

 

THIS AGREEMENT AS TO LIENS AND ENCUMBRANCES (this “Agreement”) is made effective as of April 22, 2016, by and among TWIN DISC, INCORPORATED, a Wisconsin corporation (the “Company” or the “Borrower”), each lender from time to time party to the Credit Agreement hereinafter defined (collectively, the “Lenders” and individually, a “Lender”), and BANK OF MONTREAL, a Canadian chartered bank acting through its Chicago branch, as Administrative Agent for the Lenders from time to time parties to the Credit Agreement (hereinafter defined) (the “Administrative Agent”).

 

RECITALS

 

The Administrative Agent, the Lenders and the Company have entered into that certain Credit Agreement dated as of April 22, 2016 (the “Credit Agreement”), pursuant to which the Lenders have agreed to extend credit to the Company upon the terms set forth in the Credit Agreement. The Lenders would not have agreed to extend such credit but for the Company entering into a Negative Pledge Agreement dated as of April 22, 2016 (“Negative Pledge”).

 

NOW, THEREFORE, in consideration of the extension of credit to the Company, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company hereby agrees:

 

AGREEMENT

 

1.    Definitions. Capitalized terms used herein without definition shall have the meanings ascribed thereto in the Credit Agreement and Negative Pledge.

 

2.    Exhibit B to the Negative Pledge. Section 2 of the Negative Pledge requires, among other things, the Company to keep the Real Estate free and clear from any pledge, mortgage, security interest, hypothecation, lien, charge, encumbrance, conditional sale agreements, rights or claims of third parties, other burdens and any security interest therein, other than Permitted Liens and all liens and encumbrances currently existing on the Real Estate listed in the attached Exhibit B (the “Existing Liens and Encumbrances”). In order to avoid clouding title and reinstating easements, restrictions or other matters of record that may have expired by the statute of limitations, the parties have agreed to a separate agreement solely for the purpose of agreeing to the Existing Liens and Encumbrances on the Real Estate, as fully set forth on Exhibit B. Any reference in Exhibit B that refers to an encumbrance affecting a particular parcel shall be the parcels set forth on Exhibit A, which is attached to the Negative Pledge.

 

3.    Certain Representations and Warranties. The Company represents and warrants to the Administrative Agent that the Company is the legal and beneficial owner of the Real Estate, free and clear of all liens and encumbrances, except only for Existing Liens and Encumbrances.

 

4.    Recording of Agreement. The parties agree that this Agreement shall not be recorded.

 

5.    Term. When all of the Indebtedness is irrevocably and fully paid and fully discharged and the Lenders shall have no further obligation or commitment to advance or extend credit to the Company under the Credit Agreement, this Agreement shall terminate. Notwithstanding the foregoing, this Agreement shall apply to all extensions, renewals, refinancings or modifications, if any, of the Loans. The Administrative Agent agrees to record, no later than thirty (30) days after the termination of this Agreement, a satisfaction of this Agreement (in form and substance acceptable to Company) with the Racine County Register of Deeds. If Administrative Agent fails to satisfy the requirement in the immediately preceding sentence, Administrative Agent shall be liable to the Company for such amounts available to a landowner under Wisconsin Statutes §708.15(5)(b).

 

 

6.    Miscellaneous. This Agreement may only be amended by a writing executed by both the Company and the Administrative Agent. This Agreement shall inure to the benefit of the Administrative Agent and be binding upon the Company and its successors and assigns. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which when taken together shall be deemed to constitute one and the same agreement. The Recitals to this Agreement are true, correct and incorporated herein by reference.

 

(Signature page follows.)

 

 

Dated as of April 22, 2016.

 

	TWIN DISC, INCORPORATED
	By:
		Jeffrey S. Knutson Vice President – Finance and Chief Financial Officer

 

Accepted and Agreed to:

 

BANK OF MONTREAL, as Lender and L/C Issuer

 

 

By:                                                                         

Name:                                                                    

Title:                                                                      

 

 

BANK OF MONTREAL, as Administrative Agent

 

 

By:                                                                         

Name:                                                                    

Title:                                                                      

 

 

Exhibit B

Copy of Assignment of and Amendment

to Agreement as to Liens and Encumbrances (2018)

 

See attached.

 

 

 

ASSIGNMENT OF AND AMENDMENT TO

AGREEMENT AS TO LIENS AND ENCUMBRANCES

 

THIS ASSIGNMENT OF AND AMENDMENT TO AGREEMENT AS TO LIENS AND ENCUMBRANCES (the “Assignment”), is made on June 29, 2018, by and among BANK OF MONTREAL (“Assignor”), BMO HARRIS BANK N.A. (“Assignee”), and TWIN DISC, INCORPORATED, a Wisconsin corporation (“Borrower”).

 

RECITALS:

 

A.         Pursuant to the Credit Agreement, dated April 22, 2016, by and among Borrower, Assignor and the lenders party thereto (the “2016 Credit Agreement”), Borrower and Assignor entered into that certain Agreement as to Liens and Encumbrances, dated as of April 22, 2016 (the “Agreement”), a copy of which is attached hereto as Exhibit A;

 

B.          Contemporaneously herewith, Assignee will refinance the credit facilities extended by Assignor to Borrower under the 2016 Credit Agreement, and finance additional credit facilities, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee and Borrower (the “2018 Credit Agreement”);

 

C.         Assignor now desires to assign its rights and obligations as Bank (as defined herein) under the Agreement to Assignee, and Assignee desires to accept such assignment; and

 

D.         The parties hereto also desire to amend the Agreement on the terms and conditions provided herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT:

 

1.         Assignment and Assumption.

 

(a)         Assignor hereby assigns to Assignee, and Assignee hereby assumes from Assignor, all of Assignor’s rights and obligations as Bank (as defined herein) under the Agreement. The assignment set forth in this Section 1(a) shall be without recourse to or representation or warranty (except as expressly provided in this Assignment, in the other documents executed in connection with this Assignment, or in the Agreement, as assigned and amended) by Assignor.

 

(b)         Assignee shall become and be a party to the Agreement and succeed to all of the rights and be obligated to perform all of the obligations of Bank under the Agreement.

 

(c)         In conjunction with the assignment hereunder, Assignor shall transfer and deliver to Assignee any and all Collateral, and/or evidence thereof, in Assignor’s possession. Until such time as the Collateral in Assignor’s possession is transferred to Assignee, Assignor shall hold such Collateral for the benefit of the Assignee.

 

 

2.         Amendments. The Agreement is hereby amended as follows:

 

(a)         Administrative Agent. The defined term “Administrative Agent” in the Agreement is hereby deleted in its entirety and replaced with the defined term “Bank”. The definition of “Bank” shall mean “BMO Harris Bank N.A., a national banking association.” It is the intention of the parties hereto that, from and after the date hereof, all references in the Agreement to the Administrative Agent shall mean and be a reference to Bank.

 

(b)         Credit Agreement. The definition of “Credit Agreement” in the Agreement is hereby amended and restated to mean “the Credit Agreement, dated as of June 29, 2018, by and between Bank and Borrower, as the same may hereafter be amended, restated, supplemented or otherwise modified.”

 

(c)        Negative Pledge. The definition of “Negative Pledge” in the Agreement is hereby amended and restated to mean “the Negative Pledge Agreement, dated as of April 22, 2016 and recorded as Document No. 2437708 in the Racine County Register of Deeds Office, by Borrower in favor of Bank, as assigned to and amended by that certain Assignment of and Amendment to Negative Pledge Agreement, dated as of June 29, 2018, between Borrower, Bank and Bank of Montreal, as assignor.”

 

3.         No Termination. The parties hereto acknowledge and agree that notwithstanding any terms or conditions contained in the Agreement to the contrary, neither this Assignment, nor any other assignment, amendment or restatement of any other Loan Document (as defined in the 2016 Credit Agreement), shall trigger a termination of the Agreement.

 

4.         No Novation. It is the intention of the parties hereto that this Assignment not constitute a novation of the obligations under the Agreement and that, from and after the date hereof, the Agreement shall be amended hereby and all references herein to “hereunder,” “hereof,” or words of like import and all references in any Loan Documents or any documents entered into in connection therewith to the “Agreement” or words of like import shall mean and be a reference to the Agreement as assigned and amended hereby as and as hereafter amended, supplemented, restated or renewed.

 

5.         Ratification. As hereby assigned and amended, the Agreement and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.         Conflict. In the event of a conflict between the terms and conditions of this Assignment and the terms and conditions of the Agreement, the terms and conditions of this Assignment shall control.

 

7.         Counterparts. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the definitions given said terms in the Agreement.

 

[Signatures on following page]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the date first above written.

 

	ASSIGNOR:   BANK OF MONTREAL     By:__________________________________ Name: Title:
	ASSIGNEE:   BMO HARRIS BANK N.A.     By:__________________________________       Mark Czarnecki, Senior Vice President
	BORROWER: TWIN DISC, INCORPORATED By: ________________________________        Jeffrey S. Knutson, Vice President –      Finance and Chief Financial Officer

 

 

 

 

Exhibit 1.11

 

 

Document Number	ASSIGNMENT OF AND AMENDMENT TO NEGATIVE PLEDGE AGREEMENT   Document Title
		RECORDING AREA
		Name and Return Address:   Vincent M. Morrone, Esq. Michael Best & Friedrich LLP 790 North Water Street Milwaukee, Wisconsin 53202
		PINs: See Exhibit A

 

ASSIGNMENT OF AND AMENDMENT TO NEGATIVE PLEDGE AGREEMENT

 

THIS ASSIGNMENT OF AND AMENDMENT TO NEGATIVE PLEDGE AGREEMENT (this “Assignment”), is made as of February 14, 2025, by and among Twin Disc, Incorporated, a Wisconsin corporation (“Borrower”), BMO Bank N.A. (f/k/a BMO Harris Bank N.A.) (“Assignor”), in favor of Bank of Montreal, a Canadian chartered bank acting through its Chicago branch (“Assignee”).

 

RECITALS

 

WHEREAS, pursuant to the Credit Agreement, dated April 22, 2016, by and among Borrower, Assignee and the lenders party thereto (the “2016 Credit Agreement”), Borrower executed a Negative Pledge Agreement, dated as of April 22, 2016, in favor of Assignee, in its capacity as administrative agent for the Lenders, with respect to the Real Estate legally described in Exhibit A attached hereto, which was recorded on June 22, 2016, as Document No. 2437708 in the Register of Deeds Office, Racine County, Wisconsin (the “Negative Pledge”), a copy of which is attached hereto as Exhibit B;

 

WHEREAS, contemporaneously with a refinancing of the credit facilities extended by Assignor to Borrower, dated as of July 29, 2018, which was recorded on August 29, 2018 as Document No. 2502213 in the Register of Deeds Office, Racine County, Wisconsin (the “2018 Credit Agreement”), Assignee assigned the Negative Pledge Agreement to Assignor under an Assignment of and Amendment to Negative Pledge Agreement (the “2018 Assignment”), a copy of which is attached hereto as Exhibit C;         

 

 

WHEREAS, simultaneously herewith, Assignee will refinance the credit facilities extended by Assignor to Borrower under the 2018 Credit Agreement, and finance additional credit facilities, including to Kobelt Manufacturing Co., Ltd., a federal Canadian corporation (“Canadian Borrower”), as an additional Borrower thereunder, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee, Borrower, and Canadian Borrower (the “2025 Credit Agreement”); and

 

WHEREAS, Assignor now desires to assign the Negative Pledge and Assignor’s rights and obligations as Administrative Agent and Lender (or as Bank, as revised herein) under the Negative Pledge to Assignee, and Assignee desires to accept such assignment.

 

NOW THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT

 

1.         Assignment.

 

(a)         Assignor hereby assigns the Negative Pledge and all of Assignor’s rights and obligations as Administrative Agent and Lender (or as Bank, as revised herein) under the Negative Pledge to Assignee, and Assignee hereby accepts said assignment.

 

(b)         Assignee shall become and be a party to the Negative Pledge and succeed to all of the rights and be obligated to perform all of the obligations of Administrative Agent and Lender (or as Bank, as revised herein) under the Negative Pledge.

 

(c)         In conjunction with the assignment hereunder, Assignor shall transfer and deliver to Assignee any and all Collateral, and/or evidence thereof, in Assignor’s possession. Until such time as the Collateral in Assignor’s possession is transferred to Assignee, Assignor shall hold such Collateral for the benefit of Assignee.

 

2.         Amendments. The Negative Pledge is hereby amended as follows:

 

(a)         Bank. The defined term “Bank” in the Negative Pledge The definition of “Bank” shall be restated in its entirety to mean “Bank of Montreal”.

 

(b)         Credit Agreement. The definition of “Credit Agreement” in the Negative Pledge is hereby amended and restated to mean “the Credit Agreement, dated as of February 14, 2025, by and between Bank, Borrower, and from the Closing Date until the consummation of the Kobelt Amalgamation, Twin Disc Canada Holdings Ltd., a company incorporated under the laws of British Columbia and immediately after giving effect to the Kobelt Acquisition and the Kobelt Amalgamation Kobelt Manufacturing Co., Ltd., a company amalgamated under the laws of British Columbia as a result of the Kobelt Amalgamation (“Canadian Borrower”), as the same may hereafter be amended, restated, supplemented or otherwise modified.”

 

 

3.         Priority Maintained. The parties hereto acknowledge and agree that the Negative Pledge, and the priority thereof, remains in full force and effect.

 

4.         No Novation. It is the intention of the parties to this Assignment that this Assignment not constitute a novation of the obligations under the Negative Pledge and that, from and after the date hereof, all references herein to “hereunder,” “hereof,” or words of like import and all references in the Negative Pledge, the Credit Agreement or the Loan Documents, or any documents entered into in connection therewith, or words of like import shall mean and be a reference to the Negative Pledge, as amended hereby and as the same may hereafter be amended, supplemented, restated or renewed.

 

5.         Ratification. The Negative Pledge and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.         Counterparts. This Assignment may be executed in any number of counterparts, each of which shall be deemed to be an original for all purposes; but such counterparts shall be deemed to constitute but one and the same instrument.

 

7.         Conflict. In the event of conflict between the terms and conditions of the Negative Pledge and the terms and conditions of this Assignment, the terms and conditions of this Assignment shall control.

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the meanings given to such terms in the Negative Pledge.

 

[SIGNATURES ON NEXT PAGE FOLLOWING]        

 

 

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

 

BORROWER:   TWIN DISC, INCORPORATED     By: ________________________________ Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer

 

STATE OF WISCONSIN                )                 

                                                         )SS

COUNTY OF MILWAUKEE         )

 

Personally came before me this _____ day of ________, 2025, the above-named Jeffrey S. Knutson, as the Vice President – Finance and Chief Financial Officer of Twin Disc, Incorporated, to me known to be the person who executed the foregoing Assignment and acknowledged the same in said capacity.

 

Notary Public My commission

 

 

ASSIGNOR:   BMO BANK N.A. (f/k/a BMO Harris Bank N.A.)   By: ________________________________ Name: _____________________________ Title: ______________________________

 

STATE OF ILLINOIS                 )                 

                                                     )SS

COUNTY OF COOK                  )

 

Personally came before me this _____ day of ___________, 2025, the above-named _________as __________ of BMO Bank N.A., to me known to be the person who executed the foregoing Assignment and acknowledged the same in said capacity. N

 

Notary Public, My commission

 

 

ASSIGNEE:   BANK OF MONTREAL   By: ________________________________ Name: Mark Czarnecki Title: Senior Vice President

 

STATE OF WISCONSIN                )                 

                                                         )SS

COUNTY OF MILWAUKEE         )

 

Personally came before me this _____ day of ___________, 2025, the above-named Mark Czarnecki, as a Senior Vice President of Bank of Montreal, to me known to be the person who executed the foregoing Assignment and acknowledged the same in said capacity.

 

Notary Public, Milwaukee County, Wisconsin My commission

 

 

 

 

This instrument was drafted by and should be returned to:

 

Vincent M. Morrone, Esq,

Michael Best & Friedrich LLP

790 North Water Street

Milwaukee, Wisconsin 53202

 

 

ASSIGNEE:   BANK OF MONTREAL     By: ________________________________ Name: Helen Alvarez-Hernandez Title: Managing Director

 

STATE OF WISCONSIN                )                 

                                                         )SS

COUNTY OF MILWAUKEE         )

 

 Personally came before me this _____ day of ___________, 2025, the above-named Helen Alvarez-Hernandez, as a Managing Director of Bank of Montreal, to me known to be the person who executed the foregoing Assignment and acknowledged the same in said capacity.                                                                           

 

 

Notary Public, Milwaukee County, Wisconsin My commission

 

 

 

 

This instrument was drafted by and should be returned to:

 

Vincent M. Morrone, Esq,

Michael Best & Friedrich LLP

790 North Water Street

Milwaukee, Wisconsin 53202

 

 

EXHIBIT A

TO

ASSIGNMENT OF AND AMENDMENT TO

NEGATIVE PLEDGE AGREEMENT

 

Legal Description:

 

PARCEL A:

Lots 1, 2, 5, 6, 9, 10, 16 and 17, of Harmon’s Subdivision of part of Block 76, Section 16, Township 3 North, Range 23 East, according to the recorded plat of said subdivision on file in the office of the Register of Deeds, along with that part of vacated Clark Street. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A1:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Beginning at a point in the South line of said Block 205 feet West of the West line of Racine Street; running thence West on the South line of said block to the East line of Clark Street; thence North on the East line of Clark Street 100 feet; thence East parallel with the South line of said block to a point due North of the place of beginning; thence South parallel with Clark Street 100 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A2:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at a point 328 feet South of the Northeast corner of said Block; run thence West 115 feet; thence South 62 feet; thence East 115 feet to the East line of said Block; thence North 62 feet to the place of beginning.

 

AND

 

All that part of Block 76 bounded as follows: Begin at a point 280 feet South of the Northeast corner of said Block; run thence West 115 feet; thence South 48 feet; thence East 115 feet to the East line of said Block; thence North 48 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A3:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at a point on the East line of said Block 390 feet South of the Northeast corner of said Block, run thence West 115 feet; thence South 40 feet; thence East 115 feet to the East line of the said Block; and thence North 40 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A4:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the East line of Clark Street 155 feet South from the North line of said Block; run thence East 120 feet; thence South 5 feet; thence East 26.83 feet, more or less, to a point 114.79 feet West of the West line of Racine Street; thence South 140 feet more or less to lands now owned by the Twin Disc Clutch Company, a corporation; thence West along the North line of lands owned by said Twin Disc Clutch Company, a corporation, 146.83 feet, more or less, to the East line of Clark Street; and thence North along the East line of Clark Street 145 feet, more or less, to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

 

Parcel A5:

That part of the East 1/2 of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Commencing at the Southeast corner of the East 1/2 of said Block 76; run thence North 56 1/2 feet more or less to lands and premises now owned by Twin Disc Clutch Company, a corporation; run thence West 115 more or less to lands now owned by Twin Disc Clutch Company, a corporation; thence South 56 1/2 feet, more or less, to the South line of said Block 76; and thence East along the South line of said Block to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A6:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the West line of Racine Street, 240 feet South of the North line of said Block; run thence West 115 feet; thence South 40 feet; thence East 115 feet to the West line of Racine Street; thence North to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A7:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at a point on the West line of Racine Street, 120 feet South of the Northeast corner of said Block 76; run thence West 125 feet, more or less to lands formerly owned by Tostevin and LeRoy (which distance is in fact 141.29 feet); thence North 40 feet; thence East to the West line of Racine Street; thence South 40 feet to the beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A8:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the West line of Racine Street, 160 feet South of the South line of Thirteenth Street; run thence West 114.79 feet; thence South 40 feet; thence East to Racine Street; thence North to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A9:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the South line of said Block at a point which is 115 feet West of the West line of Racine Street; run thence West along the South line of said Block 90 feet; thence North 100 feet; thence East 90 feet; and thence South 100 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

 

Parcel A10:

That part of the East 1/2 of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at a point in the East line of Clark Street 100 feet North of the South line of said Block; run thence North 80 feet; thence East parallel with the South line of said Block 146.83 feet to a point which is 115 feet West of the West line of Racine Street; thence South 80 feet; and thence West parallel with the South line of said Block 146.83 feet to the East line of Clark Street to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A11:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin in the North line of said block at at point 130 feet West of the Northeast corner of said Block; run thence South 80 feet; thence West 11.9 feet more or less to a point 120 feet East on the East line of Clark Street; thence South 75 feet; thence West 120 feet to the East line of Clark Street; thence North along the East line of Clark Street 155 feet to the North line of said Block 76; thence East along the North line of said Block to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A12:

That part of the East ½ of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the South line of Thirteenth Street in said City of Racine at a point 90 feet West from the Northeast corner of said Block; run thence West on the North line of said Block, 40 feet, to the Northeast corner of land conveyed by Boyd R. Adams and wife and Clarence E. Adams and wife to Twin Disc Clutch Company by deed dated March 1, 1929 and recorded in the Office of the Register of Deeds for Racine County, Wisconsin, on March 18, 1929, in Volume 254 of Deeds on page 30, said point being 131.9 feet East of the East line of Clark Street; run thence South, along the East line of land conveyed by said deed, 80 feet; run thence East 40 feet; run thence North 80 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A13:

That part of the East ½ of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Being at a point 44 feet South of the Northeast of said Block; run thence West 90 feet; thence South 36 feet; thence East 90 feet to the East line of said Block; thence North 36 feet, to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A14:

That part of the East ½ of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at the Northeast corner of said Block; run thence West on the North line of said Block 90 feet; run thence South 44 feet; run thence East 90 feet to the East line of said Block; run thence North 44 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A15:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the West line of Racine Street at a point 120 feet South from the South line of Thirteenth Street; run thence West 141.29 feet more or less, to land formerly owned by Tostevin and Leroy; thence South 40 feet; thence East to the West line of Racine Street; thence North 40 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

 

Parcel A16:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the East line of said Block, being the West line of Racine Street, at a point 200 feet South of the North line of said Block, run thence West 115 feet; thence South 40 feet; thence East 115 feet to the West line of Racine Street; thence North to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Tax Parcel Number:	276-00-00-08870-001
Property Address:	1328 Racine Street

 

 

PARCEL B:

That part of the Northwest Quarter of Section 19, Township 3, North, Range 23 East, bounded as follows: Begin at a point on the West line of the Northwest Quarter of said Section 19 located North 0°06’30” East 30.00 feet from the West Quarter corner of said Section, said point being the intersection of the West line of said Quarter Section with the North line of Twenty-first Street; run thence East 660.00 feet on the North line of Twenty-first Street; thence North 0°06’30” East 1143.15 feet to the Southerly line of the Chicago, Milwaukee and St. Paul Railroad right of way; thence South 83°34’20” West 664.32 feet on the Southerly line of said right of way to the West line of said Quarter Section; thence South 0°06’30” West 1068.78 feet to the point of beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

AND

 

That part of the Northwest Quarter of Section 19, Township 3 North, Range 23 East, bounded as follows: Commence at a point on the North line of Twenty-first Street located 660.00 feet East of the West line of the Northwest Quarter of said Section 19; run thence North 0°06’30” East 778.00 feet on a line parallel with the West line of said Quarter Section to the point of beginning of this description; continue thence North 0°06’30” East 365.15 feet to the Southerly line of the right of way of the Chicago, Milwaukee and St. Paul Railroad right of way; thence North 83°34’20” East 307.72 feet to the West line of Oregon Street as vacated in a vacation plat recorded in Volume S of Plats on page B in the Racine County Register of Deeds Office; thence South 0°02’ East 399.60 feet on the West line of said Street as vacated to the North line of Twentieth Street as vacated in the aforementioned vacation Plat; thence West 306.72 feet on the North line of Twentieth Street as vacated to the point of beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

AND

 

That part of the Northwest Quarter of Section 19, Township 3 North, Range 23 East, bounded as follows: Begin at a point on the North line of Twenty-first Street located 660.00 feet East of the West line of the Northwest Quarter of said Section 19; run thence North 0°06’30” East 778.00 feet parallel with the West line of said Quarter Section to the North line of Twentieth Street as vacated in a vacation plat recorded in Volume S of Plats on Page B in the Racine County Register of Deeds Office; thence East 106.72 feet to a point 200.00 feet West of the West line of Oregon Street as vacated in the aforementioned vacated plat; thence South 0°02’ East 778.00 feet parallel with the West line of Oregon Street as vacated to the North line of Twenty-first Street; thence West 108.64 feet to the point beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin. Also, that part of the Chicago, Milwaukee, St. Paul & Pacific Railroad right-of-way adjacent to parcels of land recorded in Document No. 633290. Said right of way being bounded on the West by the East line of Ohio Street and bounded on the East by the West line of Oregon Street extended Northerly to the North line of said right-of-way. Said right of way being 932.4 feet, more or less, in length and 119 feet in width. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

 

EXCEPTING THEREFROM lands conveyed for road purposes recorded June 21, 1962, as Document No. 737741, March 28, 1977, as Document No. 996501 and December 4, 2008, as Document No. 2195156.

 

Tax Parcel Number:	276-00-00-23869-001
Property Address:	4600 Twentyfirst Street

 

 

PARCEL C:

Part of Block 75, Section 16, Township 3 North, Range 23 East, as returned by the Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at the Northwest corner of said Block 75; run thence Easterly in the north line of Block 364 feet, more or less to the Westerly line of the right of way of the Chicago, Milwaukee, St. Paul and Pacific Railroad, thence Southwesterly in the Westerly line of said Railroad right of way to the South line of said Block 75; thence Westerly in the South line of said Block 286.25 feet, more or less, to the Southwest corner of said Block 75; thence Northerly in the West line of said Block 75 a distance of 483.6 feet, more or less, to the place of beginning.

 

EXCEPTING THEREFROM lands conveyed in Warranty Deed recorded August 6, 1996, as Document No. 1548655 and Warranty Deed recorded September 27, 1996, as Document No. 1554360.

 

Tax Parcel Number:	276-00-00-08846-001
Property Address:	1333 Racine Street

 

 

PARCEL D:

That part of Block 69, Section 16, Township 3 North, Range 23 East, as returned by the Appraisers of School and University Lands to the office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin in the South line of said Block at a point 4.91 chains (324.06 feet) East of the Southwest corner of that part of said Block which lies East of Washington Avenue; run thence North 120 feet; thence West 80 feet; thence South 120 feet to the South line of said Block; thence East 80 feet to the place of beginning; excepting the East 40 feet thereof. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

Parcel D1:

That part of the East ¼ of Block 69, Section 16, Township 3 North, Range 23 East, as returned by the Appraisers of School and University lands to the office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the South line of said Block, 324.06 feet East of the Southwest corner of that part of said Block East of Washington Avenue; thence North 120 feet; thence West 40 feet; thence South 120 feet; thence East to the place of beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

 

Parcel D2:

That part of Block 69, Section 16, Township 3 North, Range 23 East, as returned by the Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin Four and 91/100 (4.91) chains East of the Southwest corner of that part of said Block which lies East of the United States Road (now Washington Avenue); run thence North 120 feet; run thence East 144.5 feet, more or less, to the East line of said Block; run thence South 120 feet to the South line of said Block; run thence West 144.5 feet, more or less, to the place of beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

Tax Parcel Number:	276-00-00-8676-000
Property Address:	1212 13th Street

 

 

PARCEL E:

Lots 6, 7, 8, 13, 14, 15, 16, 21, 22, 23, 24, 29, 30, Blake and Fish’s Subdivision of part of Blocks 77, 83 and 84, School Section, Racine, according to the recorded plat thereof, along with vacated Higgins Court, as shown on Vacation Plat recorded as Document No. 935372. Said land being in the City of Racine, County of Racine and State of Wisconsin.

 

Parcel E1:

All that certain piece or parcel of land situated in the City of Racine, in said County of Racine and State of Wisconsin, bounded on the North by Fourteenth Street and on the East by Clark Street, and being part of Block 77, School Section, Section 16 and more particularly described as follows: Begin at the point of intersection of the West line of Clark Street with the North line of the alley running West from Clark Street to Blake Street which is shown on the Plat of Blake and Fish’s Subdivision, recorded in Plat Book “D”, page 29, in Register of Deeds Office for said Racine County, and which point is shown on said Plat and in prior deeds in the chain-of-title, as being 300 feet North of the North line of Fifteenth Street, and 290 feet West of the West line of Racine Street, and from said point of beginning, run thence West along the North line of said alley, a distance of 71 feet, more or less, to an iron stake; thence, run North and parallel to said Clark Street, a distance of 85 feet, more or less, to an iron stake; thence, run East right-angle, a distance of 36 feet, more or less, to an iron stake; thence, run Northward, a distance of 98-7/10 feet, more or less, to the South line of Fourteenth Street at a point which is 30 ½ feet West of the West line of Clark Street; thence, run East along the South line of said Fourteenth Street, 30 ½ feet to the said West line of Clark Street; thence, run South along said West line of Clark Street, a distance of 183 - 6/10 feet to the place of beginning.

 

AND

 

All that certain piece or parcel of land, situated in the City of Racine, in said County of Racine and State of Wisconsin, bounded on the North by Fourteenth Street, and being part of Block No. 77, School Section, in Section 16, and more particularly described as follows: Begin at a point in the South line of Fourteenth Street, which is 65 feet East of the Chicago & Northwestern Railway Company’s right-of-way, and which point of beginning is also 345 feet East of the Northwest corner of said Block No. 77, and from said point of beginning, run thence Southwesterly and parallel with said Chicago, Northwestern Railway Company’s right-of-way, a distance of 213 feet to the Northwesterly boundary line of Blake & Fish’s Subdivision, recorded in Plat Book “D” page 29, in Register of Deeds office for said Racine County, and which said point is marked by an iron stake; thence, run Northeasterly along the said Northwesterly boundary line of Blake & Fish’s Subdivision, to the North line of the alley on said Plat connecting Blake Street with Clark Street, and which said point is 300 feet North of the North line of Fifteenth Street; thence, run East along said North line of said alley to an iron stake, which is 71 feet, more or less, West from the West lien of Clark Street; thence, run North and parallel to said Clark Street, a distance of 85 feet, more or less, to an iron stake; thence, run East at right angles, a distance of 36 feet, more or less, to an iron stake; thence, run Northward, a distance of 98-7/10 feet, more or less, to the said South line of Fourteenth Street at a point which is 30-1/2 fee West of the West line of Clark Street; and thence, run West along the said South line of Fourteenth Street, 62-3/10 feet, more or less, to the place of beginning.

 

 

AND

 

That part of Block 77 in Section 16 as returned by the Appraisers of School and University lands to the office of the Secretary of State of the State of Wisconsin, bounded as follows: Commencing on the North line of said Block, 280 feet East of the Northwest corner of said Block, said point of beginning being on the East line of the right of way of the Chicago and Northwestern Railway, running thence East 65 feet, thence Southerly parallel with the East line of the right-of-way of said railway company to the Northerly line of Blake and Fish’s Subdivision of a part of said Block 77, thence Southwesterly on the Northerly line of said Blake and Fish’s Subdivision to the Easterly line of the right-of-way of said Chicago and Northwestern Railway, and thence Northerly on the Easterly line of said right of way to the place of beginning.

 

Tax Parcel Number:         276-00-00-8914-000

Property Address:         1311 14^th Street

 

  

EXHIBIT B

TO

ASSIGNMENT OF AND AMENDMENT TO

NEGATIVE PLEDGE AGREEMENT

 

 

 

PREPARED BY AND WHEN RECORDED                                                                        

RETURN TO:

Alexander P. Fraser, Esq.

Michael Best & Friedrich LLP

100 East Wisconsin Avenue, Suite 3300

Milwaukee, WI 53202

 

---

 

NEGATIVE PLEDGE AGREEMENT

 

THIS NEGATIVE PLEDGE AGREEMENT (this “Agreement”) is made effective as April 22, 2016, by and among TWIN DISC, INCORPORATED, a Wisconsin corporation (the “Company” or the “Borrower”), each lender from time to time party to the Credit Agreement hereinafter defined (collectively, the “Lenders” and individually, a “Lender”), and BANK OF MONTREAL, a Canadian chartered bank acting through its Chicago branch, as Administrative Agent for the Lenders from time to time parties to the Credit Agreement (hereinafter defined) (the “Administrative Agent”).

 

RECITALS

 

The Administrative Agent, the Lenders and the Company have entered into that certain Credit Agreement dated as of April 22, 2016 (the “Credit Agreement”), pursuant to which the Lenders have agreed to extend credit to the Company upon the terms set forth in the Credit Agreement. The Lenders would not have agreed to extend such credit but for the Company entering into this Agreement.

 

NOW, THEREFORE, in consideration of the extension of credit to the Company, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company hereby agrees:

 

AGREEMENT

 

1.    Definitions. Capitalized terms used herein without definition shall have the meanings ascribed thereto in the Credit Agreement. In addition, the following terms used in this Agreement shall have the following meanings:

 

“Real Estate” means all land, together with the buildings, structures, parking areas, and other improvements thereon, now or hereafter owned by the Company, including all easements, rights-of-way, and similar rights appurtenant thereto and all leases, tenancies, and occupancies thereof, as legally described on Exhibit A.

 

2.     Negative Pledge. The Company hereby covenants and agrees that, unless consented to by the Administrative Agent, from and after the date of this Agreement and until the termination of this Agreement in accordance with Section 8 below, the Company will (a) not sell, option, exchange or otherwise convey any legal, equitable or beneficial interest in the Real Estate or any part thereof, and (b) keep the Real Estate free and clear from any pledge, mortgage, security interest, hypothecation, lien, charge, encumbrance, conditional sale agreements, rights or claims of third parties, other burdens and any security interest therein, other than Permitted Liens and all liens and encumbrances currently existing on the Real Estate listed in the attached Exhibit B (the “Existing Liens and Encumbrances”).

 

 

3.         Certain Representations and Warranties. The Company represents and warrants to the Administrative Agent that the Company is the legal and beneficial owner of the Real Estate, free and clear of all liens and encumbrances, except only for Permitted Liens and Existing Liens and Encumbrances.

 

4.         Default; Expenses. The failure of the Company to comply with any term of this Agreement shall constitute an Event of Default under the Credit Agreement. In addition, the Company shall reimburse the Administrative Agent (and any agent or representative of the Administrative Agent) for any expenses incurred by the Administrative Agent (or such agent or representative of the Administrative Agent) in protecting or enforcing its rights under this Agreement, including, without limitation, reasonable attorneys’ fees.

 

5.          Recording of Negative Pledge. The Company hereby authorizes the Administrative Agent, without need of any further document or instrument, to record this Agreement as an encumbrance against the Real Estate.

 

6.          Agreement to Grant Mortgage. Within thirty (30) days after the beginning of a Dominion Trigger Period (as defined in the Credit Agreement), the Company agrees to execute and deliver to the Administrative Agent Mortgages and any Mortgage Related Documents, in form and substance satisfactory to the Administrative Agent, in favor of the Administrative Agent to secure performance and payment of the Indebtedness thereunder. With the exceptions of Permitted Liens and Existing Liens and Encumbrances, such Mortgages shall grant first-priority liens to the Administrative Agent on all the Real Estate that the Company owns at such time.

 

7.         Further Assurances. The Company agrees to execute and deliver, or cause to be executed and delivered, all such other papers and to take all such other actions within its power as the Administrative Agent may reasonably request from time to time in order to carry out the purposes of this Agreement.

 

8.         Term. When all of the Indebtedness is irrevocably and fully paid and fully discharged and the Lenders shall have no further obligation or commitment to advance or extend credit to the Company under the Credit Agreement, this Agreement shall terminate. Notwithstanding the foregoing, this Agreement shall apply to all extensions, renewals, refinancings or modifications, if any, of the Loans. The Administrative Agent agrees to record, no later than thirty (30) days after the termination of this Agreement, a satisfaction of this Agreement (in form and substance acceptable to Company) with the Racine County Register of Deeds. If Administrative Agent fails to satisfy the requirement in the immediately preceding sentence, Administrative Agent shall be liable to the Company for such amounts available to a landowner under Wisconsin Statutes §708.15(5)(b).

 

9.         Miscellaneous. This Agreement may only be amended by a writing executed by both the Company and the Administrative Agent. This Agreement shall inure to the benefit of the Administrative Agent and be binding upon the Company and its successors and assigns. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which when taken together shall be deemed to constitute one and the same agreement. The Recitals to this Agreement are true, correct and incorporated herein by reference.

 

 

Dated as of April 22, 2016.

 

	TWIN DISC, INCORPORATED
	By:
	Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer

 

ACKNOWLEDGMENT

 

STATE OF WISCONSIN                    )

                                                             ) SS

COUNTY OF MILWAUKEE              )

 

 

On this 21^st day of April, 2016, before me, a Notary Public, personally appeared Jeffrey S. Knutson, to me personally known, who being by me duly sworn, did say that he is the Vice President – Finance and Chief Financial Officer of Twin Disc, Incorporated, a Wisconsin corporation, and that this instrument was signed and sealed on behalf of such company, and said person acknowledged the execution of this instrument as the free act and deed of such company.

 

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

 

Name: ______________________

Notary Public,          State of ____________

County of                                                                 [NOTARIAL SEAL]
My Commission

 

This instrument was drafted by

and should be returned to:

 

Michael Best & Friedrich LLP

100 East Wisconsin Avenue

Suite 3300

Milwaukee, Wisconsin 53202

Attention: Alexander P. Fraser, Esq.

 

 

EXHIBIT A

 

Legal Description

 

PARCEL A:

Lots 1, 2, 5, 6, 9, 10, 16 and 17, of Harmon’s Subdivision of part of Block 76, Section 16, Township 3 North, Range 23 East, according to the recorded plat of said subdivision on file in the office of the Register of Deeds, along with that part of vacated Clark Street. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A1:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Beginning at a point in the South line of said Block 205 feet West of the West line of Racine Street; running thence West on the South line of said block to the East line of Clark Street; thence North on the East line of Clark Street 100 feet; thence East parallel with the South line of said block to a point due North of the place of beginning; thence South parallel with Clark Street 100 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A2:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at a point 328 feet South of the Northeast corner of said Block; run thence West 115 feet; thence South 62 feet; thence East 115 feet to the East line of said Block; thence North 62 feet to the place of beginning.

 

AND

 

All that part of Block 76 bounded as follows: Begin at a point 280 feet South of the Northeast corner of said Block; run thence West 115 feet; thence South 48 feet; thence East 115 feet to the East line of said Block; thence North 48 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A3:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at a point on the East line of said Block 390 feet South of the Northeast corner of said Block, run thence West 115 feet; thence South 40 feet; thence East 115 feet to the East line of the said Block; and thence North 40 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A4:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the East line of Clark Street 155 feet South from the North line of said Block; run thence East 120 feet; thence South 5 feet; thence East 26.83 feet, more or less, to a point 114.79 feet West of the West line of Racine Street; thence South 140 feet more or less to lands now owned by the Twin Disc Clutch Company, a corporation; thence West along the North line of lands owned by said Twin Disc Clutch Company, a corporation, 146.83 feet, more or less, to the East line of Clark Street; and thence North along the East line of Clark Street 145 feet, more or less, to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

 

Parcel A5:

That part of the East 1/2 of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Commencing at the Southeast corner of the East 1/2 of said Block 76; run thence North 56 1/2 feet more or less to lands and premises now owned by Twin Disc Clutch Company, a corporation; run thence West 115 more or less to lands now owned by Twin Disc Clutch Company, a corporation; thence South 56 1/2 feet, more or less, to the South line of said Block 76; and thence East along the South line of said Block to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A6:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the West line of Racine Street, 240 feet South of the North line of said Block; run thence West 115 feet; thence South 40 feet; thence East 115 feet to the West line of Racine Street; thence North to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A7:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at a point on the West line of Racine Street, 120 feet South of the Northeast corner of said Block 76; run thence West 125 feet, more or less to lands formerly owned by Tostevin and LeRoy (which distance is in fact 141.29 feet); thence North 40 feet; thence East to the West line of Racine Street; thence South 40 feet to the beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A8:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the West line of Racine Street, 160 feet South of the South line of Thirteenth Street; run thence West 114.79 feet; thence South 40 feet; thence East to Racine Street; thence North to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A9:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the South line of said Block at a point which is 115 feet West of the West line of Racine Street; run thence West along the South line of said Block 90 feet; thence North 100 feet; thence East 90 feet; and thence South 100 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A10:

That part of the East 1/2 of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at a point in the East line of Clark Street 100 feet North of the South line of said Block; run thence North 80 feet; thence East parallel with the South line of said Block 146.83 feet to a point which is 115 feet West of the West line of Racine Street; thence South 80 feet; and thence West parallel with the South line of said Block 146.83 feet to the East line of Clark Street to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

 

Parcel A11:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin in the North line of said block at at point 130 feet West of the Northeast corner of said Block; run thence South 80 feet; thence West 11.9 feet more or less to a point 120 feet East on the East line of Clark Street; thence South 75 feet; thence West 120 feet to the East line of Clark Street; thence North along the East line of Clark Street 155 feet to the North line of said Block 76; thence East along the North line of said Block to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A12:

That part of the East ½ of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the South line of Thirteenth Street in said City of Racine at a point 90 feet West from the Northeast corner of said Block; run thence West on the North line of said Block, 40 feet, to the Northeast corner of land conveyed by Boyd R. Adams and wife and Clarence E. Adams and wife to Twin Disc Clutch Company by deed dated March 1, 1929 and recorded in the Office of the Register of Deeds for Racine County, Wisconsin, on March 18, 1929, in Volume 254 of Deeds on page 30, said point being 131.9 feet East of the East line of Clark Street; run thence South, along the East line of land conveyed by said deed, 80 feet; run thence East 40 feet; run thence North 80 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A13:

That part of the East ½ of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Being at a point 44 feet South of the Northeast of said Block; run thence West 90 feet; thence South 36 feet; thence East 90 feet to the East line of said Block; thence North 36 feet, to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A14:

That part of the East ½ of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at the Northeast corner of said Block; run thence West on the North line of said Block 90 feet; run thence South 44 feet; run thence East 90 feet to the East line of said Block; run thence North 44 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A15:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the West line of Racine Street at a point 120 feet South from the South line of Thirteenth Street; run thence West 141.29 feet more or less, to land formerly owned by Tostevin and Leroy; thence South 40 feet; thence East to the West line of Racine Street; thence North 40 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A16:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the East line of said Block, being the West line of Racine Street, at a point 200 feet South of the North line of said Block, run thence West 115 feet; thence South 40 feet; thence East 115 feet to the West line of Racine Street; thence North to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

 

Tax Parcel Number:	276-00-00-08870-001
Property Address:	1328 Racine Street

 

 

PARCEL B:

That part of the Northwest Quarter of Section 19, Township 3, North, Range 23 East, bounded as follows: Begin at a point on the West line of the Northwest Quarter of said Section 19 located North 0°06’30” East 30.00 feet from the West Quarter corner of said Section, said point being the intersection of the West line of said Quarter Section with the North line of Twenty-first Street; run thence East 660.00 feet on the North line of Twenty-first Street; thence North 0°06’30” East 1143.15 feet to the Southerly line of the Chicago, Milwaukee and St. Paul Railroad right of way; thence South 83°34’20” West 664.32 feet on the Southerly line of said right of way to the West line of said Quarter Section; thence South 0°06’30” West 1068.78 feet to the point of beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

AND

 

That part of the Northwest Quarter of Section 19, Township 3 North, Range 23 East, bounded as follows: Commence at a point on the North line of Twenty-first Street located 660.00 feet East of the West line of the Northwest Quarter of said Section 19; run thence North 0°06’30” East 778.00 feet on a line parallel with the West line of said Quarter Section to the point of beginning of this description; continue thence North 0°06’30” East 365.15 feet to the Southerly line of the right of way of the Chicago, Milwaukee and St. Paul Railroad right of way; thence North 83°34’20” East 307.72 feet to the West line of Oregon Street as vacated in a vacation plat recorded in Volume S of Plats on page B in the Racine County Register of Deeds Office; thence South 0°02’ East 399.60 feet on the West line of said Street as vacated to the North line of Twentieth Street as vacated in the aforementioned vacation Plat; thence West 306.72 feet on the North line of Twentieth Street as vacated to the point of beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

AND

 

That part of the Northwest Quarter of Section 19, Township 3 North, Range 23 East, bounded as follows: Begin at a point on the North line of Twenty-first Street located 660.00 feet East of the West line of the Northwest Quarter of said Section 19; run thence North 0°06’30” East 778.00 feet parallel with the West line of said Quarter Section to the North line of Twentieth Street as vacated in a vacation plat recorded in Volume S of Plats on Page B in the Racine County Register of Deeds Office; thence East 106.72 feet to a point 200.00 feet West of the West line of Oregon Street as vacated in the aforementioned vacated plat; thence South 0°02’ East 778.00 feet parallel with the West line of Oregon Street as vacated to the North line of Twenty-first Street; thence West 108.64 feet to the point beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin. Also, that part of the Chicago, Milwaukee, St. Paul & Pacific Railroad right-of-way adjacent to parcels of land recorded in Document No. 633290. Said right of way being bounded on the West by the East line of Ohio Street and bounded on the East by the West line of Oregon Street extended Northerly to the North line of said right-of-way. Said right of way being 932.4 feet, more or less, in length and 119 feet in width. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

EXCEPTING THEREFROM lands conveyed for road purposes recorded June 21, 1962, as Document No. 737741, March 28, 1977, as Document No. 996501 and December 4, 2008, as Document No. 2195156.

 

 

Tax Parcel Number:	276-00-00-23869-001
Property Address:	4600 Twentyfirst Street

 

 

PARCEL C:

Part of Block 75, Section 16, Township 3 North, Range 23 East, as returned by the Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at the Northwest corner of said Block 75; run thence Easterly in the north line of Block 364 feet, more or less to the Westerly line of the right of way of the Chicago, Milwaukee, St. Paul and Pacific Railroad, thence Southwesterly in the Westerly line of said Railroad right of way to the South line of said Block 75; thence Westerly in the South line of said Block 286.25 feet, more or less, to the Southwest corner of said Block 75; thence Northerly in the West line of said Block 75 a distance of 483.6 feet, more or less, to the place of beginning.

 

EXCEPTING THEREFROM lands conveyed in Warranty Deed recorded August 6, 1996, as Document No. 1548655 and Warranty Deed recorded September 27, 1996, as Document No. 1554360.

 

Tax Parcel Number:	276-00-00-08846-001
Property Address:	1333 Racine Street

 

 

PARCEL D:

That part of Block 69, Section 16, Township 3 North, Range 23 East, as returned by the Appraisers of School and University Lands to the office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin in the South line of said Block at a point 4.91 chains (324.06 feet) East of the Southwest corner of that part of said Block which lies East of Washington Avenue; run thence North 120 feet; thence West 80 feet; thence South 120 feet to the South line of said Block; thence East 80 feet to the place of beginning; excepting the East 40 feet thereof. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

Parcel D1:

That part of the East ¼ of Block 69, Section 16, Township 3 North, Range 23 East, as returned by the Appraisers of School and University lands to the office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the South line of said Block, 324.06 feet East of the Southwest corner of that part of said Block East of Washington Avenue; thence North 120 feet; thence West 40 feet; thence South 120 feet; thence East to the place of beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

Parcel D2:

That part of Block 69, Section 16, Township 3 North, Range 23 East, as returned by the Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin Four and 91/100 (4.91) chains East of the Southwest corner of that part of said Block which lies East of the United States Road (now Washington Avenue); run thence North 120 feet; run thence East 144.5 feet, more or less, to the East line of said Block; run thence South 120 feet to the South line of said Block; run thence West 144.5 feet, more or less, to the place of beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

Tax Parcel Number:	276-00-00-8676-000
Property Address:	1212 13th Street

 

 

PARCEL E:

Lots 6, 7, 8, 13, 14, 15, 16, 21, 22, 23, 24, 29, 30, Blake and Fish’s Subdivision of part of Blocks 77, 83 and 84, School Section, Racine, according to the recorded plat thereof, along with vacated Higgins Court, as shown on Vacation Plat recorded as Document No. 935372. Said land being in the City of Racine, County of Racine and State of Wisconsin.

 

Parcel E1:

All that certain piece or parcel of land situated in the City of Racine, in said County of Racine and State of Wisconsin, bounded on the North by Fourteenth Street and on the East by Clark Street, and being part of Block 77, School Section, Section 16 and more particularly described as follows: Begin at the point of intersection of the West line of Clark Street with the North line of the alley running West from Clark Street to Blake Street which is shown on the Plat of Blake and Fish’s Subdivision, recorded in Plat Book “D”, page 29, in Register of Deeds Office for said Racine County, and which point is shown on said Plat and in prior deeds in the chain-of-title, as being 300 feet North of the North line of Fifteenth Street, and 290 feet West of the West line of Racine Street, and from said point of beginning, run thence West along the North line of said alley, a distance of 71 feet, more or less, to an iron stake; thence, run North and parallel to said Clark Street, a distance of 85 feet, more or less, to an iron stake; thence, run East right-angle, a distance of 36 feet, more or less, to an iron stake; thence, run Northward, a distance of 98-7/10 feet, more or less, to the South line of Fourteenth Street at a point which is 30 ½ feet West of the West line of Clark Street; thence, run East along the South line of said Fourteenth Street, 30 ½ feet to the said West line of Clark Street; thence, run South along said West line of Clark Street, a distance of 183 - 6/10 feet to the place of beginning.

 

AND

 

All that certain piece or parcel of land, situated in the City of Racine, in said County of Racine and State of Wisconsin, bounded on the North by Fourteenth Street, and being part of Block No. 77, School Section, in Section 16, and more particularly described as follows: Begin at a point in the South line of Fourteenth Street, which is 65 feet East of the Chicago & Northwestern Railway Company’s right-of-way, and which point of beginning is also 345 feet East of the Northwest corner of said Block No. 77, and from said point of beginning, run thence Southwesterly and parallel with said Chicago, Northwestern Railway Company’s right-of-way, a distance of 213 feet to the Northwesterly boundary line of Blake & Fish’s Subdivision, recorded in Plat Book “D” page 29, in Register of Deeds office for said Racine County, and which said point is marked by an iron stake; thence, run Northeasterly along the said Northwesterly boundary line of Blake & Fish’s Subdivision, to the North line of the alley on said Plat connecting Blake Street with Clark Street, and which said point is 300 feet North of the North line of Fifteenth Street; thence, run East along said North line of said alley to an iron stake, which is 71 feet, more or less, West from the West lien of Clark Street; thence, run North and parallel to said Clark Street, a distance of 85 feet, more or less, to an iron stake; thence, run East at right angles, a distance of 36 feet, more or less, to an iron stake; thence, run Northward, a distance of 98-7/10 feet, more or less, to the said South line of Fourteenth Street at a point which is 30-1/2 fee West of the West line of Clark Street; and thence, run West along the said South line of Fourteenth Street, 62-3/10 feet, more or less, to the place of beginning.

 

AND

 

That part of Block 77 in Section 16 as returned by the Appraisers of School and University lands to the office of the Secretary of State of the State of Wisconsin, bounded as follows: Commencing on the North line of said Block, 280 feet East of the Northwest corner of said Block, said point of beginning being on the East line of the right of way of the Chicago and Northwestern Railway, running thence East 65 feet, thence Southerly parallel with the East line of the right-of-way of said railway company to the Northerly line of Blake and Fish’s Subdivision of a part of said Block 77, thence Southwesterly on the Northerly line of said Blake and Fish’s Subdivision to the Easterly line of the right-of-way of said Chicago and Northwestern Railway, and thence Northerly on the Easterly line of said right of way to the place of beginning.

 

Tax Parcel Number:	276-00-00-8914-000
Property Address:	1311 14th Street

 

 

EXHIBIT B

 

Existing Liens and Encumbrances

 

The Permitted Liens are set forth in a separate Agreement as to Liens and Encumbrances dated as of April 22, 2016 and executed by the Borrower and acknowledged and agreed to by the Administrative Agent.

 

 

 

EXHIBIT C

TO

ASSIGNMENT OF AND AMENDMENT TO

NEGATIVE PLEDGE AGREEMENT

 

 

Document Number	ASSIGNMENT OF AND AMENDMENT TO NEGATIVE PLEDGE AGREEMENT   Document Title
		RECORDING AREA
		Name and Return Address:    Vincent M. Morrone, Esq. Michael Best & Friedrich LLP 100 East Wisconsin Avenue Suite 3300 Milwaukee, Wisconsin 53202
		PINs: See Exhibit A

 

ASSIGNMENT OF AND AMENDMENT TO NEGATIVE PLEDGE AGREEMENT

 

THIS ASSIGNMENT OF AND AMENDMENT TO NEGATIVE PLEDGE AGREEMENT (this “Assignment”), is made as of June 29 2018, by and among TWIN DISC, INCORPORATED, a Wisconsin corporation (“Borrower”), BANK OF MONTREAL, a Canadian chartered bank acting through its Chicago branch (“Assignor”) and BMO HARRIS BANK N.A., a national banking association (the “Assignee”).

 

RECITALS

 

WHEREAS, pursuant to the Credit Agreement, dated April 22, 2016, by and among Borrower, Assignor and the lenders party thereto (the “2016 Credit Agreement”), Borrower executed a Negative Pledge Agreement, dated as of April 22, 2016, in favor of Assignor, in its capacity as administrative agent for the Lenders, with respect to the Real Estate legally described in Exhibit A attached hereto, which was recorded on June 22, 2016, as Document No. 2437708 in the Register of Deeds Office, Racine County, Wisconsin (the “Negative Pledge”), a copy of which is attached hereto as Exhibit B;

 

WHEREAS, simultaneously herewith, Assignee will refinance the credit facilities extended by Assignor to Borrower under the 2016 Credit Agreement, and finance additional credit facilities, pursuant to that certain Credit Agreement, dated as of the date hereof, by and between Assignee and Borrower (the “2018 Credit Agreement”); and

 

 

WHEREAS, Assignor now desires to assign the Negative Pledge and Assignor’s rights and obligations as Administrative Agent and Lender (or as Bank, as revised herein) under the Negative Pledge to Assignee, and Assignee desires to accept such assignment.

 

NOW THEREFORE, in consideration of the foregoing recitals which are incorporated herein and made a part hereof, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

AGREEMENT

 

1.         Assignment.

 

(a)         Assignor hereby assigns the Negative Pledge and all of Assignor’s rights and obligations as Administrative Agent and Lender (or as Bank, as revised herein) under the Negative Pledge to Assignee, and Assignee hereby accepts said assignment.

 

(b)         Assignee shall become and be a party to the Negative Pledge and succeed to all of the rights and be obligated to perform all of the obligations of Administrative Agent and Lender (or as Bank, as revised herein) under the Negative Pledge.

 

(c)         In conjunction with the assignment hereunder, Assignor shall transfer and deliver to Assignee any and all Collateral, and/or evidence thereof, in Assignor’s possession. Until such time as the Collateral in Assignor’s possession is transferred to Assignee, Assignor shall hold such Collateral for the benefit of Assignee.

 

2.         Amendments. The Negative Pledge is hereby amended as follows:

 

(a)         Agent and Secured Parties. The defined terms “Administrative Agent”, “Lender” and “Lenders” in the Negative Pledge are each hereby deleted in their entirety and replaced with the defined term “Bank”. The definition of “Bank” shall mean “BMO Harris Bank N.A., a national banking association.” It is the intention of the parties hereto that, from and after the date hereof, all references in the Negative Pledge to the Administrative Agent and/or the Lender or Lenders shall mean and be a reference to Bank.

 

(b)         Credit Agreement. The definition of “Credit Agreement” in the Negative Pledge is hereby amended and restated to mean “the Credit Agreement, dated as of June 29, 2018, by and between Bank and Borrower, as the same may hereafter be amended, restated, supplemented or otherwise modified.”

 

3.         Priority Maintained. The parties hereto acknowledge and agree that the Negative Pledge, and the priority thereof, remains in full force and effect.

 

 

4.         No Novation. It is the intention of the parties to this Assignment that this Assignment not constitute a novation of the obligations under the Negative Pledge and that, from and after the date hereof, all references herein to “hereunder,” “hereof,” or words of like import and all references in the Negative Pledge, the Credit Agreement or the Loan Documents, or any documents entered into in connection therewith, or words of like import shall mean and be a reference to the Negative Pledge, as amended hereby and as the same may hereafter be amended, supplemented, restated or renewed.

 

5.         Ratification. The Negative Pledge and all representations and warranties provided therein are hereby ratified, approved and confirmed in all respects.

 

6.         Counterparts. This Assignment may be executed in any number of counterparts, each of which shall be deemed to be an original for all purposes; but such counterparts shall be deemed to constitute but one and the same instrument.

 

7.         Conflict. In the event of conflict between the terms and conditions of the Negative Pledge and the terms and conditions of this Assignment, the terms and conditions of this Assignment shall control.

 

8.         Capitalized Terms. Capitalized terms used but not otherwise defined in this Assignment shall have the meanings given to such terms in the Negative Pledge.

 

[SIGNATURES ON NEXT PAGE FOLLOWING]     

    

 

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

 

 

BORROWER:   TWIN DISC, INCORPORATED   By: ________________________________ Name: Jeffrey S. Knutson Title: Vice President – Finance and Chief Financial Officer

 

  

STATE OF WISCONSIN               )                 

                                                        )SS

COUNTY OF RACINE                  )

 

Personally came before me this _____ day of ________, 2018, the above-named Jeffrey S. Knutson, as the Vice President – Finance and Chief Financial Officer of Twin Disc, Incorporated, to me known to be the person who executed the foregoing Assignment and acknowledged the same in said capacity.

 

 

 

 

Notary Public, Milwaukee County, Wisconsin My commission

 

 

ASSIGNOR:   BANK OF MONTREAL     By: ________________________________ Name: _____________________________ Title: ______________________________

 

STATE OF ILLINOIS                )                 

                                                    )SS

COUNTY OF COOK                 )

 

Personally came before me this _____ day of ___________, 2018, the above-named _________as __________ of Bank of Montreal, to me known to be the person who executed the foregoing Assignment and acknowledged the same in said capacity.

 

 

 

Notary Public, Cook County, Illinois My commission

 

 

ASSIGNEE:   BMO HARRIS BANK N.A.     By: ________________________________ Name: Mark Czarnecki Title: Senior Vice President

 

STATE OF WISCONSIN               )                 

                                                        )SS

COUNTY OF MILWAUKEE         )

 

Personally came before me this _____ day of ___________, 2018, the above-named Mark Czarnecki, as a Senior Vice President of BMO Harris Bank N.A., to me known to be the person who executed the foregoing Assignment and acknowledged the same in said capacity.

 

 

 

Notary Public, Milwaukee County, Wisconsin My commission

 

 

 

 

 

This instrument was drafted by and should be returned to:

 

Vincent M. Morrone, Esq,

Michael Best & Friedrich LLP

100 East Wisconsin Avenue, Suite 3300

Milwaukee, Wisconsin 53202

 

 

EXHIBIT A

TO

ASSIGNMENT OF AND AMENDMENT TO

NEGATIVE PLEDGE AGREEMENT

 

Legal Description:

 

PARCEL A:

Lots 1, 2, 5, 6, 9, 10, 16 and 17, of Harmon’s Subdivision of part of Block 76, Section 16, Township 3 North, Range 23 East, according to the recorded plat of said subdivision on file in the office of the Register of Deeds, along with that part of vacated Clark Street. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A1:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Beginning at a point in the South line of said Block 205 feet West of the West line of Racine Street; running thence West on the South line of said block to the East line of Clark Street; thence North on the East line of Clark Street 100 feet; thence East parallel with the South line of said block to a point due North of the place of beginning; thence South parallel with Clark Street 100 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A2:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at a point 328 feet South of the Northeast corner of said Block; run thence West 115 feet; thence South 62 feet; thence East 115 feet to the East line of said Block; thence North 62 feet to the place of beginning.

 

AND

 

All that part of Block 76 bounded as follows: Begin at a point 280 feet South of the Northeast corner of said Block; run thence West 115 feet; thence South 48 feet; thence East 115 feet to the East line of said Block; thence North 48 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A3:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at a point on the East line of said Block 390 feet South of the Northeast corner of said Block, run thence West 115 feet; thence South 40 feet; thence East 115 feet to the East line of the said Block; and thence North 40 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A4:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the East line of Clark Street 155 feet South from the North line of said Block; run thence East 120 feet; thence South 5 feet; thence East 26.83 feet, more or less, to a point 114.79 feet West of the West line of Racine Street; thence South 140 feet more or less to lands now owned by the Twin Disc Clutch Company, a corporation; thence West along the North line of lands owned by said Twin Disc Clutch Company, a corporation, 146.83 feet, more or less, to the East line of Clark Street; and thence North along the East line of Clark Street 145 feet, more or less, to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

 

Parcel A5:

That part of the East 1/2 of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Commencing at the Southeast corner of the East 1/2 of said Block 76; run thence North 56 1/2 feet more or less to lands and premises now owned by Twin Disc Clutch Company, a corporation; run thence West 115 more or less to lands now owned by Twin Disc Clutch Company, a corporation; thence South 56 1/2 feet, more or less, to the South line of said Block 76; and thence East along the South line of said Block to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A6:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the West line of Racine Street, 240 feet South of the North line of said Block; run thence West 115 feet; thence South 40 feet; thence East 115 feet to the West line of Racine Street; thence North to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A7:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at a point on the West line of Racine Street, 120 feet South of the Northeast corner of said Block 76; run thence West 125 feet, more or less to lands formerly owned by Tostevin and LeRoy (which distance is in fact 141.29 feet); thence North 40 feet; thence East to the West line of Racine Street; thence South 40 feet to the beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A8:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the West line of Racine Street, 160 feet South of the South line of Thirteenth Street; run thence West 114.79 feet; thence South 40 feet; thence East to Racine Street; thence North to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A9:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the South line of said Block at a point which is 115 feet West of the West line of Racine Street; run thence West along the South line of said Block 90 feet; thence North 100 feet; thence East 90 feet; and thence South 100 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

 

Parcel A10:

That part of the East 1/2 of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at a point in the East line of Clark Street 100 feet North of the South line of said Block; run thence North 80 feet; thence East parallel with the South line of said Block 146.83 feet to a point which is 115 feet West of the West line of Racine Street; thence South 80 feet; and thence West parallel with the South line of said Block 146.83 feet to the East line of Clark Street to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A11:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin in the North line of said block at at point 130 feet West of the Northeast corner of said Block; run thence South 80 feet; thence West 11.9 feet more or less to a point 120 feet East on the East line of Clark Street; thence South 75 feet; thence West 120 feet to the East line of Clark Street; thence North along the East line of Clark Street 155 feet to the North line of said Block 76; thence East along the North line of said Block to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A12:

That part of the East ½ of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the South line of Thirteenth Street in said City of Racine at a point 90 feet West from the Northeast corner of said Block; run thence West on the North line of said Block, 40 feet, to the Northeast corner of land conveyed by Boyd R. Adams and wife and Clarence E. Adams and wife to Twin Disc Clutch Company by deed dated March 1, 1929 and recorded in the Office of the Register of Deeds for Racine County, Wisconsin, on March 18, 1929, in Volume 254 of Deeds on page 30, said point being 131.9 feet East of the East line of Clark Street; run thence South, along the East line of land conveyed by said deed, 80 feet; run thence East 40 feet; run thence North 80 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A13:

That part of the East ½ of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Being at a point 44 feet South of the Northeast of said Block; run thence West 90 feet; thence South 36 feet; thence East 90 feet to the East line of said Block; thence North 36 feet, to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A14:

That part of the East ½ of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at the Northeast corner of said Block; run thence West on the North line of said Block 90 feet; run thence South 44 feet; run thence East 90 feet to the East line of said Block; run thence North 44 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Parcel A15:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the West line of Racine Street at a point 120 feet South from the South line of Thirteenth Street; run thence West 141.29 feet more or less, to land formerly owned by Tostevin and Leroy; thence South 40 feet; thence East to the West line of Racine Street; thence North 40 feet to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

 

Parcel A16:

That part of Block 76, School Section, in Section 16, Town 3 North, Range 23 East, as returned by Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the East line of said Block, being the West line of Racine Street, at a point 200 feet South of the North line of said Block, run thence West 115 feet; thence South 40 feet; thence East 115 feet to the West line of Racine Street; thence North to the place of beginning. Said land being in the City of Racine, County of Racine, and State of Wisconsin.

 

Tax Parcel Number:	276-00-00-08870-001
Property Address:	1328 Racine Street

 

 

PARCEL B:

That part of the Northwest Quarter of Section 19, Township 3, North, Range 23 East, bounded as follows: Begin at a point on the West line of the Northwest Quarter of said Section 19 located North 0°06’30” East 30.00 feet from the West Quarter corner of said Section, said point being the intersection of the West line of said Quarter Section with the North line of Twenty-first Street; run thence East 660.00 feet on the North line of Twenty-first Street; thence North 0°06’30” East 1143.15 feet to the Southerly line of the Chicago, Milwaukee and St. Paul Railroad right of way; thence South 83°34’20” West 664.32 feet on the Southerly line of said right of way to the West line of said Quarter Section; thence South 0°06’30” West 1068.78 feet to the point of beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

AND

 

That part of the Northwest Quarter of Section 19, Township 3 North, Range 23 East, bounded as follows: Commence at a point on the North line of Twenty-first Street located 660.00 feet East of the West line of the Northwest Quarter of said Section 19; run thence North 0°06’30” East 778.00 feet on a line parallel with the West line of said Quarter Section to the point of beginning of this description; continue thence North 0°06’30” East 365.15 feet to the Southerly line of the right of way of the Chicago, Milwaukee and St. Paul Railroad right of way; thence North 83°34’20” East 307.72 feet to the West line of Oregon Street as vacated in a vacation plat recorded in Volume S of Plats on page B in the Racine County Register of Deeds Office; thence South 0°02’ East 399.60 feet on the West line of said Street as vacated to the North line of Twentieth Street as vacated in the aforementioned vacation Plat; thence West 306.72 feet on the North line of Twentieth Street as vacated to the point of beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

AND

 

That part of the Northwest Quarter of Section 19, Township 3 North, Range 23 East, bounded as follows: Begin at a point on the North line of Twenty-first Street located 660.00 feet East of the West line of the Northwest Quarter of said Section 19; run thence North 0°06’30” East 778.00 feet parallel with the West line of said Quarter Section to the North line of Twentieth Street as vacated in a vacation plat recorded in Volume S of Plats on Page B in the Racine County Register of Deeds Office; thence East 106.72 feet to a point 200.00 feet West of the West line of Oregon Street as vacated in the aforementioned vacated plat; thence South 0°02’ East 778.00 feet parallel with the West line of Oregon Street as vacated to the North line of Twenty-first Street; thence West 108.64 feet to the point beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin. Also, that part of the Chicago, Milwaukee, St. Paul & Pacific Railroad right-of-way adjacent to parcels of land recorded in Document No. 633290. Said right of way being bounded on the West by the East line of Ohio Street and bounded on the East by the West line of Oregon Street extended Northerly to the North line of said right-of-way. Said right of way being 932.4 feet, more or less, in length and 119 feet in width. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

 

EXCEPTING THEREFROM lands conveyed for road purposes recorded June 21, 1962, as Document No. 737741, March 28, 1977, as Document No. 996501 and December 4, 2008, as Document No. 2195156.

 

Tax Parcel Number:	276-00-00-23869-001
Property Address:	4600 Twentyfirst Street

 

 

PARCEL C:

Part of Block 75, Section 16, Township 3 North, Range 23 East, as returned by the Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin at the Northwest corner of said Block 75; run thence Easterly in the north line of Block 364 feet, more or less to the Westerly line of the right of way of the Chicago, Milwaukee, St. Paul and Pacific Railroad, thence Southwesterly in the Westerly line of said Railroad right of way to the South line of said Block 75; thence Westerly in the South line of said Block 286.25 feet, more or less, to the Southwest corner of said Block 75; thence Northerly in the West line of said Block 75 a distance of 483.6 feet, more or less, to the place of beginning.

 

EXCEPTING THEREFROM lands conveyed in Warranty Deed recorded August 6, 1996, as Document No. 1548655 and Warranty Deed recorded September 27, 1996, as Document No. 1554360.

 

Tax Parcel Number:	276-00-00-08846-001
Property Address:	1333 Racine Street

 

 

PARCEL D:

That part of Block 69, Section 16, Township 3 North, Range 23 East, as returned by the Appraisers of School and University Lands to the office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin in the South line of said Block at a point 4.91 chains (324.06 feet) East of the Southwest corner of that part of said Block which lies East of Washington Avenue; run thence North 120 feet; thence West 80 feet; thence South 120 feet to the South line of said Block; thence East 80 feet to the place of beginning; excepting the East 40 feet thereof. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

Parcel D1:

That part of the East ¼ of Block 69, Section 16, Township 3 North, Range 23 East, as returned by the Appraisers of School and University lands to the office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin on the South line of said Block, 324.06 feet East of the Southwest corner of that part of said Block East of Washington Avenue; thence North 120 feet; thence West 40 feet; thence South 120 feet; thence East to the place of beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

 

Parcel D2:

That part of Block 69, Section 16, Township 3 North, Range 23 East, as returned by the Appraisers of School and University Lands to the Office of the Secretary of State of the State of Wisconsin, bounded as follows: Begin Four and 91/100 (4.91) chains East of the Southwest corner of that part of said Block which lies East of the United States Road (now Washington Avenue); run thence North 120 feet; run thence East 144.5 feet, more or less, to the East line of said Block; run thence South 120 feet to the South line of said Block; run thence West 144.5 feet, more or less, to the place of beginning. Said land being in the City of Racine, County of Racine, State of Wisconsin.

 

Tax Parcel Number:	276-00-00-8676-000
Property Address:	1212 13th Street

 

 

PARCEL E:

Lots 6, 7, 8, 13, 14, 15, 16, 21, 22, 23, 24, 29, 30, Blake and Fish’s Subdivision of part of Blocks 77, 83 and 84, School Section, Racine, according to the recorded plat thereof, along with vacated Higgins Court, as shown on Vacation Plat recorded as Document No. 935372. Said land being in the City of Racine, County of Racine and State of Wisconsin.

 

Parcel E1:

All that certain piece or parcel of land situated in the City of Racine, in said County of Racine and State of Wisconsin, bounded on the North by Fourteenth Street and on the East by Clark Street, and being part of Block 77, School Section, Section 16 and more particularly described as follows: Begin at the point of intersection of the West line of Clark Street with the North line of the alley running West from Clark Street to Blake Street which is shown on the Plat of Blake and Fish’s Subdivision, recorded in Plat Book “D”, page 29, in Register of Deeds Office for said Racine County, and which point is shown on said Plat and in prior deeds in the chain-of-title, as being 300 feet North of the North line of Fifteenth Street, and 290 feet West of the West line of Racine Street, and from said point of beginning, run thence West along the North line of said alley, a distance of 71 feet, more or less, to an iron stake; thence, run North and parallel to said Clark Street, a distance of 85 feet, more or less, to an iron stake; thence, run East right-angle, a distance of 36 feet, more or less, to an iron stake; thence, run Northward, a distance of 98-7/10 feet, more or less, to the South line of Fourteenth Street at a point which is 30 ½ feet West of the West line of Clark Street; thence, run East along the South line of said Fourteenth Street, 30 ½ feet to the said West line of Clark Street; thence, run South along said West line of Clark Street, a distance of 183 - 6/10 feet to the place of beginning.

 

AND

 

All that certain piece or parcel of land, situated in the City of Racine, in said County of Racine and State of Wisconsin, bounded on the North by Fourteenth Street, and being part of Block No. 77, School Section, in Section 16, and more particularly described as follows: Begin at a point in the South line of Fourteenth Street, which is 65 feet East of the Chicago & Northwestern Railway Company’s right-of-way, and which point of beginning is also 345 feet East of the Northwest corner of said Block No. 77, and from said point of beginning, run thence Southwesterly and parallel with said Chicago, Northwestern Railway Company’s right-of-way, a distance of 213 feet to the Northwesterly boundary line of Blake & Fish’s Subdivision, recorded in Plat Book “D” page 29, in Register of Deeds office for said Racine County, and which said point is marked by an iron stake; thence, run Northeasterly along the said Northwesterly boundary line of Blake & Fish’s Subdivision, to the North line of the alley on said Plat connecting Blake Street with Clark Street, and which said point is 300 feet North of the North line of Fifteenth Street; thence, run East along said North line of said alley to an iron stake, which is 71 feet, more or less, West from the West lien of Clark Street; thence, run North and parallel to said Clark Street, a distance of 85 feet, more or less, to an iron stake; thence, run East at right angles, a distance of 36 feet, more or less, to an iron stake; thence, run Northward, a distance of 98-7/10 feet, more or less, to the said South line of Fourteenth Street at a point which is 30-1/2 fee West of the West line of Clark Street; and thence, run West along the said South line of Fourteenth Street, 62-3/10 feet, more or less, to the place of beginning.

 

 

AND

 

That part of Block 77 in Section 16 as returned by the Appraisers of School and University lands to the office of the Secretary of State of the State of Wisconsin, bounded as follows: Commencing on the North line of said Block, 280 feet East of the Northwest corner of said Block, said point of beginning being on the East line of the right of way of the Chicago and Northwestern Railway, running thence East 65 feet, thence Southerly parallel with the East line of the right-of-way of said railway company to the Northerly line of Blake and Fish’s Subdivision of a part of said Block 77, thence Southwesterly on the Northerly line of said Blake and Fish’s Subdivision to the Easterly line of the right-of-way of said Chicago and Northwestern Railway, and thence Northerly on the Easterly line of said right of way to the place of beginning.

 

Tax Parcel Number:	276-00-00-8914-000
Property Address:	1311 14th Street

 

Exhibit 1.12

 

 

COLLATERAL ASSIGNMENT OF RIGHTS UNDER PURCHASE AGREEMENT

 

THIS COLLATERAL ASSIGNMENT OF RIGHTS UNDER PURCHASE AGREEMENT (this “Collateral Assignment”) has been executed and delivered as of February 14, 2025, by Twin Disc, Incorporated, a Wisconsin corporation (“Borrower”), and Twin Disc Canada Holdings Ltd., a company formed under the laws of the Province of British Columbia (“Assignor”), in favor of Bank of Montreal. (together with its successors and assigns, “Bank”).

 

RECITALS

 

A.    Assignor and each of the Sellers set forth therein (each a “Seller”), have entered into that certain Share Purchase Agreement, dated as of January 31, 2025 (together with all of the schedules attached thereto, the “Purchase Agreement”), pursuant to which Assignor will acquire from Seller, and Seller will sell to Assignor, the Shares (as defined in the Purchase Agreement) in Kobelt Manufacturing Co. Ltd., a company formed under the laws of the Province of British Columbia (the “Company”), pursuant to the terms and conditions of the Purchase Agreement;

 

B.    Assignor is a Wholly-Owned Subsidiary of the Borrower;

 

C.    Borrower and the Company have entered into that certain Credit Agreement with Bank, dated as of February 14, 2025, (as may be amended or restated from time to time, the “Credit Agreement”), pursuant to which Bank will, among other things, extend certain credit facilities to Borrower and Assignor, until Kobelt Amalgamation (as defined in the Credit Agreement) and thereafter to Kobelt Manufacturing Co. Ltd., a company amalgamated under the laws of British Columbia as a result of the Kobelt Amalgamation (“Amalgamated Company”), to cause Assignor to complete the purchase transaction contemplated by the Purchase Agreement;

 

D.    In order to induce Bank to enter into the Credit Agreement, Borrower and the Amalgamated Company have granted to the Bank a security interest in and to all of its tangible and intangible assets pursuant to a Security Agreement and a Canadian Security Agreement (each as defined in the Credit Agreement); and

 

E.    To further induce Bank to enter into the Credit Agreement, Assignor has agreed to collaterally assign to Bank all of Assignor’s Rights and Remedies (as defined herein) with respect to the Purchase Agreement, in accordance with the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the facts set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Assignor and Bank hereby agree as follows:

 

AGREEMENT

 

1.    Defined Terms. Any capitalized term used in this Collateral Assignment which is defined in the Credit Agreement shall have the definition contained in the Credit Agreement, unless otherwise defined herein.

 

 

2.    Collateral Assignment. As additional security for the Obligations, Assignor hereby collaterally assigns and transfers to Bank all of Assignor’s rights, remedies, privileges, and claims with respect to the Purchase Agreement including, without limitation: (i) any right Assignor may have to indemnification from Seller, including, without limitation, pursuant to Section 9 (including the schedules related thereto) of the Purchase Agreement; (ii) rights and remedies with respect to any breach by Seller of any of its representations, warranties, and covenants thereunder including any non-competition, non-solicitation and non-disparagement covenants; and (iii) any rights to payment from Seller under the Purchase Agreement (all of the foregoing collectively referred to as the “Rights and Remedies”). Bank acknowledges and agrees that (a) this Agreement grants no rights to Bank against Seller other than the Rights and Remedies (as expressly described in this Section 2), and (b) solely as to any claim against Seller for any Rights and Remedies, Bank shall be (x) deemed to have accepted and agreed with the due diligence and negotiations undertaken by Assignor in connection with entering into the Purchase Agreement, and (y) bound by such due diligence and such negotiations and the provisions of this Agreement as if undertaken and made by Bank.

 

3.    Enforcement of Rights Prior to Event of Default. Prior to the occurrence of an Event of Default under the Credit Agreement, Assignor shall enforce all Rights and Remedies diligently and in good faith.

 

4.    Enforcement of Rights After Event of Default. Effective from and after the occurrence of an Event of Default under the Credit Agreement, and until such Event of Default is cured or waived, Assignor hereby irrevocably authorizes and empowers Bank, in Bank’s own discretion, to assert, as Bank may deem proper, either directly or on behalf of Assignor, any of the Rights and Remedies which Assignor may from time to time have against Seller; provided that nothing in this Collateral Assignment shall be construed as excusing Assignor from the performance of any of the covenants or other agreements of Assignor contained in the Purchase Agreement and the other documents executed and delivered in connection therewith.

 

5.    Right to Receive Payments and Proceeds. Regardless of the existence of an Event of Default, Assignor hereby irrevocably assigns to Bank the immediate right to receive directly from Seller any and all payments, proceeds, monies, damages and awards arising from the Rights and Remedies; provided that Bank shall not enforce such assignment against Seller unless an Event of Default has occurred and is continuing.

 

6.    Power of Attorney. Assignor hereby irrevocably makes, constitutes, and appoints Bank (and all officers, employees, or agents designated by Bank) as its true and lawful attorney (and agent-in-fact), coupled with an interest, for the purposes of enabling Bank or its agent, upon the occurrence of an Event of Default and until such Event of Default is cured or waived, to assert and collect such claims and to apply such monies in the manner set forth hereinabove.

 

7.    Assignor’s Obligations. Assignor shall keep Bank informed of any changes in all circumstances that could reasonably be expected to materially and adversely affect the Rights and Remedies, and Assignor shall not waive, amend, alter, or modify any of the Rights and Remedies without prior written consent of Bank.

 

 

8.    Continuing Effect. This Collateral Assignment shall continue in effect until the Obligations have been paid and discharged in full in cash, and the Credit Agreement has been terminated.

 

9.    Continuing Performance under Purchase Agreement. Notwithstanding the foregoing, Assignor expressly acknowledges and agrees that it shall remain liable under the Purchase Agreement to observe and perform all of the conditions and obligations in the Purchase Agreement which Assignor is bound to observe and perform, and that neither this Collateral Assignment, nor any action taken pursuant hereto, shall cause Bank to be under any obligation or liability in any respect whatsoever to any observance or performance of any of the representations, warranties, conditions, covenants, agreements, or terms of the Purchase Agreement.

 

10.   Counterparts. This Collateral Assignment may be executed in any number of counterparts, each of which, when executed and delivered, shall be deemed to be an original. All of such counterparts, taken together, shall constitute but one and the same agreement. This Collateral Assignment shall become effective upon the execution of a counterpart of this Collateral Assignment by each of the parties hereto.

 

11.    Governing Law. The validity of this Agreement, the construction, interpretation, and enforcement hereof, and the rights of the parties hereto with respect to all matters arising hereunder or related hereto shall be determined under, governed by, and construed in accordance with the laws of the State of Wisconsin.

 

[Signature Pages Follow]

 

 

IN WITNESS WHEREOF, this Collateral Assignment has been executed and delivered as of the date first set forth above.

 

 

Borrower:

TWIN DISC, INCORPORATED     By:                                              Name: Jeffrey Knutson Title: Vice President – Finance and Chief Financial Officer

 

Assignor:

TWIN DISC CANADA HOLDINGS LTD.     By:                                              Name: Title:

 

 

Bank:

BANK OF MONTREAL     By:__________________________________ Name: Mark Czarnecki Title: Senior Vice President     By:__________________________________ Name: Helen Alvarez-Hernandez Title: Managing Director

 

Exhibit 99.1

 

FOR IMMEDIATE RELEASE:

 

February 18, 2025

 

For media inquiries, please contact:
Jeff Knutson, Vice President – Finance, Chief Financial Officer, Treasurer & Secretary
Phone number: (262) 638-4242
Email: knutson.jeff@twindisc.com

 

TWIN DISC, INC. FINALIZES ACQUISITION OF KOBELT

 

 

MILWAUKEE – Twin Disc, Inc. (NASDAQ: TWIN), a global leader in power transmission technology for marine and land-based applications, announced today the successful completion of its $16.5 million acquisition of Kobelt Manufacturing Co. Ltd. ("Kobelt"), a British Columbia-based company specializing in brake, control and steering systems for industrial and marine end markets.

 

Twin Disc's global presence will expand Kobelt's international reach, while Kobelt will contribute complementary products that diversify and enhance Twin Disc's portfolio in the industrial and marine sectors. Kobelt's extensive after-sales services, combined with its in-house foundry and bronze die casting capabilities featuring precision machining, assembly and testing, ensures complete quality control.

 

For the year ending December 31, 2024, Kobelt delivered approximately $14 million of revenue. The acquisition is expected to be immediately accretive to Twin Disc's U.S. GAAP earnings.

 

"We are excited to welcome Kobelt to the Twin Disc family of brands," stated John H. Batten, President and CEO of Twin Disc. "Acquiring a well-established company with longstanding relationships in 60 countries and a strong reputation that complements the Twin Disc brand. This acquisition expands our product offering further, enabling growth opportunities and partnerships through our global sales and service team."

 

Dave Bockhold, CEO of Kobelt, stated: “Twin Disc is the right fit for Kobelt. The complementary nature of our product lines, manufacturing capabilities, and culture positions us as an integrated systems supplier for the Marine and Industrial sectors."
Bockhold added, "Both organizations' extensive history, knowledge, and expertise will add value and expand opportunities to our combined customer base."

 

 

About Twin Disc, Inc.
Twin Disc, Inc. designs, manufactures and sells marine and heavy-duty, off-highway power transmission equipment. Products offered include marine transmissions, azimuth drives, surface drives, propellers, boat management systems, power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches and control systems. The Company sells its products to customers primarily in the pleasure craft, commercial and military marine markets, as well as in the energy and natural resources, government, and industrial markets. The Company's worldwide sales to domestic and foreign customers are transacted through a direct sales force and a distributor network. For more information, please visit www.twindisc.com.

 

About Kobelt
Kobelt is a Canadian-based manufacturing company with over 60 years of expertise in designing and producing high-quality products for the marine and industrial sectors. Renowned for its history of innovation, Kobelt specializes in propulsion, steering, thrusters, and braking control systems. For more information, please visit www.kobelt.com/

 

Forward-Looking Statements

This press release may contain forward-looking statements as defined by the Securities and Exchange Commission in its rules, regulations and releases. The words "anticipates," "believes," "intends," "estimates," and "expects," or similar anticipatory expressions, usually identify forward-looking statements. The Company intends that such forward-looking statements qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. All forward-looking statements are based on current expectations and are subject to certain risks and uncertainties that could cause actual results or outcomes to differ materially from current expectations. Such risks and uncertainties include the impact of general economic conditions and the cyclical nature of many of the Company's product markets; foreign currency risks and other risks associated with the Company's international sales and operations; the ability of the Company to successfully implement price increases to offset increasing commodity costs; the ability of the Company to generate sufficient cash to pay its indebtedness as it becomes due; and the possibility of unforeseen tax consequences and the impact of tax reform in the U.S. or other jurisdictions. These and other risks are described under the caption "Risk Factors" in Item 1A of the Company's most recent Form 10-K filed with the Securities and Exchange Commission, as supplemented in subsequent periodic reports filed with the Securities and Exchange Commission. Accordingly, the making of such statements should not be regarded as a representation by the Company or any other person that the results expressed therein will be achieved. The Company assumes no obligation and disclaims any obligation to publicly update or revise any forward-looking statements to reflect subsequent events, new information, or otherwise.

 

 

Exhibit 99.2

 

 

CERTAIN INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED BY MEANS OF REDACTING A PORTION OF THE TEXT AND REPLACING IT WITH [***] BECAUSE IT IS BOTH: (I) NOT MATERIAL AND (II) THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.

 

SHARE PURCHASE AGREEMENT

 

AMONG

 

 

KOBELT MANUFACTURING CO. LTD.
as the Company

 

AND

 

TWIN DISC CANADA HOLDINGS LTD.
as the Purchaser

 

AND

 

TWIN DISC INCORPORATED
as Parent Company of the Purchaser

 

AND

 

THE SHAREHOLDERS OF THE COMPANY SET FORTH ON THE SIGNATURE PAGE HERETO,
as the Sellers

 

AND

 

MARK CHESLEY
as the Sellers’ Representative

 

 

February 14, 2025

 

 

TABLE OF CONTENTS

 

Article 1 definitions		2
1.1	Definitions.	2
Article 2 purchase and sale		10
2.1	Purchase and Sale.	10
2.2	Purchase Price.	11
2.3	Closing Date Statement; Payment of Base Purchase Price.	11
2.4	Adjustment of Purchase Price.	12
2.5	Earnout Payment.	14
2.6	Withholding.	16
Article 3 representations and warranties of the sellers		17
3.1	Capacity.	17
3.2	Authorization.	17
3.3	Title to Purchased Shares.	17
3.4	No Other Agreements to Purchase.	17
3.5	Residence of Seller.	17
3.6	No Conflict.	18
3.7	Litigation.	18
3.8	Required Governmental Authorizations and Consents.	18
Article 4 representations and warranties of the company		18
4.1	Organization.	18
4.2	Capitalization.	19
4.3	Subsidiaries.	19
4.4	Absence of Restrictions and Conflicts.	19
4.5	Real Property.	19
4.6	Title to Personal Property; Condition of Assets; Related Matters.	20
4.7	Financial Statements.	20
4.8	No Undisclosed Liabilities.	21
4.9	Absence of Certain Changes.	21
4.1	Legal Proceedings.	23
4.11	Compliance with Laws.	24
4.12	Company Contracts.	24
4.13	Tax Matters.	26
4.14	Employees.	29
4.15	Benefit Plans.	29
4.16	Labour Relations.	31
4.17	Insurance Policies.	31
4.18	Intellectual Property.	32
4.19	Environmental, Health, and Safety Matters.	33
4.2	Transactions with Affiliates.	34
4.21	Customer and Vendor Relations.	34
4.22	Licenses and Permits.	35
4.23	Sensitive Data.	35
4.24	Ethical Practices.	35
4.25	Bank Accounts; Powers of Attorney.	36
4.26	Accounts Receivable.	36
4.27	Brokers, Finders and Investment Bankers.	36

 

 

4.28	Trade Control Laws.	36
Article 5 Representations and warranties of the purchaser		37
5.1	Organization.	37
5.2	Authorization.	37
5.3	Twin Disc Shares.	38
5.4	Absence of Restrictions and Conflicts.	38
5.5	Legal Proceedings.	38
Article 6 covenants		38
6.1	Non‑Competition and Non‑Solicitation Covenants of the Principals.	38
6.2	Confidentiality Covenants of the Principals.	39
6.3	Non‑Disparagement Covenants of the Principals.	40
6.4	Director and Officer Insurance.	40
Article 7 post‑closing covenants		40
7.1	Tax Matters.	40
7.2	Public Announcements.	44
Article 8 Closing		44
8.1	Closing.	44
8.2	Closing Deliverables of the Sellers.	44
8.3	Closing Deliverables of the Purchaser.	46
Article 9 indemnification		46
9.1	Indemnification Obligations of the Sellers.	46
9.2	Indemnification Obligations for the Key Shareholders.	46
9.3	Sellers’ Indemnity – Limitations	48
9.4	Indemnification Obligations of the Purchaser.	49
9.5	Indemnification Procedure.	50
9.6	Survival.	52
9.7	Liability Limits.	52
9.8	Payment of Indemnification Escrow Amount.	53
9.9	Representations and Warranties Insurance	53
9.1	Offset.	54
9.11	Investigations.	54
9.12	Materiality.	54
9.13	Tax Treatment of Indemnification.	55
9.14	Exclusive Remedy.	55
Article 10 miscellaneous provisions		55
10.1	Appointment of Sellers’ Representative.	55
10.2	Notices.	56
10.3	Interpretation.	58
10.4	Accounting Terms.	58
10.5	Assignment.	58
10.6	No Third Party Beneficiaries.	58
10.7	Number; Gender; Currency.	59
10.8	Captions.	59
10.9	Governing Law; Amendment.	59
10.1	Consent to Jurisdiction, Etc.	59
10.11	Severability.	59

 

 

10.12	Counterparts.	60
10.13	Enforcement of Certain Rights.	60
10.14	Waiver.	60
10.15	Integration.	60
10.16	Cooperation Following the Closing.	60
10.17	Transaction Costs.	60
10.18	Schedules.	60

 

  

SHARE PURCHASE AGREEMENT

 

THIS SHARE PURCHASE AGREEMENT (this “Agreement”) made the 14^th day of February, 2025.

 

AMONG:

 

TWIN DISC CANADA HOLDINGS LTD., a company formed under the laws of the Province of British Columbia

 

(the “Purchaser”)

 

AND:

 

TWIN DISC, INCORPORATED a corporation formed under the laws of Wisconsin

 

(“Twin Disc”)

 

AND:

 

KOBELT MANUFACTURING CO. LTD., a company formed under the laws of the Province of British Columbia

 

(the “Company”)

 

AND:

 

each of the Persons set forth on the signature page hereto under the heading “Sellers”

 

(each a “Seller” and collectively, the “Sellers”)

 

AND:

 

MARK CHESLEY an individual residing at [***]

 

(the “Sellers’ Representative”)

 

WHEREAS:

 

A.	The Company is engaged in the business of designing, developing, manufacturing and selling high‑quality products for the maritime and industrial markets (the “Business”);

 

B.	The Sellers own all of the outstanding and issued shares in the capital of the Company, as more fully described in Schedule 2.1; and

 

C.

The Purchaser wishes to purchase from the Sellers, and the Sellers wish to sell to the Purchaser, all of the issued and outstanding shares in the capital of the Company, as more fully described in Schedule 2.1 attached hereto, upon the terms and subject to the conditions set forth in this Agreement,

 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual covenants, agreements and premises herein contained, and other good and valuable consideration (the receipt and sufficiency whereof being hereby acknowledged by each Party), the Parties hereto do hereby covenant and agree as follows:

 

ARTICLE 1
DEFINITIONS

 

1.1	Definitions.

 

For the purposes of this Agreement, the following terms shall have the meaning set forth below:

 

(a)

“111(4)(e) Designation” has the meaning set out in Section 7.1(d);

 

(b)

“Accounting Principles” has the meaning set out in Section 10.4;

 

(c)

“Adjustment Deficit” has the meaning set out in Section 2.4(d);

 

(d)

“Adjustment Escrow Amount” has the meaning set out in Section 2.3(b)(iv);

 

(e)

“Adjustment Escrow Shortfall” has the meaning set out in Section 2.4(d);

 

(f)

“Adjustment Surplus” has the meaning set out in Section 2.4(d);

 

(g)

“Affiliate” means with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person. For purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by Contract or otherwise, and the terms “controlling” and “controlled” have correlative meanings;

 

(h)

“Applicable Share Price” means the arithmetic mean of the daily volume weighted average price per share of the Twin Disc Shares traded on the NASDAQ Stock Market for each of the twenty (20) consecutive trading days immediately preceding the date that the transactions contemplated in this Agreement are publicly announced by Twin Disc and converted into CAD at the Exchange Rate as of the date of this Agreement. For the avoidance of doubt and taking into account that securities can only be obtained in whole, if the calculation of the number of Twin Disc Shares in accordance with the formula herein does not result in an exact number of Twin Disc Shares (in whole), the number of Twin Disc Shares to be issued or transferred to the Sellers in the aggregate shall be rounded to the nearest exact number of Twin Disc Shares (in whole).

 

(i)

“Arbitrator” has the meaning set out in Section 2.4(c);

 

(j)

“ASPE” means Canadian accounting standards for private enterprises;

 

(k)

“Base Purchase Price” has the meaning set out in Section 2.2(a)(i);

 

(l)

“Business Day” means any day, other than a Saturday, Sunday or statutory holiday in the Province of British Columbia, on which commercial banks in Vancouver, British Columbia are open for business;

 

(m)

“CEWS” means the Canada Emergency Wage Subsidy, promulgated under Bill C‑14 and assented to on April 11, 2020, as amended, and any other COVID‑19 related direct or indirect wage or other subsidy offered by any Governmental Entity;

 

 

(n)

“CEWS Returns” means any and all Tax Returns filed or required to be filed or required to be kept on file in respect of CEWS;

 

(o)

“Change of Control Payments” means all amounts payable by the Company to any current or former employee, officer, director, independent contractor, or other service provider in connection with or contingent upon the transactions contemplated by this Agreement or any event related to such transactions, including, without limitation, any termination of employment or service of such employee, officer, director, independent contractor, or other service provider occurring on or before the Closing (including any change in control or sale payments or bonuses, annual bonuses (prorated or otherwise), retention or incentive payments, phantom stock or equity, restricted stock, deferred compensation, severance benefits and other similar payments) and the employer portion of any employment, payroll or other Tax withholdings or similar Taxes thereon to the extent not paid in full prior to the Closing, but excluding Transaction Expenses and any portion of the Purchase Price due to an employee, officer, director, or independent contractor who is also a Seller;

 

(p)

“Closing” means the closing of the purchase and sale of the Purchased Shares contemplated hereby;

 

(q)

“Closing Adjustment Amount” means an amount equal to (A) the amount, if any, by which the Target Working Capital exceeds the Net Working Capital, or (B) the amount, if any, by which the Net Working Capital exceeds the Target Working Capital;

 

(r)

“Closing Date” means February 14, 2025;

 

(s)

“Closing Date Cash Amount” means, as of the Effective Time, the aggregate amount of cash and cash equivalents of the Company calculated on a combined basis (comprising solely marketable securities, liquid investments, and deposits in banks or other financial institution accounts of any kind) which can immediately be converted into cash as of such time; provided that (A) Closing Date Cash Amount shall be calculated net of issued but uncleared cheques, drafts and wire transfers, and (B) Closing Date Cash Amount shall not include (1) any deposits with third parties aside from banks or other financial institutions (including security deposits), (2) amounts collateralizing any letter of credit obligations or supporting performance bonds or other similar arrangements, (3) all refundable customer deposits, advances or prepayments (4) any other cash or cash equivalents not freely usable by the Company, and (5) any cheques, drafts and wire transfers received by the Company but not yet deposited;

 

 

(t)

“Closing Date Indebtedness” means all of the following liabilities or obligations of the Company as of immediately prior to the Closing and calculated on a combined basis in accordance with the Accounting Principles (without duplication): (A) in respect of borrowed money or represented by notes, bonds, debentures or other similar instruments; (B) for deferred purchase price of property or services (including all obligations under any acquisition agreements pursuant to which the Company is, or may be, responsible for any earn‑out, note payable or other contingent payments); (C) in respect of letters of credit, fidelity bonds, surety bonds, performance bonds and bankers’ acceptances (including contingent reimbursement obligations or any other commitments assuring a creditor against loss), but only to the extent drawn or called prior to the Closing Date; (D) in respect of prepaid or deferred revenue not included as a current liability in the calculation of Net Working Capital; (E) under hedging, interest rate swap, derivative or similar agreements (determined on the basis of actual, not notional, obligations) to the extent required to be shown as liabilities on the financial statements of the Company pursuant to the Accounting Principles; (F) under finance leases; (G) in respect of any compensation, bonuses, retention or incentive payments, phantom stock or equity, restricted stock, deferred compensation, severance benefits and other similar payments that are accrued, owed or otherwise payable to or on behalf of any current or former employee, officer, director, independent contractor or other service provider, including, without limitation, any contributions owed to any Benefit Plan, but excluding any such liabilities taken into account in the calculation of Net Working Capital, any Change in Control Payments, and the employer portion of any employment, payroll or other Tax withholdings or similar Taxes thereon; (H) guarantees with respect to the obligations or liabilities described in clauses (A) through (G); (I) in respect of due and payable but unpaid income Taxes for the Pre‑Closing Tax Period; (J) in respect of declared but unpaid dividends or dividends that may arise as the result of the transactions contemplated herein or distributions, excluding any such liabilities taken into account in the calculation of Net Working Capital and excluding any capital dividends declared or deemed to have been declared in connection with making the 111(4)(e) Designation, or as otherwise mutually agreed in writing between the parties; (K) any accrued interest on the obligations or liabilities described in clauses (A) through (J) and any prepayment premiums or penalties or similar expenses related to any of the foregoing would be payable if such obligations or liabilities were paid in full as of the Closing Date; and (L) in respect of any matters set out in Section 4.8 to the extent not otherwise included above and not taken into account in the calculation of Net Working Capital or otherwise adjusted for on the Closing Date Statement. In no event shall Closing Date Indebtedness include any liabilities taken into account in the calculation of Net Working Capital or otherwise adjusted for on the Closing Date Statement;

 

(u)

“Closing Date Statement” has the meaning set out in Section 2.3(a);

 

(v)

“Company” has the meaning ascribed in the Preamble;

 

(w)

“Company Contract” has the meaning set out in Section 4.12(a);

 

(x)

“Company Intellectual Property” means the Intellectual Property (including Software) that is owned by the Company, other than the Company Licensed Intellectual Property;

 

(y)

“Company Licensed Intellectual Property” means the Intellectual Property that is licensed to the Company;

 

(z)

“Company Registered Intellectual Property” has the meaning set out in Section 4.18(a);

 

(aa)

“Contract” has the meaning set out in Section 4.12(a);

 

(bb)

“Control Date” means January 1, 2015;

 

(cc)

“COVID‑19” means SARS‑CoV‑2 or COVID‑19, and any evolution or mutations thereof;

 

(dd)

“Disputed Earnout Items” has the meaning set out in Section 2.5(c);

 

(ee)

“Disputed Items” has the meaning set out in Section 2.4(b);

 

(ff)

“Earnout Payment” has the meaning set out in Section 2.5(a);

 

(gg)

“Earnout Period” has the meaning set out in Section 2.5(a);

 

 

(hh)

“EBITDA” means, for the applicable Earnout Period, the net income of the Company for such period, calculated on a combined basis in accordance with the Accounting Principles (including without limitation the capitalization of expenses, including transport, office, information technology, property and/or warehouse equipment when required by the Accounting Principles) and adjusted (positively or negatively) to reflect the exclusion of each of the following items for such period (without duplication), calculated on a combined basis: (A) total interest expense of the Company; (B) total interest income of the Company; (C) provision for income Taxes based on income of the Company; (D) all depreciation and amortization expense of the Company; (E) any exceptional gains or losses, extraordinary gains or losses, or any other non‑recurring items of gain or loss incurred by the Company during such period, including but not limited to those in respect of (1) any recoveries of previously written off bad debts (other than bad debts written off during such period), and (2) any losses or any other non‑recurring items of gain or loss incurred by the Company; and (F) all purchase accounting and similar adjustments of the Company resulting from the transactions contemplated by this Agreement. Solely for illustrative purposes, a sample calculation of EBITDA is attached hereto as Exhibit “A”. Such example shall serve as the basis of methodology for calculating EBITDA;

 

(ii)

“Effective Time” has the meaning set out in Section 8.1;

 

(jj)

“Environmental Laws” has the meaning set out in Section 4.19(a);

 

(kk)

“Escrow Agent” means Harper Grey LLP;

 

(ll)

“Escrow Agreement” has the meaning set out in Section 2.3(b)(iv);

 

(mm)

“Estimated Closing Adjustment Amount” has the meaning set out in Section 2.3(a);

 

(nn)

“Fair Market Value” means the highest price, expressed in terms of money, that a property would bring, in an open and unrestricted market, between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other;

 

(oo)

“Final Closing Adjustment Amount” has the meaning set out in Section 2.4(c);

 

(pp)

“Final Closing Adjustment Statement” has the meaning set out in Section 2.4(c);

 

(qq)

“Final Earnout Statement” means the Preliminary Earnout Statement as finally determined pursuant to Section 2.5(c);

 

(rr)

“Financial Statements” has the meaning set out in Section 4.7;

 

(ss)

“Fundamental Representations” means each of the representations and warranties set out in Section 3.1 (Capacity), Section 3.2 (Authorization), Section 3.3 (Title to Purchased Shares), Section 3.4 (No Other Agreements to Purchase), Section 3.5 (Residence of Seller), Section 3.6 (No Conflict), Section 3.7 (Litigation), Section 3.8 (Required Governmental Authorizations and Consents), Section 4.1 (Organization), Section 4.2 (Capitalization), Section 4.4 (Absence of Restrictions and Conflicts), Section 4.6 (Title to Personal Property; Related Matters), Section 4.13 (Tax Matters), Section 4.15 (Benefit Plans), Section 4.19 (Environmental, Health and Safety Matters), and Section 4.27 (Brokers, Finders and Investment Bankers);

 

 

(tt)

“GAAP” means generally accepted accounting principles in Canada for private enterprises, and for greater certainty includes ASPE;

 

(uu)

“General Cap” has the meaning set out in Section 9.3;

 

(vv)

“Governmental Entity” means any federal, provincial, state, local or foreign government or any court, administrative or regulatory agency or commission or other governmental authority or agency or political subdivision thereof;

 

(ww)

“Hazardous Materials” means any waste, pollutant, contaminant, hazardous substance, toxic, ignitable, reactive or corrosive substance, hazardous waste, special waste, industrial substance, by‑product, process intermediate product or waste, petroleum or petroleum‑derived substance or waste, chemical liquids or solids, liquid or gaseous products, or any constituent of any such substance or waste, the use, handling or disposal of which by the Company is in any way governed by or subject to any applicable Environmental Law;

 

(xx)

“Indemnification Escrow Amount” has the meaning set out in Section 2.3(b)(iv);

 

(yy)

“Indemnified Party” has the meaning set out in Section 9.4(a);

 

(zz)

“Indemnifying Party” has the meaning set out in Section 9.4(a);

 

(aaa)

“Intellectual Property” means any or all of the following and all rights, arising out of or associated therewith: (i) all Canadian, United States, international and foreign patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations‑in‑part thereof; (ii) all inventions (whether patentable or not), invention disclosures, improvements, proprietary information, know‑how, technology, technical data, customer lists, trade secrets and all documentation relating to any of the foregoing throughout the world; (iii) all copyrights and works of authorship, whether or not copyrightable, and all copyright registrations and applications therefor, and all other rights corresponding thereto throughout the world; (iv) all industrial designs and any registrations and applications therefor throughout the world; (v) all internet uniform resource locators, domain names, trade names, logos, slogans, designs, common law trademarks and service marks, trademark and service mark registrations and applications therefor throughout the world; (vi) all Software, databases and data collections and all rights therein throughout the world; (vii) all moral and economic rights of authors and inventors, however denominated, throughout the world; and (viii) any similar or equivalent rights to any of the foregoing anywhere in the world;

 

(bbb)

“ITCs” has the meaning set out in Section 4.13(u);

 

(ccc)

“Key Shareholders” means Mark Chesley and Dave Bockhold;

 

(ddd)

“Knowledge” means, with respect to the Company, the actual knowledge of the Key Shareholders, or knowledge which should have been acquired by the Key Shareholders with reasonable investigation of the Company’s employees, consultants, books or records;

 

(eee)

“Laws” means any statute, law, by‑law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, writ, injunction, decision, award, directive, other requirement or rule of law of any Governmental Entity having the force of law and, to the extent that they have the force of law, standards, policies, guidelines, notices and protocols of any Governmental Entity;

 

 

(fff)

“Leased Real Property” means all leasehold or subleasehold estates and other rights to use or occupy, any land, buildings, improvements, fixtures or other interest in real property;

 

(ggg)

“Leases” has the meaning set out in Section 4.5;

 

(hhh)

“Licenses” has the meaning set out in Section 4.22;

 

(iii)

“Liens” means any lien (statutory or other), pledge, security interest, charge, claim, condition, mortgage, easement, encroachment, right of way, right of first refusal or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any attribute of ownership;

 

(jjj)

“Losses” means all claims, liabilities, obligations, losses, costs, expenses, Taxes, penalties, fines and judgments (at equity or at law) and damages whenever arising or incurred (including, without limitation, amounts paid in settlement, costs of investigation and reasonable attorneys’ fees and expenses);

 

(kkk)

“Material Adverse Effect” means any event, occurrence, fact, condition, or change that is materially adverse to (i) the assets, liabilities, results of operations or the Business, taken as a whole, or (ii) the ability of the Sellers to consummate the transactions contemplated hereby; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition, or change, directly or indirectly, arising out of or attributable to: (A) general economic or political conditions; (B) conditions generally affecting the industries in which the Company or the Business operates; (C) any changes in financial or securities markets in general; (D) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (E) any action required or permitted by this Agreement, except with respect to the consents set forth on Schedule 4.12(b); (F) any changes in applicable Laws; or (G) the public announcement, pendency or completion of the transactions contemplated by this Agreement; (H) failure to meet internal or published projections, forecasts, or revenue or earning predictions for any period; (I) natural disasters, weather conditions, epidemics, pandemics, disease outbreaks, public health emergencies, or other force majeure events; or (J) changes requested by or consented to by the Purchaser, regardless of whether permitted or required under the Agreement; provided further, however, that any event, occurrence, fact, condition or change referred to in clauses (A) through (D) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur to the extent that such event, occurrence, fact, condition or change has a disproportionate effect on the Business compared to other participants in the industry in which the Company operates;

 

(lll)

“Net Working Capital” means (A) the aggregate amount of current assets of the Company, and calculated on a combined basis, minus (B) the aggregate amount of current liabilities of the Company specifically as set out in the example calculation set forth on Exhibit “B” hereto, and calculated on a combined basis (excluding any item of Closing Date Indebtedness, and Transaction Expenses), in each case determined as of the Effective Time in accordance with the Accounting Principles and the policies, practices and methodologies applied in the preparation of the example calculation set forth on Exhibit “B” hereto (including any deviations from the Accounting Principles set out therein);

 

(mmm)

“Party” means any of the Purchaser, the Sellers, and the Company individually, and “Parties” means all of them collectively;

 

 

(nnn)

“PCI DSS” means the information security standard maintained by the PCI Security Standards Council and applicable to organizations that handle payment and/or personal information;

 

(ooo)

“Permitted Liens” means, collectively, (i) Liens for Taxes not yet due and payable, (ii) statutory liens of landlords and liens of mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of business consistent with past practice or amounts that are not delinquent and which are not, individually or in the aggregate, material to the Business; or (iii) easements, rights of way, zoning ordinances and other similar encumbrances affecting the Leased Real Property which are registered against title and are not, individually or in the aggregate, material to the Business;

 

(ppp)

“Persons” means any individual, corporation, partnership, joint venture, trust, unincorporated organization or Governmental Entity;

 

(qqq)

“Pre‑Closing Tax Period” has the meaning set out in Section 7.1(b);

 

(rrr)

“Preliminary Closing Adjustment Statement” has the meaning set out in Section 2.4(a);

 

(sss)

“Preliminary Earnout Statement” has the meaning set out in Section 2.5(b);

 

(ttt)

“Principals” means each of David L. Bockhold, Mark Chesley, Dean Allan Yule, and Heiko Epkens;

 

(uuu)

“Purchase Price” has the meaning set out in Section 2.2(a);

 

(vvv)

“Purchased Shares” means all of the issued and outstanding shares in the capital of the Company, as more fully described in Schedule 2.1 attached hereto;

 

(www)

“Purchaser” has the meaning ascribed in the Preamble;

 

(xxx)

“Purchaser Ancillary Documents” has the meaning set out in Section 5.2;

 

(yyy)

“Purchaser Indemnified Parties” has the meaning set out in Section 9.1;

 

(zzz)

“Purchaser Losses” has the meaning set out in Section 9.1;

 

(aaaa)

“R&W Costs” has the meaning set out in Section 9.9(b);

 

(bbbb)

“R&W Insurance” has the meaning set out in Section 9.9(a)(i);

 

(cccc)

“R&W Insurer” has the meaning set out in Section 9.9(a)(i);

 

(dddd)

“R&W Policy” has the meaning set out in Section 9.9(a)(iii);

 

(eeee)

“Related Agreement” has the meaning set out in Section 10.5;

 

(ffff)

“Releases” has the meaning set out in Section 8.2(j);

 

(gggg)

“Resignations” has the meaning set out in Section 8.2(i);

 

(hhhh)

“Retention Amount” has the meaning set out in Section 9.9(a)(i);

 

 

(iiii)

“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by Canadian or any other Governmental Entity, including those under the Special Economic Measures Act (Canada), United Nations Act (Canada) or Justice for Victims of Corrupt Foreign Officials Act (Canada) and regulations thereto or administered by Global Affairs Canada;

 

(jjjj)

“Seller Indemnified Parties” has the meaning set out in Section 9.3;

 

(kkkk)

“Seller Losses” has the meaning set out in Section 9.3;

 

(llll)

“Sellers” has the meaning ascribed in the Preamble;

 

(mmmm)

“Sellers’ Representative” has the meaning ascribed in the Preamble;

 

(nnnn)

“Sellers’ RWI Retention Allocation” has the meaning set out in Section 9.3(a);

 

(oooo)

“Sellers’ Solicitors” means DLA Piper (Canada) LLP;

 

(pppp)

“Sellers Ancillary Documents” has the meaning set out in Section 3.2;

 

(qqqq)

“Sensitive Data” means accountholder or cardholder data, sensitive authentication data that must be protected in accordance with PCI DSS requirements, any information or data that alone or together with any other data or information relates to an identified or identifiable natural person and any other information or data considered to be personally identifiable information or nonpublic personal information under any other applicable Laws;

 

(rrrr)

“Software” means any computer software program, together with any error corrections, updates, modifications, or enhancements thereto, in both machine‑readable form and human‑readable form, including all comments, documents and any procedural code;

 

(ssss)

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, fifty percent (50%) of more of the total voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, fifty percent (50%) or more of the membership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a fifty percent (50%) or more ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated fifty percent (50%) or more of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity;

 

(tttt)

“Straddle Period” has the meaning set out in Section 7.1(c);

 

(uuuu)

“Target Working Capital” means an amount equal to Eight Million Two Hundred Thousand dollars ($8,200,000.00);

 

 

(vvvv)

“Tax” or “Taxes” means any and all federal, provincial, state, local or foreign taxes, charges (including customs duties or fines), fees, levies, imposts, duties or other similar assessments in the nature of a tax, imposed by or payable to any Governmental Entity, as may be adjusted for the receipt by the Company of any Tax credit (including but not limited to SRED credits), and including any gross income, net income, alternative or add‑on minimum, franchise, profits or excess profits, gross receipts, estimated, capital, goods, services, documentary, use, transfer, ad valorem, business rates, value added, sales (for avoidance of doubt, including British Columbia provincial sales tax), customs, real or personal property, escheat, unclaimed property, share capital, license, payroll, withholding or back‑up withholding, employment, social security, workers’ compensation, any amounts received in respect of the CEWS as a deemed overpayment of Taxes pursuant to section 125.7 of the Tax Act, unemployment compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, occupancy, gains and environmental taxes, together with any interest, penalties, fines, related liabilities or additions to tax or additional amounts imposed with respect thereto;

 

(wwww)

“Tax Act” means the Income Tax Act (Canada);

 

(xxxx)

“Tax Return” has the meaning set out in Section 4.13(b);

 

(yyyy)

“Territory” means the United States of America, Canada, and any other country, region, territory, or jurisdiction where, on the date of this Agreement, the Company conducts business activities, or has entered into any agreements, or arrangements, including but not limited to, the sale of goods and services, distribution agreements, or any other agreements in connection with the Business;

 

(zzzz)

“Third‑Party Liability” has the meaning set out in Section 9.5(d)(i);

 

(aaaaa)

“Threshold Amount” has the meaning set out in Section 9.3(a);

 

(bbbbb)

“Trade Control Laws” means import and export controls, controlled goods, customs, and anti‑boycott Laws;

 

(ccccc)

“Transaction Expenses” means all legal, accounting, financial advisory and other third‑party advisory or consulting fees and expenses incurred by the Company or the Sellers in connection with this Agreement and the transactions contemplated hereby and not paid prior to the Effective Time, including but not limited to, fifty percent (50%) of the R&W Costs, but excludes any Indebtedness and current liabilities included in the calculation of Net Working Capital;

 

(ddddd)

“Twin Disc” has the meaning ascribed in the Preamble; and

 

(eeeee)

“Twin Disc Shares” means common shares of Twin Disc, Incorporated (subject to appropriate adjustment in the event of any share dividend, share split, combination, or other similar recapitalization with respect to such shares), and each a “Twin Disc Share”.

 

ARTICLE 2
PURCHASE AND SALE

 

2.1	Purchase and Sale.

 

Subject to the terms and conditions of this Agreement, at the Closing, the Sellers agree to sell, transfer and deliver to the Purchaser, free and clear of all Liens, and the Purchaser agrees to purchase and acquire from the Sellers, the Purchased Shares and all other equity interests in the Company individually set forth on Schedule 2.1 hereto.

 

 

2.2	Purchase Price.

 

(a)

Subject to adjustments pursuant to Section 2.3 and Section 2.4, the aggregate amount to be paid by the Purchaser to the Sellers for the Purchased Shares (the “Purchase Price”) shall be:

 

(i)

an amount equal to Twenty‑Three Million dollars ($23,000,000.00) (the “Base Purchase Price”); and

 

(ii)

the right to receive the Earnout Payment (which shall be payable in accordance with Section 2.5).

 

(b)

The Parties agree that the Base Purchase Price will be allocated to the Purchased Shares as set forth in Exhibit “H”. The Earnout Payment and any and all adjustments to the Purchase Price, if any, will be allocated to the Purchased Shares on the same basis as set forth in Exhibit “H”.

 

(c)

Each of the Sellers acknowledges and agrees that: (i) the allocation of the Purchase Price set forth in this Agreement is based upon an equitable allocation of the Purchase Price as agreed to among the Sellers; (ii) each Seller has made his/her/its decision to sell such Seller’s Purchased Shares for the Purchase Price set out in Section 2.2(b) based upon its own independent investigation and without any reliance upon the Company or the Purchaser; and (iii) that the payment of the Purchase Price by the Purchaser to the Sellers’ Solicitors, as contemplated hereunder, constitutes the full and final payment of all amounts owing to each such Seller in respect of the Purchased Shares by the Purchaser and the Company, and their respective successors and assigns, and that each Seller will have no further right to any distribution, dividend, appreciation or other payment or value related to the Purchased Shares (other than the Earnout Payment), after the sale of the Purchased Shares to the Purchaser.

 

2.3	Closing Date Statement; Payment of Base Purchase Price.

 

(a)

Not less than five (5) Business Days prior to the Closing Date, the Sellers shall deliver to the Purchaser a statement (the “Closing Date Statement”) prepared in accordance with the Accounting Principles and the example calculation of Net Working Capital set forth in Exhibit “B” which sets forth a good faith detailed estimate (including underlying calculations) of (i) the Base Purchase Price; (ii) the Change of Control Payments; (iii) the Closing Date Indebtedness; (iv) the Transaction Expenses; (v) the estimated Net Working Capital, and (vi) the Closing Date Cash Amount. The Sellers shall cause the Company to provide the Purchaser with adequate supporting documentation requested by the Purchaser to assess the reasonableness of such estimates and to make any adjustments reasonably requested by the Purchaser. Attached to the Closing Date Statement shall be (A) copies of the payoff letters delivered in accordance with Section 8.2(b) with respect to the Closing Date Indebtedness, and (B) written documentation, in form and substance reasonably satisfactory to the Purchaser, that confirms that, upon payment of the respective amounts for Change of Control Payments or Transaction Expenses specified in the Closing Date Statement, each such payee shall have been paid in full for all Change of Control Payments or Transaction Expenses, as applicable, in accordance with Section 8.2(d). The Purchaser shall prepare a calculation of the estimated Closing Adjustment Amount (the “Estimated Closing Adjustment Amount”) based on the Closing Date Statement, provided that if the Estimated Closing Adjustment Amount is less than $100,000 (either positive or negative), the Estimated Closing Adjustment Amount will be deemed to be zero for the purposes of the Closing Date Statement. The Estimated Closing Adjustment Amount shall be subject to adjustment following the Closing pursuant to Section 2.4 hereof.

 

 

(b)

On the Closing Date, the Purchaser shall:

 

(i)

on behalf of the Company, pay or cause to be paid to the Sellers’ Solicitors who, in turn, shall undertake to pay to the applicable lenders the amounts required by each lender’s applicable payoff letter(s) delivered in accordance with Section 8.2(b) with respect to the Closing Date Indebtedness to payout and legally obligate each such lender, respectively, to discharge any existing financial charges charging any assets of the Company and provide proof of such discharge to the Sellers’ Solicitors within a reasonable period of time;

 

(ii)

on behalf of the Company, pay or cause to be paid to the Sellers’ Solicitors who, in turn, shall undertake to pay to the applicable payee(s) the aggregate amount of the Change of Control Payments (net of applicable tax withholdings) set forth in the Closing Date Statement, to the extent due and payable at that time, with any remaining amounts to be paid when due after the Closing Date, in accordance with the terms of the agreements under which such Change of Control Payments may become due;

 

(iii)

on behalf of the Company, pay or cause to be paid to the Sellers’ Solicitors who, in turn, shall pay to the applicable payee(s) the aggregate amount of the Transaction Expenses set forth in the Closing Date Statement;

 

(iv)

deposit or cause to be deposited the sums of: (A) Two-Hundred and Fifty Thousand dollars ($250,000.00) (the “Adjustment Escrow Amount”); and (B) Fifty-Seven Thousand and Five Hundred dollars ($57,500) (the “Indemnification Escrow Amount”) with the Escrow Agent, which the Adjustment Escrow Amount and the Indemnification Escrow Amount shall be held and released in accordance with this Agreement and the terms and conditions of the escrow agreement in substantially the form attached hereto as Exhibit “C” (the “Escrow Agreement”); and

 

(v)

pay or cause to be paid to the Sellers’ Solicitors, in trust, on behalf of the Sellers, an aggregate amount equal to (A) the Base Purchase Price, minus (B) the payments made in accordance with Sections 2.3(b)(i), 2.3(b)(ii), 2.3(b)(iii), and 2.3(b)(iv) above, and plus or minus (C) the Estimated Closing Adjustment Amount.

 

(c)

All payments required under Section 2.3(b) above shall be made by the wire transfer of immediately available funds to such bank account(s) as shall be designated in writing by the recipient(s) at least three (3) Business Days prior to the Closing Date.

 

2.4	Adjustment of Purchase Price.

 

(a)

Within ninety (90) days following the Closing Date, the Purchaser shall prepare or cause to be prepared and deliver to the Sellers a calculation of the Net Working Capital, the Closing Date Cash Amount, the Closing Date Indebtedness, the Change of Control Payments, the Transaction Expenses and the final Closing Adjustment Amount (the “Preliminary Closing Adjustment Statement”), provided that if the final Closing Adjustment Amount is less than $100,000 (either positive or negative), the final Closing Adjustment Amount will be deemed to be zero for the purposes of the Preliminary Closing Adjustment Statement and no adjustment will be made unless and until the final Closing Adjustment Amount exceeds $100,000 (either positive or negative).

 

 

(b)

The Sellers shall have thirty (30) days following receipt of the Preliminary Closing Adjustment Statement during which to notify the Purchaser of any dispute of any item contained in the Preliminary Closing Adjustment Statement, which notice shall be in writing and shall set forth in reasonable detail the basis for such dispute (the “Disputed Items”). If the Sellers do not notify the Purchaser of any Disputed Items within such thirty (30) day period, the Preliminary Closing Adjustment Statement shall be deemed to be the Final Closing Adjustment Statement. The Purchaser and the Sellers shall cooperate in good faith to resolve any Disputed Items as promptly as possible, and upon such resolution, the Final Closing Adjustment Statement shall be prepared in accordance with the agreement of the Purchaser and the Sellers.

 

(c)

If the Purchaser and the Sellers are unable to resolve any Disputed Items within fifteen (15) days (or such longer period as the Purchaser and the Sellers shall mutually agree in writing) of notice of a dispute, the Parties shall engage, Smythe LLP, being a recognized independent accounting firm (the “Arbitrator”) to resolve all issues having a bearing on such dispute and such resolution shall be final and binding on the Parties. The Arbitrator shall only decide the specific items under dispute by the Parties, and its decision for each of the Disputed Items must be within the range of values assigned to each such item in the Preliminary Closing Adjustment Statement and the Disputed Items, respectively, and the Arbitrator shall further limit its review to whether the Preliminary Closing Adjustment Statement or any component thereof contained mathematical errors and to whether the Preliminary Closing Adjustment Statement or any component thereof was calculated in accordance with this Agreement and the Accounting Principles. The Parties shall cooperate in good faith to assist the Arbitrator in connection with its work and to provide any information reasonably requested by the Arbitrator in connection therewith as promptly as possible. The Arbitrator shall use commercially reasonable efforts to complete its work within forty‑five (45) days of its engagement. The expenses of the Arbitrator shall be borne and paid 50% by the Sellers and 50% by the Purchaser. The calculation of the Net Working Capital as finally determined pursuant to this Section 2.4(c) is referred to herein as the “Final Closing Adjustment Statement” and the amount of the Closing Adjustment Amount set forth on the Final Closing Adjustment Statement is referred to herein as the “Final Closing Adjustment Amount”.

 

(d)

Within five (5) Business Days after the determination of the Final Closing Adjustment Statement in accordance with this Section 2.4, (i) if the Final Closing Adjustment Amount is greater than the Estimated Closing Adjustment Amount (such difference being referred to herein as the “Adjustment Surplus”), then (A) the Purchaser and the Sellers shall issue joint written instructions to the Escrow Agent to release the entire Adjustment Escrow Amount to the Sellers, and (B) the Purchaser shall pay to the Sellers’ Representative, on behalf of the Sellers, an amount equal to the Adjustment Surplus, or (ii) if the Estimated Closing Adjustment Amount is greater than the Final Closing Adjustment Amount (such difference being referred to herein as the “Adjustment Deficit”), then the Purchaser and the Sellers shall issue joint written instructions to the Escrow Agent to release (A) an amount equal to the Adjustment Deficit from the Adjustment Escrow Amount to the Purchaser, and (B) the balance, if any, of the Adjustment Escrow Amount (after release to the Purchaser of the amount set forth in the preceding clause (ii)(A)) to the Sellers; provided, however, if the Adjustment Escrow Amount is less than the Adjustment Deficit (such shortfall being referred to herein as the “Adjustment Escrow Shortfall”), then (x) the Purchaser and the Sellers shall issue joint written instructions to the Escrow Agent to release the entire Adjustment Escrow Amount to the Purchaser and (y) the Sellers shall pay to the Purchaser an amount equal to the Adjustment Escrow Shortfall. Any payment required under this Section 2.4(d) shall be made by wire transfer of immediately available funds to such bank account(s) as shall be designated in writing by the Sellers or the Purchaser, as applicable, at least three (3) Business Days prior to the applicable payment date and shall be treated as an adjustment to the Purchase Price by the Parties for Tax purposes. In the event the Sellers fail to pay to the Purchaser an amount equal to the Adjustment Escrow Shortfall within five (5) Business Days after the determination of the Final Closing Adjustment Statement in accordance with this Section 2.4, the Purchaser shall have the right, in its sole and absolute discretion, to set‑off, reduce and offset the Earnout Payment by the amount of the Adjustment Escrow Shortfall if the Sellers’ failure to pay is continuing at the time of payment of the Earnout Payment.

 

 

2.5	Earnout Payment.

 

(a)

Subject to the terms and conditions of this Section 2.5, following the Closing Date, if the Company exceeds a minimum EBITDA of Four Million dollars ($4,000,000) for the period commencing on January 1, 2025 and ending on December 31, 2025 (the “Earnout Period”), the Sellers shall be entitled to receive an amount equal to three dollars ($3.00) for every dollar of EBITDA in excess of Four Million dollars ($4,000,000) (the “Earnout Payment”), provided that the maximum Earnout Payment payable under this Section 2.5 shall be Four Million dollars ($4,000,000). For the avoidance of doubt, the calculation of EBITDA shall be determined in accordance with Exhibit “A” and the Accounting Principles.

 

(b)

Within sixty (60) days after the end of the Earnout Period, the Purchaser shall prepare and deliver to the Sellers a calculation (the “Preliminary Earnout Statement”) of EBITDA for the Earnout Period.

 

(c)

The Sellers shall have fifteen (15) days following receipt of the Preliminary Earnout Statement during which to notify the Purchaser of any dispute to the Earnout Payment set forth on such Preliminary Earnout Statement, which notice shall be in writing and shall set forth in reasonable detail the basis for such dispute (the “Disputed Earnout Items”). If the Sellers do not notify the Purchaser of any Disputed Earnout Items within such fifteen (15) day period, the Preliminary Earnout Statement shall be deemed to be the Final Earnout Statement. The Purchaser and the Sellers shall cooperate in good faith to resolve any Disputed Earnout Items as promptly as possible, and upon such resolution, the Final Earnout Statement shall be prepared in accordance with the agreement of the Purchaser and the Sellers. The Purchaser shall pay the Sellers any amounts, or issue or cause to be issued the necessary Twin Disc Shares, required to be paid or issued, as applicable, pursuant to this Section 2.5, on or before March 31, 2026.

 

(d)

If the Purchaser and the Sellers are unable to resolve any Disputed Earnout Items within fifteen (15) days (or such longer period as the Purchaser and the Sellers shall mutually agree in writing) of notice of a dispute, the Parties shall engage the Arbitrator to resolve all issues having a bearing on such dispute and such resolution shall be final and binding on the Parties. The Arbitrator shall only decide the specific items under dispute by the Parties, and its decision for each of the Disputed Earnout Items must be within the range of values assigned to each such item in the Preliminary Earnout Statement and the Disputed Earnout Items, respectively, and the Arbitrator shall further limit its review to whether the Preliminary Earnout Statement or any component thereof contained mathematical errors and to whether the Preliminary Earnout Statement or any component thereof was calculated in accordance with this Agreement and the Accounting Principles (except to the extent, if applicable, that the calculation of Net Working Capital deviates from the Accounting Principles). The Parties shall cooperate in good faith to assist the Arbitrator in connection with its work and to provide any information reasonably requested by the Arbitrator in connection therewith as promptly as possible. The Arbitrator shall use commercially reasonable efforts to complete its work by March 31, 2026. The expenses of the Arbitrator shall be paid by the Sellers, on the one hand, and the Purchaser, on the other hand, based upon the percentage that the amount actually contested but not awarded to the Sellers or the Purchaser, respectively, bears to the aggregate amount actually contested by or on behalf of the Sellers and the Purchaser.

 

 

(e)

Within five (5) Business Days after the determination of the Final Earnout Statement in accordance with this Section 2.5, the Purchaser shall pay to the Sellers’ Representative, on behalf of the Sellers, an amount equal to the Earnout Payment (if any) for the applicable Earnout Period as set forth on the Final Earnout Statement (net of the aggregate amount of any Change of Control Payments due and payable with respect to such Earnout Payment (plus the employer portion of any employment, payroll or other Tax withholdings or similar Taxes thereon), which the Purchaser, on behalf of the Company, shall pay or cause to be paid to the applicable payee(s) contemporaneously with the payment of the Earnout Payment). Any payment required under this Section 2.5 shall be made in by wire transfer of immediately available funds to such bank account(s) as shall be designated in writing by the Sellers at least three (3) Business Days prior to the applicable payment date; provided, however, any Change of Control Payments due and payable with respect to such Earnout Payment shall be paid through payroll of the Company, net of any applicable income, employment, payroll or other Tax withholdings or similar Taxes thereon.

 

(f)

The Purchaser shall have the option to cause Twin Disc to pay the Sellers the Earnout Payment in (i) cash, or (ii) up to fifty percent (50%) of the Earnout Payment in Twin Disc Shares and the remainder of the Earnout Payment in cash. The number of the Twin Disc Shares shall be equal to the amount of the Earnout Payment being paid in Purchased Shares divided by the Applicable Share Price of a Twin Disc Share. The Purchaser shall provide written notice to the Sellers at the same time it delivers the Preliminary Earnout Statement of the combination of cash and Purchased Shares by which it intends to pay the Earnout Payment to the Sellers. The Sellers shall, and shall procure that each of their respective Affiliates, in connection with the Purchased Shares acquired as an Earnout Payment comply with the volume limitations of Rule 144 promulgated under the Securities Act of 1933, regardless if whether Rule 144 applies to the Seller or not.

 

(g)

The Sellers agree that any information or data provided under this Section 2.5 is confidential and proprietary in favor of the Purchaser and its Affiliates. The Sellers agree not to (i) use any such information or data other than for the purposes of reviewing, verifying or disputing the Earnout Payment or (ii) disclose any such information or data to any Person other than to its representatives who are assisting the Sellers in connection with any review, verification or dispute of the Earnout Payment.

 

(h)

The Sellers hereby acknowledge that the achievement of applicable results sufficient to result in any Earnout Payment is uncertain and that the Company and the Business may not achieve such level, and it is therefore not assured that the Sellers shall be entitled to any Earnout Payment. The Sellers further acknowledge that the Purchaser and/or its Affiliates shall, subject to Section 2.5(i), have the right to operate the Company and the Business and their respective businesses in a manner that they deem to be in the best interests of the Purchaser and/or its Affiliates and their respective equity holders; provided, however, that the Purchaser shall not take or omit to take any action with the primary intent or purpose to reduce, eliminate or avoid the Earnout Payment under this Agreement.

 

 

(i)

Notwithstanding Section 2.5(h), until the expiration of the Earnout Period, the Purchaser shall agree as follows:

 

(i)

to maintain accounting standards with respect to the Company in accordance with GAAP;

 

(ii)

to cause the Company to provide financial statements to at least the level of a Review Engagement Report;

 

(iii)

to operate the Business as a distinct profit centre from the business of the Purchaser and Twin Disc;

 

(iv)

to not, directly or indirectly, take any action with the primary intent or purpose of (i) delaying or preventing any Earnout Payment from being owed or (ii) reducing the amount of any Earnout Payment.

 

(j)

In calculating EBITDA during the Earnout Period, the Purchaser shall make the following adjustments and normalizations:

 

(i)

To the extent that EBITDA of the Company in 2024 is less than Three Million Nine Hundred and Seventy-Five Thousand Dollars ($3,975,000), the difference between such target EBITDA of the Company in 2024 and the actual EBITDA of the Company in 2024 will be deducted from the EBITDA of the Company during the Earnout Period.

 

(ii)

The Purchaser will exclude transfer pricing, and head office expense or similar expense allocation charged to the Company by Twin Disc or its Affiliates.

 

(iii)

EBITDA for the Earnout Period will exclude amounts charged or earned, as the case may be, to the extent that such amounts would not have been required to be recorded or reserved for in the financial statements of the Company in accordance with GAAP at Closing.

 

(k)

If the employment of any of the Principals is terminated by the Company during the Earnout Period for any reason other than cause, then without limiting any rights of such Principal or obligations of the Company in respect thereof, the Earnout Payment will be deemed to have been earned in full, regardless of the EBITDA of the Company during the Earnout Period, and will be payable in accordance with the terms of this Agreement.

 

(l)

For the avoidance of doubt, in no event shall the aggregate amount of the Earnout Payment payable by the Purchaser to the Sellers under this Section 2.5 exceed Four Million dollars ($4,000,000.00).

 

2.6	Withholding.

 

Notwithstanding any other provision of this Agreement, the Purchaser (or any agent of the Purchaser or any of its Affiliates), the Company, or the Sellers, as applicable, shall be entitled to deduct and withhold from any amounts payable pursuant to this Agreement any withholding Taxes or other amounts required under any applicable Law to be deducted and withheld. To the extent that any such amounts are so deducted or withheld, such amounts 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 and shall be timely and properly paid to the proper Governmental Entity.

 

 

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

Each Seller hereby represents and warrants to the Purchaser, severally and not jointly, and acknowledges that the Purchaser is relying on the following representations and warranties in connection with the purchase of the Purchased Shares, as follows:

 

3.1

Capacity.

 

Each Seller has the legal capacity to enter into and perform its obligations under this Agreement and each of the Sellers Ancillary Documents to which it is a party.

 

3.2	Authorization.

 

Each Seller has full power and authority to execute and deliver this Agreement and any other certificate, agreement, document or other instrument to be executed and delivered by such Seller in connection with the transactions contemplated by this Agreement other than the employment agreements to be entered into by the Principals pursuant to Section 8.2(g) (collectively, the “Sellers Ancillary Documents”) and to perform such Seller’s obligations under this Agreement and the Sellers Ancillary Documents and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Sellers Ancillary Documents by each Seller, the performance by such Seller of their obligations under this Agreement and the Sellers Ancillary Documents, and the consummation of the transactions provided for in this Agreement and the Sellers Ancillary Documents have been duly and validly authorized by all necessary action on the part of such Seller. This Agreement has been, and the Sellers Ancillary Documents shall be as of the Closing Date, duly executed and delivered by each Seller and do or shall, as the case may be, constitute valid and binding agreements of such Seller, enforceable against such Seller in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.

 

3.3	Title to Purchased Shares.

 

Each Seller is the sole and unconditional owner of the Purchased Shares set forth beside its name in Schedule 2.1, with good, valid and marketable title thereto, free and clear of all Liens. The Seller is hereby transferring good and valid title to all of the Purchased Shares to the Purchaser, free and clear of all Liens.

 

3.4	No Other Agreements to Purchase.

 

Except for the Purchaser’s rights under this Agreement, no Person has any written or oral agreement, option or warrant, or any right or privilege (whether by Laws, pre‑emptive or contractual) capable of becoming such for the purchase or acquisition from the Seller of any of the issued and outstanding shares or other securities of the Company, including but not limited to the Purchased Shares.

 

3.5	Residence of Seller.

 

Unless otherwise disclosed on Schedule 2.1, each Seller is not a non‑resident of Canada for the purposes of the Tax Act and is not a United States citizen or a green card holder.

 

 

3.6	No Conflict.

 

The execution, delivery and performance by the Seller of this Agreement and the Sellers Ancillary Documents to which the Seller is a party:

 

(a)

do not and shall not (or would not with the giving of notice, the lapse of time, or both, or the happening of any other event or condition) constitute or result in a breach or a violation of, or conflict with, or allow any other Person to exercise any rights under, any terms, conditions or provisions of any Contracts to which the Seller is a party or pursuant to which any of its assets or property may be affected;

 

(b)

do not (or would not with the giving of notice, the lapse of time, or both, or the occurrence of any other event or condition) result in the creation or imposition of any Liens upon any property or asset of the Seller; and

 

(c)

shall not result in any violation of any Laws.

 

3.7	Litigation.

 

There are no existing (i) actions, complaints, claims, grievances, suits or proceedings by any Person, (ii) arbitration or alternative dispute resolution processes or (iii) any administrative or other proceedings by or before any Governmental Entity, or, to the Knowledge of the Seller, pending or threatened against the Seller which prohibit, restrict or seek to enjoin the transactions contemplated by this Agreement.

 

3.8	Required Governmental Authorizations and Consents.

 

To the Knowledge of the Seller there is no requirement of the Seller to make any filing with, give any notice to, or obtain or maintain any governmental authorization or the consent or authorization of any other Person as a condition to the lawful completion of the transactions contemplated by this Agreement.

 

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Each of the Key Shareholders hereby represents and warrants to the Purchaser, jointly and severally, and acknowledges that the Purchaser is relying on the following representations and warranties in connection with the purchase of the Purchased Shares, as follows:

 

4.1	Organization.

 

The Company is a company duly amalgamated, validly existing and in good standing under the Laws of the Province of British Columbia. The Company has all requisite power and authority to own, lease and operate its properties and to carry on the Business as now being conducted. The Company has heretofore delivered to the Purchaser true, correct and complete copies of its charter documents as currently in effect and its corporate record books with respect to actions taken by its directors and shareholders. Schedule 4.1 contains a true and correct list of the jurisdictions in which the Company is qualified or registered to conduct the Business.

 

 

4.2	Capitalization.

 

Schedule 2.1 hereto accurately and completely sets forth the capital structure of the Company by listing thereon the ownership interests of the Company which are authorized, and which are issued and outstanding. With respect to the Purchased Shares, the Purchased Shares (a) represent any and all ownership interests in the Company, (b) are held of record and beneficially owned as set forth on Schedule 2.1, free and clear of any Liens, and (c) were not issued in violation of the pre‑emptive rights of any person or any agreement or Laws by the Company at the time of issuance was bound. Except as disclosed on Schedule 2.1, (i) there are no outstanding options, warrants, rights, calls, commitments, conversion rights, rights of exchange, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities or other plans or commitments, contingent or otherwise, relating to the ownership interests in the Company, other than this Agreement; (ii) there are no outstanding contracts or other agreements, including without limitation shareholders’ or similar agreements, of the Company or any other Person to purchase, redeem or otherwise acquire any outstanding ownership interests in the Company, or securities or obligations of any kind convertible into any ownership interests in the Company; (iii) except as set out in Schedule 2.1 or as may be declared or deemed to be declared pursuant to Section 7.1(e) or any other arrangement mutually agreed to in writing between the Parties in connection with Closing, there are no dividends which have accrued or been declared but are unpaid on the ownership interests in the Company or which could become payable as a result of the transactions contemplated in this Agreement; and (iv) there are no outstanding or authorized stock option, stock appreciation, restricted stock, restricted stock units, phantom stock, profit interests, warrants or similar rights with respect to the Company and/or any ownership interests in the Company.

 

4.3	Subsidiaries.

 

The Company does not own, directly or indirectly, any share capital or other equity securities or interests in any other non‑individual Person.

 

4.4	Absence of Restrictions and Conflicts.

 

The execution, delivery and performance of this Agreement and the Sellers Ancillary Documents, the consummation of the transactions contemplated by this Agreement and the Sellers Ancillary Documents and the fulfillment of and compliance with the terms and conditions of this Agreement and the Sellers Ancillary Documents by the Sellers or the Principals does not or shall not (as the case may be), with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under, result in the loss of any benefit under, permit the acceleration of any obligation under or create in any party the right to terminate, modify or cancel, (a) any term or provision of the charter documents of the Company, (b) except as set forth on Schedule 4.12(b), the Company Contracts or any other contract, agreement, permit, franchise or license applicable to the Company or the Sellers or any of them, or (c) any Laws to which the Company or the Sellers or any of them is a party or by which the Company or the Sellers or any of them or any of their respective properties are bound. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required with respect to the Company or the Sellers or any of them in connection with the execution, delivery or performance of this Agreement or the Sellers Ancillary Documents or the consummation of the transactions contemplated hereby or thereby.

 

4.5	Real Property.

 

The Company does not own and has never owned any interest in any real property. Schedule 4.5 sets forth the address of each real property that the Company is currently leasing, subleasing or otherwise occupied or, for the past ten (10) years, have ever leased, subleased or otherwise occupied by the Company. True and complete copies of all leases (including all amendments, extensions, renewals and guaranties with respect thereto) for each such Leased Real Property (including the date and name of the parties to such lease document) (the “Leases”) have been provided to the Purchaser. Except as set forth on Schedule 4.5, with respect to each of the Leases: (i) such Lease is legal, valid, binding, enforceable and in full force and effect; (ii) the Company’s possession and quiet enjoyment of the Leased Real Property under such Lease has not been disturbed, and to the Knowledge of the Key Shareholders, there are no disputes with respect to such Lease; (iii) neither the Company nor to the Knowledge of the Key Shareholders, any other party to the Leases is in breach or default under such Lease, and to the Knowledge of the Key Shareholders, no event has occurred which, with the delivery of notice, the passage of time or both, would constitute such a breach or default, or permit the termination, modification or acceleration of rent under such Lease; and (iv) the Company has not subleased, licensed or otherwise granted any Person the right to use or occupy such Leased Real Property or any portion thereof.

 

 

4.6	Title to Personal Property; Condition of Assets; Related Matters.

 

(a)

Except as set forth in Schedule 4.6, the Company has good title to, or a valid and binding leasehold or license interest in, all of the tangible personal property and assets of the Company, free and clear of all Liens (other than Permitted Liens). Except as set forth in Schedule 4.6, all equipment and other items of tangible personal property and assets of the Company are in good operating condition and in a state of good maintenance and repair, ordinary wear and tear excepted, are usable in the regular and ordinary course of business and conform in all material respects to all applicable Laws, and the Sellers have no Knowledge of any material defects or problems with any of such equipment, tangible property or assets. No Person other than the Company owns any equipment or other tangible personal property or assets situated on the premises of the Lease Real Property, except for the leased items that are subject to personal property leases. The Sellers have provided to the Purchaser a true, correct and complete list and general description of each item of personal property of the Company having an original cost of more than $25,000.

 

(b)

Except as set forth in Schedule 4.6, the buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible property and assets leased or owned by the Company are structurally sound, are in good operating condition, repair and maintenance, ordinary wear and tear excepted, free from defects, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible property and assets leased or owned by the Company is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost.

 

(c)

The assets, properties and rights of the Company constitute, on a combined basis, all of the assets, properties and rights used in, or necessary and sufficient to conduct, the operations of the Business as currently conducted. Without limiting the generality of the foregoing, no Seller owns any assets, properties or rights used in, or necessary to conduct, the operations of the Business in accordance with the past practices of the Company.

 

4.7	Financial Statements.

 

The Company has delivered to the Purchaser the following (collectively, the “Financial Statements”): (a) the audited balance sheet of the Company (including the related notes and schedules) and the statements of income, retained earnings and cash flows for the fiscal years ended December 31, 2021, December 31, 2022 and December 31, 2023, and (b) the unaudited balance sheet of the Company, prepared on a combined basis, as at December 31, 2024 (the “Latest Balance Sheet”) and the income statement of the Company, prepared on a combined basis, for the twelve (12) month period then ended, which have been internally prepared by the management of the Company. Copies of the Financial Statements are attached hereto as Schedule 4.7. Except as expressly noted on Schedule 4.7, the Financial Statements have been prepared in accordance with GAAP consistently applied throughout the periods indicated. Except as expressly noted on Schedule 4.7, each of the balance sheets included in such Financial Statements (including the related notes and schedules) are based on the books and records of the Company, and fairly and accurately presents, in all material respects, the financial position of the Company as of the date of such balance sheet, and each of the profit and loss statements included in such Financial Statements (including any related notes and schedules) fairly and accurately presents, in all material respects, the results of operations of the Company for the periods set forth therein, in each case in accordance with GAAP consistently applied during the periods involved. Since December 31, 2023, there has been no change in any of the accounting (or tax accounting) policies, practices or procedures of the Company.

 

 

4.8	No Undisclosed Liabilities.

 

(a)

The Company does not have any liabilities or obligations (whether absolute, known, unknown, accrued, unliquidated, contingent or otherwise) of the nature required to be disclosed or reflected on a balance sheet prepared in accordance with GAAP, which are not adequately reflected or provided for in the Latest Balance Sheet, except liabilities and obligations (i) reflected in the applicable Latest Balance Sheet, (ii) that are not (singly or in the aggregate) material to the Company, taken as a whole, and have been incurred since the date of the Latest Balance Sheet in the ordinary course of business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of Contract, breach of warranty, tort, infringement, or violation of Law) or (iii) set forth on Schedule 4.8.

 

(b)

Except as disclosed on Schedule 4.8(b), the Company has not applied for or received (i) any support payments, loans, benefits or other incentives from any Governmental Entity or financial institution that have been provided as a result of COVID‑19 (including, without limiting the generality of the foregoing, the Canada Emergency Business Account (CEBA) interest‑free loans, Canada Emergency Wage Subsidy, Canada Emergency Rent Subsidy, Work‑Sharing Program, Loan Guarantee for Small and Medium‑Sized Enterprises offered through Export Development Bank of Canada, Co‑Lending Program for Small and Medium‑Sized Enterprises offered through the Business Development Canada), which the Company could be required to repay following the Closing, whether in whole or in part, to any Person; or (ii) any rent reductions or rent deferrals that have been provided as a result of COVID‑19 (including, without limiting the generality of the foregoing, through the Canada Emergency Commercial Rent Assistance program), which the Company could be required to repay or otherwise settle following the Closing, whether in whole or in part, to or with any Person.

 

4.9	Absence of Certain Changes.

 

Since December 31, 2023, the Company has conducted its business in the ordinary course of business and has extended credit to customers, collected accounts receivable and paid accounts payable and similar obligations in the ordinary course of business consistent with past practice. Except as set forth in Schedule 4.9, with respect to the Company and the Business, since December 31, 2023, there has not been:

 

(a)

any Material Adverse Effect;

 

(b)

any damage, destruction, loss or casualty to property or assets of the Company with a value in excess of $25,000 whether or not covered by insurance;

 

(c)

any new line of business entered into by the Company or entry into any agreement, transaction or activity or make any commitment except those in the ordinary course of business;

 

(d)

any failure by the Company to maintain its existence and good standing in its jurisdiction of organization and in each jurisdiction in which the ownership or leasing of its property or the conduct of its business requires such qualification;

 

(e)

failure by the Company to duly and timely file or cause to be filed all reports and returns required to be filed with any Governmental Entity or failure by the Company to promptly pay or cause to be paid when due all Taxes, assessments and governmental charges, including interest and penalties levied or assessed, unless diligently contested in good faith by appropriate proceedings;

 

 

(f)

any authorization for issuance, issue, and delivery any additional ownership interests or securities convertible into or exchangeable for ownership interests, or issuance or grant of any right, option or other commitment for the issuance of its ownership interests or of such securities;

 

(g)

any amendment or modification of its charter documents;

 

(h)

any declaration of any dividend, any payment or set aside for payment of any dividend or other distribution, or any payment to any related parties of the Company other than the payment of salaries in the ordinary course of business or any dividend arising pursuant to Section 7.1(e) or any other arrangement mutually agreed to in writing between the Parties in connection with Closing;

 

(i)

any creation of any Subsidiary, any acquisition of share capital or other equity securities of any corporation, or any acquisition of any equity or ownership interest in any business or entity;

 

(j)

any disposal of or permitting the lapse of any right to the use of any patent, trademark, trade name, service mark, license or copyright of the Company (including any of the Company Intellectual Property), or any disposal of or disclosure to any Person of, any trade secret, formula, process, technology or know‑how of the Company not heretofore a matter of public knowledge;

 

(k)

any (i) other than in the ordinary course of business, sale of any asset, (ii) creation, incurrence, or assumption of any indebtedness, (iii) grant, creation, incurrence, or suffering to exist of any Liens other than in the ordinary course of business, (iv) incurrence of any liability or obligation (absolute, accrued or contingent) except in the ordinary course of business consistent with past practice, (v) write‑offs of any guaranteed checks, notes, or accounts receivable except in the ordinary course of business consistent with past practice, (vi) write‑downs of the value of any asset or investment on the Company’s books or records, except for depreciation and amortization in the ordinary course of business and consistent with past practice, (vii) cancellation of any debt or waiver any claims or rights, (viii) commitment to make any capital expenditure in excess of $25,000 in the case of any single expenditure or $50,000 in the case of all capital expenditures other than as set out in Schedule 4.6, or (ix) entry into any Contract (A) involving an annual commitment or annual payment to or from the Company of more than $25,000 individually, or (B) that is outside the ordinary course of business or otherwise material to the Company;

 

(l)

any material increase in any manner to the base compensation (salary or wage rate), bonus or bonus opportunity, incentives, severance benefits, or other remuneration of, or entry into any new compensation, bonus, incentive, severance benefits, or similar payments or agreement or arrangement with or remuneration for, any of its current or former officers, employees, directors, independent contractors or other service providers outside the ordinary course of business, and except for the raise given to all employees on January 1, 2024 (approximately 5%);

 

(l.1)

any change in control or similar payments with or remuneration for, any of its current or former officers, employees, directors, independent contractors, other service providers or shareholders;

 

 

(m)

any payment or agreement to pay any additional pension, retirement allowance or other employee benefit under any Benefit Plan (or any benefit or compensation plan, program, policy, contract or arrangement that would be a Benefit Plan if in effect on the date hereof) to any employee, officer, director, independent contractor or other service provider, whether past or present, or any spouse, beneficiary or dependent thereof or any action to accelerate the vesting or payment, or fund or in any other way secure the payment, of any such compensation or benefits outside the ordinary course of business;

 

(n)

any adoption, amendment, or termination of any Benefit Plan or any increase in the benefits provided under any Benefit Plan, or any promise or commitment to undertake any of the foregoing, other than renewals in the ordinary course of business;

 

(o)

any amendment or entry into a collective bargaining agreement;

 

(p)

any amendment or termination of any employment, retention, bonus, incentive, severance, consulting, or other compensation agreement or entry by the Company into any new employment, retention, bonus, incentive, severance, consulting or other compensation agreement outside the ordinary course of business;

 

(q)

any failure to perform in all material respects all of its obligations under all Company Contracts, any default or cause to exist any event or condition which with notice or lapse of time or both would constitute a default under any Company Contract (except those being contested in good faith), or any entry into, assumption of or amendment to any Contract that is or would be a Company Contract;

 

(r)

any payment, discharge, or satisfaction of any claim, liability or obligation (absolute, contingent or otherwise) other than in the ordinary course of business consistent with past practice;

 

(s)

any increase in any reserves for contingent liabilities (excluding any adjustment to bad debt reserves in the ordinary course of business consistent with past practice);

 

(t)

any material change in the coverage amounts or scope of coverage of the policies of insurance maintained by the Company or any lapse in the effectiveness of such policies;

 

(u)

any election (or any change or revocation of any election) relating to Taxes other than any election contemplated in Section 7.1(d), any change to any Tax accounting period, any adoption or change to any method of Tax accounting, any filing of any amended Tax Return, any entry into any Tax closing agreement, any settlement or compromise of any Tax claim or liability (other than the payment of Taxes or collection of refunds in the ordinary course of business), any agreement or consent to any extension or waiver of any statute of limitations with respect to any assessment or determination of any Taxes, or any surrender any right to claim a Tax refund;

 

(v)

any change in the Company’s cash management practices, other than in the ordinary course of business consistent with past practice; and

 

(w)

any authorization, or commitment, or agreement to take, any of the foregoing actions.

 

4.10	Legal Proceedings.

 

(a)

Except as set forth in Schedule 4.10(a), there are no suits, demands, actions, claims, arbitration, proceedings or investigations pending or, to the Knowledge of the Key Shareholders, threatened against, relating to or involving the Company or the property of the Company before any Governmental Entity. None of such suits, actions, claims, proceedings or investigations, if finally determined adversely, are reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. The Company is not subject to any judgment, decree, injunction, rule or order of any court or arbitration panel.

 

 

(b)

There are no suits, demands, actions, claims, arbitration, proceedings, or investigations pending or, to the Knowledge of the Key Shareholders, threatened against or by the Sellers or any of them or any Affiliate of the Sellers that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.

 

4.11	Compliance with Laws.

 

The Company is (and has been at all times during the past five (5) years) in compliance in all material respects with all applicable Laws (including, without limitation, applicable Laws relating to the health and safety of employees). The Company has not been charged with and, to the Knowledge of the Key Shareholders, is not now under investigation with respect to, a violation of any applicable Law, the Company has not received any written communication from any Governmental Entities or other Person alleging noncompliance in any material respect with any applicable Law.

 

4.12	Company Contracts.

 

(a)

Schedule 4.12(a) sets forth a true, correct and complete list of the following contracts, agreements, leases, licenses, commitments or other instruments (each, a “Contract”) to which the Company is a party or by which the Company is otherwise bound (collectively, the “Company Contracts”):

 

(i)

bonds, debentures, notes, loans, credit or loan agreements or loan commitments, mortgages, indentures, guarantees or other contracts relating to the borrowing of money or binding upon any properties or assets (real, personal or mixed, tangible or intangible) of the Company;

 

(ii)

the Leases and any leases or licenses of personal property involving an annual commitment or payment of more than $25,000 individually by the Company;

 

(iii)

Contracts that (A) limit or restrict the Company or its Affiliates, or any officers, directors, employees, equity holders, agents or representatives of the Company (in their capacity as such) from engaging in any business or other activity in any jurisdiction; (B) create or purport to create any exclusive or preferential relationship or arrangement relating to the Company; (C) otherwise restrict or limit the ability of the Company or its Affiliates to operate or expand any line of business; or (D) impose, or purport to impose, any obligations or restrictions on Affiliates of the Company with respect to the Business;

 

(iv)

Contracts for capital expenditures or the acquisition or construction of fixed assets requiring the payment by the Company of an amount in excess of $25,000;

 

(v)

Contracts (A) that are an employment, consulting or other Contract relating to the employment of or performance of services by any current or former employee, officer, director, independent contractor or other service provider of the Company, other than any such Contract that is terminable “at will” or in accordance with applicable Law on thirty (30) days’ or less notice and without any obligation on the part of the Company to make any severance, termination, change in control, transaction, sale or similar payment or to provide any other compensation or benefit; (B) pursuant to which the Company is or may become obligated to pay any compensation, bonuses, options, phantom rights or other equity, pensions, deferred compensation, profit sharing, fringe benefits, severance, termination, change in control, transaction, sale, Tax gross‑up or similar payments or to provide any other compensation or benefits to any current or former employee, officer, director, independent contractor or other service provider of the Company; or (C) pursuant to which the Company is or may become obligated to make any bonus, incentive, commission‑based, deferred compensation or similar payment (other than payments constituting base salary or wages) to any current or former employee, officer, director, independent contractor or other service provider of the Company or that provides for any compensation, payments or benefits upon the execution hereof or the Closing or in connection with the transactions contemplated hereby (including without limitation in connection with any termination of employment or other service on or prior to the Closing), to the extent not already disclosed in Schedule 4.14;

 

 

(vi)

Contracts granting any Person a Lien on all or any part of the Company’s assets;

 

(vii)

Contracts granting to any Person an option or a right of first refusal, first‑offer or similar preferential right to purchase or acquire any of the assets or equity of the Company;

 

(viii)

Contracts with any consultant, independent contractor or other service provider relating to the administration, operation, funding, investment or other aspects of any Benefit Plan;

 

(ix)

Contracts for the granting or receiving of a license, sublicense or franchise or under which any Person is obligated to pay or has the right to receive a royalty, license fee, franchise fee or similar payment, other than licenses of commercially available software to the Company;

 

(x)

joint venture or partnership Contracts or Contracts entitling any Person to any profits, revenues or cash flows or requiring payments or other distributions based on such profits, revenues or cash flows;

 

(xi)

Contracts with any Top Customers or Top Vendors which, either individually or in the aggregate over the last 12 months, have a value in excess of $40,000;

 

(xii)

Contracts with any Governmental Entity; and

 

(xiii)

Contracts (other than those described in Sections 4.12(a)(i) through 4.12(a)(xii)): (A) involving an annual commitment or annual payment to or from the Company of more than $40,000 individually or (B) that are outside the ordinary course of business.

 

(b)

Schedule 4.12(b) sets forth a list of all Company Contracts (i) that contain a restriction on, or payment as a result of, a change of control of the Company or (ii) pursuant to which a breach, default, violation, conflict or termination right would result upon the consummation of the transactions contemplated by this Agreement, absent the notice to or consent of the other party to such Company Contract.

 

 

(c)

True, correct and complete copies of all Company Contracts have been provided to the Purchaser. The Company Contracts are legal, valid, binding and enforceable in accordance with their respective terms with respect to the Company, as applicable, and, to the Knowledge of the Key Shareholders, each other party to such Company Contracts. Since the Control Date, there are no existing defaults or breaches of the Company under any of its Company Contract (or events or conditions which, with notice or lapse of time or both would constitute a default or breach) and the Company has not received any notice alleging a default or breach under any of its Company Contracts from any third party thereto. Since the Control Date, there are no such defaults (or events or conditions which, with notice or lapse of time or both, would constitute a default or breach) with respect to any third party to any Company Contract. Except as otherwise disclosed in Schedule 4.12(c), the Company is not participating in any discussions or negotiations regarding modification of or amendment to any of its Company Contracts (other than renewals on the same terms in the ordinary course of business) or entry into any new material Contract.

 

4.13	Tax Matters.

 

Except as otherwise disclosed in Schedule 4.13:

 

(a)

Each of the Key Shareholders is not a non‑resident of Canada for purposes of the Tax Act;

 

(b)

The Company has prepared and duly and timely filed all federal, provincial, municipal, local and foreign returns, information statements, forms, elections, designations, reports and any other filings related to Taxes and CEWS Returns required to be filed by it on or before Closing (collectively, “Tax Returns”, and each a “Tax Return”), has timely paid all Taxes which are due and payable on or before the Closing Date and all such Tax Returns are true and complete. The Company has made adequate provision for Taxes in the Financial Statements for the period ended on the date thereof. The Company has made adequate and timely instalments of Taxes required to be made. The information contained in such Tax Returns and CEWS Returns is correct, complete and accurate in all material respects.

 

(c)

Since the date of the Latest Balance Sheet, the Company has only incurred liabilities for Taxes arising in the ordinary course of the Business.

 

(d)

All Tax Returns of the Company have been assessed for periods ending on or before December 31, 2023, and there are no outstanding waivers of any limitation periods or agreements providing for an extension of time for the filing of any Tax Return or the payment of any Tax of the Company or any outstanding objections to any assessment or reassessment of Taxes. Any Taxes assessed or reassessed have been paid and settled.

 

(e)

The Company has not received any indication from any taxation authority that an assessment or reassessment of Tax is proposed.

 

(f)

Since the Control Date, the Company has withheld from each payment made to any of its past and present shareholders, directors, officers, employees and agents the amount of all Taxes required to be withheld and has timely paid such amounts when due, in the form required under applicable Laws, or if not yet due, made adequate provision in its books and records for the payment of such amounts to the proper receiving authorities.

 

(g)

The Company has collected from any of the past and present customers (or other Persons paying amounts to the Company) the amount of all Taxes (including goods and services tax and provincial sales taxes) which the Company calculated as required to be collected and has timely paid such Taxes when due, in the form required under applicable Laws or made adequate provision in its books and records for the payment of such amounts to the proper receiving authorities.

 

 

(h)

The Company is not subject to any current or outstanding assessments or reassessments with respect to Taxes which shall result in any liability on its part in respect of any period ending on or prior to the Closing Date and none are, to the Knowledge of the Key Shareholders, pending.

 

(i)

There are no Liens for Taxes upon any of the assets of the Company, except Liens for current Taxes not yet due and payable;

 

(j)

The Company has not been, and is not currently, required to file any Tax Returns or other filings with any taxation authority located in any jurisdiction outside Canada. The Company has not been notified by any Governmental Entity in a jurisdiction where it does not file Tax Returns that the Company is subject to Tax or required to file Tax Returns in such jurisdiction.

 

(k)

None of sections 15, 17, 18(4), 67, 78, 79, 79.1 or 80 to 80.04 of the Tax Act, or any corresponding provision of applicable federal, state, provincial or territorial Laws, have applied or will apply to the Company at any time up to and including the Closing Date;

 

(l)

The Company has not acquired any property with a Fair Market Value greater than $5,000.00 or which is otherwise material to the Business from a Person not dealing at arm’s length with it, within the meaning of the Tax Act (or any applicable Laws of any province or any other jurisdiction regarding Taxes), for consideration with a value less than the Fair Market Value of the property acquired in circumstances which could subject it to a liability under section 160 of the Tax Act or section 325 of the Excise Tax Act (Canada) (or any corresponding provision of applicable federal, state, provincial or territorial Laws or any other jurisdiction regarding Taxes);

 

(m)

The Company has not acquired any property with a Fair Market Value greater than $5,000.00 or which is otherwise material to the Business from a non-arm’s length Person, within the meaning of the Tax Act (or any applicable Laws of any province or any other jurisdiction regarding Taxes), for consideration, the value of which was, as of the date of the acquisition, in excess of the Fair Market Value thereof and which could subject it to a liability under the Tax Act or the Excise Tax Act (Canada) (or any corresponding provision of applicable federal, state, provincial or territorial Laws or any other jurisdiction regarding Taxes). The Company has not disposed of any property with a Fair Market Value greater than $5,000.00 or which is otherwise material to the Business to a non-arm’s length Person, within the meaning of the Tax Act (or any applicable Laws of any province or any other jurisdiction regarding Taxes), for consideration, the value of which was, as of the date of the disposition or rendering, less than the Fair Market Value thereof and which could subject it to a liability under the Tax Act or the Excise Tax Act (Canada) (or any corresponding provision of applicable federal, state, provincial or territorial Laws or any other jurisdiction regarding Taxes);

 

(n)

None of the Purchased Shares are taxable Canadian property (within the meaning of subsection 248(1) of the Tax Act.

 

(o)

At no time has the Company paid dividends or deemed dividends that create a liability under Part VI.1 of the ITA.

 

 

(p)

Other than as disclosed, the Company is a Canadian-controlled private corporation, as defined in the Tax Act, and has been a Canadian-controlled private corporation continuously since January 1, 2021.

 

(q)

The Company has not ever filed or been party to any election pursuant to sections 83 or 85 of the Tax Act or the corresponding provisions of any provincial statute, other than the anticipated subsection 83(2) elections made or deemed to have been made to distribute capital dividends in connection with the 111(4)(e) Designation, as set out in Section 7.1(e).

 

(r)

There is no Contract, plan or arrangement, covering any employee or former employee of the Company that, individually or collectively, could give rise to the payment of any amount that would not be deductible by the Company as an expense under applicable Law other than reimbursements of a reasonable amount of entertainment expenses and other non‑deductible expenses that are commonly paid by similarly situated businesses in reasonable amounts.

 

(s)

The Key Shareholders have delivered to the Purchaser copies of all federal, provincial, state, local and foreign Tax Returns, examination reports and statements of deficiencies assessed against, or agreed to by, the Company for all Tax periods ending after December 31, 2019.

 

(t)

Except for changes in cost amounts arising out of the Parties pre-Closing tax elections pursuant to Section 7.1(d), the Company’s cost amounts, as defined in the Tax Act, in respect of the assets are accurately reflected on its Tax Returns and records that have been provided to the Purchaser.

 

(u)

All research and development investment tax credits (“ITCs”) for prior fiscal years were claimed by the Company in accordance with the Tax Act and the relevant provincial tax legislation. The Company has satisfied at all times the relevant criteria and conditions entitling the Company to such ITCs. All refunds of ITCs received or receivable by the Company in any taxation year were claimed in accordance with the Tax Act and the relevant provincial tax legislation. The Company has satisfied at all times the relevant criteria and conditions entitling the Company to claim a refund of such ITCs.

 

(v)

All CEWS claimed by the Company were claimed in accordance with the Tax Act, and the Company has satisfied at all times the relevant criteria and conditions entitling the Company to such CEWS. The Company has not claimed or received any other federal, provincial, territorial, municipal, foreign or other Governmental Entity COVID‑19 related subsidy, grant or benefit to which it was not entitled.

 

(w)

The Company is a “private issuer” as defined in Section 2.4 of National Instrument 45‑106 Prospectus Exemptions.

 

 

4.14	Employees.

 

Schedule 4.14 contains a true and complete list of all of the employees, including co‑employees, (whether full‑time, part‑time or otherwise) and independent contractors of the Company as of the date hereof, specifying their annual salary, hourly wages, position, length of service, annual vacation entitlement in days and the allocation of amounts paid and other benefits provided to each of them, respectively, consulting or other independent contractor fees, and for each current employee their annual vacation entitlement in days, their accrued and unused vacation days as of the Closing Date, any other annual paid time off entitlements in days, and their accrued and unused days of such other paid time off as of the Closing Date, if any, together with an appropriate notation next to the name of any such employee or independent contractor on such list who is subject to any written employment agreement or any other written offer letter or other document describing the terms and/or conditions of employment of such employee or of the rendering of services by such independent contractor. The Company is not delinquent in any payments to any employees or independent contractors for any wages, salaries, commissions, bonuses, fees or other direct compensation or benefits due with respect to any services performed for it to the date hereof or amounts required to be reimbursed to such employees or independent contractors. Except as specifically noted on Schedule 4.14, (a) the Company is not party to or bound by any contracts, consulting agreements or termination or severance agreements in respect of any officer, employee or former employee, consultant or independent contractor of the Company, (b) no employee, consultant or independent contractor of the Company is entitled to any severance or other termination payment, whether pursuant to any contract, policy or otherwise, in the event of the termination of such Person’s employment or engagement with the Company, and (c) all compensation, including wages and vacation pay, commissions and bonuses, accrued or payable to employees, independent contractors or consultants of the Company for services performed on or prior to the date hereof, with the exception of base salary or hourly wages for the current pay period that are payable on the Company’s next regular payroll date, have been paid in full or accurately reflected on the books and records of the Company, and there are no outstanding agreements, understandings or commitments of the Company or any of its Affiliates with respect to any compensation, commissions or bonuses. The Company has provided to the Purchaser true, correct and complete copies of each such employment agreement, offer letter or other document respecting the terms of employment of any employee. Neither the Company nor the Sellers or any of them has made any verbal commitments to any such officers, employees or former employees, consultants or independent contractors with respect to compensation, promotion, retention, termination, severance or similar matters in connection with the transactions contemplated by this Agreement or otherwise. Except as indicated on Schedule 4.14, all employees of the Company are active on the date hereof, not on any sort of leave of absence, furlough or temporary layoff (with or without any right to return to work) and, to the Knowledge of Sellers, none has expressed any intention to terminate employment with the Company.

 

4.15	Benefit Plans.

 

(a)

Schedule 4.15(a) contains a list of each employee benefit, supplemental unemployment benefit, deferred compensation, bonus, profit sharing, termination, pension, health, welfare, medical, dental, disability, life insurance, retirement, incentive, stock option, restricted stock, stock purchase, stock appreciation right, phantom equity, change in control, health, welfare, medical, dental, disability, group savings and fringe‑benefit agreement, and similar plans, policies and programs, arrangements or practices relating to current or former employees of the Company, current or former officers or directors of the Company, current or former consultants or other service providers of the Company, or the beneficiaries or dependents of any such Persons and is maintained, sponsored, or contributed to by the Company or for which the Company has any liabilities or obligations (contingent or otherwise), whether written or oral, funded or unfunded, insured or self‑insured, registered or unregistered (as listed in Schedule 4.15(a) in respect of the Company, each a “Benefit Plan”), other than government‑sponsored employment insurance, workers’ compensation, parental insurance, health insurance or pension plans.

 

(b)

The Company has delivered to the Purchaser complete and accurate copies of all the Benefit Plans, together with all related documentation, including funding and investment management agreements, investment policy, summary plan descriptions, member booklets, the most recent Financial Statements and asset statements, and all non‑routine correspondence with all Governmental Entities or other relevant Persons. No changes have occurred or are expected to occur which would affect the information contained in the information required to be provided to the Purchaser pursuant to this Section 4.15(b).

 

 

(c)

All of the Benefit Plans are and have been established, registered, invested and administered, in all respects, in accordance with their terms and all Laws, including all Tax Laws where same is required for preferential Tax treatment. To the Knowledge of the Key Shareholders, no fact or circumstance exists that could adversely affect the preferential Tax treatment ordinarily accorded to any such Benefit Plan.

 

(d)

All obligations regarding the Benefit Plans have been satisfied, there are no outstanding breaches, defaults or violations by any party to any Benefit Plan, and no Taxes, penalties or fees are owing or due and payable under or in respect of any of the Benefit Plans.

 

(e)

No Benefit Plan is subject to any pending or threatened investigation, examination or other proceeding, action or claim initiated by any Governmental Entity or by any other Person (other than routine claims for benefits).

 

(f)

All contributions or premiums required to be collected and remitted or paid by the Company under the terms of each Benefit Plan or by Law have been collected and remitted or paid in a timely fashion and are properly recorded in the books and records of the Company or either of them and in the financial statements. The Company has not any liability or obligation whether absolute, accrued or contingent (other than liabilities or obligations accruing after the date hereof), with respect to any of the Benefit Plans. Contributions or premiums for the period up to the date hereof have been paid or collected and remitted by the Company within the time required by applicable Laws.

 

(g)

The Company may unilaterally amend or terminate, subject to required notice periods, in whole or in part, each Benefit Plan to which it is a party, subject only to approvals required by applicable Laws.

 

(h)

No commitments to improve or otherwise amend any Benefit Plan have been made except as required by applicable Laws.

 

(i)

No insurance policy or any other agreement affecting any Benefit Plan requires or permits a retroactive increase in contributions, premiums or other payments due thereunder.

 

(j)

Since the Control Date, all employee data necessary to administer each Benefit plan in accordance with its terms and conditions and all Laws is in possession of the Company and such data is complete and accurate in all material respects, and in a form which is sufficient for the proper administration of each Benefit Plan.

 

(k)

No advance Tax ruling been sought or received in respect of any Benefit Plan.

 

(l)

None of the Benefit Plans provide benefits to retired employees or to the beneficiaries or dependents of retired employees.

 

(m)

No Benefit Plan, arrangement or agreement exists that could require as a result of the transactions contemplated by this Agreement (i) the payment to any Person of any money, benefits or other property; (ii) accelerated or increased funding requirements for any Benefit Plan; or (iii) the acceleration or provision of any other increased rights or benefits to any Person.

 

(n)

The Company has not ever sponsored, administered, contributed to or been obligated to contribute to: (i) a “registered pension plan” within the meaning of subsection 248(1) of the Tax Act; (ii) a “retirement compensation arrangement” within the meaning of subsection 248(1) of the Tax Act; (iii) an “employee life and health trust” within the meaning of subsection 248(1) of the Tax Act; or (iv) a “health and welfare trust” within the meaning of Canada Revenue Agency Income Tax Folio S2‑F1‑C1. No Benefit Plan is intended to be or has ever been found or alleged by a Governmental Entity to be a “salary deferral arrangement” within the meaning of subsection 248(1) of the Tax Act.

 

 

(o)

No Benefit Plan has a situs of, or is subject to the Laws of, the United States, and no employee of the Company is a United States taxpayer.

 

4.16	Labour Relations.

 

(a)

Except as set forth on Schedule 4.16(a), (i) the Company is not a party to or bound by any collective bargaining agreement or other agreement or obligation of any sort with any labour union, and no collective bargaining agreement is currently being negotiated, (ii) there are no ongoing strikes or other work stoppages involving any employees of the Company, and there are no labour disputes by any labour organization in progress or pending or, to the Knowledge of the Key Shareholders, threatened against the Company, (iii) the Company has not encountered any labour union organizing activity, nor had any actual, or to the Knowledge of the Key Shareholders, threatened employee strikes, work stoppages, slowdowns or lockouts, or other claims or disputes relating to any labour, safety or employment matters involving any employee, including discrimination complaints, (iv) there are no charges of unfair labour practices or unlawful discrimination or harassment pending before any Governmental Entity involving or affecting the Company, and (v) the Company has complied with all employment verification procedures, as such procedures relate to all employees of the Company.

 

(b)

Except as set forth on Schedule 4.16(b), the Company is and, since the Control Date, has been at all times in compliance in all material respects with all applicable Laws respecting labour, employment, human rights, pay equity, fair employment practices, work place safety and health, workers’ compensation, unemployment insurance, terms and conditions of employment, and wages and hours. All individuals characterized and treated by the Company as independent contractors or consultants of the Company are properly treated as independent contractors under all applicable Laws and the Company has not received any notice from any Governmental Entity disputing such classification. All employees classified as exempt under the federal, provincial, state and local wage and hour Laws are properly classified. There are no suits, demands, actions, claims, arbitration, proceedings or investigations against the Company pending or, to the Knowledge of the Key Shareholders, threatened to be brought or filed by or with any Governmental Entity or arbitrator in connection with the employment or engagement of any current or former applicant, employee, consultant, volunteer, intern or independent contractor of the Company, including any claim relating to unfair labour practices, employment discrimination, harassment, retaliation, reprisal, equal pay, wage and hours or any other employment‑related matter arising under applicable Laws, nor have any events occurred which may give rise to, or serve as a basis for, any such suit, demand, action, claim, arbitration, proceeding or investigation. The Company is not now and, since the Control Date, has not ever been a party to or otherwise bound by any citation or order by any Governmental Entity relating to employees or employment practices.

 

4.17	Insurance Policies.

 

Schedule 4.17 contains a complete and correct list of all insurance policies carried by or for the benefit of the Company, specifying the insurer, amount of and nature of coverage, the risk insured against, the deductible amount (if any) and the date through which coverage shall continue by virtue of premiums already paid. The Company maintains insurance against all risks and in amounts required to be insured by the terms of the Company Contracts. All insurance policies and bonds with respect to the business and assets the Company are in full force and effect and shall be maintained by the Company in full force and effect as they apply to any matter, action or event relating to the Company occurring through the Closing Date, and the Company has not reached or exceeded its policy limits for any insurance policies in effect at any time during the past five (5) years.

 

 

4.18	Intellectual Property.

 

(a)

Schedule 4.18(a) sets forth a true, correct and complete list of all Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded with any Governmental Entity and owned by, filed in the name of, or licensed to the Company (collectively, the “Company Registered Intellectual Property”).

 

(b)

Schedule 4.18(b) sets forth a true, correct and complete list of all Software used or held for use by the Company (excluding shrink‑wrap, click‑wrap, or other similar agreements for commercially available off‑the‑shelf software with annual license or subscription fees or a replacement value of less than $5,000 per licence).

 

(c)

All of the Company Intellectual Property (other than the Company Licensed Intellectual Property) is owned exclusively by the Company. The Company has the full right to use the Company Intellectual Property for the life thereof (except for Company Licensed Intellectual Property disclosed to the Purchaser which is for the length of the applicable license) for any purpose in connection with the Business, free from any (i) Liens (subject to the terms and conditions of all licenses and related restrictions disclosed to the Purchaser for the Company Licensed Intellectual Property), and (ii) requirement of any past, present or future royalty payments, license fees, charges or other payments, or conditions or restrictions whatsoever (except for the Company Licensed Intellectual Property disclosed to the Purchaser which is subject to the terms of the applicable license).

 

(d)

The Company Intellectual Property is all of the Intellectual Property necessary to operate the Business as presently conducted. The consummation of the transactions contemplated hereunder shall not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of the Company’s continued right to own, use or hold for use any Intellectual Property as owned, used or held for use in the conduct of the Business as currently conducted.

 

(e)

Since the Control Date, the conduct of the Company does not infringe or otherwise conflict with any rights of any Person in respect of Intellectual Property, including with respect to user interface or “look/feel” of the Company’s services or products, and the Company has not received any written notice or claim alleging infringement or other conflict with any rights of any Person in respect of Intellectual Property. To the Knowledge of the Key Shareholders, none of the Company Intellectual Property is being infringed or otherwise used or available for use by any Person without a license or permission from the Company.

 

(f)

No claim or demand of any Person has been made or, to the Knowledge of the Key Shareholders, threatened, nor is there any litigation that is pending or, to the Knowledge of the Key Shareholders, threatened, that (i) challenges the rights of the Company in respect of the Company Intellectual Property, or (ii) asserts that the Company are infringing or otherwise in conflict with, or are required to pay any royalty, license fee, charge or other amount in regard to, any Intellectual Property. The Sellers or any of them are not aware of any facts or circumstances that could reasonably be expected to give rise to any such action.

 

 

(g)

The items of Company Registered Intellectual Property that have been duly registered with, filed in or issued by, as the case may be, the applicable domestic or foreign filing offices, remain in full force and effect.

 

(h)

All Company Intellectual Property which the Company purports to own was developed by (i) an employee of the Company working within the scope of his or her employment at the time of such development, or (ii) agents, consultants, contractors or other Persons, and in each case all such employees, agents, consultants, contractors or other Persons have executed appropriate instruments of assignment in favor of the Company as assignee that have conveyed to the Company ownership of all intellectual property rights in the Company Intellectual Property and waived moral rights with respect thereto.

 

(i)

The Company has taken all reasonable steps to maintain and enforce the Company Intellectual Property and Company Licensed Intellectual Property and to preserve the confidentiality of all trade secrets and confidential information included in the Company Intellectual Property, including by requiring all Persons having access thereto to execute binding, written non‑disclosure agreements.

 

4.19	Environmental, Health, and Safety Matters.

 

Except as set forth on Schedule 4.19:

 

(a)

The Company possesses, and is in material compliance with, all Licenses and since the Control Date has filed all notices that are required under local, provincial, state and federal Laws relating to protection of the environment, pollution control, and Hazardous Materials (as hereinafter defined) (“Environmental Laws”), and the Company is in material compliance with all applicable limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in those Laws or contained in any Law issued, entered, promulgated or approved thereunder.

 

(b)

The Company has not received any directive, inquiry, notice, order or warning from any Governmental Entity or any third party that relates to any Hazardous Materials or any alleged actual or potential violation or failure to comply with any Environmental Laws, and, to the Knowledge of the Key Shareholders, there are no facts or circumstances which could reasonably be expected to form the basis for the assertion of any claim against the Company under any Environmental Laws.

 

(c)

The Company has not entered into or agreed to enter into (and the Company is not contemplating entering into) any consent decree or order, and the Company is not subject to any judgment, decree or judicial or administrative order relating to compliance with, or the cleanup of Hazardous Materials under, any applicable Environmental Laws.

 

(d)

The Company has not been alleged to be in violation of, nor has been subject to any administrative or judicial proceeding pursuant to, applicable Environmental Laws or regulations either now or any time during the past five (5) years.

 

(e)

The Company is not subject to any claim, obligation, liability, loss, damage or expense of whatever kind or nature, contingent or otherwise, incurred or imposed or based upon any provision of any Environmental Law or arising out of any act or omission of the Company, or the employees, agents or representatives thereof or arising out of the ownership, use, control or operation by the Company of any plant, facility, site, area or property (including, without limitation, any plant, facility, site, area or property currently or previously owned or leased by the Company or either of them) from which any Hazardous Materials were released into the environment (the term “release” meaning any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment, and the term “environment” meaning any surface or ground water, drinking water supply, soil, surface or subsurface strata or medium, or the ambient air).

 

 

(f)

The Sellers have heretofore provided to the Purchaser true, correct and complete copies of all reports, correspondence, memoranda, computer data and the complete files relating to environmental matters relating to the Company to the extent in the Company’s possession and control, and the Key Shareholders are not aware of any other reports relating to environmental matters relating to the Company outside of the Company’s possession and control. The Company has not paid any fines, penalties or assessments within the last five (5) years with respect to environmental matters or compliance with Environmental Laws or Licenses.

 

(g)

The Leased Real Property, improvements and equipment of the Company do not now contain and have not since the Control Date contained any asbestos, PCBs, underground storage tanks, open or closed pits, sumps or other containers on or under any such Leased Real Property, improvements or equipment.

 

(h)

The Company has not imported, manufactured, stored, used, operated, transported, treated or disposed of any Hazardous Materials other than in compliance with all applicable Environmental Laws.

 

4.20	Transactions with Affiliates.

 

Except as set forth in Schedule 4.20, neither the Sellers or any of them, any officer or director of the Company, nor any person with whom any such Person has any direct or indirect relation by blood, marriage or adoption, or any entity in which any such person owns any beneficial interest (other than a publicly held corporation whose shares are traded on a national or international securities exchange or in the over‑the counter market and less than five percent (5%) of the shares of which are beneficially owned by all such Persons in the aggregate) nor any Affiliate of any of the foregoing or any current or former Affiliate of the Company has any interest in: (a) any contract, arrangement or understanding with, or relating to, the Company or the properties or assets of the Company other than Contracts disclosed in Schedule 4.12(a) or Schedule 4.14; (b) any loan, arrangement, understanding, agreement or contract for or relating to the Company or the properties or assets of the Company; or (c) any property (real, personal or mixed), tangible or intangible, used or currently intended to be used by the Company. Schedule 4.20 also sets forth a complete list of all accounts, notes and other receivables of the Company and accounts payable of the Company owed to or due from the Sellers or any of them or any other Affiliate of the Company.

 

4.21	Customer and Vendor Relations.

 

Schedule 4.21 contains a complete and accurate list of (a) the twenty‑five (25) largest customers (by revenue) of the Company, calculated on a combined basis, for the trailing twelve (12)‑month period ended September 30, 2024 (the “Top Customers”), and (b) the ten (10) largest vendors or suppliers (by volume of payments made) of the Company, calculated on a combined basis, for the trailing twelve (12)‑month period ended September 30, 2024 (the “Top Vendors”). The Company maintains good relations with each of the Top Customers and Top Vendors, and, to the Knowledge of the Key Shareholders, no event has occurred that would materially and adversely affect the Company’s relations with any such Top Customer or Top Vendor. Except as expressly noted on Schedule 4.21, no Top Customer during the last twelve (12) months has canceled, terminated or, to the Knowledge of the Key Shareholders, made any threat to cancel or otherwise terminate its contract or to decrease its usage of the Company’s services or products. The Company has not received any written notice, and the Sellers have no Knowledge to the effect that, any Top Customer or Top Vendor may terminate or materially alter its business relations with the Company, either as a result of the transactions contemplated by this Agreement or otherwise. To the Knowledge of the Key Shareholders, there is no development specifically affecting any Top Customer or Top Vendor that would impair, in any material respect, the ability of such Top Customer or Top Vendor to perform its obligations under its Contracts with the Company in accordance with its respective terms.

 

 

4.22	Licenses and Permits.

 

Schedule 4.22 is a true and complete list of all notifications, licenses, permits, franchises, certificates, approvals, exemptions, classifications, registrations and other similar documents and authorizations, and applications therefor (collectively, the “Licenses”) held by the Company and issued by, or submitted by the Company to, any Governmental Entity. The Company owns or possesses all of the Licenses which are necessary to enable it to carry on its operations as presently conducted. All Licenses are valid, binding, and in full force and effect. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby shall not adversely affect any License. The Company has taken all necessary action to maintain each License, except where the failure to so act is not reasonably likely to have a Material Adverse Effect. To the Knowledge of the Key Shareholders, no loss or expiration of any License is threatened, pending, or reasonably foreseeable (other than expiration upon the end of any term, which expiration date is set forth on Schedule 4.22).

 

4.23	Sensitive Data.

 

Except as disclosed on Schedule 4.23, Sensitive Data collected or received by the Company in connection with providing services or products (a) was collected, used, disclosed and safeguarded in accordance with all applicable Laws (including state and federal consumer financial protection Laws) or agreements, or both, and (b) when collected, used, disclosed or safeguarded by the Company, in any manner in which the Sensitive Data was collected, used, disclosed or safeguarded prior to the date hereof, (i) does not infringe the patent, copyright, trademark, trade secret, or other intellectual property rights of any Person, (ii) does not violate the privacy rights of any Person, and (iii) does not violate any applicable Law or agreement. The Company has taken all commercially reasonable steps to maintain the confidentiality and proprietary nature of the Sensitive Data, including, without limitation, implementing and maintaining an information security program that includes reasonable administrative, technical and physical safeguards designed to: (1) insure the security and confidentiality of such Sensitive Data, (2) protect against any anticipated threats or hazards to the security or integrity of such Sensitive Data; and (3) protect against unauthorized access to or use of such Sensitive Data that could reasonably be expected to result in a substantial harm or inconvenience to any merchant or other customer of the Company. Except as disclosed on Schedule 4.23, in the past five (5) years, there have been (A) no losses or thefts or security breaches suffered by the Company in respect of Sensitive Data or other data used by the Company; (B) no violations of any posted or internal policies related to privacy, Sensitive Data or system security of the Company; (C) no unauthorized access or unauthorized use of any Sensitive Data or other data used by the Company; and (D) no unintended or improper disclosure of any Sensitive Data in the possession, custody or control of the Company or a contractor or agent acting on behalf of the Company.

 

4.24	Ethical Practices.

 

Neither the Company nor any representative thereof has offered or given, and the Sellers have no Knowledge of any Person that has offered or given on its behalf, anything of value to: (a) any official of a Governmental Entity, any political party or official thereof, or any candidate for political office; (b) any customer or member of any Governmental Entity; or (c) any other Person, in any such case while knowing or having reason to know that all or a portion of such money or thing of value may be offered, given or promised, directly or indirectly, to any customer, member of the government or candidate for political office for the purpose of the following: (i) influencing any action or decision of such Person, in his or its official capacity, including a decision to fail to perform his or its official function; (ii) inducing such Person to use his or its influence with any government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality to assist the Company in obtaining or retaining business for, or with, or directing business to, any Person; or (iii) where such payment would constitute a bribe, kickback or illegal or improper payment to assist the Company in obtaining or retaining business for, or with, or directing business to, any Person.

 

 

4.25	Bank Accounts; Powers of Attorney.

 

Schedule 4.25 sets forth a true and complete list of (a) all bank accounts and safe deposit boxes of the Company and all Persons who are signatories thereunder or who have access thereto and (b) the names of all Persons holding general or special powers of attorney from the Company and a summary of the terms thereof.

 

4.26	Accounts Receivable.

 

All accounts receivable of the Company (a) were acquired by the Company from bona fide sales of goods and services in the ordinary course to Persons who are not Affiliates of the Company or the Sellers or any of them; (b) are reflected properly and adequately reserved for on the Financial Statements in accordance with GAAP, and (c) are valid, and binding obligations of the account debtors and are not subject to credits, setoffs or counterclaims, and are current and, to the Knowledge of the Principles, collectible in accordance with their terms subject to applicable reserves on the Financial Statements.

 

4.27	Brokers, Finders and Investment Bankers.

 

Except as disclosed on Schedule 4.27, neither the Company, any officers, directors or employees thereof nor the Sellers or any of them or any Affiliate of the Company has employed or engaged any broker, finder or investment banker or incurred any liability for any investment banking fees, financial advisory fees, brokerage fees or finders’ fees in connection with the transactions contemplated by this Agreement.

 

4.28	Trade Control Laws.

 

Except as disclosed on Schedule 4.28, the Company has conducted the Business operations and respective import and export transactions in accordance with all applicable Sanctions (as defined below) and Trade Control Laws administered by Global Affairs Canada, the Canada Border Services Agency, the Royal Canadian Mounted Police or any other applicable Governmental Entity. Without limiting the foregoing, in respect of the Company:

 

(a)

has obtained all import and export permits required for its imports or exports of products from Canada (and Schedule 4.28 sets forth the status of all such applications);

 

(b)

is in compliance with the terms of all applicable import and export permits;

 

(c)

there are no pending or, to the Knowledge of the Key Shareholders, threatened claims or investigations against the Company with respect to such import or export permits or any import or export activities;

 

(d)

is not and has never been required to be registered in the Canadian Controlled Goods Program pursuant to the Defence Production Act (Canada);

 

(e)

in the past five years, (i) the Company, or any director, officer, or employee of the Company, or, to the Knowledge of the Key Shareholders, any representative acting on behalf of the Company has not been, or has not engaged in any dealings with any Person that has been, (A) the subject of Sanctions administered by Global Affairs Canada or any other equivalent Canadian or other Governmental Entity, or (B) located in, organized in, or a resident of any country or territory subject to comprehensive Sanctions, including China, Iran, North Korea, Russia, Sudan, Syria, Venezuela, or Ukraine. The Company has instituted, maintained and enforced policies and procedures reasonably designed to promote and ensure compliance with applicable Sanctions;

 

 

(f)

no director, officer or employee, or, to the Knowledge of the Key Shareholders, Person otherwise affiliated with the Company is listed on any Canadian government Sanctions list of prohibited or restricted Persons or is owned or controlled, or acting on behalf of, a Person on any such Sanctions list;

 

(g)

there are no actions, conditions or circumstances pertaining to the Company’s import or export transactions that would reasonably be expected to give rise to any future suits, demands, actions, claims, arbitration, proceedings or investigations; and

 

(h)

has not, in connection with or relating to the Business, (i) received from any Governmental Entity or any other Person any notice, inquiry, or internal or external allegation; (ii) made any voluntary or involuntary disclosure to a Governmental Entity; or (iii) conducted any internal investigation or audit concerning any actual or potential violation or wrongdoing, in each case related to Trade Control Laws.

 

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

The Purchaser and Twin Disc hereby jointly and severally represent and warrant to the Sellers as follows:

 

5.1	Organization.

 

Twin Disc is a corporation duly organized, validly existing and in good standing under the Laws of the State of Wisconsin. The Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of the Province of British Columbia. Both Twin Disc and the Purchaser have all requisite company power and authority to own, lease and operate its properties and to carry on their respective businesses as now being conducted.

 

5.2	Authorization.

 

Each of Twin Disc and the Purchaser has full power and authority to execute and deliver this Agreement and any other certificate, agreement, document or other instrument to be executed and delivered by the Purchaser or Twin Disc, as applicable, in connection with the transactions contemplated by this Agreement (collectively, the “Purchaser Ancillary Documents”), to perform its obligations under this Agreement and the Purchaser Ancillary Documents and to consummate the transactions contemplated by this Agreement and the Purchaser Ancillary Documents. The execution and delivery of this Agreement and the Purchaser Ancillary Documents by the Purchaser and/or Twin Disc, as applicable, the performance by the Purchaser and Twin of their respective obligations under this Agreement and the Purchaser Ancillary Documents, and the consummation of the transactions provided for in this Agreement and the Purchaser Ancillary Documents has been duly and validly authorized by all necessary company action on the part of the Purchaser and Twin Disc. This Agreement has been and, as of the Closing Date, the Purchaser Ancillary Documents shall be, duly executed and delivered by the Purchaser and Twin Disc, as applicable, and do or shall, as the case may be, constitute valid and binding agreements of the Purchaser and Twin Disc, enforceable against each of them in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.

 

 

5.3	Twin Disc Shares.

 

(a)

The Twin Disc Shares, when issued in accordance with this Agreement, shall be duly authorized, validly issued, fully paid and nonassessable, and issued in compliance with the charter documents of the Purchaser and all applicable Laws. Twin Disc shall reserve or cause to be reserved a sufficient number of the Twin Disc Shares for the Twin Disc Shares to be issued upon achievement of the Earnout Payment, if applicable.

 

(b)

A complete and correct copy of the charter documents, each as amended to date, of Twin Disc is available for public review on the SEC website (www.sec.gov).

 

5.4	Absence of Restrictions and Conflicts.

 

The execution, delivery and performance of this Agreement and the Purchaser Ancillary Documents, the consummation of the transactions contemplated by this Agreement and the Purchaser Ancillary Documents and the fulfillment of and compliance with the terms and conditions of this Agreement and the Purchaser Ancillary Documents does not or shall not (as the case may be), with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under, result in the loss of any benefit under, or permit the acceleration of any obligation under, (a) any term or provision of the charter documents of the Purchaser or Twin Disc, (b) any material contract to which the Purchaser or Twin Disc is a party, (c) any judgment, decree or order of any Governmental Entity to which the Purchaser or Twin Disc is a party or by which the Purchaser or Twin or any of their properties is bound or (d) any Law applicable to the Purchaser or Twin Disc.

 

5.5	Legal Proceedings.

 

There are no actions, suits, claims, investigations or other legal proceedings pending or, to the Purchaser’s Knowledge, threatened against or by the Purchaser, the Twin Disc or any Affiliate of the Purchaser or Twin Disc that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.

 

ARTICLE 6
COVENANTS

 

6.1	Non‑Competition and Non‑Solicitation Covenants of the Principals.

 

(a)

Non‑Competition. Each of the Principals covenants and agrees that:

 

(i)

Subject to Section 6.1(a)(ii), during the period commencing on the Closing Date and continuing for a period of five (5) years from the Closing Date, it shall not, on its own behalf or on behalf of or in connection with any other Person, directly or indirectly, in any capacity whatsoever including as an employer, employee, principal, agent, joint venturer, partner, shareholder or other equity holder, independent contractor, licensor, licensee, franchiser, franchisee, distributor, consultant, supplier or trustee or by or through any corporation, cooperative, company, trust, unincorporated association or otherwise carry on, be engaged in, or other interest in or be otherwise commercially involved in any endeavor, activity or business in all or any part of the Territory, which provides technology in competition with the Business’s operations.

 

(ii)

None of the Principals shall be in default under either Section 6.1(a)(i) by virtue of directly or indirectly holding as a passive investor only, not more than five percent (5%) in the aggregate, including securities held by any Persons acting jointly or in concert with such Principal, of the issued and outstanding securities of a Person, the securities of which are listed on a recognized stock exchange or an organized securities market.

 

 

(b)

Non‑Solicitation. Each of the Principals covenants and agrees that during the period commencing on the Closing Date and continuing for a period of five (5) years from the Closing Date, he or she shall not, on his or her own behalf or on behalf of or in connection with any other Person, directly or indirectly, in any capacity whatsoever including as an employer, employee, principal, agent, joint venturer, partner, shareholder or other equity holder, independent contractor, licensor, licensee, franchiser, franchisee, distributor, consultant, supplier or trustee or by or through any corporation, cooperative, company, trust, unincorporated association or otherwise:

 

(i)

lure or entice away or in any other manner persuade or attempt to persuade any customer of the Business to cease or materially reduce its business with the Company;

 

(ii)

lure or entice away or in any other manner persuade or attempt to persuade any supplier of the Company to cease or reduce its business with the Company; and

 

(iii)

employ, offer employment to, solicit the employment or service of, or procure or assist any Person to employ, offer employment to, solicit the employment or service of, or otherwise entice away from the employment or service of the Company or any Person who is, or within six months prior to the date of such solicitation, offer or hiring was, employed by the Company, any Person whose consulting services are retained by the Company; provided, however, that in the case of a Person who left his or her employment or terminated his or her contract with the Company, such Person may be solicited, offered employment or hired upon obtaining written consent of the Purchaser, which consent shall not be unreasonably withheld,

 

provided that none of the Principals shall not be in breach or violation of this Section 6.1(b) where any of the prohibited activities set forth in this Section 6.1(b) have occurred as a result of a general advertisement or recruitment campaign not specifically directed to any such customer, supplier, employee or contractor.

 

6.2	Confidentiality Covenants of the Principals.

 

Except as required by Law (unless such Law permits such Principal to refrain from disclosing the information for confidentiality or other reasons), each of the Principals shall maintain all information in its possession or in its control relating to the Business (including this Agreement) strictly in confidence and shall not disclose to any Person or make public or authorize the disclosure of any such information and shall not use such information for any purpose except as required to perform any duties that it is required to perform in its capacity as an employee or independent contractor of the Company, as the case may be, or for the purposes contemplated herein. Notwithstanding the foregoing, the restrictions in this Section 6.2 shall not apply to: (i) information that is independently developed by or on behalf of such Principal, (ii) information that is or becomes available to such Principal after the Closing Date from a third party having no obligation of confidentiality to the Purchaser with respect to such information, and (iii) disclosure that is required for purposes of such Principal enforcing its rights under this Agreement or the other agreements contemplated hereby.

 

 

6.3	Non‑Disparagement Covenants of the Principals.

 

Each of the Principals covenants and agrees that it shall not, at any time, engage in any pattern of conduct that involves the making or publishing, directly or indirectly, of written or oral remarks (including without limitation, the repetition or distribution of derogatory rumors, allegations, negative reports, or comments) which could be construed as disparaging, deleterious or damaging to the integrity, reputation or goodwill of the Company, or any of their respective directors, officers, management, affiliates, or any two or more of them. The foregoing provisions of this Section 6.3 shall not restrict or impede the Principals from exercising or enforcing their respective rights under this Agreement or any other protected legal rights (including rights arising from the Principals’ employment with the Company) or from providing truthful statements in response to any Governmental Entity, rulemaking authority, subpoena power, legal process, required governmental testimony or filings, or judicial, administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings).

 

6.4	Director and Officer Insurance.

 

The Key Shareholders may obtain, prior to Closing, such insurance policy or policies as they deem necessary in order to continue to protect and indemnify, for a period of six (6) years after the Closing Date, the current and former directors or officers of the Company. The cost of such policy shall be shared equally between the Purchaser on the one hand, and the Sellers on the other hand, up to maximum one-time cost to the Purchaser of Eleven Thousand Dollars ($11,000.00). The Purchaser’s share of any such cost shall be paid as part of the Estimated Closing Adjustment Amount.

 

ARTICLE 7
POST‑CLOSING COVENANTS

 

7.1	Tax Matters.

 

(a)

Tax Return Preparation. All Tax Returns prepared pursuant to this Section 7.1 shall be prepared in a manner consistent with prior practices, methods, and elections of the Company, unless otherwise required by applicable Law or agreed to by the Parties in writing. The preparing Party shall deliver copies of the Tax Returns prepared by such Party to the non‑preparing Party, for review and comment, at least twenty (20) days prior to filing. The non‑preparing Party shall provide any written comments within ten (10) days after receipt of such Tax Return from the preparing Party. If no such written comments are delivered, then the non‑preparing Party shall be deemed to have accepted such Tax Return. Upon receipt of written comments, the Purchaser and the Sellers shall consult and attempt to resolve in good faith all reasonable comments to any Tax Returns. If, after consulting in good faith, the Purchaser and the Sellers are unable to resolve any comments, such unagreed Tax Return shall be referred to the Arbitrator for resolution. If the Arbitrator is unable to make a determination with respect to any disputed item prior to the due date for the filing of the Tax Return in question, then (i) the Sellers or the Purchaser, as applicable, shall timely file such Tax Return in accordance with the preparing Party’s reasonable position and (ii) when the Arbitrator subsequently resolves the dispute, the Sellers or the Purchaser, as applicable, shall promptly file an amended Tax Return, if necessary, reflecting the resolution by the Arbitrator. The fees and expenses of the Arbitrator shall be shared equally by the Purchaser and the Sellers.

 

 

(b)

Tax Periods Ending on or Before the Closing Date. The Sellers shall prepare or cause to be prepared and file or cause to be filed all Tax Returns for the Company for all taxable periods ending on or prior to the Closing Date (a “Pre‑Closing Tax Period”) which are filed after the Closing Date. The Purchaser shall pay, and the Sellers shall reimburse the Purchaser for Taxes of the Company with respect to any such Pre‑Closing Tax Periods (whether the corresponding Tax Return is prepared by the Purchaser or the Sellers) within fifteen (15) days after payment by the Purchaser or the Company of such Taxes to the extent such Taxes are not reflected in the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) shown on the face of the Final Closing Adjustment Statement and included in the computation of Net Working Capital or otherwise not taken into account as a reduction of the Purchase Price. Any income Tax deductions arising from any Change of Control Payments, Closing Date Indebtedness, or Transaction Expenses shall, to the maximum extent permitted by applicable Law, be allocated to the Pre‑Closing Tax Period and the portion of the Straddle Period (as defined below) ending on the Closing Date.

 

(c)

Tax Periods Beginning Before and Ending After the Closing Date.

 

(i)

The Purchaser shall prepare or cause to be prepared and file or cause to be filed any Tax Returns of the Company for Tax periods which begin on or before the Closing Date and end after the Closing Date (the “Straddle Period”).

 

(ii)

The Sellers shall pay to the Purchaser within fifteen (15) days after the date on which Taxes are paid by the Purchaser or the Company with respect to the Straddle Period an amount equal to the portion of such Taxes which relates to the portion of the Straddle Period ending on the Closing Date to the extent such Taxes are not reflected in a reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) shown on the face of the Final Closing Adjustment Statement and included in the computation of Net Working Capital or are otherwise not taken into account as a reduction of the Purchase Price. For purposes of the Tax Return preparation, Tax reimbursement, and Tax indemnity provisions of this Agreement, in the case of any Taxes that are payable for the Straddle Period, the portion of such Tax related to the portion of the Straddle Period ending on and including the Closing Date shall (i) in the case of any Taxes other than those described in clause (ii) below, be deemed equal to the amount of such Tax for the entire Tax period multiplied by a fraction the numerator of which is the number of days in the Tax period ending on and including the Closing Date and the denominator of which is the number of days in the entire Tax period, and (ii) in the case of any Taxes based upon or related to income, gains, payments or receipts (including sales and use Taxes), or employment or payroll Taxes, be deemed equal to the amount which would be payable if the relevant Tax period ended on and included the Closing Date.

 

(iii)

Cooperation on Tax Matters; Refunds. In connection with the preparation and filing of Tax Returns, Tax claims, audits, examinations, and any administrative or judicial proceedings relating to the Tax liabilities imposed on or with respect to the Company, the Purchaser and the Sellers shall reasonably cooperate with each other, including the furnishing or making available during normal business hours of records, personnel (including representatives, agents and auditors) (as reasonably required on a mutually convenient basis), books of account, or other materials necessary or helpful for the preparation of such Tax Returns, the conduct of audit examinations or the defense of claims by Taxing authorities as to the imposition of Taxes and any assessment or reassessment in respect of Taxes. The Purchaser, on the one hand, and the Sellers, on the other hand, shall, and in the Purchaser’s case shall cause the Company to, retain all books and records with respect to Tax matters pertinent to the Company, relating to any Tax period beginning before the Closing Date until the expiration of the applicable statute of limitations (and, to the extent notified by the other Party, any extension thereof) for the respective taxable periods, plus sixty (60) days, and to abide by all record retention Laws and agreements entered into with any Taxing authority. Each Party further agrees, upon the reasonable request of another Party, to use its commercially reasonable best efforts to obtain any certificate or other document from any Governmental Entity or any other Person as may be necessary to mitigate, reduce, or eliminate any Tax that could be imposed (including with respect to the transactions contemplated hereby). Except to the extent included as an adjustment which increases the Purchase Price, any Tax refunds that are received by the Purchaser or the Company, and any amounts credited against Tax in lieu of a Tax refund to which Purchaser or the Company becomes entitled, that relate to Tax periods or portions thereof ending on or before the Closing Date shall be for the account of the Sellers, and Purchaser shall pay over (or cause the Company to pay over) to the Sellers the amount of any such refund or credit within ten (10) Business Days after receipt thereof or entitlement thereto. At the reasonable request and sole cost of Sellers, the Purchaser shall (or shall cause the Company to) make all filings and take all actions necessary or appropriate to secure such refunds or credits.

 

 

(iv)

Tax Sharing Agreements. Any Tax sharing, allocation, or indemnification agreement between the Sellers or any one or more of them and the Company is terminated as of the Closing Date and shall have no further effect for any taxable year (whether the current year, a future year, or a past year).

 

(v)

Certain Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement shall be paid by the Sellers when due, and the Sellers shall, at its own expense, file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees, and, if required by applicable Law, the Purchaser shall, and shall cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.

 

(vi)

The Parties agree to treat an amount paid pursuant to Section 2.4, Section 2.5, this Section 7.1, or Article 9 as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by applicable Law. To the extent that any amount required to be paid under this Section 7.1 was otherwise included in the calculation of the Purchase Price, the same amount may not be recovered again under this Section 7.1.

 

(vii)

If it is determined that the Company has made an “excessive eligible dividend designation” (as defined in subsection 89(1) of the Tax Act), each Seller hereby concurs with and agrees to make (and agrees to cause the recipient of such dividend to concur with and agree to make) an election under subsection 185.1(2) of the Tax Act in respect of the full amount thereof, and Purchaser shall cause the Company to make such election in the manner and within the time prescribed by subsections 185.1(2) and 185.1(3) of the Tax Act.

 

(viii)

Each party shall notify the other party if it determines that any transaction contemplated by this Agreement is required to be reported pursuant to section 237.3 or 237.4 of the Tax Act or any other rules of similar effect (the “Mandatory Reporting Rules”) or if the party otherwise intends to file any information returns in connection with this Agreement pursuant to the Mandatory Reporting Rules. Each party shall, to the extent possible, share a draft of any such filing (subject to redactions of solicitor-client privileged information) with the other party no later than fifteen (15) Business Days prior to the due date for such filing and shall take into account, acting reasonably, any comments of the other party received at least five (5) Business Days before the relevant filing deadline. Notwithstanding the foregoing, no party is under any obligation to report a transaction that it determines, acting reasonably, to be subject to a reporting requirement pursuant to the Mandatory Reporting Rules.

 

 

(d)

In the Tax Return under the Tax Act for the taxation year ending on or immediately before the Closing Date, the Sellers shall cause the Company to make a designation pursuant to paragraph 111(4)(e) of the Tax Act in respect of the Company’s intangible assets (the “111(4)(e) Designation”) in an aggregate amount not to exceed an amount equal to the lesser of (A) two times (if the relevant capital gains inclusion rate in effect is 1/2), or one-and-a-half times (if the relevant capital gains inclusion rate in effect is 2/3) the amount of net operating losses available to the Company at the relevant time, and (B) the aggregate fair market value of the Company’s intangible assets at the relevant time. The Purchaser agrees to promptly provide such co‑operation and information to the Sellers as the Sellers may reasonably require in order for the Company to make the 111(4)(e) Designation.

 

(e)

In connection with determining the allocations and amounts to be included in the 111(4)(e) Designation, the parties agree that the Company’s capital dividend account will be increased, provided that the Company’s capital dividend account will be at least Two Million Four Hundred Thousand dollars ($2,400,000.00) on Closing. The parties agree that immediately prior to Closing, the Company will allocate an amount up to the amount in the capital dividend account to the Purchased Shares, or such classes or series thereof as the directors of the Company may reasonably determine, by way of an increase in the legal stated capital of such Purchased Shares, and the deemed dividend arising therefrom will be treated as a capital dividend for the purposes of subsection 83(2) of the Tax Act. Notwithstanding the preceding sentence, if it is determined that the Company has made an election under subsection 83(2) of the Tax Act in respect of the full amount of any dividend payable by it on any Purchased Shares and the full amount of such dividend exceeded the amount of the Company’s capital dividend account immediately before the dividend became payable, each Seller hereby agrees to make (and agrees to cause the recipient of such dividend to agree to make) an election under subsection 184(3) of the Tax Act in respect of such dividend, to declare such excess portion to be a taxable dividend.

 

(f)

The Purchaser reserves the right to increase the 111(4)(e) Designation after a final valuation of the Company’s intangible assets has been made after Closing, provided there is no negative tax impact on any Seller and subject to the Purchaser’s obligations under Section 9.4.

 

(g)

For greater certainty, in connection with making the 111(4)(e) Designation:

 

(i)

the amount of the Earnout Payment, if any will not be included in any calculations necessary to determine the amount being included in the 111(4)(e) Designation.

 

(ii)

No election under subsection 256(9) of the Tax Act will be made for the timing of the change of control at Closing.

 

 

7.2	Public Announcements.

 

Unless otherwise required by applicable Law (based upon the reasonable advice of counsel), no Party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other Party (which consent shall not be unreasonably withheld, conditioned or delayed), and the Parties shall cooperate as to the timing and contents of any such announcement.

 

ARTICLE 8
CLOSING

 

8.1

Closing.

 

The Closing shall take place electronically via the exchange of documents and signatures, or at such other place as the Parties may agree. For Tax purposes, the Closing shall be deemed to occur at 12:01am on the Closing Date (the “Effective Time”).

 

8.2	Closing Deliverables of the Sellers.

 

In addition to any other documents to be delivered under other provisions of this Agreement, on or prior to the Closing Date, the Sellers shall have delivered, or caused to be delivered, to the Purchaser the following:

 

(a)

written consents of third parties, as set forth in Schedule 4.12(b), in form and substance reasonably satisfactory to the Purchaser, with respect to the change of control of the Company that shall occur upon the consummation of the transactions contemplated by this Agreement and/or any deemed assignment of any contract or agreement that shall result therefrom (and all such consents and waivers shall be in full force and effect);

 

(b)

payoff letters, in form and substance reasonably satisfactory to the Purchaser, from all third party lenders to the effect that, upon receipt of payment under such payoff letters, each such lender shall have been paid in full for all Closing Date Indebtedness and any Liens relating thereto shall be released;

 

(c)

a statement from the R&W Insurer or the insurance broker responsible for placing the R&W Insurance, specifying the R&W Costs;

 

(d)

written documentation, in form and substance reasonably satisfactory to the Purchaser, that confirms that, upon payment of the respective amounts for Change of Control Payments or Transaction Expenses specified in the Closing Date Statement, each such payee shall have been paid in full for all Change of Control Payments or Transaction Expenses, as applicable;

 

(e)

all third-party consents and approvals, in form and substance reasonably satisfactory to the Purchaser, that are necessary for the consummation of the transactions contemplated hereby, or that are required in order to prevent a breach of or default under any agreement to which the Company is a party;

 

(f)

terminations, in form and substance reasonably satisfactory to the Purchaser, of all agreements, arrangements, notes and accounts receivable and payable of the Company owing by or to the Sellers or any director, officer, employee or Affiliate of the Company as set forth on Schedule 4.20 and such terminations shall include a release of the Company from any and all liabilities and obligations arising out of or related to such arrangements;

 

 

(g)

employment agreements, in substantially the form attached hereto as Exhibit “D”, executed and delivered by each Principal which employment agreements shall supersede and replace such Principal’s existing employment agreements;

 

(h)

to the extent certificated, the original certificates representing all of the Purchased Shares, duly endorsed by the Sellers in blank for transfer or accompanied by stock powers of attorney for transfer duly executed by the Sellers in blank, and such other instruments, in form reasonably satisfactory to the Purchaser, sufficient to transfer to the Purchaser all legal and beneficial ownership of the Purchased Shares;

 

(i)

resignations and releases in the form attached hereto as Exhibit “E” of the directors and officers of Company, effective as of the Closing Date (the “Resignations”);

 

(j)

releases, in form and substance satisfactory to the Purchaser and Sellers’ Representative, acting reasonably, executed by each of the Sellers in favour of the Company in the form attached hereto as Exhibit “F” (the “Releases”);

 

(k)

a termination and release, in form and substance satisfactory to the Purchaser and EdgePoint Capital Advisors, executed by EdgePoint Capital Advisors in the form attached hereto as Exhibit “F-2”;

 

(l)

a duly executed certificate from a duly appointed officer of the Company, dated the Closing Date, certifying as to (1) the good standing of the Company in its jurisdiction of organization, (2) the completeness of and lack of amendments to its charter documents and (3) the effectiveness of any resolutions the Company passed in connection with this Agreement and transactions contemplated hereby;

 

(m)

a certificate of good standing for the Company, issued by the appropriate governmental official of the jurisdiction of its incorporation or amalgamation of a date no more than five (5) Business Days prior to the Closing;

 

(n)

the organizational record books and minute books the Company, including BC OnLine passwords;

 

(o)

the Escrow Agreement, duly executed by the Sellers;

 

(p)

an assignment of intellectual property rights, duly executed by each of the Principals and the Company, in form and substance reasonably acceptable to the Purchaser;

 

(q)

three complete copies of the electronic data room created in connection with the transaction; and

 

(r)

all other documents required to be entered into by the Sellers or any of them pursuant to this Agreement or reasonably requested by the Purchaser to convey the ownership interests in the Company to the Purchaser or to otherwise consummate the transactions contemplated by this Agreement.

 

 

8.3	Closing Deliverables of the Purchaser.

 

In addition to any other documents to be delivered under other provisions of this Agreement, at the Closing, the Purchaser shall each have delivered, or caused to be delivered, to the Sellers the following:

 

(a)

a duly executed certificate from a duly appointed officer of the Purchaser, dated the Closing Date, certifying as to (1) the good standing of the Purchaser in its jurisdiction of organization and (2) the effectiveness of any board resolutions of the Purchaser passed in connection with this Agreement and transactions contemplated hereby;

 

(b)

the Escrow Agreement, duly executed by the Purchaser; and

 

(c)

all other documents required to be entered into or delivered by the Purchaser at or prior to the Closing pursuant to this Agreement.

 

ARTICLE 9
INDEMNIFICATION

 

9.1	Indemnification Obligations of the Sellers.

 

Subject to the limitations set out in this Article 9, the Sellers, severally and not jointly, shall indemnify, defend and hold harmless the Purchaser and each of its officers, directors, employees, agents and representatives and each of the Affiliates, heirs, executors, successors and assigns of any of the foregoing (collectively, the “Purchaser Indemnified Parties”) from, against and in respect of any and all Losses arising out of or relating to any or all of:

 

(a)

any breach or inaccuracy of any representation or warranty of such Seller contained in this Agreement or in any of the Sellers Ancillary Documents; or

 

(b)

any breach of any covenant, agreement or undertaking made by such Seller in this Agreement or in any of the Sellers Ancillary Documents.

 

9.2	Indemnification Obligations for the Key Shareholders.

 

Subject to the limitations set out in this Article 9, the Key Shareholders, jointly and severally, shall indemnify, defend and hold harmless the Purchaser and the Purchaser Indemnified Parties from, against and in respect of any and all Losses arising out of or relating to any or all of:

 

(a)

any breach or inaccuracy of any representation or warranty of the Key Shareholders contained in this Agreement or in any of the Sellers Ancillary Documents;

 

(b)

any breach of any covenant (other than the covenant set out in Section 9.1), agreement or undertaking made by the Sellers or the Key Shareholders in this Agreement or in any of the Sellers Ancillary Documents;

 

(c)

any claim made by any former or current holder of any ownership interest in the Company, or any securities convertible into, exchangeable for or entitling the holder to receive any ownership interest in the Company, in connection with (i) the transactions contemplated by this Agreement or (ii) any rights relating to any ownership interest in the Company, any securities convertible into, exchangeable for or entitling the holder to receive any ownership interest in the Company, in either case, other than in connection with the Purchaser’s failure to pay the consideration payable pursuant to this Agreement in accordance with the terms hereof;

 

 

(d)

the Closing Date Indebtedness, the Change of Control Payments or the Transaction Expenses, in each case, to the extent not reflected on the Final Closing Adjustment Statement;

 

(e)

to the extent not reflected in any reserve for Tax liability (rather than any reserve for deferred Taxes) shown on the face of the Final Closing Adjustment Statement and included in the computation of Net Working Capital or otherwise not taken into account as a reduction of the Purchase Price, any liability of the Purchaser Indemnified Parties or Company for any Taxes (and related Losses) (i) of the Sellers for any taxable period, (ii) imposed on the Company for a Pre‑Closing Tax Period and the portion of the Straddle Period ending on the Closing Date, (iii) imposed on the Company as a result of their inclusion with any Person, prior to the Closing Date in a consolidated, combined, affiliated, associated or unitary Tax group, or an integrated fiscal unit, by reason of a liability under Treasury Regulation Section 1.1502‑6, or any comparable provisions of foreign, provincial, state or local Law, (iv) of any Person for the Pre‑Closing Tax Period imposed on the Company arising under the principles of transferee or successor liability, by contract or otherwise (other than a contract entered into in the ordinary course of business, the primary purpose of which is not related to Taxes), or (v) for the Pre‑Closing Tax Period and the portion of the Straddle Period ending on the Closing Date for which the Company is liable as a result of any tax sharing, tax indemnity or tax allocation agreement (other than a contract entered into in the ordinary course of business, the primary purpose of which is not related to Taxes);

 

(f)

any claims arising out of or resulting from any asbestos or Polychlorinated Biphenyls on the Leased Real Property that would constitute a breach of Section 4.19(g);

 

(g)

any claims constituting the monetary amount by which any unfunded or underfunded employee defined benefit plans are unfunded or underfunded;

 

(h)

any claims arising out of or resulting from the amount, availability or existence in any taxable period following the Closing of any previously unused tax credits, net operating losses or other tax attributes of the Company; provided that this exclusion shall not apply to any Taxes paid or payable by or with respect to the Company for any pre-Closing Tax period;

 

(i)

any claims arising out of or resulting from any government assistance program, grant, loan, or tax deferral with respect to COVID-19, including any employee retention credits, the CEWS program, and the Canadian government’s EDC Business Credit Availability Program (BCAP);

 

(j)

any claims arising out of or resulting from the failure of the Company to withhold, deduct or remit Canadian withholding Taxes on management fees paid to Beri Management LLC;

 

(k)

any claims arising out of or resulting from the Areas of Potential Environmental Concern (as defined and identified in the Phase I Environmental Site Assessment for 8238 129 Street, Surrey, BC) prepared by Next Environmental Inc. dated November 18, 2024, and revised on December 19, 2024 that would constitute a breach of Section 4.19;

 

(l)

any claim made by any former or current holder of any ownership interest in the Company, or any securities convertible into, exchangeable for or entitling the holder to receive any ownership interest in the Company arising out of or resulting from the allocation of the Purchase Price set forth in Section 2.2(b); or

 

 

(m)

any claims arising out of or resulting from any United States federal or state Tax arising out of, relating to or resulting from sales made by the Company in the United States.

 

The Losses of the Purchaser Indemnified Parties described in Section 9.1 and this Section 9.2 as to which the Purchaser Indemnified Parties are entitled to indemnification are hereinafter collectively referred to as the “Purchaser Losses”.

 

9.3	Sellers’ Indemnity – Limitations

 

The indemnity obligations of the Sellers under Section 9.1 and the indemnity obligations of the Key Shareholders under Section 9.2 shall be limited in the following respects:

 

(a)

No Seller shall be liable to the Purchaser Indemnified Parties pursuant to Section 9.1 in respect of Purchaser Losses until the aggregate amount of all claims for such Purchaser Losses exceeds $50,000 (the “Threshold Amount”), in which case any claim for indemnity made by the Purchaser Indemnified Parties pursuant to Section 9.1 in respect of such Purchaser Losses may be claimed against the applicable Seller(s), and with respect to each such claim the applicable Seller(s) shall be obliged to pay to the Purchaser fifty percent (50%) of the Purchaser Losses (the “Sellers’ RWI Retention Allocation”) until such time as the Purchaser Indemnified Parties’ aggregate Purchaser Losses equal the Retention Amount, after which time the Purchaser Indemnified Parties shall, in every instance, first claim indemnity and seek recovery for such Purchaser Losses under the R&W Insurance, and thereafter shall be entitled to claim indemnity and seek recovery for any remaining portion of any such Purchaser Losses not recovered under the R&W Insurance against the applicable Seller(s), subject to the limitations set out in Section 9.3(c).

 

(b)

The Key Shareholders shall not be liable to the Purchaser Indemnified Parties pursuant to Section 9.2 in respect of Purchaser Losses until the aggregate amount of all claims for such Purchaser Losses exceeds the Threshold Amount, in which case any claim for indemnity made by the Purchaser Indemnified Parties pursuant to Section 9.2 in respect of such Purchaser Losses may be claimed against the Key Shareholders, and with respect to each such claim the Key Shareholders shall be obliged to pay to the Purchaser the Sellers’ RWI Retention Allocation until such time as the Purchaser Indemnified Parties’ aggregate Purchaser Losses equal the Retention Amount, after which time the Purchaser Indemnified Parties shall, in every instance (including, for clarity any claim pursuant to Section 9.2(e)) first claim indemnity and seek recovery for such Purchaser Losses under the R&W Insurance, and thereafter shall be entitled to claim indemnity and seek recovery for any remaining portion of any such Purchaser Losses not recovered under the R&W Insurance against the Key Shareholders, subject to the limitations set out in Section 9.3(c).

 

(c)

The Sellers’ liability to the Purchaser Indemnified Parties pursuant to Section 9.1 and the Key Shareholders liability to the Purchaser Indemnified Parties pursuant to Section 9.2 shall be limited as follows:

 

(i)

in no event shall the aggregate liability for indemnification by any Seller under Section 9.1 exceed the total amount of such Seller’s portion of the Purchase Price; and

 

 

(ii)

in no event shall the aggregate liability for indemnification by any Key Shareholders under Section 9.2 exceed:

 

A.

for Fundamental Representations, the total amount of the Purchase Price; and

 

B.

for all other representations and warranties, ten percent (10%) of the Purchase Price (the “General Cap”).

 

(d)

Notwithstanding the terms of this Section 9.3, the Threshold Amount and the limitations contained in Section 9.3(c) will not apply to any indemnity claim made by a Purchaser Indemnified Party based on fraud or intentional misrepresentation.

 

(e)

The obligations of the Sellers and the Key Shareholders to indemnify the Purchaser Indemnified Parties in respect of an indemnity claim are subject to and conditional upon the Purchaser Indemnified Parties providing written notice of such indemnity claim to the Sellers’ Representative prior to the expiry of the applicable time period set forth in Section 9.6.

 

(f)

The Purchaser Indemnified Parties shall not be entitled to recover any Purchaser Losses from any Seller for:

 

(i)

any Purchaser Losses that would result in double recovery for the Purchaser Indemnified Parties (but only for the amount of such double recovery) even though they may have resulted from the breach of more than one of the representations, warranties, agreements and covenants made by such Seller in this Agreement; or

 

(ii)

to the extent that any matter was reflected as an adjustment to the Purchase Price pursuant to the terms of this Agreement.

 

9.4	Indemnification Obligations of the Purchaser.

 

The Purchaser and Twin Disc shall indemnify and hold harmless the Sellers and each of their respective officers, directors, employees, agents and representatives and each of the Affiliates, heirs, executors, successors and assigns of any of the foregoing (collectively, the “Seller Indemnified Parties”) from, against and in respect of any and all Losses arising out of or relating to:

 

(a)

any breach or inaccuracy of any representation or warranty made by the Purchaser or Twin Disc in this Agreement or in any of the Purchaser Ancillary Documents;

 

(b)

any breach of any covenant, agreement or undertaking made by the Purchaser or Twin Disc in this Agreement or in any of the Purchaser Ancillary Documents; or

 

(c)

any liability of the Seller Indemnified Parties (or any of them) or the Company for any Taxes (and related Losses) imposed on the Company or any Seller Indemnified Party as a result of any tax planning or arrangements made by the Purchaser or Twin Disc in connection with the Closing or the making of the 111(4)(e) Designation (including any withholding tax obligations imposed on any Seller Indemnified Party as a result thereof), except to the extent that such liability or Loss was reflected as an adjustment to the Purchase Price pursuant to the terms of this Agreement.

 

The Losses of the Seller Indemnified Parties described in this Section 9.4 as to which the Seller Indemnified Parties are entitled to indemnification are hereinafter collectively referred to as “Seller Losses”.

 

 

9.5	Indemnification Procedure.

 

(a)

Promptly after receipt by a Purchaser Indemnified Party or a Seller Indemnified Party (either such party, an “Indemnified Party”) of notice by a third party (including any Governmental Entity) of any complaint or the commencement of any audit, investigation, action or proceeding with respect to which such Indemnified Party may be entitled to receive payment from any other Party for any Purchaser Losses or any Seller Losses (as the case may be), such Indemnified Party shall promptly notify the Purchaser or the Sellers’ Representative, as the case may be (the “Indemnifying Party”), such notice shall be in writing and specify (to the extent that information is available) the factual basis for the indemnity claim and the amount of the indemnity claim or, if an amount is not then determinable, an estimate of the amount of the indemnity claim if an estimate is feasible in the circumstances. In the event that the Purchaser delivers any such written notice of an indemnity claim to the Sellers’ Representative, the Purchaser shall also promptly deliver such written notice to the R&W Insurer, in the manner and within the timeframe required by the R&W Insurance.

 

(b)

Failure to notify the Indemnifying Party as required under Section 9.5(a) shall not relieve the Indemnifying Party from liability under this Agreement with respect to such claim unless, and only to the extent that, such failure to notify the Indemnifying Party results in the forfeiture by the Indemnifying Party of rights and defenses otherwise available to the Indemnifying Party with respect to such claim.

 

(c)

The Indemnifying Party shall have the right to assume the defense of such claim, upon written notice delivered to the Indemnified Party within ten (10) days after receipt of such written notice described in Section 9.5(a), assuming full responsibility for any Purchaser Losses or Seller Losses (as the case may be) resulting from such audit, investigation, action or proceeding, to assume the defense of such audit, investigation, action or proceeding, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of the reasonable fees and disbursements of such counsel; provided, however, that, the Indemnifying Party shall not have the right to assume such defense if (i) in the reasonable opinion of counsel for the Indemnified Party or the R&W Insurer, as applicable, there is a reasonable likelihood of a conflict of interest between the Indemnifying Party and the Indemnified Party; (ii) the claim for indemnification relates to or arises in connection with a criminal proceeding or any non‑criminal proceeding the adverse determination of which, in the reasonable opinion of the Indemnified Party, could reasonably be expected to have a material adverse effect on the Indemnified Party or any of its Affiliates; (iii) the principal relief sought by such action is an injunction or equitable relief against the Indemnified Party, (iv) the Indemnified Party reasonably estimates that the amount of Losses that will arise in respect of such claim are greater than the maximum liability on unused portion thereof for which the Indemnifying Party could be liable pursuant to the terms of this Agreement; (v) the appropriate court rules that the Indemnifying Party failed or is failing to vigorously prosecute or defend such audit, investigation, action or proceeding.

 

(d)

In the event that:

 

(i)

an indemnity claim being provided by the Purchaser to the Sellers’ Representative and the R&W Insurer (as the case may be) relates to an alleged liability of any Purchaser Indemnified Parties to any other Person (a “Third‑Party Liability”) where coverage under the R&W Insurance is denied or not applicable, and the Sellers wish to assume defense of such Third‑Party Liability and the conduct of any related proceedings;

 

 

(ii)

the Indemnifying Party declines or fails to assume the defense of the audit, investigation, action or proceeding on the terms provided above or to employ counsel reasonably satisfactory to the Indemnified Party, in either case within such ten (10)‑day period; or

 

(iii)

the Indemnifying Party is otherwise not entitled to assume such defense,

 

then such Indemnified Party may employ counsel to represent or defend it in any such audit, investigation, action or proceeding and the Indemnifying Party shall pay the reasonable fees and disbursements of such counsel as incurred; provided, however, that the Indemnifying Party shall not be required to pay the fees and disbursements of more than one (1) counsel for all Indemnified Parties in any jurisdiction in any single audit, investigation, action or proceeding. In any audit, investigation, action or proceeding with respect to which indemnification is being sought hereunder, the Indemnified Party or the Indemnifying Party, whichever is not assuming the defense of such action, shall have the right to participate in such matter and to retain its own counsel at such Party’s own expense. The Indemnifying Party or the Indemnified Party, as the case may be, shall at all times use reasonable efforts to keep the Indemnifying Party or the Indemnified Party, as the case may be, reasonably apprised of the status of the defense of any matter the defense of which they are maintaining and to cooperate in good faith with each other with respect to the defense of any such matter.

 

(e)

No Indemnified Party may settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought hereunder without the prior written consent of the Indemnifying Party, unless: (i) the Indemnifying Party fails to assume and maintain the defense of such claim pursuant to this Section 9.5; (ii) such settlement, compromise or consent includes an unconditional release of the Indemnifying Party from all liability arising out of such claim; and (iii) to the extent such claim is in respect of Losses which can be recovered under the R&W Insurance, the R&W Insurer has consented to such settlement, compromise or consent. An Indemnifying Party may not, without the prior written consent of the Indemnified Party, settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought hereunder unless: (A) such settlement, compromise or consent includes an unconditional release of the Indemnified Party from all liability arising out of such claim; (B) does not contain any admission or statement suggesting any wrongdoing or liability on behalf of the Indemnified Party; and (C) does not contain any equitable order, judgment or term which in any manner affects, restrains or interferes with the business of the Indemnified Party or any of the Indemnified Party’s Affiliates.

 

(f)

Subject to Section 9.10, payment of indemnification Losses (or such portion thereof) arising from any indemnity claim shall be paid by wire transfer of immediately available funds by an Indemnifying Party within ten (10) Business Days following the earliest of the following: (i) the date on which such Indemnifying Party provides to the Indemnified Party an express written acknowledgement of its responsibility to indemnify the Indemnified Party under this Article 9 for such Losses (or such portion thereof), (ii) the date on which such Indemnifying Party and Indemnified Party agree in writing as to the Indemnifying Party’s responsibility to indemnify the Indemnified Party under this Article 9 for such Losses (or such portion thereof), and (iii) the date on which such Losses (or such portion thereof) are determined by an order of a court of competent jurisdiction or an arbitrator to be the responsibility of such Indemnifying Party under this Article 9.

 

 

9.6

Survival.

 

The representations and warranties of the Parties contained herein shall not be extinguished by the Closing, but shall survive the Closing for, and all claims for indemnification in connection therewith shall be asserted not later than:

 

(a)

for Fundamental Representations, the period ending at 11:59 p.m. (Pacific Time) on the date that is seventy (70) months after the Closing Date;

 

(b)

for all other representations and warranties, eighteen (18) months following the Closing Date; and

 

(c)

none of the covenants or other agreements contained in this Agreement shall survive the Closing other than those which by their terms contemplate performance after the Closing. Such surviving covenants and agreements shall survive the Closing for the applicable statute of limitations.

 

For the avoidance of doubt, the Parties hereby agree and acknowledge that the survival periods set forth in this Section 9.6 are contractual statutes of limitations and any claim brought by any Party pursuant to this Article 9 must be brought or filed prior to the expiration of the applicable survival period. Notwithstanding the foregoing, if, prior to the close of business on the last day a claim for indemnification may be asserted hereunder, an Indemnifying Party shall have been properly notified of a claim for indemnity hereunder and such claim shall not have been finally resolved or disposed of at such date, such claim shall continue to survive and shall remain a basis for indemnity hereunder until such claim is finally resolved or disposed of in accordance with the terms hereof.

 

9.7	Liability Limits.

 

(a)

For the avoidance of doubt, the above limitations shall not prohibit a Party from seeking specific performance as a remedy in the event such remedy is available pursuant to the terms of this Agreement, the Purchaser Ancillary Documents, or the Sellers Ancillary Documents, as applicable.

 

(b)

No Seller shall be liable for any breach of any representation and warranty of (and regarding) another Seller or any covenant or agreement of any other Seller under Article 3 (such that each Seller shall only be liable for its own breaches thereof on a several basis); provided, that the foregoing limitation shall not, for the avoidance of doubt, apply to any representation, warranty, covenant or agreement made by a Seller regarding the Company or such Seller.

 

(c)

Losses shall be reduced to the extent that the Indemnified Party actually recovers the Loss that is the subject matter of the claims pursuant to any proceeds received from an insurance policy (other than any proceeds from self‑insurance or fronted insurance programs) in which case the quantum of such insurance proceeds shall be calculated net of any reasonable costs of realizing such insurance proceeds (including, without limitation, any deductible paid and the costs of increased premiums, but excluding the Sellers’ RWI Retention Allocation).

 

(d)

Nothing in this Agreement in any way restricts or limits the general obligation at law of an Indemnified Party to mitigate any Losses which it may suffer or incur by reason of the breach by an indemnifying party of any representation, warranty, covenant or obligation of such indemnifying party under this Agreement.

 

 

9.8	Payment of Indemnification Escrow Amount.

 

(a)

Any Purchaser Losses not covered by proceeds from the R&W Insurance or any Sellers’ RWI Retention Allocation payable to a Purchaser Indemnified Party pursuant to this Article 9 shall be satisfied: (i) first, from the Indemnification Escrow Amount; and (ii) second, to the extent such amount exceeds the amounts available to the Purchaser Indemnified Party in the Indemnification Escrow Amount, from the Sellers or the Key Shareholders, as the case may be, subject to the limitations set out in this Article 9. If the Purchaser becomes entitled to any distribution of all or any portion of the Indemnification Escrow Amount pursuant to this Article 9, the Purchaser and the Sellers shall take all actions necessary under the Escrow Agreement (including the execution and delivery of joint written instructions to the Escrow Agent) to cause the Escrow Agent to release to the Purchaser the amounts to be paid from the Indemnification Escrow Amount to the Purchaser in accordance with this Agreement.

 

(b)

Subject to any claims pursuant to Section 9.1, the Indemnification Escrow Amount shall be promptly released for payment to the Sellers in accordance with the Escrow Agreement on the date that is seventy (70) months after the Closing Date.

 

9.9	Representations and Warranties Insurance

 

(a)

The Purchaser covenants and agrees to:

 

(i)

obtain, before Closing, buyer‑side representation and warranty insurance (the “R&W Insurance”) from an insurer (the “R&W Insurer”) which (A) names the Purchaser as named insured, and the Company and the Purchaser Indemnified Parties as additional insureds, with coverage in an aggregate limit of liability of $5,000,000 and an aggregate retention amount under the R&W Insurance of no more than $115,000 (the “Retention Amount”); and (B) does not permit any Seller or Principal to be liable pursuant to a right of subrogation or contribution or otherwise under the R&W Insurance or any other representation and warranty insurance policy purchased by the Purchaser or any of its Affiliates in connection with this Agreement or the transactions contemplated herein, except in the case of fraud;

 

(ii)

deliver at Closing a true and complete copy of the binder with respect to such R&W Insurance, together with confirmation of payment of the premium (as to be paid pursuant to Section 9.9(b)) in respect thereof;

 

(iii)

deliver to the Sellers’ Representative, when received by the Purchaser following Closing, a true and complete copy of the insurance policy with respect to such R&W Insurance (the “R&W Policy”), a form of which R&W Policy is attached hereto as Exhibit “G”; and

 

(iv)

maintain such R&W Insurance in place following Closing and not, thereafter, cancel, terminate, amend, or vary the R&W Insurance without the express written consent of the Sellers’ Representative.

 

 

(b)

The Sellers agree to provide such co‑operation to the Purchaser as the Purchaser may reasonably require in order to obtain and maintain the R&W Insurance. The Purchaser and the Sellers agree that any and all premium costs, R&W Insurer due diligence/underwriting fees, commissions, and any other reasonable fees and expenses charged by the R&W Insurer relating to the underwriting of the R&W Insurance together with any applicable taxes thereon (specifically excluding any fees payable to legal or tax advisors of the Purchaser or any of its Affiliates) (collectively, the “R&W Costs”), shall be borne and paid 50% by the Purchaser, on the one hand, and 50% by the Sellers, on the other hand, with the amount payable by the Purchaser in respect of any work fee payable to the R&W Insurer to be paid in cash as and when called upon by the R&W Insurer, and the amount payable by the Sellers for their collective portion of the R&W Costs to be paid at Closing.

 

(c)

Notwithstanding anything to the contrary herein, neither any revocation, cancellation or modification of the R&W Policy after the Closing Date, nor any inability of, nor any denial by any R&W Insurer, to pay any Losses contemplated by the R&W Policy, shall result in liability not otherwise contemplated under this Article 9 for Sellers.

 

9.10

Offset.

 

To the extent the Purchaser determines in good faith that there exists a bona fide indemnity claim against a Seller pursuant to which a Purchaser Indemnified Party would be entitled to indemnification and to the extent such indemnity claim would not be fully satisfied by proceeds of insurance available under the R&W Insurance, the Purchaser shall have the right, in its sole and absolute discretion, to set‑off, reduce and offset any amount otherwise payable by the Purchaser under this Agreement (including the Earnout Payment or any portion thereof) by the amount of such Loss which would not be fully satisfied by proceeds of insurance available under the R&W Insurance and which is either (i) finally determined by a court of competent jurisdiction or agreed upon pursuant to the terms of this Agreement or (ii) asserted in good faith pursuant to the terms of this Agreement, based on reasonable and objective evidence provided by the Purchaser to the Sellers’ Representative. Neither the exercise nor the failure to exercise the right set forth in this Section 9.10 shall constitute an election of remedies or limit the Purchaser in any manner in the enforcement of any other remedies that may be available to the Purchaser.

 

9.11	Investigations.

 

The Purchaser and Twin Disc acknowledge and agree that neither of them has knowledge that any of the representations or warranties made by the Sellers, the Key Shareholders or any of them in this Agreement as of the date hereof are untrue or inaccurate (but for greater certainty, in making this acknowledgement neither the Purchaser nor Twin Disc are confirming or acknowledging the completeness of any disclosures made by the Sellers). Neither the Sellers nor the Key Shareholders shall be liable to the Purchaser or Twin Disc for any Losses based upon or arising out of any inaccuracy in or breach of any of the representations or warranties of the Sellers or the Key Shareholders contained in this Agreement if the Purchaser or Twin Disc had actual knowledge of such inaccuracy or breach prior to Closing, and the Purchaser will notify the Sellers if it becomes aware of any such inaccuracy or breach. For greater certainty, providing or furnishing information or documentation to the Purchaser does not constitute knowledge of the contents or existence of such information or documentation except to the extent expressly disclosed in the schedules attached to this Agreement and for the purpose such disclosure was relied upon.

 

9.12	Materiality.

 

For purposes of this Article 9, any breach or inaccuracy of any representation or warranty as well as any Purchaser Losses or Seller Losses resulting from any such breach or inaccuracy, shall be determined without regard to any materiality, Material Adverse Effect or other similar qualification contained in or otherwise applicable to such representation or warranty.

 

 

9.13	Tax Treatment of Indemnification.

 

For all Tax purposes, the Parties agree to treat (and shall cause each of their respective Affiliates to treat) any indemnity payment under this Agreement as an adjustment to the Purchase Price.

 

9.14	Exclusive Remedy.

 

The Parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising from fraud on the part of a Party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this Article 9; provided, however, nothing in this Section 9.14 shall limit (a) any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled, or (b) any Person’s right to enforce such Person’s rights under any Seller Ancillary Document or Purchaser Ancillary Document. For the avoidance of doubt, nothing in this Agreement shall limit the liability of any Indemnifying Party (and this Article 9 shall not be the sole and exclusive remedy in respect of such Indemnifying Party) in connection with a claim based on fraud in connection with this Agreement committed by such Indemnifying Party.

 

ARTICLE 10
MISCELLANEOUS PROVISIONS

 

10.1	Appointment of Sellers’ Representative.

 

(a)

Each Seller hereby irrevocably appoints the Sellers’ Representative, or any successor thereto, as its representative, agent, proxy and attorney in fact for such Seller and in such Seller’s name, place and stead for all purposes of this Agreement and the Escrow Agreement. Each Seller agrees that such agency and proxy are coupled with an interest and are therefore irrevocable without the consent of the Sellers’ Representative and shall survive the death, incapacity, bankruptcy, dissolution, or liquidation of any Seller.

 

(b)

Without limiting the generality of the foregoing, the Sellers’ Representative shall have full power and authority to make all decisions and take all actions relating to any one Seller or all of the Sellers’ respective rights, obligations and remedies under, or to be delivered in connection with, this Agreement and the Escrow Agreement, including to receive and make payments, to receive and send notices (including notices of termination), to receive and deliver documents, to exercise, enforce or waive rights or conditions, any amendment or waiver to this Agreement or any agreements contemplated hereunder, to enter into settlements including with respect to indemnification claims and Purchase Price adjustments, to give releases and discharges, to seek indemnification on behalf of the Sellers, to defend against indemnification claims of the Purchaser, to estimate holdback amounts for fees and costs that have accrued or shall be incurred from time to time, and to take all other actions that are either (i) necessary or appropriate in the judgment of the Sellers’ Representative for the accomplishment of the foregoing; or (ii) specifically mandated by the terms of this Agreement. All decisions and actions taken by the Sellers’ Representative shall be binding upon all Sellers, and no Seller shall have the right to object, dissent, protest or otherwise contest the same.

 

(c)

The Purchaser shall be entitled to deal only with the Sellers’ Representative in respect of all matters arising under this Agreement, the Escrow Agreement, including to receive and make payments, to receive and send notices (including notices of termination), to receive and deliver documents, to exercise, enforce or waive rights or conditions, to give releases and discharges, to seek indemnification against the Sellers or any one of them and to defend against indemnification claims of the Sellers.

 

 

(d)

All references in this Agreement to decisions and actions to be taken by the Sellers or any one of them, as the case may be, shall be deemed taken by the Sellers or any one of them, as the case may be, if such decisions or actions are taken by the Sellers’ Representative and all such decisions and actions shall be binding upon any one or all Sellers, as applicable. All references in this Agreement to decisions and actions to be taken by the Purchaser and directed to the Sellers or any one of them, as the case may be, shall be deemed directed to the Sellers or any one of them, as the case may be, if such decisions or actions are directed by the Purchaser to the Sellers’ Representative.

 

(e)

The Purchaser shall be entitled to rely upon any notice provided to the Purchaser by the Sellers’ Representative or action taken by the Sellers’ Representative acting within the scope of its authority.

 

(f)

Notwithstanding the foregoing, no payment, notice, receipt or delivery of documents, exercise, enforcement or waiver of rights or conditions, indemnification claim or indemnification or a principal defense shall be ineffective by reason only of it having been made or given to or by a Seller directly if each of the Purchaser and such Seller consent by virtue of not objecting to such dealings without the intermediary of the Sellers’ Representative.

 

(g)

The Sellers’ Representative shall not be liable to the Sellers for any act done or omitted hereunder, or under any agreements delivered or otherwise in connection with transactions contemplated herein, while acting in good faith (and any act done or omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith) and not in a manner constituting gross negligence or wilful misconduct. The Sellers hereby agree to jointly and severally indemnify the Sellers’ Representative and hold it harmless against any and all losses, damages, injuries, liabilities, claims (including any third party claims), charges, interest, actions, suits, proceedings, fines, levies, judgments, liens, penalties, Taxes, costs or expenses (including reasonable legal and accounting or other professional fees) and fees and costs incurred in enforcing rights under this Agreement incurred without gross negligence or wilful misconduct on the part of the Sellers’ Representative and arising out of or in connection with the acceptance or administration of his duties hereunder.

 

(h)

If the then‑appointed Sellers’ Representative dies, resigns, refuses or otherwise is unable to serve as the Sellers’ Representative, then a majority in interest (based on the pro rata share of the Sellers at such time) of the Sellers shall select a successor Sellers’ Representative. The resignation of the Sellers’ Representative shall not give rise to additional liability or obligations thereafter, except for liability or obligations arising prior to such resignation.

 

10.2

Notices.

 

All notices, communications and deliveries under this Agreement shall be made in writing and, other than in respect of email transmission, signed by or on behalf of the Party making the same, shall specify the Section under this Agreement pursuant to which it is given or being made, and shall be delivered personally or by both email and by a national overnight courier service (with evidence of delivery and postage and other fees prepaid) as follows:

 

 

To the Purchaser and/or Twin Disc:

 

c/o Twin Disc, Incorporated
222 East Erie Street, Suite 400
Milwaukee, Wisconsin 53202
Attn:  John H. Batten
Email: batten.john@twindisc.com         

 

with a copy to:                   von Briesen & Roper, s.c.
411 East Wisconsin Avenue, Suite 1000
Milwaukee, Wisconsin 53202
Attn:   Steven M. Szymanski
            Kenneth A. Hoogstra
Email:  steven.szymanski@vonbriesen.com
             kenneth.hoogstra@vonbriesen.com

 

with a copy to:                    Harper Grey LLP
3200 ‑ 650 West Georgia Street
Vancouver, BC V6B 4P7
Attn:   Steven G. Lukas
Email:  slukas@harpergrey.com

 

To the Sellers’ Representative, on behalf of the Sellers:

Mark Chesley
[***]

[***]

 

Atten:         Mark Chesley
Email:         markc@kobelt.com

 

with a copy to:                     DLA Piper (Canada) LLP
1133 Melville Street, Suite 2700
Vancouver, BC V6E 4E5
Atten:     Michael Mjanes
Email:     michael.mjanes@ca.dlapiper.com

 

with a copy to:                   EdgePoint Capital Advisors
2000 Auburn Drive, Suite 330
Beachwood, Ohio 44211
Atten:     Paul Chameli
Email:     pchameli@edgepoint.com

 

or to such other representative or at such other address of a Party as such Party may furnish to the other Parties in writing. Any such notice, communication or delivery shall be deemed given or made (a) on the date of delivery if delivered in person, (b) on the first (1st) Business Day after delivery to an appropriate customer service representative if sent by overnight courier, or (c) upon transmission by email of a PDF document if receipt is confirmed by telephone or in writing (including via email).

 

 

10.3	Interpretation.

 

For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Schedules and Exhibits mean the Articles and Sections of, and Schedules and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof; and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. In this Agreement, the words “provided”, “furnished” and phrases of similar import includes information or documents posted and thereby made available to the Purchaser or its representatives no later than five (5) Business Days prior to the date hereof through the “Project Grizzly Data Room” virtual data room established by Sellers, and (j) any reference to a statute refers to such statute and all rules and regulations made under it as they may have been or may from time to time be amended, re-enacted or replaced. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein. Unless otherwise specified herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP.

 

10.4	Accounting Terms.

 

All accounting terms not specifically defined in this Agreement are to be interpreted in accordance with GAAP applied consistently (the “Accounting Principles”). Notwithstanding the foregoing, the Closing Date Statement, the Preliminary Closing Adjustment Statement and the Final Closing Adjustment Statement shall be prepared in a manner consistent with the calculation of Net Working Capital set forth on Exhibit “B” and all applicable individual elements thereof used to make the calculations as contemplated in such statements, including the calculation of the Estimated Purchase Price and the Purchase Price, shall be determined in accordance with the Accounting Principles, and to the extent practicable, consistent with Exhibit “B”.

 

10.5	Assignment.

 

This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of each of the Parties hereto and their respective successors and permitted assigns. Except as set forth in the following sentence, neither this Agreement nor any rights, benefits or obligations set forth herein may be assigned by any of the Parties hereto. Anything in this Agreement or any agreement related to this Agreement (any such related agreement, a “Related Agreement”) to the contrary notwithstanding, the Purchaser shall have the right (without the prior written consent of any Seller), at any time, and in its sole discretion, to assign in whole or in part any or all of its rights or obligations under this Agreement and any Related Agreement (i) for security interest purposes to any lender providing financing to the Purchaser, any of its permitted assigns, or any Affiliates of the Purchaser or the Purchaser’s permitted assigns, (ii) to one or more of its Affiliates; and (iii) to any indirect or direct subsequent purchaser of the Purchaser or its Affiliates or any material portion of its assets (whether such sale is structured as a sale of equity, a sale of assets, a merger or otherwise); provided, however, that notwithstanding any such assignment, the Purchaser shall remain fully liable for the performance of all obligations of the Purchaser under this Agreement, to the extent such obligations are not performed by the Purchaser’s assignee(s). Further, any assignment by the Purchaser under clause (ii) of this Section 10.5 shall not preclude the Purchaser from paying the Escrow Payment in accordance with this Agreement.

 

10.6	No Third Party Beneficiaries.

 

Except as otherwise expressly set forth in this Agreement, nothing herein expressed or implied is intended or shall be construed to confer upon or give to any Person, other than the Parties hereto and their respective permitted successors and assigns and other than the investors of the Purchaser, any rights or remedies under or by reason of this Agreement, such third parties specifically including employees or creditors of the Company or any Seller.

 

 

10.7	Number; Gender; Currency.

 

Whenever the context so requires, the singular number shall include the plural and the plural shall include the singular, and the gender of any pronoun shall include the other genders. Unless otherwise specified to the contrary, all references to “dollars” or “$” are references to Canadian dollars.

 

10.8

Captions.

 

The titles, captions and table of contents contained in this Agreement are inserted in this Agreement only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision of this Agreement.

 

10.9	Governing Law; Amendment.

 

This Agreement shall be governed by and construed and enforced in accordance with the Laws of the Province of British Columbia and the Laws of Canada applicable therein without reference to its choice of Law rules. This Agreement may not be amended, modified or supplemented except by written agreement of the Parties.

 

10.10

Consent to Jurisdiction, Etc.

 

Each of the Parties hereby irrevocably consents and agrees that, subject to Section 2.4(c) and Section 2.5(d), any action, suit or proceeding arising in connection with any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or any related document (for purposes of this Section, a “Legal Dispute”) shall be brought only to the exclusive jurisdiction of the courts of the Province of British Columbia or the federal courts located in the Province of British Columbia. The Parties agree that, after a Legal Dispute is before a court as specified in this Section 10.10 and during the pendency of such Legal Dispute before such court, all actions, suits or proceedings with respect to such Legal Dispute or any other Legal Dispute, including, without limitation, any counterclaim, cross‑claim or interpleader, shall be subject to the exclusive jurisdiction of such court. Each of the Parties hereby waives, and agrees not to assert, as a defense in any legal dispute, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in such court or that its property is exempt or immune from execution, that the action, suit or proceeding is brought in an inconvenient forum or that the venue of the action, suit or proceeding is improper. Each Party hereto agrees that a final judgment in any action, suit or proceeding described in this Section 10.10 after the expiration of any period permitted for appeal and subject to any stay during appeal shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Laws.

 

10.11

Severability.

 

Any provision of this Agreement, which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable Law, the Parties waive any provision of Law which renders any such provision prohibited or unenforceable in any respect.

 

 

10.12

Counterparts.

 

This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement or the terms of this Agreement to produce or account for more than one (1) of such counterparts. Delivery of an executed counterpart of this Agreement delivered by facsimile, email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

10.13

Enforcement of Certain Rights.

 

Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any Person other than the Parties, and their successors or permitted assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement or result in such Person being deemed a third‑party beneficiary of this Agreement.

 

10.14

Waiver.

 

Any agreement on the part of a Party to any extension or waiver of any provision of this Agreement shall be valid only if set forth in an instrument in writing signed on behalf of such Party. A waiver by a Party of the performance of any covenant, agreement, obligation, condition, representation, or warranty shall not be construed as a waiver of any other covenant, agreement, obligation, condition, representation or warranty. A waiver by any Party of the performance of any act shall not constitute a waiver of the performance of any other act or an identical act required to be performed at a later time.

 

10.15

Integration.

 

This Agreement and the documents executed pursuant to this Agreement supersede all negotiations, agreements and understandings among the Parties with respect to the subject matter of this Agreement and constitute the entire agreement between the Parties.

 

10.16

Cooperation Following the Closing.

 

Following the Closing, each of the Parties shall deliver to the others such further information and documents and shall execute and deliver to the others such further instruments and agreements as the other Party shall reasonably request to consummate or confirm the transactions provided for in this Agreement, to accomplish the purpose of this Agreement or to assure to the other Party the benefits of this Agreement.

 

10.17

Transaction Costs.

 

Except as otherwise expressly provided herein, (a) the Purchaser shall pay their own fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement, including the fees, costs and expenses of its financial advisors, accountants and counsel, and (b) the Sellers shall pay the fees, costs and expenses of the Sellers and the Company incurred in connection with this Agreement and the transactions contemplated by this Agreement, including the fees, costs and expenses of their financial advisors, accountants and counsel.

 

10.18

Schedules.

 

(a)

For purposes of this Agreement, references to “Schedules” are to the individual schedules delivered by the Sellers to the Purchaser concurrently with the execution and delivery of this Agreement. In the event of any inconsistency between the statements in this Agreement and those in the Schedules attached hereto (other than an exception expressly set forth as such in the Schedules with respect to a specifically identified representation or warranty), the statements in this Agreement shall control.

 

 

(b)

Notwithstanding anything to the contrary contained in the Schedules, the statements in the Schedules relate only to the provisions in the Sections of this Agreement to which they expressly relate and not to any other provision in this Agreement; provided, a matter set forth in one section of the Schedules need not be set forth in any other section so long as its relevance to such other section of the Schedules or section of the Agreement is reasonably apparent on the face of the information disclosed therein to the Person to which such disclosure is being made. The specification of any dollar amount in the representations or warranties contained in this Agreement or the inclusion of any specific item in the Schedules is not intended to imply that such amounts, or higher or lower amounts or the items so included or other items, are or are not material, and no party shall use the fact of the setting of such amounts or the inclusion of any such item in any dispute or controversy as to whether any obligation, items or matter not described herein or included in the Schedules is or is not material for purposes of this Agreement. The Schedules and the information and disclosures contained therein are intended only to qualify and limit the representations, warranties and covenants of the Sellers contained in this Agreement and shall not be deemed to expand in any way the scope or effect of any such representations, warranties or covenants. A disclosure of any Contract in the Schedules shall be deemed to include any and all exhibits, addenda and schedules thereto if, and only if, the Sellers have provided such Contract, exhibits, addenda and schedules to the Purchaser. The Schedules include brief descriptions or summaries of certain Contracts, and such descriptions or summaries do not purport to be comprehensive and are qualified in their entirety by reference to the text of the documents described if, and only if, the Sellers have provided such Contract to the Purchaser.

 

(Signature page follows)

 

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed, as of the date first above written.

 

PURCHASER:   TWIN DISC CANADA HOLDINGS LTD. Per:                                                                              Authorized Signatory          Name:          Title:	COMPANY:   KOBELT MANUFACTURING CO. LTD. Per:                                                                              Authorized Signatory          Name:          Title:
TWIN DISC, INCORPORATED Per:                                                                              Authorized Signatory          Name:          Title:

 

 

 

SELLERS:
____________________________________ DAVID L. BOCKHOLD	____________________________________ MARK CHESLEY
____________________________________ [***]	____________________________________ [***]
____________________________________ [***]	____________________________________ [***]
____________________________________ [***]	____________________________________ [***]
____________________________________ [***]	____________________________________ [***]
[***]   Per:                                                                     Authorized Signatory Name: Title:	[***]   Per:                                                                     Authorized Signatory Name: Title:

 

 

[***]   Per:                                                                     Authorized Signatory Name: Title:	[***]   ____________________________________ [***]   ____________________________________ [***]
SELLERS’ REPRESENTATIVE:
MARK CHESLEY

 

 

  

EXHIBIT “A”
EBITDA CALCULATION

 

 

EXHIBIT “B”
NET WORKING CAPITAL CALCULATION

 

 

EXHIBIT “C”
FORM OF ESCROW AGREEMENT

 

(See attached)

 

 

EXHIBIT “D”
FORM OF EMPLOYMENT AGREEMENT

 

(See attached)

 

 

EXHIBIT “E”
FORM OF RESIGNATIONS

 

(See attached)

 

 

EXHIBIT “F”
FORM OF RELEASES

 

(See attached)

 

 

 

EXHIBIT “F-2”
FORM OF TERMINATION AND RELEASE

 

(See attached)

 

 

EXHIBIT “G”
FORM OF R&W POLICY

 

(See attached)

 

 

EXHIBIT “H”
PURCHASED SHARES PRICE ALLOCATION

 

 

v3.25.0.1

Document And Entity Information	Feb. 14, 2025
Document Information [Line Items]
Entity, Registrant Name	TWIN DISC, INCORPORATED
Document, Type	8-K
Document, Period End Date	Feb. 14, 2025
Entity, Incorporation, State or Country Code	WI
Entity, File Number	001-7635
Entity, Tax Identification Number	39-0667110
Entity, Address, Address Line One	222 East Erie Street, Suite 400
Entity, Address, City or Town	Milwaukee
Entity, Address, State or Province	WI
Entity, Address, Postal Zip Code	53202
City Area Code	262
Local Phone Number	638-4000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock
Trading Symbol	TWIN
Security Exchange Name	NASDAQ
Entity, Emerging Growth Company	false
Amendment Flag	false
Entity, Central Index Key	0000100378

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