FINANCING AGREEMENT

EXHIBIT 10.1

 

FINANCING AGREEMENT

By and Among

BUTLER COUNTY PORT AUTHORITY

And

QUAKER CHEMICAL CORPORATION.

And

BROWN BROTHERS HARRIMAN & CO.

Dated May 15, 2008

Relating to

$10,000,000

Butler County Port Authority

Industrial Development Revenue Bond

(Quaker Chemical Corporation Project)

Series 2008

 

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FINANCING AGREEMENT

FINANCING AGREEMENT dated May 15, 2008 (the “Agreement”), is made by and among QUAKER CHEMICAL CORPORATION, a Pennsylvania business corporation (the “Borrower”), BUTLER COUNTY PORT AUTHORITY (the “Authority”), a port authority and public body corporate and politic, organized and existing under the laws of the State of Ohio (the “State”), including Revised Code Sections 4582.21 through 4582.59 (collectively with the authorities therein mentioned, as amended and supplemented (the “Act”) and BROWN BROTHERS HARRIMAN & CO., a private bank organized as a partnership (the “Bank”).

W I T N E S S E T H

WHEREAS, the Authority was created and exists under the provisions of the Act to issue revenue bonds for the acquisition, construction, furnishing, or equipping of any real or personal property, or any combination thereof, related to, useful for, or in furtherance of any authorized purpose, including all costs in connection with or incidental thereto; and

WHEREAS, the Borrower is a corporation organized under the laws of the Commonwealth of Pennsylvania, which operates a chemical manufacturing facility, located in the City of Middletown, County of Butler, State of Ohio; and

WHEREAS, the Borrower has applied to the Authority for financial assistance in connection with a project consisting generally of (a) paying the costs of expanding its manufacturing facility located at 3431 Yankee Road, Middletown, Ohio; and (b) paying all or any portion of the issuance costs related to the hereinafter defined “Bond” (collectively, the “Project”), and has requested that the Authority issue $10,000,000 of its Industrial Development Revenue Bond (Quaker Chemical Corporation Project), Series 2008 (the “Bond”), which together with a loan in the amount of $3,500,000 from the Ohio Department of Development (“ODOD”) to the Borrower (the “ODOD Loan”) and funds of the Borrower, are to be used to fund the costs of the Project; and

WHEREAS, the Bond is being issued pursuant to the Act and a resolution of the Authority adopted on April 29, 2008 (the “Resolution”); and

WHEREAS, the Authority intends to sell the Bond to the Bank at the face amount thereof and to lend the proceeds from the sale of the Bond to the Borrower to assist in financing the Project (such loan being hereinafter referred to as the “Loan”), which loan will be repaid by the Borrower in accordance with the terms hereof; and

WHEREAS, payment of the Bond will be secured by an assignment of the Authority’s rights hereunder (other than its rights to payment of certain fees and expenses and to indemnification) to the Bank and its successors and assigns; and

WHEREAS, all acts and things have been done and performed which are necessary to make the Bond, when executed and delivered by the Authority, the legal, valid and binding limited obligation of the Authority in accordance with its terms and to make this Agreement a valid and binding agreement;

NOW, THEREFORE, in consideration of the purchase and acceptance of the Bond by the Bank and of the mutual covenants and agreements herein contained, and intending to be legally bound, the parties hereby agree as follows:

ARTICLE 1.

DEFINITIONS

SECTION 1.1 Definitions .

In this Agreement and any supplement hereto (except as otherwise expressly provided), the following words and terms shall have the meanings specified in the foregoing recitals:

 

In addition, the following words and terms shall have the following meanings, unless a different meaning clearly appears from the context:

“AFFILIATE” means, as to any entity, any corporation controlling, controlled by, or under common control with such entity.

“ATTRIBUTABLE INDEBTEDNESS” means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease.

“AUTHORIZED OFFICER” means in the case of the Authority, its Chairman or Vice Chairman and Secretary or Treasurer or any other individual or individuals duly authorized in writing by the Authority to act on its behalf, and in the case of each Borrower, the individuals duly authorized by such Borrower to act on its behalf as provided in the certificate delivered in accordance with Section 7.2(b) hereof.

“BASE RATE” means the reference interest rate determined from time to time by the Bank as its “base rate.”

“BOND COUNSEL” means Counsel having a national reputation in the field of municipal and tax-exempt finance whose opinions are generally accepted by purchasers of municipal bonds and who are reasonably satisfactory to the Authority and the Bank.

“BORROWER FINANCING DOCUMENTS” means the Security Agreement, the Bond, this Agreement, the Tax Representation Letter and all other documents or instruments now or hereafter executed, issued or delivered by the Borrower in connection with the Loan, as the same may be amended from time to time.

“BUSINESS DAY” means any day other than (i) a Saturday or Sunday or a legal holiday, or (ii) a day on which banking institutions located in the State are required or authorized by law or executive order to be closed for commercial banking purposes, or (iii) so long as the Bank is the owner of the Bond, any day on which the Bank’s office in Philadelphia, Pennsylvania, is not open for banking business.

 

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“CAPITAL EXPENDITURES” shall mean, with respect to any Person for any period, the aggregate of all expenditures (whether paid in cash or accrued as a liability) by such Person during that period which, in accordance with GAAP, are or should be included in “additions to property, plant or equipment” or similar items reflected in the statement of cash flows of such Person (other than expenditures incurred in connection with any Permitted Acquisition).

“CODE” means the Internal Revenue Code of 1986, as amended, and all applicable regulations promulgated thereunder.

“COLLATERAL” means all the real and personal property subject to the lien of the Security Agreement, as well as all those assets, of the Borrower to which the Bank is granted a security interest in order to secure the Bond.

“COMMONWEALTH” means the Commonwealth of Pennsylvania.

“COMPLIANCE CERTIFICATE” shall have the meaning set forth in Section 11.4 of this Agreement.

“CONSOLIDATED EBITDA” means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges for such period, (ii) the provision for Federal, state, local and foreign income taxes includable in Net Income for such period including, without limitation, Permitted Non-Cash Reversals, (iii) depreciation and amortization expense, (iv) non-cash charges in respect of any write down of assets taken in the ordinary course of business, (v) commencing on January 1, 2006, non-cash compensation expenses related to the application of financial accounting standard 123-R and (vi) charges taken to Consolidated Net Income in an aggregate amount not to exceed $7,500,000 as a result of the Permitted Environmental Obligations minus (b) the following to the extent included in calculating such Consolidated Net Income: (x) Federal, state, local and foreign income tax credits of the Borrower and its Subsidiaries for such period and (y) non-cash items increasing Consolidated Net Income in respect of any write up of assets taken in the ordinary course of business. Calculations of Consolidated EBITDA shall give effect, on a pro forma basis, to all Permitted Acquisitions and Dispositions permitted under this Agreement made during the quarter or year to which the required compliance relates, as if such Permitted Acquisition or Disposition had been consummated on the first day of the applicable period.

“CONSOLIDATED FUNDED INDEBTEDNESS” means, as of any date of determination, for the Company and its Subsidiaries on a consolidated basis, but without duplication, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, (b) all purchase money Indebtedness, (c) all direct obligations arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments (other than letters of credit to the extent such letters of credit support Indebtedness otherwise included in clauses (a) through (g) hereof), (d) all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business), (e) Attributable Indebtedness in respect of capital leases and Synthetic Lease Obligations, (f) without duplication, all Guarantees with respect to outstanding Indebtedness of the types specified in clauses (a) through (e) above of Persons other than the Company or any Subsidiary, and (g) all Indebtedness of the types referred to in clauses (a) through (f) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Company or a Subsidiary is a general partner or Joint Venturer unless such Indebtedness is expressly made non-recourse to the Company or such Subsidiary; provided that each

 

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of clauses (a) through (g) (except Synthetic Lease Obligations) shall only be included in Consolidated Funded Indebtedness to the extent the foregoing appears as a liability on the balance sheet of the Company in accordance with GAAP.

“CONSOLIDATED INTEREST CHARGES” means, for any period, for the Company and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses of the Company and its Subsidiaries in connection with (i) borrowed money (including capitalized interest), (ii) the deferred purchase price of assets, and (iii) off-balance sheet liabilities, in each case to the extent treated as interest in accordance with GAAP, and (b) the portion of rent expense of the Company and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP, plus or minus the benefits or detriments, as the case may be, of any interest rate protection.

“CONSOLIDATED INTEREST COVERAGE RATIO” means, as of any date of determination, the ratio of (a) Consolidated EBITDA for the period of the four prior fiscal quarters ending on such date to (b) Consolidated Interest Charges for such period.

“CONSOLIDATED LEVERAGE RATIO” means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the period of the four fiscal quarters most recently ended.

“CONSOLIDATED NET INCOME” means, for any period, for the Company and its Subsidiaries on a consolidated basis, the net income of the Company and its Subsidiaries (excluding extraordinary gains and extraordinary losses) determined in accordance with GAAP for such period.

“CONTRACTUAL OBLIGATION” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“COUNSEL” means an attorney or firm of attorneys duly admitted to the practice of law before the highest court of any state in the United States of America or the District of Columbia.

“DETERMINATION OF TAXABILITY” means (a) the enactment of legislation to or with the effect that interest payable on the Bond is includable in the gross income of the Bank (other than by reason of the Bank being a “substantial user” or “related Person,” as each such term is defined in the Code) under the federal income tax laws, any such determination being deemed to have occurred on the effective date of such legislation; or (b) receipt by the Borrower, the Authority or the Bank of notice that the Commissioner of Internal Revenue or any district director of the Internal Revenue Service, based upon filings of the Borrower, any review, examination of the Borrower, or any other ground, shall have determined that a Taxable Event has occurred; provided that the Borrower shall have been afforded a reasonable opportunity to appeal such determination, but only so long as (i) the Borrower shall diligently pursue such appeal, and (ii) the Borrower shall provide the Bank with reasonable assurance of payment of all obligations to the Bank in connection with the Bond as a result of an adverse determination of such appeal, and (iii) the prosecution of such appeal does not otherwise adversely affect the Bank in the Bank’s reasonable judgment; or (c) issuance of a published or private ruling or a technical advice memorandum by the Internal Revenue Service, or a determination by any court of competent jurisdiction, that the interest payable on the Bond is includable for federal income tax purposes in the gross income of the Bank (except as aforesaid); or (d) an opinion of Bond Counsel addressed to the Bank that such Bond Counsel cannot conclude that the interest on the Bond qualifies as exempt income under Section 103 of the Code; provided, however, that the Borrower shall have been given thirty (30) days’ notice and an opportunity to consult with such Bond Counsel.

 

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“DISPOSITION” or “DISPOSE” means the sale, transfer, exclusive license (other than any such license as to which exclusivity is granted by the licensor as to geographic scope only) or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA AFFILIATE” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

“ERISA EVENT” means (a) a Reportable Event with respect to a Pension Plan (as defined in ERISA); (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan (as defined in ERISA) is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; or (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan.

“EVENT OF DEFAULT” means any of the events enumerated in Section 14.1.

“FAVORABLE OPINION OF BOND COUNSEL” means an opinion of a nationally recognized bond counsel, reasonably acceptable to the Authority, addressed to the Authority to the effect that the action proposed to be taken either(i) will not adversely affect the excludability of interest on the Bond from gross income of the holders thereof for federal income tax purposes or (ii) that all federal income tax requirements have been met with respect to a technical reissuance of the Bond.

“FUNDAMENTAL CHANGE” means: (i) any merger (except where the Borrower is the surviving entity), dissolution, liquidation or consolidation of the Borrower with our into another Person; (ii) any Disposition of the majority of the assets (whether now owned or hereinafter acquired) of the Borrower to or in favor of any Person, in any one or series of transaction; (iii) a fundamental change in the business lines or operations of the Borrower, as determined by the Bank in its reasonable discretion; (iv) a sale of more than 25% of the stock of the Borrower except in connection with acquisitions or similar transactions; or (v) a delisting of the Borrower from the New York Stock Exchange.

“GAAP” means generally accepted accounting principles and practices applied on a consistent basis.

“GOVERNMENTAL AUTHORITY” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

 

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“GOVERNMENT OBLIGATIONS” means direct obligations of, or obligations the principal and interest on which are unconditionally guaranteed by, the United States of America.

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

“INDEBTEDNESS” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

(c) net obligations of such Person under any Swap Contract;

(d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and, in each case, not past-due for more than 90 days after the date on which the related invoice was originally payable, which date is not more than 90 days after the date the invoice was originally issued.

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(f) capital leases and Synthetic Lease Obligations;

(g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of the acquisition of any Equity Interest in such Person or any other Person, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and

(h) all Guarantees of such Person in respect of any of the foregoing.

 

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For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a Joint Venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.

“INDEMNIFIED PARTIES” means the State, the Authority, the Bank, any Person who “controls” the Authority or the Bank, within the meaning of Section 15 of the Securities Act of 1933, as amended, any member, officer, director, official or employee of and attorney for the Authority or the Bank (including any partner of the Bank) and their respective executors, administrators, heirs, successors and assigns.

“INTEREST PAYMENT DATE” for the Bond means the first day of each month, commencing June 1, 2008.

“INTERNAL CONTROL EVENT” means a material weakness in, or fraud that involves management or other employees who have a significant role in, the Borrower’s internal controls over financial reporting within the meaning of Item 308 of Regulation S-K promulgated by the SEC, in each case as described in the Securities Laws.

“JOINT VENTURER” means any Person holding an equity interest in an entity for whose obligations and liabilities such Person is jointly and severally liable.

“LIEN” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

“LOAN ACCOUNTS” has the meaning set forth in Section 8.3 hereof.

“MATERIAL AMOUNT” means an amount in excess of the lesser of: (i) $15,000,000 or (ii) five percent (5%) of the value of the total consolidated assets of the Company and its Subsidiaries.

“MATERIAL ADVERSE EFFECT” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, or financial condition of the Borrower; (b) a material impairment of the ability of the Borrower to perform its obligations under this Agreement; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Borrower of any Borrower Financing Document. As used in this definition, “material” shall mean an amount of five percent (5%) or more of the total consolidated assets of the Company and its Subsidiaries as of the relevant date of determination.

“MATURITY DATE” means May 1, 2028.

 

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“OBLIGATIONS” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Borrower arising under any loan, including the Loan, or letter of credit of the Borrower or any of its Affiliates, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Borrower or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

“OUTSTANDING” shall mean, as of the time in question, the Bond issued and delivered under this Agreement, except all or any portion of the principal amount thereof, as the case may be, such as:

(a) is cancelled or required to be cancelled under the terms of this Agreement; or

(b) in substitution for which another Bond has been authenticated and delivered pursuant hereto; or

(c) is paid in part without presentation and surrender of the Bond in accordance with Section 6.1(d) hereof (but only to the extent of such payments).

“PERMITTED ACQUISITIONS” means any purchase of or investments in the capital stock or other equity or assets of any entity by the Borrower or any Subsidiary:

(a) provided that (i) the sum of the aggregate purchase price and the aggregate amount of all such acquisitions and investments made in any fiscal year, does not exceed $50,000,000, in the aggregate; and (ii) if after giving effect to such acquisitions and any related dispositions of assets purchased in connection therewith, the Borrower or Subsidiary is in compliance with Section 12.5; provided further that the aggregate value of all “Unrelated Lines of Business” acquired and continuing to be held after the Closing Date pursuant to Permitted Acquisitions does not exceed the Material Amount; and

(b) provided that no Event of Default has occurred and is continuing; and

(c) which, after giving effect to such acquisition, including without limitation, recalculating the covenants set forth in Sections 12.3 and 12.4 on a pro forma basis, including the stock or assets and concomitant liabilities then being acquired, the Borrower will not be in default under this Agreement.

“PERMITTED ENVIRONMENTAL OBLIGATIONS” means amounts to be paid (including without limitation, costs of litigation) on account of either a court-approved settlement or final judgment rendered against the Company or any of its Subsidiaries with respect to current pending litigation in Superior Court, Orange County, California by the Orange County Water District against AC Products, Inc., a subsidiary of the Company, relating to a groundwater contamination claim.

“PERMITTED NON-CASH REVERSALS” means a one-time reversal on the balance sheet of non-cash U.S. deferred tax assets which primarily relate to differences in when certain items are deductible for tax purposes vs. expensed for GAAP purposes, the realization of which is contingent upon future taxable income, provided that the aggregate amount of such reversals does not exceed $20,000,000.

“PERSON” means any natural person, firm, association, public body, corporation, partnership, limited liability company or other entity.

 

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“PROJECT COSTS” shall mean the costs of the Project to the extent permitted to be paid pursuant to the Act, including, without limitation, the cost of construction of the Project, the cost of acquisition and installation of machinery and equipment, the costs of issuance of the Bond, and all costs related thereto incurred by the Borrower.

“PROJECT FACILITIES” means the improvements, equipment and other property constituting the Borrower’s facilities located at 3431 Yankee Road, Middletown, Ohio, for the improvement of which the Authority is undertaking the Project.

“PROJECT FUND” means the fund created by Section 9.1 hereof.

“RECORD DATE” means, with respect to any Interest Payment Date, the Business Day preceding such Interest Payment Date.

“REGISTERED PUBLIC ACCOUNTING FIRM” has the meaning specified in the Securities Laws and shall be independent of the Borrower as prescribed by the Securities Laws.

“REGULATIONS” means the United States Treasury Regulations and any pertinent Revenue Rulings, Revenue Procedures, Notices or Announcements promulgated by the Secretary of the Treasury of the United States or by the Internal Revenue Service.

“RESERVED RIGHTS” means the rights of the Authority to (1) execute and deliver supplements and amendments to this Agreement pursuant to Section 15.1 hereof, (2) be held harmless and indemnified pursuant to Section 16.6 hereof, (3) receive any funds for its own use, whether as administration fees pursuant to Section 8.2 or reimbursement or indemnification pursuant to Section 16.6 hereof, (4) receive notices and other documents and (5) provide any consent, acceptance or approval with respect to matters as provided herein.

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

“SECURITY AGREEMENT” means the Security Agreement by and between the Bank and the Borrower, dated the date hereof in connection with the Loan.

“SECURITIES LAWS” means the Securities Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the Public Company Accounting Oversight Board, as each of the foregoing may be amended and in effect on any applicable date hereunder.

“SUBSIDIARY” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

“SWAP CONTRACT” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate

 

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options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“SWAP TERMINATION VALUE” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include the Bank or any Affiliate of the Bank).

“SYNTHETIC LEASE OBLIGATION” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

“TAX REPRESENTATION LETTER” means, collectively, the certificate regarding the total financed property and the expenditure of funds executed by the Borrower, concurrently with the delivery of the Bond, relating to the expectations, representations and covenants of the Borrower with respect to the expenditure of the proceeds of the Bond and the compliance by the Borrower with the provisions of the Code required to ensure the exclusion from gross income for federal income tax purposes of the interest on the Bond and the Tax Exemption Certificate and Agreement between the Authority and the Borrower dated the date of delivery of the Bonds.

“TAXABLE EVENT” means the application of the proceeds of the Bond in such manner, or the occurrence or non-occurrence of any other event (except the enactment of legislation described in clause (a) of the definition of Determination of Taxability above), whether within or without the control of the Borrower, with the result that, under the Code, the interest on the Bond is or becomes includable in the gross income for federal income tax purposes of the Bank (except as aforesaid).

“TAXABLE RATE” means the rate as determined by the Bank and as set forth on the Bond upon a Determination of Taxability.

“TAX-EXEMPT RATE” mean the rate as determined by the Bank and as set forth on the Bond upon the date hereof.

“UNRELATED LINES OF BUSINESS” means any line of business substantially different from those lines of business conducted by the Company and its Subsidiaries on the date hereof or any business substantially related or incidental thereto.

 

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SECTION 1.2 Rules of Construction .

In this Agreement (except as otherwise expressly provided), the following rules shall apply unless a different meaning clearly appears from the context:

(a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth.

(b) The section and other headings contained in this Agreement and the table of contents preceding this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation thereof in any respect.

(c) Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, the singular the plural, and the part the whole. The words “hereof,” “herein,” “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not to a particular provision of this Agreement.

(d) The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part, such provision shall be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability of the remaining provisions of this Agreement.

(e) Words importing the singular number include the plural number and vice versa; and all words importing the masculine gender include the feminine gender.

(f) All references herein to financial or accounting terms, except as the context may clearly otherwise require, shall be construed in accordance with GAAP.

(g) All references to the time of any day shall mean Eastern Standard or Daylight Savings Time, as prevailing on the applicable date in Philadelphia, Pennsylvania.

 

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ARTICLE 2.

AUTHORITY REPRESENTATIONS

The Authority represents and warrants as follows:

SECTION 2.1 Organization; Authority To Issue Bond .

The Authority is a port authority and public body corporate and politic constituting an instrumentality of the State, duly organized, established and existing under the laws of the State, with the power and authority set forth in the Act. The Authority is authorized to issue the Bond in accordance with the Act and to use the proceeds thereof to make the Loan.

SECTION 2.2 Authorization for Financing .

The Authority has complied with the provisions of the Act and has full power and authority pursuant to the Act to consummate all transactions contemplated by this Agreement, the Bond, the Resolution, and any and all agreements relating thereto and to perform its obligations thereunder and to issue, sell and deliver the Bond to the Bank as provided herein.

SECTION 2.3 Resolution .

Pursuant to the Resolution adopted by the Authority and still in force and effect, the Authority has duly authorized the execution, delivery and due performance of this Agreement and the Bond and the Authority has duly authorized the taking of any and all action as may be required on the part of the Authority pursuant to the express provisions of this Agreement to perform, give effect to and consummate the transactions contemplated by this Agreement and all approvals necessary in connection with the foregoing have been received.

SECTION 2.4 The Bond .

When the Bond is issued, transferred and delivered in accordance with the provisions of this Agreement, the Bond will have been duly authorized, executed, issued and delivered and will constitute the valid and special, limited obligation of the Authority payable solely from the revenues derived by the Authority from this Agreement. The Bond and the interest thereon do not constitute a general obligation, debt, bonded indebtedness or a pledge of the faith and credit, of the Authority or of the State or any political subdivision of the State, and the holders or owners of the Bond has no right to have taxes levied by the general assembly or taxing authority of any political subdivision of the State for the payment of the principal of or interest on the Bond, but the Bond is payable solely from the revenues and funds pledged for its payment as authorized under the Act. The Bond shall contain on its face thereof a statement to the effect that the Bond, as to both principal and interest, is not debts of the State or any political subdivision of the State, but is payable solely from revenues and funds pledged for its payment.

 

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SECTION 2.5 No Conflict or Violation .

The execution and delivery of this Agreement and the Bond and compliance with the provisions thereof, will not conflict with or constitute on the part of the Authority a violation of the Constitution of the State or violation, breach of or default under its By-Laws or any statute, indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which the Authority is a party or by which the Authority is bound, or, to the knowledge of the Authority, any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Authority or any of its activities or properties, and all consents, approvals, authorizations and orders of governmental or regulatory authorities which are required to be obtained by the Authority for the consummation of the transactions contemplated thereby have been obtained.

SECTION 2.6 Litigation .

There is no action, suit, proceeding or investigation at law or in equity or before or by any court, public board or body pending or threatened against or affecting the Authority, or, to the best knowledge of the Authority, any basis therefor, wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated hereby, or which in any way would contest or adversely affect the validity of the Bond or this Agreement or the power of the Authority for the issuance of the Bond, the validity of the Resolution, the validity of, or power of the Authority to execute and deliver, any agreement or instrument to which the Authority is a party and which is used or contemplated for use in consummation of the transactions contemplated hereby or the right of the Authority to finance the Project.

SECTION 2.7 No Repeal .

No authority or proceedings for the issuance of the Bond or documents executed in connection therewith has been repealed, revoked, rescinded or superseded.

SECTION 2.8 Limitations on the Representation and Warranties of the Authority .

The Authority makes no representation as to (a) the financial position or business condition of the Borrower, (b) the value of the Project or its suitability for any particular purpose, or (c) the correctness, completeness or accuracy of any of the statements, materials (financial or otherwise), representations or certifications furnished or to be made by the Borrower in connection with the sale or transfer of the Bond, the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

 

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ARTICLE 3.

BORROWER REPRESENTATIONS

The Borrower represents and warrants as follows:

SECTION 3.1 Organization and Existence .

The Borrower is a corporation duly organized and existing in good standing under the laws of the Commonwealth, with full power and legal right to enter into the Borrower Financing Documents and to perform its obligations thereunder. The making and performance by the Borrower of its obligations under this Agreement have been duly authorized by proper corporate action.

SECTION 3.2 Consents .

No authorization, consent, approval, license, exemption by or filing or registration with any court or governmental department, commission, board (including the Board of Governors of the Federal Reserve System), bureau, agency or instrumentality is or will be necessary for the valid execution, delivery or performance by the Borrower of any Borrower Financing Document.

SECTION 3.3 No Conflict or Violation .

The execution and delivery of the Borrower Financing Documents and the consummation of the transactions contemplated thereby do not conflict with or cause or constitute a breach of or default under any material bond, contract, indenture, agreement or other instrument to which the Borrower is a party or by which it or its property is bound.

SECTION 3.4 Litigation or Proceedings .

There is no action, suit, proceeding or investigation at law or in equity before or by any court, arbitration board or tribunal, public board or body pending or, to the best knowledge of the Borrower, threatened against or affecting the Borrower, or, to the best knowledge of the Borrower, any basis therefor, wherein an unfavorable decision, ruling or finding would (i) adversely affect in a material way the transactions contemplated by the Borrower Financing Documents, or any other agreement or instrument to which the Borrower is a party, which is used or contemplated for use in the consummation of the transactions contemplated by the Borrower Financing Documents, or (ii) adversely affect the exemption of interest on the Bond from federal income taxation or any state tax-exemption applicable thereto.

SECTION 3.5 Legal and Binding Obligation .

Each of the Borrower Financing Documents is a legal, valid and binding obligation of the Borrower enforceable against it in accordance with its terms except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting the enforcement of creditors’ rights generally and except to the extent that the enforceability thereof may be limited by the application of general principles of equity.

SECTION 3.6 ERISA .

Each defined benefit pension plan as to which the Borrower may have any liability complies in all material respects with all applicable provisions of ERISA, including minimum funding requirements except with respect to any non-compliance that reasonably could be expected not to exceed $1,500,000, and (i) no “prohibited transaction” (as defined under ERISA) has occurred with respect

 

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to any such plan, (ii) no “reportable event” (as defined under Section 4043 of ERISA) has occurred with respect to any such plan which would cause the Pension Benefit Guaranty Corporation to institute proceedings under Section 4042 of ERISA, (iii) the Borrower has not withdrawn from any such plan or initiated steps to do so, and (iv) no steps have been taken to terminate any such plan.

SECTION 3.7 Indebtedness .

The Borrower is not liable to any Person for Indebtedness that is not disclosed on the financial statements heretofore provided to the Bank or has been otherwise disclosed in writing to the Bank.

SECTION 3.8 Contingent Liabilities .

There are no suretyship agreements, guarantees or other contingent liabilities of the Borrower that are not disclosed on the financial statements heretofore provided to the Bank or as otherwise disclosed in writing to the Bank.

SECTION 3.9 Investment Company Act .

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

SECTION 3.10 Federal Reserve Regulations .

No indebtedness that is required to be, or will be, reduced or retired from the proceeds of the Bond was incurred for the purpose of purchasing or carrying any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 C.F.R. 221, as amended), and the Borrower does not own or have any present intention to acquire any such margin stock.

SECTION 3.11 Payment of Taxes .

Except for such amounts as the Borrower is contesting in good faith through proper proceedings, the Borrower has filed or caused to be filed all federal, state and local tax returns which are required to be filed, and has paid or caused to be paid all taxes as shown on said returns or on any assessment received by it, to the extent that such taxes have become due.

SECTION 3.12 No Default

The Borrower is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which it is bound, to the extent such default would have a Materially Adverse Effect on the Borrower.

SECTION 3.13 Financial Statements .

All financial statements now and heretofore furnished to the Authority and the Bank by the Borrower are true, accurate and correct in all material respects as of the date thereof and have been, or will be, with respect to the financial statements hereafter furnished to the Authority and the Bank, prepared in accordance with GAAP. Such financial statements do, or will, fairly present the Borrower’s financial condition, as of the date of such statements, in all material respects, and the results of its respective operations for the fiscal period then ended and there has been no change, financial or otherwise that has a Material Adverse Effect on the Borrower, since the date of the last financial statement furnished to the Authority and the Bank.

 

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SECTION 3.14 Title; Encumbrances .

Except as otherwise disclosed in writing to the Bank, the Borrower has good and marketable title to all of its properties and assets.

SECTION 3.15 Tax Status of Bond .

The Borrower has not taken any action and knows of no action that any Person has taken or intends to take, and will not take or permit any Person to take, which would cause interest on the Bond to be includable in the gross income of the Bank for federal income tax purposes.

SECTION 3.16 Environmental Laws .

To Borrower’s knowledge, except as set forth under Schedule 3.16 hereof, the Borrower is in compliance, in all material respects, with all Environmental Laws (as defined below), including, without limitation, all Environmental Laws in jurisdictions in which the Borrower owns or operates, or has owned or operated, a facility or site, arranges or has arranged for disposal or treatment of hazardous substances, solid waste or other waste, accepts or has accepted for transport any hazardous substances, solid waste or other wastes or holds or has held any interest in real property or otherwise. Except as disclosed to the Bank in writing, no litigation, action, proceeding, inquiry, request for information, administrative action or overt investigation arising under, relating to or in connection with any Environmental Law is pending or, to the best knowledge of the Borrower, threatened against the Borrower, any real property which the Borrower holds or has held an interest or any past or present operation of the Borrower. Except as disclosed to the Bank in writing, to the Borrower’s knowledge, no release, threatened release or disposal of hazardous waste, solid waste or other wastes is occurring, or to the best knowledge of the Borrower, has occurred, on, under or to any real property in which the Borrower holds any interest or performs any of its operations, in violation of any Environmental Law. As used in this Section, “Environmental Laws” means all provisions of laws, statutes, ordinances, rules, regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, awards and standards promulgated by any Governmental Authority concerning health, safety and protection of, or regulation of the discharge of substances into, the environment.

SECTION 3.17 No False Statements .

As of the date hereof, neither any Borrower Financing Document nor any other document, certificate or statement furnished to the Authority or the Bank by or on behalf of the Borrower contains any untrue statement of a material fact with respect to the Borrower or omits to state a material fact with respect to the Borrower necessary in order to make the statements contained herein and therein not misleading. It is specifically understood by the Borrower that all such statements, representations and warranties shall be deemed to have been relied upon by the Authority as an inducement to make the Loan and issue the Bond and by the Bank to purchase the Bond.

 

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ARTICLE 4.

BANK REPRESENTATIONS

The Bank represents and warrants as follows:

SECTION 4.1 Independent Investigation .

The Bank has made an independent investigation and evaluation of the financial position and business condition of the Obligors and the value of the Equipment or has caused such investigation and evaluation to be made by Persons it deems competent to do so. All information relating to the business and affairs of the Obligors that the Bank has requested in connection with the transactions referred to herein have been provided to the Bank. The Bank hereby expressly waives the right to receive such information from the Authority and relieves the Authority and its agents, representatives and attorneys of any liability for failure to provide such information or for the inclusion in such information or in any of the documents, representations or certifications to be provided by the Borrower under this Agreement of any untrue fact or for the failure therein to include any fact.

SECTION 4.2 Purchase for Own Account .

The Bank is purchasing the Bond for its own account, with the purpose of investment and not with the intention of distribution or resale thereof. The Bond will not be sold unless registered in accordance with the rules and regulations of the Securities and Exchange Commission or unless the Authority is furnished with an opinion of Counsel or a “No Action” letter from the Securities and Exchange Commission that such registration is not required.

 

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ARTICLE 5.

THE BOND

SECTION 5.1 Form; Amount and Terms .

(a) In order to provide funds for the Project, the Bond is hereby authorized to be issued in the aggregate principal amount of $10,000,000, and shall be issued as a fully registered Bond, without coupons, substantially in the form set forth as Exhibit A hereto, with appropriate insertions and deletions. The Bond shall be issued in a single denomination equal to the entire outstanding principal amount thereof.

(b) The Bond shall mature on May 1, 2028, shall be subject to optional and mandatory redemption prior to maturity as provided in Section 6.1 hereof and in the Bond and shall bear interest from and including the date thereof, or from the most recent Interest Payment Date to which interest has been fully paid or provided, until payment of the principal thereof shall have been made in accordance with the provisions thereof. Principal of and interest on the Bond shall be paid as provided for in the form thereof set forth as Exhibit A hereto and made a part hereof, and as otherwise set forth in this Agreement.

SECTION 5.2 Payment and Dating of the Bond .

Principal of the Bond shall be payable to the Bank upon presentation and surrender of the Bond at the principal office of the Borrower on the Maturity Date shown thereon unless previously redeemed by the Authority pursuant to Section 6.1 hereof. Interest on the Bond shall be payable on each Interest Payment Date in the manner provided in Section 8.1(c) hereof. The Bond shall bear interest on overdue principal and, to the extent permitted by law, on overdue interest, at the Base Rate plus 2%. Payment as aforesaid shall be made in such coin or currency of the United States of America as, at the respective times of payment, shall be legal tender for the payment of public and private debts.

The Bond shall be dated the date of delivery thereof.

SECTION 5.3 Execution

(a) The Bond shall be executed on behalf of the Authority by its Chairman or Vice Chairman and the Secretary or Treasurer by their manual or facsimile signatures. In case any officer whose signature (or facsimile thereof) shall appear on the Bond shall cease to be such officer before the delivery of the Bond, such signature or such facsimile shall nevertheless be valid and sufficient for all purposes, the same as if such officer had remained in office until delivery.

(b) The Bond shall not be valid or obligatory for any purpose unless and until the Certificate of Authentication attached thereto shall have been duly executed by the Borrower. The executed certificate of the Borrower upon the Bond shall be conclusive evidence that the Bond has been authenticated and delivered hereunder. The Borrower is hereby authorized and empowered to authenticate the Bond on the date of execution hereof and to deliver the Bond to the Bank upon receipt of the purchase price therefor in accordance with Section 7.3 hereof.

 

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ARTICLE 6.

REDEMPTION OF BOND BEFORE MATURITY

SECTION 6.1 Redemption of the Bond .

(a) Optional Redemption; Notice. The Bond shall be subject to optional redemption by the Authority, at the written direction of the Borrower, in whole or in part (but if in part in the principal amount of $100,000 or integral multiples of $5,000 in excess thereof), on the last day of any Interest Period (as defined in the form of Bond attached hereto as Exhibit A ), at a price equal to 100% of the principal amount thereof to be redeemed, together with accrued interest to the date of redemption. The Borrower shall provide the Bank with notice of the date of any optional redemption pursuant to this paragraph and the principal amount of the Bond to be redeemed to the Bank at least one (1) Business Day prior to such redemption date to the Bank. On each such redemption date, payment of the redemption price having been made to the Bank as provided herein and in the Bond, the Bond or the portion thereof so called for redemption shall become due and payable on the redemption date and interest shall cease to accrue on such redeemed principal from and after the redemption date. Any amounts applied to an optional redemption shall reduce the mandatory scheduled redemption obligations of the Authority described below in the order selected by the Borrower and approved by the Bank (or in the absence of such approval in inverse order of payment obligations).

(b) Mandatory Redemption at Option of Bank . At any time on or after the third anniversary of the date of original issuance of the Bond, all of the Bond shall be redeemed by the Authority, in whole and not in part, at a redemption price equal to 100% of the principal amount thereof, together with accrued interest to the date of redemption, upon the written demand of the Bank in the form attached as Exhibit B to this Agreement, to the Borrower, with a copy to the Authority. The Bank shall provide the Borrower with notice of the date of any mandatory redemption pursuant to this paragraph and the principal amount of the Bond to be redeemed by first-class mail, postage prepaid, sent at least ninety (90) days before such redemption date to the Borrower at the Borrower’s address for notice appearing in this Agreement as of the close of business on the Business Day prior to such mailing. The Bond shall be redeemed, and the redemption price of the Bond shall be paid to the owner of the Bond, on the date specified by the Bank. Notwithstanding the foregoing, if the Bank shall demand the redemption of the Bond in whole pursuant to this paragraph, in lieu of such redemption, the Borrower shall have the right to (A) purchase the Bond from the Bank on any date after the date of the Bank’s written demand and prior to the next Business Day preceding the date of the proposed redemption, at a purchase price equal to 100% of the principal amount of the Bond, plus accrued interest to the date of purchase; or (B) after delivery of a Favorable Opinion of Bond Counsel, deliver a letter of credit to the benefit of the Bank on any date after the date of the Bank’s written demand and prior to the next Business Day preceding the date of the proposed redemption which shall satisfy the following requirements:

(i) the letter of credit shall be in an amount equal to the aggregate principal amount of the Bond plus thirty-five (35) days of interest on the Bond;

(ii) the letter of credit shall provide for payment in immediately available funds, upon receipt of request for such payment with respect to any Interest Payment Date, or Mandatory Redemption Date pursuant to this Agreement;

(iii) the letter of credit shall (a) provide for an expiration date no earlier than the earlier of (1) the date on which the Bond is to mature and is to be paid in full or (2) the date on which the Bond becomes secured by an substitute letter of credit which meets the conditions of this Section 6.1(c), or (b) permit a draw on the letter of credit by the Bank thirty (30) days prior to the

 

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expiration date of the letter of credit in the event the Borrower has not provided to the Bank a written commitment, to the reasonable satisfaction of the Bank, that (x) the letter of credit will be renewed on the expiration date, or (y) a substitute letter of credit, meeting the conditions of this Section 6.1(c), will be provided to the Bank by the Borrower;

(iv) the letter of credit shall be issued by a financial institution reasonably acceptable to the Bank and which has at least Aa2/P-1 rating from Moody’s; and

(v) such other terms and conditions as the Bank or the Authority may reasonably require.

In the event the Borrower delivers a letter of credit pursuant to this Section 6.1(b), the interest rate on the Bond shall be reduced by 80 basis points.

(c) Mandatory Redemption Upon Determination of Taxability . On the date of the occurrence of a Determination of Taxability, the Bond shall be called for