Exhibit 10.1
[Execution]
WAIVER
AND SEVENTH AMENDMENT TO
LOAN
AND SECURITY AGREEMENT
This
WAIVER AND SEVENTH Amendment TO LOAN AND SECURITY AGREEMENT (the “Amendment”), is dated May 31, 2024, and is
made by and among (a) AIR INDUSTRIES MACHINING, CORP., a New York corporation (“AIM”), NASSAU TOOL WORKS, INC., a New
York corporation (“NTW”), THE STERLING ENGINEERING CORPORATION, a Connecticut corporation (“Engineering”,
and together with AIM and NTW, collectively the “Borrower”), (b) AIR INDUSTRIES GROUP, a Nevada corporation (together
with its successors and permitted assigns, “Parent”), and AIR REALTY GROUP, LLC, a Connecticut limited liability company
(“Realty”, and together with Parent, the “Guarantor”) and WEBSTER BANK, NATIONAL ASSOCIATION, a national
banking association (successor by merger to Sterling National Bank), (together with its successors and permitted assigns, the “Lender”).
Recitals
Pursuant to that certain Loan
and Security Agreement, dated as of December 31, 2019 (the “Loan Agreement”) by and among Borrower, Guarantor, the
other Credit Parties thereto, and Lender, Lender has agreed to make certain financial accommodations available to Borrower from time to
time pursuant to the terms and conditions thereof (capitalized terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Loan Agreement, as amended hereby).
The Credit Parties have acknowledged
that the Fixed Charge Coverage Ratio of Parent and its consolidated Subsidiaries for the Fiscal Quarter ending March 31, 2024 was less
than the ratio permitted by Section 9.14(a) of the Loan Agreement, resulting in an Event of Default under Section 10.1(c)(i) of the Loan
Agreement (the “Existing Event of Default”).
The Credit Parties have requested
that Lender agree to (a) waive the Existing Event of Default and (b) make certain amendments to the Loan Agreement.
NOW, THEREFORE, in consideration
of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound hereby, agree as follows:
1. Limited
Waiver of Existing Event of Default.
(a) Borrower
hereby acknowledges, confirms and agrees that (i) the Existing Event of Default has occurred and is continuing; (ii) the Existing Event
of Default constitutes an Event of Default under the Loan Agreement and the other Loan Documents; and (iii) in the absence of this Amendment
and at all times during the period commencing on the earliest date on which the Existing Event of Default occurred through the Seventh
Amendment Effective Date (as defined below), the occurrence of the Existing Event of Default entitles Lender to exercise its rights and
remedies under the Loan Documents, applicable law and otherwise.
(b) Subject
to the limitations and other terms and conditions set forth in this Amendment, Lender hereby waives the Existing Event of Default. Notwithstanding
the foregoing, Lender has not waived and is not by this Amendment waiving, and has no present intention of waiving, any Event of Default
which may have occurred prior to the Seventh Amendment Effective Date, or may be continuing on the Seventh Amendment Effective Date or
any Event of Default which may occur after the Seventh Amendment Effective Date, other than the Existing Event of Default to the extent
set forth herein, whether the same or similar to any Existing Event of Default or otherwise. Lender hereby reserves the right, in its
sole discretion, to exercise any or all of its rights and remedies arising under the Loan Documents, applicable law or otherwise, as a
result of any Event of Default, other than the Existing Event of Default, which may have occurred prior to the Seventh Amendment Effective
Date, or are continuing on the Seventh Amendment Effective Date, or any Events of Default which may occur after the Seventh Amendment
Effective Date, whether the same, similar, or related to the Existing Event of Default.
2. Amendments
to Loan Agreement. As of the effective date of this Amendment, the Loan Agreement is amended as follows:
(a) Section
1.1. Section 1.1 of the Loan Agreement is hereby amended by the amendment and restatement of each of the following definitions, to
read in their entirety as follows
“Additional Term
Loan Amount” means $1,000,000.
“Availability
Block” means $500,000 commencing on the Seventh Amendment Effective Date, continuing until the occurrence of a Covenant Trigger
Event.
“Borrowing
Base” means, as of any day of determination, an amount equal to the difference between:
(a) the
sum of (i) eighty-five percent (85%) of the Net Amount of Eligible Accounts other than Eligible Canadian Accounts, plus (ii) the
lesser of (1) eighty-five percent (85%) of the Net Amount of Eligible Canadian Accounts, or (2) $500,000, plus (iii) the lesser
of (1) fifty percent (50%) of the Net Amount of Eligible Government Accounts, or (2) $500,000, plus (iv) the lesser of (1) eighty-five
percent (85%) of the Net Amount of Eligible Inventory, (2) fifty percent (50%) of the lower of cost or market value of Eligible Inventory
and (3) the Inventory Sublimit, minus
(b) the
Judgment Reserve and the aggregate amount of any and all other reserves implemented by Lender pursuant to Section 2.1, in
each case determined as of such day; minus
(c) the
Availability Block;
provided, however, that
Lender shall have the continuing right to reduce the percentages specified in clauses (a)(i), (ii) and (iii) of this definition by one
percentage point or fraction of a percentage point for every percentage point or fraction of a percentage point of dilution of Accounts
over five percent.
“Covenant
Trigger Event” means the Borrower has maintained a Fixed Charge Coverage Ratio, calculated on a trailing twelve month basis,
of not less than 1.25 to 1.00 for the quarter ending June 30, 2025, as certified in writing to Lender by a Responsible Officer of Borrower
Representative in a Compliance Certificate, including reasonable calculations of such compliance.
“EBITDA”
means, with respect to a Person for any period, an amount equal to (a) consolidated net earnings (or loss) from continuing operations,
for such period minus (b) extraordinary gains for such period plus (c) Interest Expense (whether paid or accrued), income taxes, depreciation
and amortization for such period plus (d) Approved Add Backs for such period, plus (e) for the first four Fiscal Quarters after the Agreement
Date only, beginning with the Fiscal Quarter ending March 31, 2020 and ending with the Fiscal Quarter ending December 31, 2020, closing
costs for this Agreement and the transactions contemplated hereby in an aggregate amount not to exceed $150,000, in each case determined
for such Person and its Subsidiaries on a consolidated basis in accordance with GAAP.
“Seventh Amendment Effective Date”
means May 31, 2024
“Term Loan Commitment”
means $ 5,700,000.
(b) Section
2.1(b)(i). Section 2.1(b)(i) of the Loan Agreement is hereby amended and restated in its entirety as follows:
(i) Subject
to the terms and provisions of this Agreement, (a) Lender has made term loans to Borrowers for the purpose of financing Eligible Equipment
upon the satisfaction of all conditions precedent to the initial funding hereunder in accordance with Sections 6.1 and 6.3 in an amount
equal to the Initial Term Loan Amount (the “Initial Term Loan Advance”) and (b) on the Seventh Amendment Effective
Date, Lender agrees to make an additional term loan to Borrowers for the purpose of financing Eligible Equipment once all conditions precedent
to the additional term loan funding hereunder have been met in accordance with Sections 6.2 and 6.3 (such date, the “Additional
Term Loan Funding Date”) in an amount equal to the Additional Term Loan Amount (the “Additional Term Loan Advance”;
together with the Initial Term Loan Advance, collectively, the “Term Loan Advances” or “Term Loans”
and each a “Term Loan Advance” or a “Term Loan”). Amounts paid on the Term Loan may not be re-borrowed.
The Term Loan shall not (and no portion of the Term Loan shall) be evidenced by a note unless requested by Lender, in which case the Term
Loan shall be evidenced by a note executed by Borrowers in favor of Lender (as amended, supplemented, restated or otherwise modified,
the “Term Note”) in form and substance satisfactory to Lender.
(c) Section
4.3(a). Section 4.3(a) of the Loan Agreement is hereby amended and restated in its entirety as follows:
(a) The
principal of the Term Loan shall be payable to Lender in equal monthly installments on each Installment Payment Date occurring after the
Seventh Amendment Effective Date in an amount equal to $67,857.15 (plus interest payable pursuant to Section 4.1).
(d) Section
9.14. Section 9.14 of the Loan Agreement is hereby amended and restated in its entirety as follows:
(a) The
Fixed Charge Coverage Ratio for Parent and its consolidated Subsidiaries for any Fiscal Quarter of Parent, determined as of the last day
of such Fiscal Quarter, shall not be less than (i) 1.05 to 1.00 for the Fiscal Quarter Ending March 31, 2025 and (ii) 1.25 to 1.00 for
all other Fiscal Quarters.
(b) The
aggregate amount of Capital Expenditures by Parent and its consolidated Subsidiaries in any Fiscal Year shall not exceed $2,500,000.
(c) The
EBITDA for Parent and its consolidated Subsidiaries for any Fiscal Quarter of Parent, determined as of the last day of such Fiscal Quarter,
shall not be less than (i) $740,000 for the Fiscal Quarter Ending June 30, 2024,on a rolling six month basis, (ii) $1,500,000 for the
Fiscal Quarter Ending September 30, 2024, on a rolling nine month basis and (iii) $2,800,000 for the Fiscal Quarter Ending December 31,
2024, on a rolling twelve month basis, in each case on such date of determination.
(e) Form
of Compliance Certificate. Exhibit A to the Form of Compliance Certificate attached to the Loan Agreement is amended and restated
in its entirety by the Exhibit A to Compliance Certificate attached to this Amendment as Exhibit A.
3. No
Other Changes. Except as explicitly amended by this Amendment, all of the terms and conditions of the Loan Agreement shall remain
in full force and effect and shall apply to any Loan made thereunder.
4. Amendment
Fee. In consideration of Lender’s agreement to enter into this Amendment, Borrower shall pay to Lender a non-refundable amendment
fee in an amount equal to $20,000 which amendment fee has been fully earned as of the effective date of this Amendment, and which shall
be payable at the execution and delivery of this Amendment.
5. Conditions
Precedent. This Amendment shall be effective on the date (such date, the “Seventh Amendment Effective Date”) that
each of the following conditions have been satisfied, in form and substance satisfactory to Lender:
(a) Lender
shall have received a fully executed copy of this Amendment;
(b) Lender
shall have received a copy of the resolutions or equivalent action, in form and substance reasonably satisfactory to Lender, of the Board
of Directors or equivalent authorizing body of Borrower authorizing, as applicable, the execution, delivery of this Amendment and the
performance of this Amendment, certified by the Secretary, an Assistant Secretary or other authorized representatives of Borrower as of
the Seventh Amendment Effective Date, which certificate shall state that the resolutions or other action hereby certified have not been
amended, modified (except as any later such resolution or other action may modify any earlier such resolution or other action), revoked
or rescinded and are in full force and effect;
(c) Lender
shall have received an original executed Term Note, executed by Borrower; and
(d) Lender
shall have received the amendment fee set forth in Section 4 above and Borrower shall have paid or cause to be paid all fees and expenses
required to be paid in accordance with this Amendment.
6. Representations
and Warranties. Borrower hereby represents and warrants to Lender as follows:
(a) Borrower
has all requisite power and authority to execute this Amendment and any other agreements or instruments required hereunder and to perform
all of its obligations hereunder, and this Amendment and all such other agreements and instruments have been duly executed and delivered
by Borrower and constitute the legal, valid and binding obligation of Borrower, enforceable in accordance with its terms.
(b) The
execution, delivery and performance by Borrower of this Amendment and any other agreements or instruments required hereunder have been
duly authorized by all necessary corporate action and do not (i) require any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any provision of any law, rule
or regulation or of any order, writ, injunction or decree presently in effect, having applicability to Borrower, or the certificate of
formation, articles of incorporation, operating agreement, or by-laws of Borrower, or (iii) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which Borrower is a party or by
which it or its properties may be bound or affected.
(c) All
of the representations and warranties contained in the Loan Agreement are correct on and as of the date hereof as though made on and as
of such date, except to the extent that such representations and warranties relate solely to an earlier date.
(d) After
giving effect to this Amendment and the transactions contemplated hereby, no Default or Event of Default has occurred and is continuing.
7. References.
All references in the Loan Agreement to “this Agreement” shall be deemed to refer to the Loan Agreement as amended hereby;
and any and all references in the Loan Documents to the Loan Agreement shall be deemed to refer to the Loan Agreement as amended hereby.
8. No
Waiver. Except as set forth in Section 1 of this Amendment, the execution of this Amendment and the acceptance of all other agreements
and instruments related hereto shall not be deemed to be a waiver of any Default or Event of Default under the Loan Agreement or a waiver
of any breach, default or event of default under any Loan Document or other document held by Lender, whether or not known to Lender and
whether or not existing on the date of this Amendment.
9. Release.
Borrower hereby absolutely and unconditionally releases and forever discharges Lender, and any and all participants, parent corporations,
subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing, from any and all claims, demands or causes of action of
any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise,
Borrower has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or thing
whatsoever relating to any Loan Document arising from the beginning of time to and including the date of this Amendment, whether such
claims, demands and causes of action are matured or unmatured or known or unknown.
10. Costs
and Expenses. Borrower hereby reaffirms its agreement under the Loan Agreement to pay or reimburse Lender on demand for all costs
and expenses incurred by Lender in connection with the Loan Documents, including without limitation all reasonable fees and disbursements
of legal counsel. Without limiting the generality of the foregoing, Borrower specifically agrees to pay all fees and disbursements of
counsel to Lender for the services performed by such counsel in connection with the preparation of this Amendment and the documents and
instruments incidental hereto. Borrower hereby agrees that Lender may, at any time or from time to time in its sole discretion and without
further authorization by Borrower, make a loan to the Borrower under the Loan Agreement, or apply the proceeds of any loan, for the purpose
of paying any such fees, disbursements, and costs and expenses.
11. Counterparts.
This Amendment may be executed by means of (a) an electronic signature that complies with the federal Electronic Signatures in Global
and National Commerce Act, state enactments of the Uniform Electronic Transactions Act, or any other relevant and applicable electronic
signatures law; (b) an original manual signature; or (c) a faxed, scanned, or photocopied manual signature. Each electronic signature
or faxed, scanned, or photocopied manual signature shall for all purposes have the same validity, legal effect, and admissibility in evidence
as an original manual signature. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an
original, but such counterparts shall, together, constitute only one instrument. Delivery of an executed counterpart of a signature page
of this Amendment will be as effective as delivery of a manually executed counterpart of the Agreement.
12. Headings.
Section Headings are for convenience of reference only, and are not part of, and are not to be taken into consideration in interpreting
this Amendment.
13. Governing
Law. The rights and obligations hereunder of each of the parties hereto shall be governed by and interpreted and determined in accordance
with the laws of the State of New York.
[Signature pages follow]
IN WITNESS WHEREOF, the parties
hereto have caused this Amendment to be duly executed as of the date first written above.
| BORROWER: |
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AIR INDUSTRIES MACHINING, CORP. |
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By: |
/s/ Scott Glassman |
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Name |
Scott Glassman |
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Title: |
Chief Financial Officer |
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NASSAU TOOL WORKS, INC. |
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By: |
/s/ Scott Glassman |
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Name |
Scott Glassman |
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Title: |
Chief Financial Officer |
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THE STERLING ENGINEERING CORPORATION |
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By: |
/s/ Scott Glassman |
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Name |
Scott Glassman |
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Title: |
Chief Financial Officer |
| GUARANTOR: |
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AIR INDUSTRIES GROUP, |
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as parent |
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By: |
/s/ Scott Glassman |
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Name |
Scott Glassman |
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Title: |
Chief Financial Officer |
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AIR REALTY GROUP, LLC |
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By: |
/s/ Scott Glassman |
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Name |
Scott Glassman |
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Title: |
Chief Financial Officer |
[Signature Page to Seventh Amendment to Loan and Security Agreement
(Air Industries)]
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WEBSTER BANK, NATIONAL ASSOCIATION, |
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as Lender |
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By: |
/s/ Gordon Massave |
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Name: |
Gordon Massave |
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Title: |
Managing Director |
[Signature Page to Seventh Amendment to Loan and Security Agreement
(Air Industries)]
EXHIBIT A TO
COMPLIANCE CERTIFICATE
(Detailed calculation of each financial covenant)
9.14(a) The Fixed Charge Coverage Ratio for Parent
and its consolidated Subsidiaries for any Fiscal Quarter of Parent, determined as of the last day of such Fiscal Quarter, shall not be
less than 1.05 to 1.00 for the Fiscal Quarter Ending March 31, 2025 and (ii) 1.25 to 1.00 for all other Fiscal Quarters.
Insert detailed calculation or N/A if not Quarter-end
9.14(b) The aggregate amount of Capital Expenditures
by Parent and its consolidated Subsidiaries in any Fiscal Year shall not exceed $2,500,000.
Insert detailed calculation or N/A if not Quarter-end
9.14(c) The EBITDA for Parent and its consolidated
Subsidiaries for any Fiscal Quarter of Parent, determined as of the last day of such Fiscal Quarter, shall not be less than (i) $740,000
for the Fiscal Quarter Ending June 30, 2024, (ii) $1,500,000 for the Fiscal Quarter Ending September 30, 2023, and (iii) $2,800,000 for
the Fiscal Quarter Ending December 31, 2025.
Insert detailed calculation or N/A if not Quarter-end
[Exhibit A]
