EXHIBIT 10.3
LOAN AND SECURITY AGREEMENT
BY AND AMONG
CONGRESS FINANCIAL CORPORATION (CENTRAL)
AS LENDER,
FANSTEEL INC.
AS A BORROWER, AND
▇▇▇▇▇▇▇ DYNAMICS CORPORATION
AS A BORROWER
DATED: JANUARY 23, 2004
TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS....................................................................................................4
SECTION 2. CREDIT FACILITIES.............................................................................................21
2.1. Revolving Loans.........................................................................................21
2.2. Letter of Credit Accommodations.........................................................................22
2.3. Intentionally Omitted...................................................................................25
SECTION 3. INTEREST AND FEES.............................................................................................25
3.1. Interest................................................................................................25
3.2. Closing Fee.............................................................................................25
3.3. [INTENTIONALLY OMITTED].................................................................................25
3.4. Servicing Fee...........................................................................................25
3.5. Unused Line Fee.........................................................................................26
3.6. [INTENTIONALLY OMITTED].................................................................................26
SECTION 4. CONDITIONS PRECEDENT..........................................................................................26
4.1. Conditions Precedent to Initial Loans and Letter of Credit Accommodations...............................26
4.2. Conditions Precedent to All Loans and Letter of Credit Accommodations...................................28
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST.....................................................................29
5.1. Grant of Security Interest..............................................................................29
5.2. Perfection of Security Interests........................................................................30
SECTION 6. COLLECTION AND ADMINISTRATION.................................................................................34
6.1. Borrowers' Loan Account.................................................................................34
6.2. Statements..............................................................................................34
6.3. Collection of Accounts..................................................................................34
6.4. Payments................................................................................................35
6.5. Authorization to Make Loans.............................................................................36
6.6. Use of Proceeds.........................................................................................36
SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS.................................................................37
7.1. Collateral Reporting....................................................................................37
7.2. Accounts Covenants......................................................................................37
7.3. Inventory Covenants.....................................................................................38
7.4. Equipment and Real Property Covenants...................................................................39
7.5. Power of Attorney.......................................................................................39
7.6. Right to Cure...........................................................................................40
7.7. Access to Premises......................................................................................41
SECTION 8. REPRESENTATIONS AND WARRANTIES................................................................................41
8.1. Corporate Existence; Power and Authority................................................................41
8.2. Name; State of Organization; Chief Executive Office; Collateral Locations...............................41
8.3. Financial Statements; No Material Adverse Change........................................................42
8.4. Priority of Liens; Title to Properties..................................................................42
8.5. Tax Returns.............................................................................................42
8.6. Litigation..............................................................................................43
8.7. Compliance with Other Agreements and Applicable Laws....................................................43
8.8. Environmental Compliance................................................................................43
8.9. Employee Benefits.......................................................................................44
8.10. Bank Accounts...........................................................................................44
8.11. Intellectual Property...................................................................................45
8.12. Subsidiaries; Affiliates; Capitalization................................................................45
8.13. Labor Disputes..........................................................................................46
8.14. Restrictions on Subsidiaries............................................................................48
8.15. Material Contracts......................................................................................46
8.16. Plan of Reorganization..................................................................................46
8.17. Accuracy and Completeness of Information................................................................47
8.18. Survival of Warranties; Cumulative......................................................................47
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS............................................................................47
9.1. Maintenance of Existence................................................................................47
9.2. New Collateral Locations................................................................................48
9.3. Compliance with Laws, Regulations, Etc..................................................................48
9.4. Payment of Taxes and Claims.............................................................................49
9.5. Insurance...............................................................................................49
9.6. Financial Statements and Other Information..............................................................50
9.7. Sale of Assets, Consolidation, Merger, Dissolution, Etc.................................................51
9.8. Encumbrances............................................................................................52
9.9. Indebtedness............................................................................................53
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9.10. Loans, Investments, Etc.................................................................................54
9.11. Dividends and Redemptions; Payments to Unsecured Creditors..............................................55
9.12. Transactions with Affiliates............................................................................55
9.13. Compliance with ERISA...................................................................................56
9.14. End of Fiscal Years: Fiscal Quarters....................................................................56
9.15. Change in Business......................................................................................56
9.16. Limitation of Restrictions Affecting Subsidiaries.......................................................56
9.17. Financial Covenants.....................................................................................57
9.18. License Agreements......................................................................................57
9.19. After-Acquired Real Property..................................................ERROR! BOOKMARK NOT DEFINED.
9.20. Costs and Expenses......................................................................................59
9.21. Complince with Plan of Reorganization...................................................................61
9.22. Special Purpose Companies...............................................................................61
9.23. Further Assurances......................................................................................59
SECTION 10. EVENTS OF DEFAULT AND REMEDIES................................................................................60
10.1. Events of Default.......................................................................................60
10.2. Remedies................................................................................................62
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW..................................................65
11.1. Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver...................................65
11.2. Waiver of Notices.......................................................................................67
11.3. Amendments and Waivers..................................................................................67
11.4. Waiver of Counterclaims.................................................................................67
11.5. Indemnification.........................................................................................67
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS..............................................................................68
12.1. Term....................................................................................................68
12.2. Interpretative Provisions...............................................................................69
12.3. Notices.................................................................................................71
12.4. Partial Invalidity......................................................................................71
12.5. Successors..............................................................................................72
12.6. Borrower Representative.................................................................................72
12.7. Entire Agreement........................................................................................72
12.8. Counterparts, Etc.......................................................................................73
SECTION 13. JOINT AND SEVERAL OBLIGATIONS.................................................................................73
13.1. Joint and Several Obligations...........................................................................73
13.2. Waivers by Borrowers....................................................................................74
13.3. Benefit of Joint and Several Obligations................................................................74
13.4. Subordination of Subrogation, Etc.......................................................................74
13.5. Election of Remedies....................................................................................74
13.6. Limitation..............................................................................................75
13.7. Contribution with Respect to Joint and Several Obligations..............................................75
13.8. Liability Cumulative....................................................................................76
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INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Compliance Certificate
Schedule 1.27 Eligible Equipment Locations
Schedule 1.74 Mortgaged Real Property
Schedule 1.99 Permitted Holders
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated January 23, 2004 is entered into
by and among Congress Financial Corporation (Central), an Illinois corporation
("Lender") and Fansteel Inc., a Delaware corporation ("Fansteel") and ▇▇▇▇▇▇▇
Dynamics Corporation, a Delaware corporation ("▇▇▇▇▇▇▇"; Fansteel and ▇▇▇▇▇▇▇
are collectively "Borrowers" and each individually is a "Borrower").
W I T N E S S E T H:
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WHEREAS, Borrowers have requested that Lender enter into financing
arrangements with Borrowers pursuant to which Lender may make loans and provide
other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
Section 1.01 "Accounts" shall mean, with respect to a Borrower, all
present and future rights of such Borrower to payment of a monetary obligation,
whether or not earned by performance, which is not evidenced by chattel paper or
an instrument, (a) for property that has been or is to be sold, leased,
licensed, assigned, or otherwise disposed of, (b) for services rendered or to be
rendered, (c) for a secondary obligation incurred or to be incurred, or (d)
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arising out of the use of a credit or charge card or information contained on or
for use with the card.
Section 1.02 "Affiliate" shall mean, with respect to a specified
Person, any other Person (a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
such specified person; (b) which beneficially owns or holds five percent (5%) or
more of any class of the Voting Stock or other equity interest of such specified
person; or (c) of which five percent (5%) or more of the Voting Stock or other
equity interest is beneficially owned or held by such specified person or a
Subsidiary of such specified person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with") when used with respect to any specified person
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of Voting Stock, by agreement or otherwise. "Affiliates"
of Fansteel shall include, without limitation, each Special Purpose Company.
Section 1.03 "Amended Decommissioning Plan" has the meaning assigned to
such term in the Plan of Reorganization.
Section 1.04 "Available General Unsecured Cash" has the meaning
assigned to such term in the Plan of Reorganization.
Section 1.05 "Avoidance Action Cash" has the meaning assigned to such
term in the Plan of Reorganization.
Section 1.06 "Bankruptcy Code" shall mean the United States Bankruptcy
Code, 11 U.S.C. ss. 101 et seq., as in effect from time to time.
Section 1.07 "Bankruptcy Court" shall mean the United States District
Court for the District of Delaware.
Section 1.08 "Blocked Accounts" has the meaning set forth in Section
6.3 hereof.
Section 1.09 "Borrower Representative" shall mean Fansteel.
Section 1.10 "Borrowing Base" shall mean, at any time, as to each
Borrower, the amount equal to: (a) eighty-five percent (85%) of the Net Amount
of Eligible Accounts of such Borrower, plus (b) the lesser of (i) seventy
percent (70%) of the Net Orderly Liquidation Value of the Eligible Equipment of
such Borrower and (ii) the Equipment Sublimit for such Borrower, less (c) any
Reserves attributable to such Borrower.
Section 1.11 "Business Day" shall mean any day other than a Saturday,
Sunday, or other day on which commercial banks are authorized or required to
close under the laws of the State of New York or the State of North Carolina,
and a day on which the Reference Bank and Lender are open for the transaction of
business.
Section 1.12 "Capital Leases" shall mean, as applied to any Person, any
lease of (or any agreement conveying the right to use) any property (whether
real, personal or mixed) by
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such Person as lessee which in accordance with GAAP is required to be reflected
as a liability on the balance sheet of such Person.
Section 1.13 "Capital Stock" shall mean, with respect to any Person,
any and all shares, interests, participations or other equivalents (however
designated) of such Person's capital stock, partnership interests or limited
liability company interests at any time outstanding, and any and all rights,
warrants or options exchangeable for or convertible into such capital stock or
other interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
Section 1.14 "Cash Equivalents" shall mean, at any time, (a) any
evidence of Indebtedness with a maturity date of ninety (90) days or less issued
or directly and fully guaranteed or insured by the United States of America of
any agency or instrumentality thereof; provided, that, the full faith and credit
of the United States of America is pledged in support thereof; (b) certificates
of deposit or bankers' acceptances with a maturity of ninety (90) days or less
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than
$250,000,000; (c) commercial paper (including variable rate demand notes) with a
maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of a Borrower) organized under the laws of any State of the United
States of America or the District of Columbia and rated at least A-1 by Standard
& Poor's Ratings Service, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or at
least P-1 by ▇▇▇▇▇'▇ Investors Service, Inc.; (d) repurchase obligations with a
term of not more than thirty (30) days for underlying securities of the types
described in clause (a) above entered into with any financial institution having
combined capital and surplus and undivided profits of not less than
$250,000,000; (e) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the United States of America or issued by any governmental agency thereof and
backed by the full faith and credit to the United States of America, in each
case maturing within ninety (90) days or less from the date of acquisition;
provided, that, the terms of such agreements comply with the guidelines set
forth in the Federal Financial Agreements of Depository Institutions with
Securities Dealers and Others, as adopted by the Comptroller of the Currency on
October 31, 1985; and (f) investments in money market funds and mutual funds
which invest substantially all of their assets in securities of the types
described in clauses (a) through (e) above.
Section 1.15 "Change of Control" shall mean (a) the transfer (in one
transaction or a series of transactions) of all or substantially all of the
assets of any Borrower to any Person or group (as such term is used in Section
13(d)(3) of the Exchange Act); (b) the liquidation or dissolution of any
Borrower or the adoption of a plan by the stockholders of any Borrower relating
to the dissolution or liquidation of such Borrower; (c) the failure of Fansteel
to own one hundred percent (100%) of the voting power and the issued and
outstanding capital stock of ▇▇▇▇▇▇▇ and any other direct or indirect
wholly-owned Subsidiary of Fansteel as of the date of this Agreement; (d) the
acquisition by any Person or group (as such term is used in Section 13(d)(3) of
the Exchange Act), except for one or more Permitted Holders, of beneficial
ownership, directly or indirectly, of fifty percent (50%) or more of the voting
power of the total outstanding Voting Stock of Fansteel or the Board of
Directors of Fansteel; or (e) during any period of two (2) consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of Fansteel (together with any new directors who have been appointed
by
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any Permitted Holder, or whose nomination for election by the stockholders of
Fansteel, as the case may be, was approved by a vote of at least sixty-six and
two-thirds percent (66 2/3%) of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of Fansteel then still in office.
Section 1.16 "Chapter 11 Debtors" shall mean Fansteel Inc., Chapter 11
Debtor-in-Possession, Fansteel Holdings, Inc., Chapter 11 Debtor-in-Possession,
Custom Technologies Corp., Chapter 11 Debtor-in-Possession, Escast, Inc.,
Chapter 11 Debtor-in-Possession, ▇▇▇▇▇▇▇ Dynamics Corporation, Chapter 11
Debtor-in-Possession, Washington Manufacturing Company, Inc., Chapter 11
Debtor-in-Possession, Phoenix Aerospace Corp., Chapter 11 Debtor-in-Possession
and American Sintered Technologies, Inc., Chapter 11 Debtor-in-Possession.
Section 1.17 "Code" shall mean the Internal Revenue Code of 1986, as
the same now exists or may from time to time hereafter be amended, modified,
recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
Section 1.18 "Collateral" has the meaning set forth in Section 5
hereof.
Section 1.19 "Collateral Access Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, from any lessor of Real
Property to any Borrower, or any other person to whom any Collateral (including
Inventory, Equipment, bills of lading or other documents of title) is consigned
or who has custody, control or possession of any such Collateral or is otherwise
the owner or operator of any premises on which any of such Collateral is
located, pursuant to which such lessor, consignee or other person, inter alia,
acknowledges the first priority security interest of Lender in such Collateral,
agrees to waive any and all claims such lessor, consignee or other person may,
at any time, have against such Collateral, whether for processing, storage or
otherwise, and agrees to permit Lender access to, and the right to remain on,
the premises of such lessor, consignee or other person so as to exercise
Lender's rights and remedies and otherwise deal with such Collateral and, in the
case of any consignee or other person who at any time has custody, control or
possession of any Collateral, acknowledges that it holds and will hold
possession of the Collateral for the benefit of Lender and agrees to follow all
instructions of Lender with respect thereto.
Section 1.20 "Confirmation Order" shall mean the order of the
Bankruptcy Court dated December 23, 2003 confirming the Plan of Reorganization
pursuant to Section 1129 of the Bankruptcy Code.
Section 1.21 "Default" shall mean an act, condition or event which with
notice or passage of time or both would constitute an Event of Default.
Section 1.22 "Deposit Account Control Agreement" shall mean an
agreement in writing, in form and substance satisfactory to Lender, by and among
Lender, a Borrower and any bank at which any deposit account of such Borrower is
at any time maintained which provides that such bank will comply with
instructions originated by Lender directing disposition of the funds in the
deposit account without further consent by such Borrower and such other terms
and conditions as Lender may require, including as to any such agreement with
respect to any
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Blocked Account, providing that all items received or deposited in the Blocked
Accounts are the property of Lender, that the bank has no lien upon, or right to
setoff against, the Blocked Accounts, the items received for deposit therein, or
the funds from time to time on deposit therein and that the bank will wire, or
otherwise transfer, in immediately available funds, on a daily basis to the
Lender Payment Account all funds received or deposited into the Blocked
Accounts.
Section 1.23 "Disclosure Statement" shall mean the First Amended
Disclosure Statement of Chapter 11 Debtors with respect to the Plan of
Reorganization, dated September 18, 2003.
Section 1.24 "Disputed Claim Reserve" has the meaning assigned to such
term in the Plan of Reorganization.
Section 1.25 "EBITDA" shall mean, with respect to any fiscal period,
the net earnings of Borrowers and the Special Purpose Companies on a
consolidated basis for such fiscal period, minus extraordinary gains included in
such net earnings for such fiscal period, plus interest expense, income taxes,
depreciation and amortization and non-cash extraordinary losses deducted from
such net earnings for such fiscal period, all as determined in accordance with
GAAP.
Section 1.26 "Eligible Accounts" shall mean, with respect to a
Borrower, Accounts created by such Borrower which are and continue to be
acceptable to Lender based on the criteria set forth below. In general, Accounts
shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and delivery
of goods by such Borrower or rendition of services by such Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than sixty (60) days after the
original due date for them and such Accounts are not unpaid more than ninety
(90) days after the date of the original invoice for them (except that with
respect to Accounts owing by account debtors with special dating terms approved
by Lender in advance, such Accounts are not unpaid more than one hundred twenty
(120) days after the date of the original invoice for them and such Accounts are
not unpaid more than sixty (60) days after the original due date for them);
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(b) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America or Canada (provided,
that, at any time promptly upon Lender's request, such Borrower shall execute
and deliver, or cause to be executed and delivered, such other agreements,
documents and instruments as may be required
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by Lender to perfect the security interests of Lender in those Accounts of an
account debtor with its chief executive office or principal place of business in
Canada in accordance with the applicable laws of the Province of Canada in which
such chief executive office or principal place of business is located and take
or cause to be taken such other and further actions as Lender may request to
enable Lender as secured party with respect thereto to collect such Accounts
under the applicable Federal or Provincial laws of Canada) or, at Lender's
option, if the chief executive office and principal place of business of the
account debtor with respect to such Accounts is located other than in the United
States of America or Canada, then if either: (i) the account debtor has
delivered to such Borrower an irrevocable letter of credit issued or confirmed
by a bank satisfactory to Lender and payable only in the United States of
America and in U.S. dollars, sufficient to cover such Account, in form and
substance satisfactory to Lender and if required by Lender, the original of such
letter of credit has been delivered to Lender or Lender's agent and such
Borrower has complied with the terms of Section 5.2(f) hereof with respect to
the assignment of the proceeds of such letter of credit to Lender or naming
Lender as transferee beneficiary thereunder, as Lender may specify, or (ii) such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (iii) such Account is
otherwise acceptable in all respects to Lender (subject to such lending formula
with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇ (such that the
obligation of the account debtors with respect to such Accounts is conditioned
upon such Borrower's satisfactory completion of any further performance under
the agreement giving rise thereto), ▇▇▇▇ and hold invoices or retainage
invoices, except as to ▇▇▇▇ and hold invoices, if Lender shall have received an
agreement in writing from the account debtor, in form and substance satisfactory
to Lender, confirming the unconditional obligation of the account debtor to take
the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute, and does not have, any right of setoff or
recoupment against such Accounts (but the portion of the Accounts of such
account debtor in excess of the amount at any time and from time to time owed by
such Borrower to such account debtor or claimed owed by such account debtor may
be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of such Borrower;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any
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State, political subdivision, department, agency or instrumentality thereof,
upon Lender's request, the Federal Assignment of Claims Act of 1940, as amended
or any similar State or local law, if applicable, has been complied with in a
manner reasonably satisfactory to Lender;
(l) there are no proceedings or actions which, to any Borrower's
knowledge, are threatened or pending against the account debtors with respect to
such Accounts which might result in any material adverse change in any such
account debtor's financial condition (including, without limitation, any
bankruptcy, dissolution, liquidation, reorganization or similar proceeding);
(m) such Accounts are not evidenced by or arising under any instrument
or chattel paper;
(n) (i) with respect to Accounts not owing by any of Rolls-Royce,
United Technologies and International Engine, such Accounts of a single account
debtor or its affiliates do not constitute more than ten percent (10%) of all
otherwise Eligible Accounts (but the portion of the Accounts not in excess of
such percentage may be deemed Eligible Accounts) and (ii) with respect to
Accounts owing by any of Rolls-Royce, United Technologies and International
Engine, such Accounts do not, in either case, constitute more than fifteen
percent (15%) of all otherwise Eligible Accounts (but the portion of the
Accounts not in excess of such percentage may be deemed Eligible Accounts) ;
(o) such Accounts are not owed by an account debtor who has Accounts
unpaid more than (i) sixty (60) days after the original due date for them or
(ii) ninety (90) days after the original invoice date for them (except for
Accounts owing by account debtors with special dating terms approved by Lender
in advance with respect to which such number of days shall be one hundred twenty
(120) instead of ninety (90)) which together constitute more than fifty (50%)
percent of the total Accounts of such account debtor;
(p) the account debtor is not located in a state requiring the filing
of a Notice of Business Activities Report or similar report in order to permit
such Borrower to seek judicial enforcement in such State of payment of such
Account, unless such Borrower has qualified to do business in such state or has
filed a Notice of Business Activities Report or equivalent report for the then
current year or such failure to file and inability to seek judicial enforcement
is capable of being remedied without any material delay or material cost;
(q) such Accounts are owed by account debtors whose total indebtedness
to such Borrower does not exceed the credit limit with respect to such account
debtors as determined by Lender in good faith and after consultation with
Borrowers (but the portion of the Accounts not in excess of such credit limit
may be deemed Eligible Accounts, and such credit limit shall only apply to
Accounts arising after the establishment thereof);
(r) such Accounts do not consist of Unreimbursed Tooling Costs (unless
the same are subject to a final invoice that has been accepted and approved by
the account debtor and otherwise satisfy the criteria of being an Eligible
Account); and
(s) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender in good faith.
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The criteria for Eligible Accounts set forth above may only be changed and any
new criteria for Eligible Accounts may only be established by Lender in good
faith based on either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Lender has no written notice thereof
from Borrowers prior to the date hereof, in either case under clause (i) or (ii)
which adversely affects or could reasonably be expected to adversely affect the
Accounts in the good faith determination of Lender. Any Accounts which are not
Eligible Accounts shall nevertheless be part of the Collateral.
Section 1.27 "Eligible Equipment" shall mean Equipment (i) that is
owned and fully paid for by a Borrower and listed in the Equipment Appraisal
(specifically excluding any Equipment obtained after the Closing Date), (ii)
that has not become affixed to any real property (other than Real Property that
is owned by a Borrower and subject to a Mortgage) in a manner that would cause
such Equipment to be considered a fixture, (iii) with respect to which Lender
has a first-priority perfected lien, (iv) that is located at one of the business
locations of Borrowers listed on Schedule 1.27 and (v) that is subject to a
Collateral Access Agreement to the extent that such Equipment is located at a
business location leased by a Borrower.
Section 1.28 "Environmental Claims" shall mean all claims, however
asserted, by any governmental, regulatory or judicial authority or other Person
for violation of any Environmental Law, any Release or any injury to the
environment.
Section 1.29 "Environmental Insurance Claims" shall mean all insurance
claims filed by any Borrower or any Borrower's Affiliate in respect of any
Environmental Claim asserted against or in relation to the FLRI Facility, the
FMRI Facility, the NCI Facility, the WI Facility, the Old Southington Superfund
Site located in Southington, Connecticut, the PCB Treatment, Inc. Superfund Site
located in Kansas City, Kansas and in Kansas City, Missouri, the Li Tungsten
Superfund Site located in Glen Cove, New York and/or the Operating Industries,
Inc. Superfund Site Located in Monterey Park, California, in each case to the
extent that the proceeds of any such insurance claim are required to be used for
the benefit of such Facility in accordance with the terms of the Plan of
Reorganization.
Section 1.30 "Environmental Laws" shall mean all foreign, Federal,
State and local laws (including common law), legislation, rules, codes,
licenses, permits (including any conditions imposed therein), authorizations,
judicial or administrative decisions, injunctions or agreements between any
Borrower and any Governmental Authority, (a) relating to pollution and the
protection, preservation or restoration of the environment (including air, water
vapor, surface water, ground water, drinking water, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, (b) relating to the exposure to, or the
use, storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to all
laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term "Environmental Laws"
includes (i) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act,
the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act,
the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste
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Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974,
(ii) applicable state counterparts to such laws, and (iii) any common law or
equitable doctrine that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to any
Hazardous Materials.
Section 1.31 "Equipment" shall mean, with respect to a Borrower, all of
such Borrower's now owned and hereafter acquired equipment, wherever located,
including machinery, data processing and computer equipment and computer
hardware and software, whether owned or licensed, and including embedded
software, vehicles, tools, furniture, fixtures, all attachments, accessions and
property now or hereafter affixed thereto or used in connection therewith, and
substitutions and replacements thereof, wherever located.
Section 1.32 "Equipment Appraisal" shall mean the appraisal with
respect to Borrowers' Equipment conducted by Hilco Appraisal Services, LLC and
dated November 19, 2003.
Section 1.33 "Equipment Cap" shall mean $2,000,000, provided that (a)
the Equipment Cap will be reduced by $33,333 on the first day of each month
(commencing January 1, 2004) and (b) in addition to the monthly reduction set
forth in the foregoing clause (a), the Equipment Cap will be reduced by the
amount of any proceeds received from the disposition of any Equipment (excluding
any Fansteel Asset Sale Proceeds).
Section 1.34 "Equipment Sublimit" shall mean, as to each Borrower, at
any time, the amount equal to the Equipment Cap minus the then outstanding
principal amount of Loans to the other Borrower based on Eligible Equipment.
Section 1.35 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, together with all rules, regulations and interpretations thereunder
or related thereto.
Section 1.36 "ERISA Affiliate" shall mean any person required to be
aggregated with Borrower or any of its Subsidiaries under Sections 414(b),
414(c), 414(m) or 414(o) of the Code.
Section 1.37 "ERISA Event" shall mean (a) any "reportable event", as
defined in Section 4043 of ERISA or the regulations issued thereunder, with
respect to a Plan; (b) the adoption of any amendment to a Plan that would
require the provision of security pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA; (c) the existence with respect to any Plan of an
"accumulated funding deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section
412 of the Code or Section 303(d) of ERISA of an application for a waiver of the
minimum funding standard with respect to any Plan; (e) the occurrence of a
"prohibited transaction" with respect to which any Borrower or any of its
Subsidiaries is a "disqualified person" (within the meaning of Section 4975 of
the Code); (f) a complete or partial withdrawal by the any Borrower or any ERISA
Affiliate from a Multiemployer Plan or a cessation of operations which is
treated as such a withdrawal or notification that a Multiemployer Plan is in
reorganization; (g) the filing of a notice of intent to terminate, the treatment
of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or
the commencement of proceedings by the Pension Benefit
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Guaranty Corporation to terminate a Plan; (h) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan; (i) the
imposition of any liability under Title IV of ERISA, other than the Pension
Benefit Guaranty Corporation premiums due but not delinquent under Section 4007
of ERISA, upon any Borrower or any ERISA Affiliate; and (j) any other event or
condition with respect to a Plan including any Plan subject to Title IV of ERISA
maintained, or contributed to, by any ERISA Affiliate that results in a material
adverse effect on the assets, business or prospects of Borrowers taken as a
whole.
Section 1.38 "Event of Default" shall mean the occurrence or existence
of any event or condition described in Section 10.1 hereof.
Section 1.39 "Excess Availability" shall mean as to Borrowers in the
aggregate, the amount, as determined by Lender, calculated at any time, equal to
(a) the lesser of: (i) the Borrowing Bases of Borrowers in the aggregate and
(ii) the Revolving Loan Limit, minus (b) the sum of: (i) the amount of all then
outstanding and unpaid Obligations of Borrowers, plus (ii) the aggregate amount
of all then outstanding and unpaid trade payables and other obligations of
Borrowers which are more than seven (7) days past due as of such time, plus
(iii) the amount of checks issued by Borrowers to pay trade payables and other
obligations which are more than seven (7) days past due as of such time, but not
yet sent (but without duplication of clause (b)(ii)) and the book overdraft of
Borrowers.
Section 1.40 "Exchange Act" shall mean the Securities Exchange Act of
1934, together with all rules, regulations and interpretations thereunder or
related thereto.
Section 1.41 "Excluded Collateral" shall mean (a) all Fansteel Asset
Sale Proceeds, (b) all proceeds of any Environmental Insurance Claim, (c) the
Fansteel Asset Sale Proceeds Escrow, (d) the General Unsecured Distribution
Account and proceeds or distributions therefrom, including without limitation
the Available General Unsecured Cash, Avoidance Action Cash and any cash held by
Borrowers on account of any Disputed Claim Reserve, (e) any and all proceeds
received by a Borrower pursuant to the North Chicago Eminent Domain Option, (f)
the ▇▇▇▇▇▇▇ Sanitary Landfill Account and any and all proceeds received by
Borrowers on account thereof, (g) any proceeds received by a Borrower with
respect to any exercise of an eminent domain action (in each case with respect
to the foregoing clauses (a) through (g), to the extent that such proceeds, cash
or other items are required to be directed or re-directed by Borrowers to a
third-party pursuant to the Plan of Reorganization) and (h) all of the Real
Property, Equipment and Inventory owned by or in the control or possession of
Fansteel de Mexico and located in Mexico subject to the lien and security
interest of the PBGC pursuant to the Pledge and Bailment Agreement between
Fansteel and the PBGC dated January 23, 2004.
Section 1.42 "Fansteel Asset Sale Proceeds" has the meaning assigned to
such term in the Plan of Reorganization; it being understood that the Fansteel
Asset Sale Proceeds do not include the proceeds of any Eligible Equipment,
Eligible Accounts, any assets located at ▇▇▇▇▇▇▇'▇ facility in Creston, Iowa,
any assets located at Fansteel's facility in Washington, Iowa or any assets
located at Fansteel's facility in Emporium, Pennsylvania.
Section 1.43 "Fansteel Asset Sale Proceeds Escrow" has the meaning
assigned to such term in the Plan of Reorganization; it being understood that
any funds subject to the
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Fansteel Asset Sale Proceeds do not include the proceeds of any Eligible
Equipment, Eligible Accounts, any assets located at ▇▇▇▇▇▇▇'▇ facility in
Creston, Iowa, any assets located at Fansteel's facility in Washington, Iowa or
any assets located at Fansteel's facility in Emporium, Pennsylvania.
Section 1.44 "Fansteel de Mexico" shall mean Fansteel de Mexico, S. de
▇.▇. de C.V., a limited liability company formed under the laws of the United
Mexican States and a Subsidiary of Fansteel.
Section 1.45 "Financing Agreements" shall mean, collectively, this
Agreement and all notes, guarantees, security agreements and other agreements,
documents and instruments now or at any time hereafter executed and/or delivered
by any Borrower or any Obligor in connection with this Agreement.
Section 1.46 "FLRI" shall mean FLRI, Inc., a wholly-owned subsidiary of
Fansteel incorporated on or about the date of this Agreement pursuant to the
Plan of Reorganization.
Section 1.47 "FLRI Contingent Note" shall mean the non-interest
bearing, unsecured note of Fansteel issued pursuant to and in accordance with
the Plan of Reorganization to FLRI, if necessary, following additional site
characterization at the Lexington Facility, in an aggregate principal amount to
be determined by agreement of Fansteel, FLRI, and the KNREPC, reflecting as and
to the extent required, the additional costs (in excess of the amount of the
FLRI Primary Note) to remediate contamination at the Lexington Facility.
Section 1.48 "FLRI Notes" shall mean, collectively, the FLRI Primary
Note and FLRI Contingent Note.
Section 1.49 "FLRI Primary Note" shall mean the non-interest bearing,
unsecured note of Fansteel in aggregate principal amount of $1,780,000, issued
pursuant to and in accordance with the Plan of Reorganization to FLRI on or
about the date of this Agreement.
Section 1.50 "FMRI" shall mean FMRI Inc., a wholly-owned subsidiary of
Fansteel incorporated on November 12, 2003 pursuant to the Plan of
Reorganization as a special purpose entity to fulfill all obligations under the
NRC License.
Section 1.51 "FMRI Contingent Note" shall mean the non-interest
bearing, unsecured note of Fansteel issued pursuant to and in accordance with
the Plan of Reorganization to FMRI following additional site characterization at
the Muskogee Facility, in an aggregate principal amount to be determined by
agreement of Fansteel, FMRI, and the NRC, reflecting as and to the extent
required, the additional costs (in excess of the costs estimated in the Amended
Decommissioning Plan) to (a) remediate contaminated soils at the Muskogee
Facility and other additional costs required to complete the Amended
Decommissioning Plan and (b) monitor and treat groundwater at the Muskogee
Facility.
Section 1.52 "FMRI Notes" shall mean, collectively, the FMRI Primary
Note, the FMRI Secondary Note, and the FMRI Contingent Note.
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Section 1.53 "FMRI Primary Note" shall mean the non-interest bearing,
unsecured note of Fansteel in aggregate principal amount of $30,600,000, issued
pursuant to and in accordance with the Plan of Reorganization to FMRI on or
about the date of this Agreement, to cover the costs of decommissioning the
Muskogee Facility in accordance with the Amended Decommissioning Plan.
Section 1.54 "FMRI Secondary Note" shall mean the non-interest bearing,
unsecured note of Fansteel in aggregate principal amount of $4,200,000, issued
pursuant to and in accordance with the Plan of Reorganization to FMRI on or
about the date of this Agreement, to cover the estimated costs of groundwater
treatment and monitoring at the Muskogee Facility.
Section 1.55 "GAAP" shall mean generally accepted accounting principles
in the United States of America as in effect from time to time as set forth in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board which are applicable
to the circumstances as of the date of determination consistently applied,
except that, for purposes of Section 9.17 hereof, GAAP shall be determined on
the basis of such principles in effect on the date hereof and consistent with
those used in the preparation of the most recent audited financial statements
delivered to Lender prior to the date hereof.
Section 1.56 "General Unsecured Distribution Account" has the meaning
assigned to such term in the Plan of Reorganization.
Section 1.57 "Governmental Authority" shall mean any nation or
government, any state, province, or other political subdivision thereof, any
central bank (or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
Section 1.58 "Hazardous Materials" shall mean any element, compound or
chemical that is defined, listed or otherwise classified as a hazardous or toxic
substance, material or waste under the Environmental Laws, including
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biohazardous substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including materials which include hazardous constituents), sewage,
sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including any that are
or become classified as hazardous or toxic under any Environmental Law).
Section 1.59 "Indebtedness" shall mean, with respect to any Person, any
liability, whether or not contingent, (a) in respect of borrowed money (whether
or not the recourse of the lender is to the whole of the assets of such Person
or only to a portion thereof) or evidenced by bonds, notes, debentures or
similar instruments; (b) representing the deferred and unpaid balance of the
purchase price of any property or services (except any such balance that
constitutes an account payable to a trade creditor (whether or not an Affiliate)
created, incurred, assumed or guaranteed by such Person in the ordinary course
of business of such Person in
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connection with obtaining goods, materials or services that either is not
overdue by more than ninety (90) days is being contested in good faith); (c) all
obligations as lessee under leases which have been, or should be, in accordance
with GAAP recorded as Capital Leases; (d) any contractual obligation, contingent
or otherwise, of such Person to pay or be liable for the payment of any
indebtedness described in this definition of another Person, including, without
limitation, any such indebtedness, directly or indirectly guaranteed, or any
agreement to purchase, repurchase, or otherwise acquire such indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof, or to maintain solvency, assets, level of income,
or other financial condition; (e) all obligations with respect to redeemable
stock and redemption or repurchase obligations under any Capital Stock or other
equity securities issued by such Person; (f) all reimbursement obligations and
other liabilities of such Person with respect to surety bonds (whether bid,
performance or otherwise), letters of credit, banker's acceptances or similar
documents or instruments issued for such Person's account; and (g) all
indebtedness of such Person in respect of indebtedness of another Person for
borrowed money or indebtedness of another Person otherwise described in this
definition which is secured by any consensual lien, security interest,
collateral assignment, conditional sale, mortgage, deed of trust, or other
encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time.
Section 1.60 "Information Certificate" shall mean the Information
Certificate of each Borrower constituting Exhibit A hereto containing material
information with respect to such Borrower, its business and assets provided by
or on behalf of such Borrower to Lender in connection with the preparation of
this Agreement and the other Financing Agreements and the financing arrangements
provided for herein.
Section 1.61 "Intellectual Property" shall mean, with respect to a
Borrower, such Borrower's now owned and hereafter arising or acquired: patents,
patent rights, patent applications, copyrights, works which are the subject
matter of copyrights, copyright registrations, trademarks, trade names, trade
styles, trademark and service ▇▇▇▇ applications, and licenses and rights to use
any of the foregoing; all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing; all rights to
▇▇▇ for past, present and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings, designs,
blueprints, surveys, reports, manuals, and operating standards; goodwill
(including any goodwill associated with any trademark or the license of any
trademark); customer and other lists in whatever form maintained; and trade
secret rights, copyright rights, rights in works of authorship, domain names and
domain name registrations; software and contract rights relating to software, in
whatever form created or maintained.
Section 1.62 "Interest Rate" shall mean a rate equal to one percent
(1.00%) per annum in excess of the Prime Rate; provided, that, notwithstanding
anything to the contrary contained herein, the Interest Rate shall mean the rate
of three percent (3.00%) per annum in excess of the Prime Rate, at Lender's
option, without notice, (a) either (i) for the period on and after the date of
termination or non-renewal hereof until such time as all Obligations are
indefeasibly paid and satisfied in full in immediately available funds, or (ii)
for the period from and after the date of the occurrence of any Event of
Default, and for so long as such Event of Default is continuing as determined by
Lender and (b) on the Revolving Loans at any time
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outstanding in excess of the amounts available to Borrowers under Section 2
(whether or not such excess(es) arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default).
Section 1.63 "Inventory" shall mean, with respect to a Borrower, all of
such Borrower's now owned and hereafter existing or acquired goods, wherever
located, which (a) are leased by such Borrower as lessor; (b) are held by such
Borrower for sale or lease or to be furnished under a contract of service; (c)
are furnished by such Borrower under a contract of service; or (d) consist of
raw materials, work in process, finished goods or materials used or consumed in
its business.
Section 1.64 "Investment Property Control Agreement" shall mean an
agreement in writing, in form and substance satisfactory to Lender, by and among
Lender, a Borrower and any securities intermediary, commodity intermediary or
other person who has custody, control or possession of any investment property
of such Borrower acknowledging that such securities intermediary, commodity
intermediary or other person has custody, control or possession of such
investment property on behalf of Lender, that it will comply with entitlement
orders originated by Lender with respect to such investment property, or other
instructions of Lender, or (as the case may be) apply any value distributed on
account of any commodity contract as directed by Lender, in each case, without
the further consent of such Borrower and including such other terms and
conditions as Lender may require.
Section 1.65 "KNREPC" shall mean the Kentucky Natural Resources and
Environmental Protection Cabinet.
Section 1.66 "Lender Payment Account" shall mean account no.
5000000030266 of Lender at Wachovia Bank, National Association, or such other
account of Lender as Lender may from time to time designate to Borrower
Representative as the Lender Payment Account for purposes of this Agreement.
Section 1.67 "Letter of Credit Accommodations" shall mean,
collectively, the letters of credit, merchandise purchase or other guaranties
which are from time to time either (a) issued or opened by Lender for the
account of any Borrower or any Obligor or (b) with respect to which Lender has
agreed to indemnify the issuer or guaranteed to the issuer the performance by a
Borrower of its obligations to such issuer: sometimes being referred to herein
individually as a "Letter of Credit Accommodation"; it being agreed and
understood that the "Letter of Credit Accommodations" shall include, without
limitation, the Irrevocable Standby Letter of Credit No. SM422043W issued on
July 25, 2002 by Wachovia Bank, National Association in the original amount of
$670,000 (increased to $1,388,000 pursuant to an amendment dated July 7, 2003)
and with an initial expiry date of June 30, 2003 (extended to June 30, 2004
pursuant to the amendment dated July 7, 2003).
Section 1.68 "Letter of Credit Availability" shall mean as to each
Borrower, the amount, as determined by Lender, calculated at any time, equal to
(a) the lesser of: (i) the Borrowing Base of such Borrower and (ii) the
Revolving Loan Limit, minus (b) the amount of all then outstanding and unpaid
Obligations of Borrowers.
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Section 1.69 "Lexington Facility" has the meaning assigned to such term
in the Plan of Reorganization.
Section 1.70 "License Agreements" has the meaning set forth in Section
8.11 hereof.
Section 1.71 "Loans" shall mean the Revolving Loans.
Section 1.72 "Material Contract" shall mean (a) any contract or other
agreement (other than the Financing Agreements), written or oral, of a Borrower
involving monetary liability of or to any Person in an amount in excess of (i)
$100,000, with respect to long-term contracts with account debtors and (ii)
$500,000, with respect to all other contracts and agreements, in any fiscal year
and (b) any other contract or other agreement (other than the Financing
Agreements), whether written or oral, to which any Borrower is a party as to
which the breach, nonperformance, cancellation or failure to renew by any party
thereto would have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations or prospects of Borrower or
the validity or enforceability of this Agreement, any of the other Financing
Agreements, or any of the rights and remedies of Lender hereunder or thereunder.
Section 1.73 "Maximum Credit" shall mean the amount of $10,000,000.
Section 1.74 "Mortgages" shall mean the mortgages and deeds of trust in
favor of Lender encumbering the Real Property described on Schedule 1.74.
Section 1.75 "Multiemployer Plan" shall mean a "multi-employer plan" as
defined in Section 4001(a)(3) of ERISA which is or was at any time during the
current year or the immediately preceding six (6) years contributed to by any
Borrower or any ERISA Affiliate.
Section 1.76 "Muskogee Facility" has the meaning assigned to such term
in the Plan of Reorganization.
Section 1.77 "NCI" shall mean North Chicago, Inc., a wholly-owned
subsidiary of Fansteel incorporated on or about the date of this Agreement
pursuant to the Plan of Reorganization.
Section 1.78 "NCI Contingent Note" shall mean the non-interest bearing,
unsecured note of Fansteel in aggregate principal amount of not more than
$500,000, to be issued pursuant to and in accordance with the Plan of
Reorganization and the North Chicago Consent Decree to NCI, if necessary, to
finance the cost of the North Chicago Response Action in excess of $2,025,000.
Section 1.79 "NCI ED Note" shall mean the unsecured non-interest
bearing, unsecured note of Fansteel in the aggregate principal amount of
$700,000 less (x) the costs, if any, of NCI incurred subsequently to the
exercise of the North Chicago Eminent Domain Option for any and all reasonable
costs incurred by Fansteel and/or NCI to prepare additional revisions necessary
to complete the Engineering Evaluation and Cost Analysis (as defined in the Plan
of
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Reorganization) for the North Chicago Facility and (y) any amounts paid by
Fansteel under the NCI Primary Note.
Section 1.80 "NCI Notes" shall mean, collectively, the NCI Primary
Note, the NCI Contingent Note and the NCI ED Note.
Section 1.81 "NCI Primary Note" shall mean the non-interest bearing,
unsecured note of Fansteel in aggregate principal amount of $2,170,000 issued
pursuant to and in accordance with the Plan of Reorganization and the North
Chicago Consent Decree to NCI on or about the date of this Agreement.
Section 1.82 "NCP" shall mean the North Central Pennsylvania Regional
Planning & Development Commission.
Section 1.83 "NCP Mortgage" shall mean the mortgage on Fansteel's Real
Property in Emporium, Pennsylvania held by NCP.
Section 1.84 "Net Amount of Eligible Accounts" shall mean the gross
face amount of Eligible Accounts less (a) sales, excise or similar taxes
included in the amount thereof and (b) returns, discounts, claims, credits and
allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed with respect thereto.
Section 1.85 "Net Orderly Liquidation Value" shall mean, with respect
to any item of Equipment, the net orderly liquidation value of such Equipment as
determined by an appraiser acceptable to Lender (pursuant to the most recent
written appraisal obtained by Lender that is in form and substance acceptable to
Lender and that contains assumptions and other terms acceptable to Lender), net
of liquidation expenses and commissions.
Section 1.86 "North Chicago Consent Decree" has the meaning assigned to
such term in the Plan of Reorganization.
Section 1.87 "North Chicago Facility" has the meaning assigned to such
term in the Plan of Reorganization.
Section 1.88 "North Chicago Eminent Domain Option" shall mean the
agreement by and between Fansteel and the City of North Chicago dated as of
November 13, 2003 pursuant to which the City of North Chicago has an option to
acquire the North Chicago Facility for a limited option period.
Section 1.89 "North Chicago Response Action" has the meaning assigned
to such term in the Plan of Reorganization.
Section 1.90 "North Chicago Site Account" has the meaning assigned to
such term in the Plan of Reorganization.
Section 1.91 "NRC" shall mean the United State Nuclear Regulatory
Commission.
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Section 1.92 "NRC License" has the meaning assigned to such term in the
Plan of Reorganization.
Section 1.93 "Obligations" shall mean any and all Revolving Loans,
Letter of Credit Accommodations and all other obligations, liabilities and
indebtedness of every kind, nature and description owing by Borrowers to Lender
and/or its affiliates, including, without limitation, principal, interest,
charges, fees, costs and expenses, however evidenced, whether as principal,
surety, endorser, guarantor or otherwise, whether arising under this Agreement
or otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to Borrowers under the Bankruptcy Code or
any similar statute (including the payment of interest and other amounts which
would accrue and become due but for the commencement of such case, whether or
not such amounts are allowed or allowable in whole or in part in such case),
whether direct or indirect, absolute or contingent, joint or several, due or not
due, primary or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Lender.
Section 1.94 "Obligor" shall mean any guarantor, endorser, acceptor,
surety or other person liable on or with respect to the Obligations or who is
the owner of any property which is security for the Obligations, other than
Borrowers.
Section 1.95 "PBGC" shall mean the Pension Benefit Guaranty
Corporation, a wholly-owned Untied States government corporation created to
administer and enforce the provisions of Title IV of ERISA.
Section 1.96 "PBGC Note" shall mean the non-interest bearing note of
Fansteel, in aggregate principal amount of $9,500,000, issued pursuant to and in
accordance with the Plan of Reorganization and the PBGC Agreement (as defined in
the Plan of Reorganization) to PBGC on or about the date of this Agreement.
Section 1.97 "PIDA" shall mean the Pennsylvania Industrial Development
Authority.
Section 1.98 "PIDA Mortgage" shall mean the mortgage on Fansteel's Real
Property in Emporium, Pennsylvania held by PIDA.
Section 1.99 "Permitted Holders" shall mean the persons listed on
Schedule 1.99 hereto and their respective successors and assigns.
Section 1.100 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Code), limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
Section 1.101 "Plan" shall mean an employee benefit plan (as defined in
Section 3(3) of ERISA) which any Borrower sponsors, maintains, or to which it
makes, is making, or is obligated to make contributions, or in the case of a
Multiemployer Plan has made contributions at any time during the immediately
preceding six (6) plan years.
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Section 1.102 "Plan of Reorganization" shall mean the Second Amended
Joint Reorganization Plan of Chapter 11 Debtors under Chapter 11 of the United
States Bankruptcy Code, dated December 23, 2003.
Section 1.103 "Prime Rate" shall mean the rate from time to time
publicly announced by Wachovia Bank, National Association, or its successors, as
its prime rate, whether or not such announced rate is the best rate available at
such bank.
Section 1.104 "Real Property" shall mean, with respect to a Borrower,
all now owned and hereafter acquired Real Property of such Borrower, including
leasehold interests, together with all buildings, structures, and other
improvements located thereon and all licenses, easements and appurtenances
relating thereto, wherever located, including the Real Property and related
assets more particularly described in the Mortgages.
Section 1.105 "Receivables" shall mean, with respect to a Borrower, all
of the following now owned or hereafter arising or acquired property of such
Borrower: (a) all Accounts; (b) all amounts at any time payable to such Borrower
in respect of the sale or other disposition by such Borrower of any Account or
other obligation for the payment of money; (c) all interest, fees, late charges,
penalties, collection fees and other amounts due or to become due or otherwise
payable in connection with any Account; (d) all payment intangibles of such
Borrower and other contract rights, chattel paper, instruments, notes, and other
forms of obligations owing to such Borrower, whether from the sale and lease of
goods or other property, licensing of any property (including Intellectual
Property or other general intangibles), rendition of services or from loans or
advances by such Borrower or to or for the benefit of any third person
(including loans or advances to any Affiliates or Subsidiaries of such Borrower)
or otherwise associated with any Accounts, Inventory or general intangibles of
such Borrower (including, without limitation, choses in action, causes of
action, tax refunds, tax refund claims, any funds which may become payable to
such Borrower in connection with the termination of any Plan or other employee
benefit plan and any other amounts payable to such Borrower from any Plan or
other employee benefit plan, rights and claims against carriers and shippers,
rights to indemnification, business interruption insurance and proceeds thereof,
casualty or any similar types of insurance and any proceeds thereof and proceeds
of insurance covering the lives of employees on which such Borrower is
beneficiary).
Section 1.106 "Records" shall mean, with respect to a Borrower, all of
such Borrower's present and future books of account of every kind or nature,
purchase and sale agreements, invoices, ledger cards, bills of lading and other
shipping evidence, statements, correspondence, memoranda, credit files and other
data relating to the Collateral or any account debtor, together with the tapes,
disks, diskettes and other data and software storage media and devices, file
cabinets or containers in or on which the foregoing are stored (including any
rights of such Borrower with respect to the foregoing maintained with or by any
other person).
Section 1.107 "Reference Bank" shall mean Wachovia Bank, National
Association, or such other bank as Lender may from time to time designate.
Section 1.108 "Release" shall mean any spilling, leaking, pumping,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing (including the
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abandonment or discarding of barrels, containers or other closed receptacles
containing Hazardous Materials) of Hazardous Materials into the environment.
Section 1.109 "Remedial Action" shall mean all actions necessary or
appropriate to clean up, remove, remediate, contain, treat, monitor, assess,
evaluate or in any other way address Hazardous Materials in the indoor or
outdoor environment; prevent or minimize a Release or threatened Release of
Hazardous Materials so they do not migrate or endanger or threaten to endanger
public health or welfare or the indoor or outdoor environment; perform
pre-remedial studies and investigations and post-remedial operation and
maintenance activities; or any other actions authorized by 42 U.S.C. 9601.
Section 1.110 "Reserves" shall mean as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans and Letter of Credit Accommodations which
would otherwise be available to Borrowers under the lending formula(s) provided
for herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, adversely affect, or would have a reasonable
likelihood of adversely affecting, either (i) the Collateral or any other
property which is security for the Obligations or its value, (ii) the assets,
business or prospects of any Borrower or any Obligor or (iii) the security
interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's good
faith belief that any collateral report or financial information furnished by or
on behalf of any Borrower or any Obligor to Lender is or may have been
incomplete, inaccurate or misleading in any material respect or (c) to reflect
outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof or
(d) in respect of any state of facts which Lender determines in good faith
constitutes a Default or an Event of Default. Without limiting the foregoing, it
is agreed and understood that the following Reserves shall be established: (i) a
Reserve in respect of the NCP Mortgage in the amount that is owing to NCP and
secured by the NCP Mortgage, (provided that such Reserve shall be reduced on a
dollar-for-dollar basis upon a reduction of the amount owing to NCP and secured
by the NCP Mortgage), (ii) a Reserve in respect of the Timminco UCC in an amount
that is equal to the lesser of (1) $85,000 and (2) the amount that is owing by
Fansteel to Timminco from time to time (provided that such Reserve shall be
terminated upon the termination of the Timminco UCC) and (iii) Reserves in
respect of any equipment lease arrangements of Borrowers pursuant to which a
UCC-1 financing statement has been recorded that identifies the collateral as
"all equipment leased by the secured party to debtor" or the like, in an amount
equal to the amount owing by the applicable Borrower to the applicable equipment
lessor (provided that any such Reserve in respect of an equipment lease
arrangement shall be terminated upon Lender having received a letter or written
certification from the applicable equipment lessor that specifies the Equipment
leased by such equipment lessor to the applicable Borrower and allows Lender to
verify that no such Equipment has been included in the Equipment Appraisal). To
the extent Lender may revise the lending formulas used to determine the
Borrowing Base or establish new criteria or revise existing criteria for
Eligible Accounts so as to address any circumstances, condition, event or
contingency in a manner satisfactory to Lender, Lender shall not establish a
Reserve for the same purpose. The amount of any Reserve established by Lender
shall have a reasonable relationship to the event, condition or other matter
which is the basis for such reserve as determined by Lender in good faith.
Section 1.111 "Revolving Loan Limit" shall mean $10,000,000.
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Section 1.112 "Revolving Loans" shall mean the loans now or hereafter
made by Lender to or for the benefit of a Borrower on a revolving basis
(involving advances, repayments and readvances) as set forth in Section 2.1
hereof.
Section 1.113 "Settlement Notes" shall mean the FMRI Notes, the FLRI
Notes, the WI Note, the NCI Notes and the PBGC Note.
Section 1.114 "Solvent" shall mean, at any time with respect to any
Person, that at such time such Person (a) is able to pay its debts as they
mature in the ordinary course of business and has (and has a reasonable basis to
believe it will continue to have) sufficient capital (and not unreasonably small
capital) to carry on its business consistent with its practices as of the date
hereof, and (b) the assets and properties of such Person at a fair valuation
(and including as assets for this purpose at a fair valuation all rights of
subrogation, contribution or indemnification arising pursuant to any guarantees
given by such Person) are greater than the Indebtedness of such Person, and
including subordinated and contingent liabilities computed at the amount which,
such person has a reasonable basis to believe, represents an amount which can
reasonably be expected to become an actual or matured liability (and including
as to contingent liabilities arising pursuant to any guarantee the face amount
of such liability as reduced to reflect the probability of it becoming a matured
liability).
Section 1.115 "Special Purpose Companies" shall mean FLRI, FMRI, NCI
and WI.
Section 1.116 "Subsidiary" or "subsidiary" shall mean, with respect to
any Person, any corporation, limited liability company, limited liability
partnership or other limited or general partnership, trust, association or other
business entity of which an aggregate of at least a majority of the outstanding
Capital Stock or other interests entitled to vote in the election of the board
of directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one or more subsidiaries of such Person. Notwithstanding the foregoing or any
other provision in this Agreement or any other Financing Agreement to the
contrary, none of the Special Purpose Companies shall be considered
"Subsidiaries" of Fansteel for purposes of this Agreement or any other Financing
Agreement.
Section 1.117 "Timminco" shall mean Timminco Metals a division of
Timminco Limited.
Section 1.118 "Timminco UCC" shall mean the UCC-1 Financing Statement
recorded with the Delaware Secretary of State as filing number 32430406, listing
Fansteel as debtor and Timmino as secured party.
Section 1.119 "Tooling Purchase Order" shall mean a confirmed purchase
order, letter of intent and related documentation entered into at arm's length
between a Borrower and an account debtor pursuant to which such Borrower has
agreed to manufacture and assemble tooling for Inventory to be produced by such
Borrower for such account debtor.
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Section 1.120 "UCC" shall mean the Uniform Commercial Code as in effect
in the State of Illinois, and any successor statute, as in effect from time to
time (except that terms used herein which are defined in the Uniform Commercial
Code as in effect in the State of Illinois on the date hereof shall continue to
have the same meaning notwithstanding any replacement or amendment of such
statute except as Lender may otherwise determine).
Section 1.121 "Unreimbursed Tooling Costs" shall mean the reimbursable
costs incurred by a Borrower pursuant to a Tooling Purchase Order for which such
Borrower has not yet been reimbursed.
Section 1.122 "Voting Stock" shall mean with respect to any Person, (a)
one (1) or more classes of Capital Stock of such Person having general voting
powers to elect at least a majority of the board of directors, managers or
trustees of such Person, irrespective of whether at the time Capital Stock of
any other class or classes have or might have voting power by reason of the
happening of any contingency, and (b) any Capital Stock of such Person
convertible or exchangeable without restriction at the option of the holder
thereof into Capital Stock of such Person described in clause (a) of this
definition.
Section 1.123 "▇▇▇▇▇▇▇ Sanitary Landfill Account" has the meaning
assigned to such term in the ▇▇▇▇▇▇▇ AOC (as defined in the Plan of
Reorganization).
Section 1.124 "WI" shall mean Waukegan, Inc., a wholly-owned subsidiary
of Fansteel incorporated on or about the date of this Agreement pursuant to the
Plan of Reorganization.
Section 1.125 "WI Note" shall mean the non-interest bearing, unsecured
note of Fansteel in aggregate principal amount of $1,250,000, issued pursuant to
and in accordance with the Plan of Reorganization to WI on or about the date of
this Agreement.
ARTICLE II
SECTION 2. CREDIT FACILITIES
Section 2.01 Revolving Loans.
(i) Subject to and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to each Borrower from time to time
in amounts requested by Borrower Representative up to the amount equal to the
Borrowing Base of such Borrower at such time; provided, that notwithstanding
anything the contrary contained herein, no Revolving Loans shall be made if the
same would cause the aggregate outstanding amount of the Revolving Loans to
exceed the Revolving Loan Limit.
(ii) Lender may, in its good faith discretion, from time to
time, upon not less than five (5) days prior notice to Borrower Representative,
reduce the lending formula with respect to Eligible Accounts to the extent that
Lender determines in good faith that: (i) the dilution with respect to the
Accounts for any period (based on the ratio of (A) the aggregate amount of
reductions in Accounts other than as a result of payments in cash to (B) the
aggregate amount of total sales) has increased or may be reasonably anticipated
to increase
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above historical levels, or (ii) the general creditworthiness of account debtors
has declined. The amount of any decrease in the lending formulas shall have a
reasonable relationship to the event, condition or circumstance which is the
basis for such decrease as determined by Lender in good faith. In determining
whether to reduce the lending formula(s), Lender may consider events,
conditions, contingencies or risks which are also considered in determining
Eligible Accounts or in establishing Reserves.
(iii) Except in Lender's discretion, (i) the aggregate amount
of the Revolving Loans outstanding at any time shall not exceed the Revolving
Loan Limit, (ii) the aggregate amount of the Revolving Loans and Letter of
Credit Accommodations outstanding at any time to a Borrower shall not exceed the
Borrowing Base of such Borrower and (iii) the aggregate amount of the Revolving
Loans and the Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations, exceed the amounts available to a Borrower
pursuant to the Borrowing Base of such Borrower or the amounts available to
Borrowers pursuant to the Revolving Loan Limit, the sublimits for Letter of
Credit Accommodations set forth in Section 2.2(e) or the Maximum Credit, as
applicable, such event shall not limit, waive or otherwise affect any rights of
Lender in that circumstance or on any future occasions and Borrower shall, upon
demand by Lender, which may be made at any time or from time to time,
immediately repay to Lender the entire amount of any such excess(es) for which
payment is demanded.
Section 2.02 Letter of Credit Accommodations.
(i) Subject to and upon the terms and conditions contained
herein, at the request of Borrower Representative, Lender agrees to provide or
arrange for Letter of Credit Accommodations for the account of a Borrower
containing terms and conditions acceptable to Lender and the issuer thereof. Any
payments made by Lender to any issuer thereof and/or related parties in
connection with the Letter of Credit Accommodations for the account of a
Borrower shall constitute additional Revolving Loans to such Borrower pursuant
to this Section 2.
(ii) In addition to any charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations for
the account of a Borrower, such Borrower shall pay to Lender a letter of credit
fee at a rate equal to two and one-half of one percent (2.50%) per annum on the
daily outstanding balance of the Letter of Credit Accommodations for the
immediately preceding month (or part thereof), payable in arrears as of the
first day of each succeeding month, except that such Borrower shall pay to
Lender such letter of credit fee, at Lender's option, without notice, at a rate
equal to four and one-half of one percent (4.50%) per annum on such daily
outstanding balance for: (i) the period from and after the date of termination
or non-renewal hereof until Lender has received full and final payment of all
Obligations (notwithstanding entry of a judgment against any Borrower) and (ii)
the period from and after the date of the occurrence of an Event of Default for
so long as such Event of Default is continuing as reasonably determined by
Lender. Such letter of credit fee shall be calculated on the basis of a three
hundred sixty (360) day year and actual days elapsed and the obligation of
Borrowers to pay such fee shall survive the termination or non-renewal of this
Agreement.
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(iii) Borrower Representative shall give Lender two (2)
Business Days' prior written of any request for the issuance of a Letter of
Credit Accommodation. Such notice shall be irrevocable and shall specify the
original face amount of the Letter of Credit Accommodation requested, the
effective date (which date shall be a Business Day) of issuance of such
requested Letter of Credit Accommodation, whether such Letter of Credit
Accommodations may be drawn in a single or in partial draws, the date on which
such requested Letter of Credit Accommodation is to expire (which date shall be
a Business Day), the purpose for which such Letter of Credit Accommodation is to
be issued, and the beneficiary of the requested Letter of Credit Accommodation.
Borrower Representative shall attach to such notice the proposed form of the
Letter of Credit Accommodation unless Lender has already been provided with the
same.
(iv) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Lender: (i) Borrower Representative shall
have delivered to the proposed issuer of such Letter of Credit Accommodation at
such times and in such manner as such proposed issuer may require, an
application in form and substance satisfactory to such proposed issuer and
Lender for the issuance of the Letter of Credit Accommodation and such other
documents as may be required pursuant to the terms thereof, and the form and
terms of the proposed Letter of Credit Accommodation shall be satisfactory to
Lender and such proposed issuer, (ii) as of the date of issuance, no order of
any court, arbitrator or other Governmental Authority shall purport by its terms
to enjoin or restrain money center banks generally from issuing letters of
credit of the type and in the amount of the proposed Letter of Credit
Accommodation, and no law, rule or regulation applicable to money center banks
generally and no request or directive (whether or not having the force of law)
from any Governmental Authority with jurisdiction over money center banks
generally shall prohibit, or request that the proposed issuer of such Letter of
Credit Accommodation refrain from, the issuance of letters of credit generally
or the issuance of such Letters of Credit Accommodation; and (iii) the Letter of
Credit Availability, prior to giving effect to any Reserves with respect to such
Letter of Credit Accommodations, on the date of the proposed issuance of any
Letter of Credit Accommodations, shall be equal to or greater than an amount
equal to one hundred percent (100%) of the face amount thereof and all other
commitments and obligations made or incurred by Lender with respect thereto.
Effective on the issuance of each Letter of Credit Accommodation, a Reserve
shall be established in the applicable amount set forth in Section
2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(v) Except in Lender's discretion, the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Lender in connection therewith shall not at any
time exceed $2,500,000.
(vi) Each Borrower shall indemnify and hold Lender harmless
from and against any and all losses, claims, damages, liabilities, costs and
expenses which Lender may suffer or incur in connection with any Letter of
Credit Accommodations for the account of such Borrower and any documents, drafts
or acceptances relating thereto, including any losses, claims, damages,
liabilities, costs and expenses due to any action taken by any issuer or
correspondent with respect to any Letter of Credit Accommodation. Borrowers
assume all
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risks with respect to the acts or omissions of the drawer under or beneficiary
of any Letter of Credit Accommodation and for such purposes the drawer or
beneficiary shall be deemed Borrowers' agent. Borrowers assume all risks for,
and agrees to pay, all foreign, Federal, State and local taxes, duties and
levies relating to any goods subject to any Letter of Credit Accommodations or
any documents, drafts or acceptances thereunder. Borrowers hereby release and
hold Lender harmless from and against any acts, waivers, errors, delays or
omissions, whether caused by Borrowers, by any issuer or correspondent or
otherwise with respect to or relating to any Letter of Credit Accommodation,
except for the gross negligence or willful misconduct of Lender as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction.
The provisions of this Section 2.2(f) shall survive the payment of Obligations
and the termination or non-renewal of this Agreement.
(vii) In connection with Inventory purchased pursuant to
Letter of Credit Accommodations, the applicable Borrower shall, at Lender's
request, instruct all suppliers, carriers, forwarders, customs brokers,
warehouses or others receiving or holding cash, checks, Inventory, documents or
instruments in which Lender holds a security interest to deliver them to Lender
and/or subject to Lender's order, and if they shall come into such Borrower's
possession, to deliver them, upon Lender's request, to Lender in their original
form. Such Borrower shall also, at Lender's request, designate Lender as the
consignee on all bills of lading and other negotiable and non-negotiable
documents.
(viii) Each Borrower hereby irrevocably authorizes and directs
any issuer of a Letter of Credit Accommodation to name such Borrower as the
account party therein and to deliver to Lender all instruments, documents and
other writings and property received by issuer pursuant to the Letter of Credit
Accommodations and to accept and rely upon Lender's instructions and agreements
with respect to all matters arising in connection with the Letter of Credit
Accommodations or the applications therefor. Nothing contained herein shall be
deemed or construed to grant any Borrower any right or authority to pledge the
credit of Lender in any manner. Lender shall have no liability of any kind with
respect to any Letter of Credit Accommodation provided by an issuer other than
Lender unless Lender has duly executed and delivered to such issuer the
application or a guarantee or indemnification in writing with respect to such
Letter of Credit Accommodation. Borrowers shall be bound by any interpretation
made in good faith by Lender, or any other issuer or correspondent under or in
connection with any Letter of Credit Accommodation or any documents, drafts or
acceptances thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of Borrowers. Lender shall have the sole and
exclusive right and authority to, and no Borrower shall: (i) at any time an
Event of Default exists or has occurred and is continuing, (A) approve or
resolve any questions of non-compliance of documents, (B) give any instructions
as to acceptance or rejection of any documents or goods or (C) execute any and
all applications for steamship or airway guaranties, indemnities or delivery
orders, and (ii) at all times, (A) grant any extensions of the maturity of, time
of payment for, or time of presentation of, any drafts, acceptances, or
documents, and (B) agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letter of Credit Accommodations, or documents, drafts or
acceptances thereunder or any letters of credit included in the Collateral.
Lender may take such actions either in its own name or in any Borrower's name.
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(ix) Any rights, remedies, duties or obligations granted or
undertaken by any Borrower to any issuer or correspondent in any application for
any Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been granted or undertaken by such Borrower to Lender. Any duties
or obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by such Borrower to
Lender and to apply in all respects to such Borrower.
Section 2.03 Intentionally Omitted.
ARTICLE III
SECTION 3. INTEREST AND FEES
Section 3.01 Interest.
(i) Each Borrower shall pay to Lender interest on the
outstanding principal amount of the Loans for the account of such Borrower at
the Interest Rate. All interest accruing hereunder on and after the date of any
Event of Default or termination or non-renewal hereof shall be payable on
demand.
(ii) Interest shall be payable by Borrowers to Lender monthly
in arrears not later than the first Business Day of each calendar month and
shall be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed. The interest rate on non-contingent Obligations shall
increase or decrease by an amount equal to each increase or decrease in the
Prime Rate effective on the first day of the month after any change in such
Prime Rate is announced based on the Prime Rate in effect on the last day of the
month in which any such change occurs. In no event shall charges constituting
interest payable by Borrowers to Lender exceed the maximum amount or the rate
permitted under any applicable law or regulation, and if any such part or
provision of this Agreement is in contravention of any such law or regulation,
such part or provision shall be deemed amended to conform thereto.
Section 3.02 Closing Fee.
Borrowers shall pay to Lender as a closing fee the amount of $100,000,
which shall be fully earned and payable as of the date hereof.
Section 3.03 [INTENTIONALLY OMITTED].
Section 3.04 Servicing Fee.
Borrowers shall pay to Lender quarterly a servicing fee in an amount
equal to $7,500 in respect of Lender's services for each quarter (or part
thereof) while this Agreement remains in effect and for so long thereafter as
any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each fiscal
quarter hereafter (commencing with the fiscal quarter beginning on January 1,
2004).
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Section 3.05 Unused Line Fee.
Borrowers shall pay to Lender monthly an unused line fee at a rate
equal to one-half of one percent (0.50%) per annum calculated upon the amount by
which the Revolving Loan Limit exceeds the average daily principal balance of
the outstanding Revolving Loans and Letter of Credit Accommodations during the
immediately preceding month (or part thereof) while this Agreement is in effect
and for so long thereafter as any of the Obligations are outstanding, which fee
shall be payable on the first day of each month in arrears.
Section 3.06 [INTENTIONALLY OMITTED].
ARTICLE IV
SECTION 4. CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations.
Each of the following is a condition precedent to Lender making the
initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(i) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents as
Lender may request to evidence and effectuate the termination by the existing
lenders to Borrowers of their respective financing arrangements with Borrowers
and the termination and release by it or them, as the case may be, of any
interest in and to any assets and properties of Borrowers and each Obligor, duly
authorized, executed and delivered by it or each of them, including, but not
limited to, (i) UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and a Borrower or any Obligor, as debtor and (ii) satisfactions and discharges
of any mortgages, deeds of trust or deeds to secure debt by a Borrower or any
Obligor in favor of such existing lender or lenders, in form acceptable for
recording with the appropriate Governmental Authority;
(ii) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or Governmental Authority (and
including a copy of the certificate of incorporation of each Borrower certified
by the Secretary of State (or equivalent Governmental Authority) which shall set
forth the same complete corporate name of such Borrower as is set forth herein
and such document as shall set forth the organizational identification number of
such Borrower, if one is issued in its jurisdiction of incorporation);
(iii) no material adverse change shall have occurred in the
assets, business or prospects of Borrowers since the date of Lender's latest
field examination and no change or event shall have occurred which would impair
the ability of any Borrower or any
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Obligor to perform its obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Lender to enforce the Obligations or
realize upon the Collateral;
(iv) Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may require
to determine the amount of Revolving Loans available to Borrowers (including,
without limitation, roll-forwards of Accounts through the date of closing,
together with such supporting documentation as may be necessary or appropriate,
and other documents and information that will enable Lender to accurately
identify and verify the Collateral), the results of which each case shall be
satisfactory to Lender, not more than seven (7) Business Days prior to the date
hereof;
(v) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may reasonably deem necessary or
desirable in order to permit, protect and perfect its security interests in and
liens upon the Collateral or to effectuate the provisions or purposes of this
Agreement and the other Financing Agreements, including, without limitation,
Collateral Access Agreements by owners and lessors of leased Real Property of
each Borrower and by warehouses at which Collateral is located;
(vi) the Excess Availability as determined by Lender, as of
the date hereof, shall be not less than $2,000,000 after giving effect to the
initial Loans made or to be made and Letter of Credit Accommodations issued or
to be issued in connection with the initial transactions hereunder;
(vii) Lender shall have received, in form and substance
satisfactory to Lender, Deposit Account Control Agreements by and among Lender,
each Borrower and each bank where such Borrower has a deposit account, in each
case, duly authorized, executed and delivered by such bank and such Borrower (or
Lender shall be the bank's customer with respect to such deposit account, as
Lender may specify);
(viii) Lender shall have received evidence, in form and
substance satisfactory to Lender, that Lender has a valid perfected first
priority security interest in all of the Collateral;
(ix) Lender shall have received and reviewed lien and judgment
search results for the jurisdiction of incorporation or organization of each
Borrower, the jurisdiction of the chief executive office of each Borrower and
all jurisdictions in which assets of any Borrower are located, which search
results shall be in form and substance satisfactory to Lender;
(x) Lender shall have received with respect to each parcel of
Real Property to be subject to a Mortgage, a title report as of a recent date
which discloses any liens on such Real Property and which is otherwise
satisfactory to Lender in form and substance;
(xi) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
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(xii) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrowers with
respect to the Financing Agreements and such other matters as Lender may
request;
(xiii) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender; and
(xiv) Lender shall have received the final Plan of
Reorganization, the final Disclosure Statement and the final Confirmation Order
confirming the Plan of Reorganization; such final Plan of Reorganization, final
Disclosure Statement and final Confirmation Order each shall be in form and
substance satisfactory to Lender; such final Confirmation Order shall be in full
force and effect and shall not have been stayed pending any appeal, no appeal or
petition for review or for rehearing shall have been taken or shall be pending,
not less than 30 days shall have elapsed since entry of the Confirmation Order
and Lender shall have received evidence satisfactory to each demonstrating such
facts; the Confirmation (as defined in the Confirmation Order) shall have
occurred; and the Plan of Reorganization shall have become effective in
accordance with its terms.
Section 4.02 Conditions Precedent to All Loans and Letter of Credit
Accommodations.
Each of the following is an additional condition precedent to Lender
making Loans and/or providing Letter of Credit Accommodations to Borrowers,
including the initial Loans and Letter of Credit Accommodations and any future
Loans and Letter of Credit Accommodations:
(i) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto, except
to the extent that such representations and warranties expressly relate solely
to an earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such earlier date);
(ii) no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court or before
any arbitrator or Governmental Authority, which (i) purports to enjoin,
prohibit, restrain or otherwise affect (A) the making of the Loans or providing
the Letter of Credit Accommodations, or (B) the consummation of the transactions
contemplated pursuant to the terms hereof or the other Financing Agreements or
(ii) has or could reasonably be expected to have a material adverse effect on
the assets, business or prospects of Borrowers or would impair the ability of
Borrowers to perform their obligations hereunder or under any of the other
Financing Agreements or of Lender to enforce any Obligations or realize upon any
of the Collateral; and
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(iii) no Default or Event of Default shall exist or have
occurred and be continuing on and as of the date of the making of such Loan or
providing each such Letter of Credit Accommodation and after giving effect
thereto.
ARTICLE V
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
Section 5.01 Grant of Security Interest.
To secure payment and performance of all Obligations, each Borrower
hereby grants to Lender a continuing security interest in, a lien upon, and a
right of set off against, and hereby assigns to Lender as security, all personal
and Real Property and fixtures and interests in property and fixtures of such
Borrower, whether now owned or hereafter acquired or existing, and wherever
located (together with all other collateral security for the Obligations at any
time granted to or held or acquired by Lender, collectively, the "Collateral"),
including:
(i) all Accounts;
(ii) all general intangibles, including, without limitation,
all Intellectual Property;
(iii) all goods, including, without limitation, Inventory and
Equipment;
(iv) all Real Property and fixtures;
(v) all chattel paper (including all tangible and electronic
chattel paper);
(vi) all instruments (including all promissory notes);
(vii) all documents;
(viii) all deposit accounts;
(ix) all letters of credit, banker's acceptances and similar
instruments and including all letter-of-credit rights;
(x) all supporting obligations and all present and future
liens, security interests, rights, remedies, title and interest in, to and in
respect of Receivables and other Collateral, including (i) rights and remedies
under or relating to guaranties, contracts of suretyship, letters of credit and
credit and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lien or secured party, (iii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (i) deposits by and property of account debtors or
other persons securing the obligations of account debtors;
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(xi) all (i) investment property (including securities,
whether certificated or uncertificated, securities accounts, security
entitlements, commodity contracts or commodity accounts) and (ii) monies, credit
balances, deposits and other property of such Borrower now or hereafter held or
received by or in transit to Lender or its Affiliates or at any other depository
or other institution from or for the account of such Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise;
(xii) all commercial tort claims, including, without
limitation, those identified in the Information Certificate;
(xiii) to the extent not otherwise described above, all
Receivables;
(xiv) all Records; and
(xv) all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of or other involuntary conversion of any kind or
nature of any or all of the other Collateral.
Notwithstanding the foregoing or any other provisions to the contrary
set forth herein, the Collateral shall not include the Excluded Collateral (or
the products and proceeds thereof).
Section 5.02 Perfection of Security Interests.
(i) Each Borrower irrevocably and unconditionally authorizes
Lender (or its agent) to file at any time and from time to time such financing
statements with respect to the Collateral naming Lender or its designee as the
secured party and such Borrower as debtor, as Lender may require, and including
any other information with respect to such Borrower or otherwise required by
part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as
Lender may determine, together with any amendment and continuations with respect
thereto, which authorization shall apply to all financing statements filed on,
prior to or after the date hereof. Each Borrower hereby ratifies and approves
all financing statements naming Lender or its designee as secured party and such
Borrower as debtor with respect to the Collateral (and any amendments with
respect to such financing statements) filed by or on behalf of Lender prior to
the date hereof and ratifies and confirms the authorization of Lender to file
such financing statements (and amendments, if any). Each Borrower hereby
authorizes Lender to adopt on behalf of such Borrower any symbol required for
authenticating any electronic filing. In no event shall any Borrower at any time
file, or permit or cause to be filed, any correction statement or termination
statement with respect to any financing statement (or amendment or continuation
with respect thereto) naming Lender or its designee as secured party and such
Borrower as debtor.
(ii) No Borrower has any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except as set forth in the
Information Certificate. In the event that any Borrower shall be entitled to or
shall receive any chattel paper or instrument after the date hereof, such
Borrower shall promptly notify Lender thereof in writing. Promptly
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upon the receipt thereof by or on behalf of any Borrower (including by any agent
or representative), such Borrower shall deliver, or cause to be delivered to
Lender, all tangible chattel paper and instruments that such Borrower or may at
any time acquire, accompanied by such instruments of transfer or assignment duly
executed in blank as Lender may from time to time specify, in each case except
as Lender may otherwise agree. At Lender's option, each applicable Borrower
shall, or Lender may at any time on behalf of any Borrower, cause the original
of any such instrument or chattel paper to be conspicuously marked in a form and
manner acceptable to Lender with the following legend referring to chattel paper
or instruments as applicable: "This [chattel paper][instrument] is subject to
the security interest of Congress Financial Corporation (Central) and any sale,
transfer, assignment or encumbrance of this [chattel paper][instrument] violates
the rights of such secured party."
(iii) In the event that any Borrower shall at any time hold or
acquire an interest in any electronic chattel paper or any "transferable record"
(as such term is defined in Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction), such Borrower shall
promptly notify Lender thereof in writing. Promptly upon Lender's request, each
applicable Borrower shall take, or cause to be taken, such actions as Lender may
reasonably request to give Lender control of such electronic chattel paper under
Section 9-105 of the UCC and control of such transferable record under Section
201 of the Federal Electronic Signatures in Global and National Commerce Act or,
as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in
effect in such jurisdiction.
(iv) No Borrower has any deposit accounts as of the date
hereof, except as set forth in the Information Certificate. No Borrower shall,
directly or indirectly, after the date hereof open, establish or maintain any
deposit account unless each of the following conditions is satisfied: (i) Lender
shall have received not less than five (5) Business Days prior written notice of
the intention of such Borrower to open or establish such account which notice
shall specify in reasonable detail and specificity acceptable to Lender the name
of the account, the owner of the account, the name and address of the bank at
which such account is to be opened or established, the individual at such bank
with whom such Borrower is dealing and the purpose of the account, (ii) the bank
where such account is opened or maintained shall be acceptable to Lender, and
(iii) on or before the opening of such deposit account, such Borrower shall as
Lender may specify either (A) deliver to Lender a Deposit Account Control
Agreement with respect to such deposit account duly authorized, executed and
delivered by such Borrower and the bank at which such deposit account is opened
and maintained or (B) arrange for Lender to become the customer of the bank with
respect to the deposit account on terms and conditions acceptable to Lender. The
terms of this subsection (d) shall not apply to deposit accounts specifically
and exclusively used for payroll, payroll taxes and other employee wage and
benefit payments to or for the benefit of a Borrower's employees.
(v) No Borrower owns or holds, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the date
hereof, or have any investment account, securities account, commodity account or
other similar account with any bank or other financial institution or other
securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth in the Information Certificate.
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(A) In the event that any Borrower shall be entitled
to or shall at any time after the date hereof hold or acquire any certificated
securities, such Borrower shall promptly endorse, assign and deliver the same to
Lender, accompanied by such instruments of transfer or assignment duly executed
in blank as Lender may from time to time specify. If any securities, now or
hereafter acquired by any Borrower are uncertificated and are issued to such
Borrower or its nominee directly by the issuer thereof, such Borrower shall
promptly notify Lender thereof and shall as Lender may specify, either (A) cause
the issuer to agree to comply with instructions from Lender as to such
securities, without further consent of such Borrower or such nominee, or (B)
arrange for Lender to become the registered owner of the securities.
(B) No Borrower shall, directly or indirectly, after
the date hereof open, establish or maintain any investment account, securities
account, commodity account or any other similar account (other than a deposit
account) with any securities intermediary or commodity intermediary unless each
of the following conditions is satisfied: (A) Lender shall have received not
less than five (5) Business Days prior written notice of the intention of such
Borrower to open or establish such account which notice shall specify in
reasonable detail and specificity acceptable to Lender the name of the account,
the owner of the account, the name and address of the securities intermediary or
commodity intermediary at which such account is to be opened or established, the
individual at such intermediary with whom such Borrower is dealing and the
purpose of the account, (B) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be acceptable to Lender, and (C) on or before the opening of such
investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, such Borrower shall as Lender
may specify either (1) execute and deliver, and cause to be executed and
delivered to Lender, an Investment Property Control Agreement with respect
thereto duly authorized, executed and delivered by such Borrower and such
securities intermediary or commodity intermediary or (2) arrange for Lender to
become the entitlement holder with respect to such investment property on terms
and conditions acceptable to Lender.
(vi) No Borrower is the beneficiary or otherwise entitled to
any right to payment under any letter of credit, banker's acceptance or similar
instrument as of the date hereof, except as set forth in the Information
Certificate. In the event that any Borrower shall be entitled to or shall
receive any right to payment under any letter of credit, banker's acceptance or
any similar instrument, whether as beneficiary thereof or otherwise after the
date hereof, such Borrower shall promptly notify Lender thereof in writing. Such
Borrower shall immediately, as Lender may specify, either (i) deliver, or cause
to be delivered to Lender, with respect to any such letter of credit, banker's
acceptance or similar instrument, the written agreement of the issuer and any
other nominated person obligated to make any payment in respect thereof
(including any confirming or negotiating bank), in form and substance
satisfactory to Lender, consenting to the assignment of the proceeds of the
letter of credit to Lender by such Borrower and agreeing to make all payments
thereon directly to Lender or as Lender may otherwise direct or (ii) cause
Lender to become, at such Borrower's expense, the transferee beneficiary of the
letter of credit, banker's acceptance or similar instrument (as the case may
be).
(vii) No Borrower has any commercial tort claims as of the
date hereof, except as set forth in the Information Certificate. In the event
that any Borrower shall at
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any time after the date hereof have any commercial tort claims, such Borrower
shall promptly notify Lender thereof in writing, which notice shall (i) set
forth in reasonable detail the basis for and nature of such commercial tort
claim and (ii) include the express grant by such Borrower to Lender of a
security interest in such commercial tort claim (and the proceeds thereof). In
the event that such notice does not include such grant of a security interest,
the sending thereof by such Borrower to Lender shall be deemed to constitute
such grant to Lender. Upon the sending of such notice, any commercial tort claim
described therein shall constitute part of the Collateral and shall be deemed
included therein. Without limiting the authorization of Lender provided in
Section 5.2(a) hereof or otherwise arising by the execution by Borrowers of this
Agreement or any of the other Financing Agreements, Lender is hereby irrevocably
authorized from time to time and at any time to file such financing statements
naming Lender or its designee as secured party and any Borrower as debtor, or
any amendments to any financing statements, covering any such commercial tort
claim as Collateral. In addition, each Borrower shall promptly upon Lender's
request, execute and deliver, or cause to be executed and delivered, to Lender
such other agreements, documents and instruments as Lender may require in
connection with such commercial tort claim.
(viii) No Borrower has any goods, documents of title or other
Collateral in the custody, control or possession of a third party as of the date
hereof, except as set forth in the Information Certificate and except for (i)
Inventory held by Fansteel de Mexico and (ii) goods located in the United States
in transit to a location of such Borrower permitted herein in the ordinary
course of business of such Borrower in the possession of the carrier
transporting such goods. In the event that any goods, documents of the title or
other Collateral are at any time after the date hereof in the custody, control
or possession of any other person not referred to in the Information Certificate
or such carriers, the applicable Borrower shall promptly notify Lender thereof
in writing. Promptly upon Lender's request, the applicable Borrower shall
deliver to Lender a Collateral Access Agreement duly authorized, executed and
delivered by such person and such Borrower.
(ix) Each Borrower shall take any other actions reasonably
requested by Lender from time to time to cause the attachment, perfection and
first priority (except as otherwise expressly set forth herein) of, and the
ability of Lender to enforce, the security interest of Lender in any and all of
the Collateral, including, without limitation, (i) executing, delivering and,
where appropriate, filing financing statements and amendments relating thereto
under the UCC or other applicable law, to the extent, if any, that such
Borrower's signature thereon is required therefor, (ii) causing Lender's name to
be noted as secured party on any certificate of title for a titled good if such
notation is a condition to attachment, perfection or priority of, or ability of
Lender to enforce, the security interest of Lender in such Collateral, (iii)
complying with any provision of any statute, regulation or treaty of the United
States as to any Collateral if compliance with such provision is a condition to
attachment, perfection or priority of, or ability of Lender to enforce, the
security interest of Lender in such Collateral, (iv) obtaining the consents and
approvals of any Governmental Authority or third party, including, without
limitation, any consent of any licensor, lessor or other person obligated on
Collateral, and taking all actions required by any earlier versions of the UCC
or by other law, as applicable in any relevant jurisdiction.
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ARTICLE VI
SECTION 6. COLLECTION AND ADMINISTRATION
Section 6.01 Borrowers' Loan Account.
Lender shall maintain one or more loan account(s) on its books in which
shall be recorded (a) all Loans, Letter of Credit Accommodations and other
Obligations and the Collateral, (b) all payments made by or on behalf of
Borrowers and (c) all other appropriate debits and credits as provided in this
Agreement, including fees, charges, costs, expenses and interest. All entries in
the loan account(s) shall be made in accordance with Lender's customary
practices as in effect from time to time.
Section 6.02 Statements.
Lender shall render to Borrower Representative each month a statement
setting forth the balance in the Borrowers' loan account(s) maintained by Lender
for Borrowers pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and conclusively binding
upon Borrowers as an account stated except to the extent that Lender receives a
written notice from Borrower Representative of any specific exceptions of
Borrowers thereto within thirty (30) days after the date such statement has been
mailed by Lender. Until such time as Lender shall have rendered to Borrower
Representative a written statement as provided above, the balance in Borrowers'
loan account(s) shall be presumptive evidence of the amounts due and owing to
Lender by Borrowers.
Section 6.03 Collection of Accounts.
(i) Each Borrower shall establish and maintain, at its
expense, blocked accounts or lockboxes and related blocked accounts (in either
case, "Blocked Accounts"), as Lender may specify, with such banks as are
acceptable to Lender into which such Borrower shall promptly deposit and direct
its account debtors to directly remit all payments on Receivables and all
payments constituting proceeds of Inventory or other Collateral of such Borrower
in the identical form in which such payments are made, whether by cash, check or
other manner. Each Borrower shall deliver, or cause to be delivered to Lender, a
Depository Account Control Agreement duly authorized, executed and delivered by
each bank where a Blocked Account is maintained as provided in Section 5.2
hereof or at any time and from time to time Lender may become bank's customer
with respect to the Blocked Accounts and promptly upon Lender's request, such
Borrower shall execute and deliver such agreements or documents as Lender may
require in connection therewith. Each Borrower agrees that all payments made to
such Blocked Accounts or other funds received and collected by Lender, whether
in respect of the Receivables, as proceeds of Inventory or other Collateral of
such Borrower or otherwise shall be treated as payments to Lender in respect of
the Obligations and therefore shall constitute the property of Lender to the
extent of the then outstanding Obligations.
(ii) For purposes of calculating the amount of the Loans
available to a Borrower, such payments referenced in Section 6.3(a) above will
be applied
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(conditional upon final collection) to the Obligations on the Business Day of
receipt by Lender of immediately available funds in the Lender Payment Account
provided such payments and notice thereof are received in accordance with
Lender's usual and customary practices as in effect from time to time and within
sufficient time to credit such Borrower's loan account on such day, and if not,
then on the next Business Day. For the purposes of calculating interest on the
Obligations, such payments or other funds received will be applied (conditional
upon final collection) to the Obligations one (1) Business Day following the
date of receipt of immediately available funds by Lender in the Lender Payment
Account provided such payments or other funds and notice thereof are received in
accordance with Lender's usual and customary practices as in effect from time to
time and within sufficient time to credit such Borrower's loan account on such
day, and if not, then on the next Business Day. In the event that at any time or
from time to time there are no Loans outstanding, Lender shall be entitled to an
administrative charge in an amount equivalent to the interest Lender would have
received for such Business Day had there been Loans outstanding on such day.
(iii) Each Borrower and its shareholders, directors,
employees, agents, Subsidiaries or other Affiliates shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts or
any other payment relating to and/or proceeds of Accounts or other Collateral
which come into their possession or under their control and immediately upon
receipt thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with any Borrower's own funds.
Each Borrower agrees to reimburse Lender on demand for any amounts owed or paid
to any bank at which a Blocked Account is established or any other bank or
person involved in the transfer of funds to or from the Blocked Accounts arising
out of Lender's payments to or indemnification of such bank or person. The
obligation of Borrowers to reimburse Lender for such amounts pursuant to this
Section 6.3 shall survive the termination or non-renewal of this Agreement.
Section 6.04 Payments.
(i) All Obligations shall be payable to the Lender Payment
Account as provided in Section 6.3 or such other place as Lender may designate
from time to time. Lender shall apply payments received or collected from a
Borrower or for the account of such Borrower (including the monetary proceeds of
collections or of realization upon any Collateral) as follows: first, to pay any
fees, indemnities or expense reimbursements then due to Lender from such
Borrower; second, to pay interest due in respect of any Loans for the account of
such Borrower; third, to pay principal due in respect of the Loans for the
account of such Borrower; fourth, to pay or prepay any other Obligations whether
or not then due, in such order and manner as Lender determines. Notwithstanding
anything to the contrary contained in this Agreement, to the extent any Borrower
uses any proceeds of the Loans or Letter of Credit Accommodations to acquire
rights in or the use of any Collateral or to repay any Indebtedness used to
acquire rights in or the use of any Collateral, payments in respect of the
obligations shall be deemed applied first to the Obligations arising from Loans
and Letter of Credit Accommodations that were not used for such purposes and
second to the Obligations arising from Loans and Letter of Credit Accommodations
the proceeds of which were used to acquire rights in or the use of any
Collateral in the chronological order in which such Borrower acquired such
rights or use.
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(ii) At Lender's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other Financing
Agreements owing by a Borrower may be charged directly to such Borrower's loan
account. Each Borrower shall make all payments to Lender on the Obligations free
and clear of, and without deduction or withholding for or on account of, any
setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or proceeds
to any Person for any reason, then the Obligations intended to be satisfied by
such payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender. Borrowers shall be liable to pay to Lender, and do
hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
Section 6.05 Authorization to Make Loans.
Lender is authorized to make the Loans and provide the Letter of Credit
Accommodations based upon telephonic or other instructions received from anyone
purporting to be an officer of Borrower Representative or other authorized
person or, at the discretion of Lender, if such Loans are necessary to satisfy
any Obligations. All requests for Loans or Letter of Credit Accommodations
hereunder shall specify the date on which the requested advance is to be made or
Letter of Credit Accommodations established (which day shall be a Business Day)
and the amount of the requested Loan. Requests received after 11:00 a.m. Chicago
time on any day shall be deemed to have been made as of the opening of business
on the immediately following Business Day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, Borrowers when deposited
in an operating account to the credit of Borrowers or otherwise disbursed or
established in accordance with the instructions of Borrowers or in accordance
with the terms and conditions of this Agreement.
Section 6.06 Use of Proceeds.
Borrowers shall use the initial proceeds of the Loans provided by
Lender to Borrowers hereunder for: (a) payments to each of the persons listed in
the disbursement direction letter furnished by Borrowers to Lender on or about
the date hereof and (b) costs, expenses and fees in connection with the
preparation, negotiation, execution and delivery of this Agreement and the other
Financing Agreements. All other Loans made or Letter of Credit Accommodations
provided by Lender to Borrowers pursuant to the provisions hereof shall be used
by Borrowers only for general operating, working capital and other proper
corporate purposes of Borrowers not otherwise prohibited by the terms hereof. In
addition, none of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, as amended.
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ARTICLE VII
SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS
Section 7.01 Collateral Reporting.
(i) Each Borrower shall provide Lender with the following
documents in a form satisfactory to Lender:
(A) on a regular basis as reasonably required by
Lender, a schedule of sales made, credits issued and cash received;
(B) as soon as possible after the end of each month
(but in any event within ten (10) days after the end thereof), on a monthly
basis or more frequently as Lender may request, (A) perpetual inventory reports,
(B) inventory reports by location and category (including identifying Inventory
at locations owned and operated by third parties or on consignment), (C) agings
of accounts payable (and including information indicating the status of payments
to owners and lessors of the leased Real Property of such Borrower) and (D)
agings of accounts receivable (together with a reconciliation to the previous
month's aging and general ledger);
(C) upon Lender's request, (A) copies of customer
statements and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (B) copies of shipping and delivery
documents, and (C) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by such Borrower; and
(D) such other reports as to the Collateral of such
Borrower as Lender shall request from time to time;
(ii) If any of a Borrower's records or reports of the
Collateral of such Borrower are prepared or maintained by an accounting service,
contractor, shipper or other agent, such Borrower hereby irrevocably authorizes
such service, contractor, shipper or agent to deliver such records, reports, and
related documents to Lender and to follow Lender's instructions with respect to
further services at any time that an Event of Default exists or has occurred and
is continuing.
Section 7.02 Accounts Covenants.
(i) Borrowers shall notify Lender promptly of: (i) any
material delay in any Borrower's performance of any of its obligations to any
account debtor or the assertion of any claims, offsets, defenses or
counterclaims by any account debtor, or any disputes with account debtors, or
any settlement, adjustment or compromise thereof, (ii) all material adverse
information relating to the financial condition of any account debtor and (iii)
any event or circumstance which, to any Borrower's knowledge, would cause Lender
to consider any then existing Accounts as no longer constituting Eligible
Accounts. No credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any account debtor without Lender's consent,
except in the ordinary course of Borrower's business in
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accordance with practices and policies previously disclosed in writing to Lender
and except as set forth in the schedules delivered to Lender pursuant to Section
7.1(a) above. So long as no Event of Default exists or has occurred and is
continuing, Borrowers shall settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor. At any time that an Event of
Default exists or has occurred and is continuing, Lender shall, at its option,
have the exclusive right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with account debtors or grant any credits, discounts or
allowances.
(ii) With respect to each Account: (i) the amounts shown on
any invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of Borrowers' business in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable foreign, Federal, State or local
laws or regulations, all documentation relating thereto will be legally
sufficient under such laws and regulations and all such documentation will be
legally enforceable in accordance with its terms.
(iii) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
Section 7.03 Inventory Covenants.
With respect to the Inventory: (a) Borrowers shall at all times
maintain inventory records reasonably satisfactory to Lender, keeping correct
and accurate records itemizing and describing the kind, type, quality and
quantity of Inventory, Borrowers' cost therefor and daily withdrawals therefrom
and additions thereto; (b) Borrowers shall conduct a physical count of the
Inventory at least once each year, but at any time or times as Lender may
request on or after an Event of Default, and promptly following such physical
inventory shall supply Lender with a report in the form and with such
specificity as may be reasonably satisfactory to Lender concerning such physical
count; (c) Borrowers shall not remove any Inventory from the locations set forth
or permitted herein, without the prior written consent of Lender, except for
sales of Inventory in the ordinary course of Borrowers' business and except to
move Inventory directly from one location set forth or permitted herein to
another such location and except for Inventory shipped from the manufacturer
thereof to a Borrower which is in transit to the locations set forth or
permitted herein; (d) upon Lender's request, Borrowers shall, at their expense,
no more than twice in any twelve (12) month period, but at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written appraisals as to the Inventory in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender,
addressed to Lender and upon which Lender is expressly permitted to rely; (e)
Borrowers shall produce, use, store and maintain the Inventory with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with
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applicable laws (including the requirements of the Federal Fair Labor Standards
Act of 1938, as amended and all rules, regulations and orders related thereto);
(f) none of the Inventory or other Collateral shall constitute farm products or
the proceeds thereof; (g) Borrowers assume all responsibility and liability
arising from or relating to the production, use, sale or other disposition of
the Inventory; (h) no Borrower shall sell Inventory to any customer on approval,
or any other basis which entitles the customer to return or may obligate such
Borrower to repurchase such Inventory; (i) Borrower shall keep the Inventory in
good and marketable condition; and (j) no Borrower shall, without prior written
notice to Lender or the specific identification of such Inventory with respect
thereto provided by such Borrower to Lender pursuant to Section 7.1(a) hereof,
acquire or accept any Inventory on consignment or approval.
Section 7.04 Equipment and Real Property Covenants.
With respect to the Equipment and Real Property: (a) upon Lender's
request, Borrowers shall, at their expense, no more than once in any twelve (12)
month period, but at any time or times as Lender may request on or after an
Event of Default, deliver or cause to be delivered to Lender written appraisals
as to the Equipment and/or the Real Property in form, scope and methodology
acceptable to Lender and by an appraiser acceptable to Lender, addressed to
Lender and upon which Lender is expressly permitted to rely; (b) Borrowers shall
keep the Equipment in good order, repair, running and marketable condition
(ordinary wear and tear excepted); (c) Borrowers shall use the Equipment and
Real Property with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with all applicable
laws; (d) the Equipment is and shall be used in Borrowers' business and not for
personal, family, household or farming use; (e) no Borrower shall remove any
Equipment from the locations set forth or permitted herein, except to the extent
necessary to have any Equipment repaired or maintained in the ordinary course of
the business of such Borrower or to move Equipment directly from one location
set forth or permitted herein to another such location and except for the
movement of motor vehicles used by or for the benefit of such Borrower in the
ordinary course of business; (f) the Equipment is now and shall remain personal
property and no Borrower shall permit any of the Equipment to be or become a
part of or affixed to Real Property; and (g) Borrowers assume all responsibility
and liability arising from the use of the Equipment and Real Property.
Section 7.05 Power of Attorney.
Each Borrower hereby irrevocably designates and appoints Lender (and
all persons designated by Lender) as such Borrower's true and lawful
attorney-in-fact, and authorizes Lender, in such Borrower's or Lender's name,
to: (a) at any time an Event of Default exists or has occurred and is continuing
(i) demand payment on Receivables or other Collateral, (ii) enforce payment of
Receivables by legal proceedings or otherwise, (iii) exercise all of such
Borrower's rights and remedies to collect any Receivable or other Collateral,
(iv) sell or assign any Receivable upon such terms, for such amount and at such
time or times as the Lender deems advisable, (v) settle, adjust, compromise,
extend or renew an Account, (vi) discharge and release any Receivable, (vii)
prepare, file and sign such Borrower's name on any proof of claim in bankruptcy
or other similar document against an account debtor or other obligor in respect
of any Receivables or other Collateral, (viii) notify the post office
authorities to change the address for delivery of remittances from account
debtors or other obligors in respect of Receivables or other proceeds of
Collateral to an address designated by Lender, and open and dispose of all mail
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addressed to such Borrower and handle and store all mail relating to the
Collateral; and (ix) do all acts and things which are necessary, in Lender's
determination, to fulfill such Borrower's obligations under this Agreement and
the other Financing Agreements and (b) at any time to (i) take control in any
manner of any item of payment in respect of Receivables or constituting
Collateral or otherwise received in or for deposit in the Blocked Accounts or
otherwise received by Lender, (ii) have access to any lockbox or postal box into
which remittances from account debtors or other obligors in respect of
Receivables or other proceeds of Collateral are sent or received, (iii) endorse
such Borrower's name upon any items of payment in respect of Receivables or
constituting Collateral or otherwise received by Lender and deposit the same in
Lender's account for application to the Obligations, (iv) endorse Borrower's
name upon any chattel paper, document, instrument, invoice, or similar document
or agreement relating to any Receivable or any goods pertaining thereto or any
other Collateral, including any warehouse or other receipts, or bills of lading
and other negotiable or non-negotiable documents, (v) clear Inventory the
purchase of which was financed with Letter of Credit Accommodations through U.S.
Customs or foreign export control authorities in such Borrower's name, Lender's
name or the name of Lender's designee, and to sign and deliver to customs
officials powers of attorney in such Borrower's name for such purpose, and to
complete in such Borrower's or Lender's name, any order, sale or transaction,
obtain the necessary documents in connection therewith and collect the proceeds
thereof, (vi) sign such Borrower's name on any verification of Receivables and
notices thereof to account debtors or any secondary obligors or other obligors
in respect thereof. Each Borrower hereby releases Lender and its officers,
employees and designees from any liabilities arising from any act or acts under
this power of attorney and in furtherance thereof, whether of omission or
commission, except as a result of Lender's own gross negligence or willful
misconduct as determined pursuant to a final non-appealable order of a court of
competent jurisdiction.
Section 7.06 Right to Cure.
Lender may, at its option, upon three Business Days prior notice to
Borrower Representative (unless the passage of such time would have an adverse
effect upon Lender or the Collateral, in which event such notice may be given at
any time prior to, contemporaneously with or promptly after the applicable
action), (a) cure any default by any Borrower under any material agreement with
a third party that affects the Collateral, its value or the ability of Lender to
collect, sell or otherwise dispose of the Collateral or the rights and remedies
of Lender therein or the ability of such Borrower to perform its obligations
hereunder or under the other Financing Agreements, (b) pay or bond on appeal any
judgment entered against any Borrower, (c) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (d) pay any amount, incur any expense or perform any act
which, in Lender's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Lender with respect thereto.
Lender may add any amounts so expended to the Obligations and charge Borrowers'
account therefor, such amounts to be repayable by Borrowers on demand. Lender
shall be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of
Borrowers. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
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Section 7.07 Access to Real Property.
From time to time as requested by Lender, at the cost and expense of
Borrowers, (a) Lender or its designee shall have complete access to all of
Borrower's Real Property during normal business hours and after notice to
Borrower Representative, or at any time and without notice to Borrower
Representative if an Event of Default exists or has occurred and is continuing,
for the purposes of inspecting, verifying and auditing the Collateral and all of
Borrowers' books and records, including the Records, and (b) Borrowers shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and (c) Lender or its designee may use during
normal business hours such of Borrowers' personnel, equipment, supplies and Real
Property as may be reasonably necessary for the foregoing and if an Event of
Default exists or has occurred and is continuing for the collection of Accounts
and realization of other Collateral.
ARTICLE VIII
SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to Lender the following
(which shall survive the execution and delivery of this Agreement), the truth
and accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrowers:
Section 8.01 Corporate Existence; Power and Authority.
Each Borrower is a corporation duly organized and in good standing
under the laws of its state of incorporation and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it or the ownership of assets
makes such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a material adverse effect on such
Borrower's financial condition, results of operation or business or the rights
of Lender in or to any of the Collateral. The execution, delivery and
performance of this Agreement, the other Financing Agreements and the
transactions contemplated hereunder and thereunder (a) are all within each
Borrower's corporate powers, (b) have been duly authorized, (c) are not in
contravention of law or the terms of any Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which any Borrower is a party or by which any
Borrower or its property are bound and (d) will not result in the creation or
imposition of, or require or give rise to any obligation to grant, any lien,
security interest, charge or other encumbrance upon any property of any Borrower
(other than the liens and security interests being granted to Agent hereunder
and in connection herewith).
Section 8.02 Name; State of Organization; Chief Executive Office;
Collateral Locations.
(i) The exact legal name of each Borrower is as set forth on
the signature page of this Agreement and in the Information Certificate. No
Borrower has, during the past five years, been known by or used any other
corporate or fictitious name or been a party to any merger or consolidation, or
acquired all or substantially all of the assets of any
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Person, or acquired any of its property or assets out of the ordinary course of
business, except as set forth in the Information Certificate.
(ii) Each Borrower is an organization of the type and
organized in the jurisdiction set forth in the Information Certificate. The
Information Certificate accurately sets forth the organizational identification
number of each Borrower or accurately states that such Borrower has none and
accurately sets forth the federal employer identification number of each
Borrower.
(iii) The chief executive office and mailing address of each
Borrower and such Borrower's Records concerning Accounts are located only at the
address identified as such in Schedule 8.2 to the Information Certificate and
its only other places of business and the only other locations of Collateral, if
any, are the addresses set forth in Schedule 8.2 to the Information Certificate,
subject to the right of such Borrower to establish new locations in accordance
with Section 9.2 below. The Information Certificate correctly identifies any of
such locations which are not owned by such Borrower and sets forth the owners
and/or operators thereof.
Section 8.03 Financial Statements; No Material Adverse Change.
All financial statements relating to Borrowers which have been or may
hereafter be delivered by any Borrower to Lender have been prepared in
accordance with GAAP (except, as to any interim financial statements, to the
extent such statements are subject to normal year-end adjustments and do not
include any notes) and fairly present the financial condition and the results of
operation of Borrowers as at the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements furnished by any
Borrower to Lender prior to the date of this Agreement, there has been no
material adverse change in the assets, liabilities, properties and condition,
financial or otherwise, of Borrowers, since the date of the most recent audited
financial statements furnished by any Borrower to Lender prior to the date of
this Agreement.
Section 8.04 Priority of Liens; Title to Properties.
The security interests and liens granted to Lender under this Agreement
and the other Financing Agreements constitute valid and perfected first priority
liens and security interests in and upon the Collateral subject only to the
liens indicated on Schedule 8.4 to the Information Certificate and the other
liens permitted under Section 9.8 hereof. Each Borrower has good and marketable
fee simple title to or valid leasehold interests in all of its Real Property and
good, valid and merchantable title to all of its other properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except those granted to Lender and such others as are
specifically listed on Schedule 8.4 to the Information Certificate or permitted
under Section 9.8 hereof.
Section 8.05 Tax Returns.
Each Borrower has filed, or caused to be filed, in a timely manner all
tax returns, reports and declarations which are required to be filed by it. All
information in such tax returns, reports and declarations is complete and
accurate in all material respects. Each Borrower has
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paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower and with respect to which adequate reserves have been
set aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
Section 8.06 Litigation.
Except as set forth in Schedule 8.6 to the Information Certificate,
there is no present investigation by any Governmental Authority pending, or to
the best of any Borrower's knowledge threatened, against or affecting any
Borrower, its assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the best of any Borrower's knowledge
threatened, against any Borrower or its assets or goodwill, or against or
affecting any transactions contemplated by this Agreement or by the Plan of
Reorganization, which if adversely determined against such Borrower would result
in any material adverse change in the assets, business or prospects of Borrowers
or would impair the ability of Borrowers to perform their obligations hereunder
or under any of the other Financing Agreements to which it is a party or of
Lender to enforce any Obligations or realize upon any Collateral.
Section 8.07 Compliance with Other Agreements and Applicable Laws.
Subject to the provisions of Section 8.8 below, no Borrower is in
default in any material respect under, or in violation in any material respect
of any of the terms of, any agreement, contract, instrument, lease or other
commitment to which it is a party or by which it or any of its assets are bound
and each Borrower is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, Federal, State or local Governmental Authority.
Section 8.08 Environmental Compliance.
(i) Except as set forth on Schedule 8.8 to the Information
Certificate, neither any Borrower nor any of its Subsidiaries have, to the best
of their knowledge, generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its Real
Property (whether or not owned by it) in any manner which at any time violates
any applicable Environmental Law or any license, permit, certificate, approval
or similar authorization thereunder and the operations of each Borrower and each
of its Subsidiaries comply, to the best of their knowledge, in all material
respects with all Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder.
(ii) Except as set forth on Schedule 8.8 to the Information
Certificate, to the best knowledge of each Borrower and each of its
Subsidiaries, (i) there have been no Environmental Claims, (ii) no Environmental
Claims are pending or threatened against any Borrower or any of its Subsidiaries
and (iii) there has been no Release or threatened Release of any Hazardous
Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which adversely affects any
Borrower or its business,
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operations or assets or any facility at which any Borrower has transported,
stored or disposed of any Hazardous Materials.
(iii) Except as set forth on Schedule 8.8 to the Information
Certificate, neither any Borrower nor any of its Subsidiaries has, to the best
of its knowledge, any material liability (contingent or otherwise) in connection
with a Release or threatened Release of any Hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials.
(iv) Except as set forth on Schedule 8.8 to the Information
Certificate, each Borrower and each of its Subsidiaries have, to the best of
their knowledge, all licenses, permits, certificates, approvals or similar
authorizations required to be obtained or filed in connection with the
operations of Borrower under any Environmental Law and all of such licenses,
permits, certificates, approvals or similar authorizations are valid and in full
force and effect.
Section 8.09 Employee Benefits.
(i) Except as set forth in Schedule 8.9 of the Information
Certificate, each Plan is in compliance with the applicable provisions of ERISA,
the Code and other federal or state law. Each Plan which is intended to qualify
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service and to the best of any Borrower's knowledge,
nothing has occurred which would cause the loss of such qualification. Each
Borrower and each of its ERISA Affiliates have made all required contributions
to any Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Code has been made with respect to any Plan.
(ii) There are no pending or to the best of any Borrower's
knowledge, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan.
(iii) (i) No ERISA Event has occurred or is reasonably
expected to occur as a result of events occurring prior to the date of this
Agreement; (ii) the current value of each Plan's assets (determined in
accordance with the assumptions used for funding such Plan pursuant to Section
412 of the Code) are not less than such Plan's liabilities under Section
4001(a)(16) of ERISA; (iii) neither any Borrower nor any of its ERISA Affiliates
has incurred and do not reasonably expect to incur, any liability under Title IV
of ERISA with respect to any Plan (other than premiums due and not delinquent
under Section 4007 of ERISA); (iv) neither any Borrower nor any of its ERISA
Affiliates has not incurred and do not reasonably expect to incur, any liability
(and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA
with respect to a Multiemployer Plan; and (v) neither any Borrower nor any of
its ERISA Affiliates has engaged in a transaction that could be subject to
Section 4069 or 4212(c) of ERISA.
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Section 8.10 Bank Accounts.
All of the deposit accounts, investment accounts or other accounts in
the name of or used by any Borrower maintained at any bank or other financial
institution are set forth in Schedule 8.10 to the Information Certificate,
subject to the right of such Borrower to establish new accounts in accordance
with Section 5.2 hereof.
Section 8.11 Intellectual Property.
Each Borrower owns or licenses or otherwise has the right to use all
Intellectual Property necessary for the operation of its business as presently
conducted or proposed to be conducted. As of the date hereof, no Borrower has
any Intellectual Property registered, or subject to pending applications, in the
United States Patent and Trademark Office or any similar office or agency in the
United States, any State thereof, any political subdivision thereof or in any
other country, other than those described in Schedule 8.11 to the Information
Certificate hereto and has not granted any licenses with respect thereto other
than as set forth in Schedule 8.11 to the Information Certificate. No event has
occurred which permits or would permit after notice or passage of time or both,
the revocation, suspension or termination of such rights. To the best of each
Borrower's knowledge, no slogan or other advertising device, product, process,
method, substance or other Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated to be sold by or employed by such
Borrower infringes any patent, trademark, servicemark, tradename, copyright,
license or other Intellectual Property owned by any other Person presently and
no claim or litigation is pending or threatened against or affecting such
Borrower contesting its right to sell or use any such Intellectual Property.
Schedule 8.11 to the Information Certificate sets forth all of the agreements or
other arrangements of each Borrower pursuant to which such Borrower has a
license or other right to use any trademarks, logos, designs, representations or
other Intellectual Property owned by another person as in effect on the date
hereof and the dates of the expiration of such agreements or other arrangements
of such Borrower as in effect on the date hereof (collectively, together with
such agreements or other arrangements as may be entered into by any Borrower
after the date hereof, collectively, the "License Agreements" and individually,
a "License Agreement").
Section 8.12 Subsidiaries; Affiliates; Capitalization.
(i) No Borrower has any direct or indirect Subsidiaries or
Affiliates and is not engaged in any joint venture or partnership except as set
forth in Schedule 8.12 to the Information Certificate, subject to the right of
Borrowers to form or acquire Subsidiaries in accordance with Section 9.10
hereof.
(ii) Each Borrower is the record and beneficial owner of all
of the issued and outstanding shares of Capital Stock of each of the
Subsidiaries listed on Schedule 8.12 to the Information Certificate as being
owned by such Borrower and there are no proxies, irrevocable or otherwise, with
respect to such shares and no equity securities of any of the Subsidiaries are
or may become required to be issued by reason of any options, warrants, rights
to subscribe to, calls or commitments of any kind or nature and there are no
contracts, commitments, understandings or arrangements by which any Subsidiary
is or may become bound to issue additional shares of it Capital Stock or
securities convertible into or exchangeable for such shares.
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(iii) The issued and outstanding shares of Capital Stock of
each Borrower are directly and beneficially owned and held by the persons
indicated in the Information Certificate, and in each case all of such shares
have been duly authorized and are fully paid and non-assessable, free and clear
of all claims, liens, pledges and encumbrances of any kind, except as disclosed
in writing to Lender prior to the date hereof.
(iv) Borrower is Solvent and will continue to be Solvent after
the creation of the Obligations, the security interests of Lender and the other
transaction contemplated hereunder.
Section 8.13 Labor Disputes.
(i) Set forth on Schedule 8.13 to the Information Certificate
is a list (including dates of termination) of all collective bargaining or
similar agreements between or applicable to any Borrower and any union, labor
organization or other bargaining agent in respect of the employees of any
Borrower on the date hereof.
(ii) Except as set forth on Schedule 8.13 to the Information
Certificate, there is (i) no significant unfair labor practice complaint pending
against any Borrower or, to the best of any Borrower's knowledge, threatened
against it, before the National Labor Relations Board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is pending on the date hereof against any
Borrower or, to best of any Borrower's knowledge, threatened against it, and
(ii) no significant strike, labor dispute, slowdown or stoppage is pending
against any Borrower or, to the best of any Borrower's knowledge, threatened
against any Borrower.
Section 8.14 Restrictions on Subsidiaries.
Except for restrictions contained in this Agreement or any
other agreement with respect to Indebtedness of a Borrower or any of its
Subsidiaries permitted hereunder as in effect on the date hereof, there are no
contractual or consensual restrictions on a Borrower or any of its Subsidiaries
which prohibit or otherwise restrict (a) the transfer of cash or other assets
(i) between such Borrower and any of its Subsidiaries or (ii) between any
Subsidiaries of such Borrower or (b) the ability of such Borrower or any of its
Subsidiaries to incur Indebtedness or grant security interests to Lender in the
Collateral.
Section 8.15 Material Contracts.
Schedule 8.15 to the Information Certificate sets forth all Material
Contracts to which any Borrower is a party or is bound as of the date hereof.
Borrowers have delivered true, correct and complete copies of such Material
Contracts to Lender on or before the date hereof. No Borrower is in breach of or
in default under any Material Contract and has not received any notice of the
intention of any other party thereto to terminate any Material Contract.
Section 8.16 Plan of Reorganization.
Borrowers have delivered to Lender true and correct copies of the Plan
of Reorganization and the Disclosure Statement and neither the Plan of
Reorganization nor the
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Disclosure Statement has been amended or modified. The Plan of Reorganization
has been confirmed pursuant to the Confirmation Order, Borrowers have delivered
to Lender a true and correct copy of the Confirmation Order, the Confirmation
Order has not been amended or modified, the time for filing a notice of appeal
from the Confirmation Order has expired without any such notices of appeal
having been filed, and the Plan or Reorganization has become effective in
accordance with its terms.
Section 8.17 Accuracy and Completeness of Information.
All information furnished by or on behalf of any Borrower in writing to
Lender in connection with this Agreement or any of the other Financing
Agreements or any transaction contemplated hereby or thereby, including all
information on the Information Certificate and all information in the Plan of
Reorganization and the Disclosure Statement, is true and correct in all material
respects on the date as of which such information is dated or certified and does
not omit any material fact necessary in order to make such information not
misleading. No event or circumstance has occurred which has had or could
reasonably be expected to have a material adverse effect on the business, assets
or prospects of Borrowers, which has not been fully and accurately disclosed to
Lender in writing prior to the date hereof.
Section 8.18 Survival of Warranties; Cumulative.
All representations and warranties contained in this Agreement or any
of the other Financing Agreements shall survive the execution and delivery of
this Agreement and shall be deemed to have been made again to Lender on the date
of each additional borrowing or other credit accommodation hereunder and shall
be conclusively presumed to have been relied on by Lender regardless of any
investigation made or information possessed by Lender. The representations and
warranties set forth herein shall be cumulative and in addition to any other
representations or warranties which Borrowers shall now or hereafter give, or
cause to be given, to Lender.
ARTICLE IX
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
Section 9.01 Maintenance of Existence.
(i) Each Borrower shall at all times preserve, renew and keep
in full, force and effect its corporate existence and rights and franchises with
respect thereto and maintain in full force and effect all permits, licenses,
trademarks, tradenames, approvals, authorizations, leases and contracts
necessary to carry on the business as presently or proposed to be conducted.
(ii) No Borrower shall change its name unless each of the
following conditions is satisfied: (i) Lender shall have received not less than
thirty (30) days prior written notice from such Borrower of such proposed change
in its corporate name, which notice shall accurately set forth the new name; and
(ii) Lender shall have received a copy of the amendment to the Certificate of
Incorporation of such Borrower providing for the name change
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certified by the Secretary of State of the jurisdiction of incorporation or
organization of such Borrower as soon as it is available.
(iii) No Borrower shall change its chief executive office or
its mailing address or organizational identification number (or if it does not
have one, shall not acquire one) unless Lender shall have received not less than
thirty (30) days' prior written notice from such Borrower of such proposed
change, which notice shall set forth such information with respect thereto as
Lender may require and Lender shall have received such agreements as Lender may
reasonably require in connection therewith. No Borrower shall change its type of
organization, jurisdiction of organization or other legal structure.
Section 9.02 New Collateral Locations.
Any Borrower may open new location within the continental United States
provided such Borrower (a) gives Lender thirty (30) days prior written notice
from such Borrower of the intended opening of any such new location and (b)
executes and delivers, or causes to be executed and delivered, to Lender such
agreements, documents, and instruments as Lender may deem necessary or desirable
to protect its interests in the Collateral at such location.
Section 9.03 Compliance with Laws, Regulations, Etc.
(i) Each Borrower shall, and shall cause any Subsidiary to, at
all times, comply in all material respects with all laws, rules, regulations,
licenses, permits, approvals and orders applicable to it and duly observe all
requirements of any foreign, Federal, State or local Governmental Authority,
including ERISA, the Code, the Occupational Safety and Health Act of 1970, as
amended, the Fair Labor Standards Act of 1938, as amended, and all Environmental
Laws.
(ii) Each Borrower shall give written notice to Lender within
24 hours upon such Borrower's receipt of any notice of, or such Borrower's
otherwise obtaining knowledge of, (i) any Release of Hazardous Material that
could reasonably be expected to have a material adverse effect on any Borrower
or the Collateral or (ii) any Environmental Claims with respect to: (A) any
non-compliance with or violation of any applicable Environmental Law by such
Borrower that could reasonably be expected to have a material adverse effect on
any Borrower or the Collateral or (B) Release of any Hazardous Material other
than in the ordinary course of business and other than as permitted under any
applicable Environmental Law. Copies of all environmental surveys, audits,
assessments, feasibility studies and results of remedial investigations shall be
promptly furnished, or caused to be furnished, by such Borrower to Lender
(subject to applicable legal privilege). Each Borrower shall take prompt and
appropriate Remedial Action required by any applicable Environmental Law to
respond to any non-compliance with any of the Environmental Laws and shall
provide copies to Lender of reports discussing all such Remedial Action.
(iii) Without limiting the generality of the foregoing except
as set forth on Schedule 8.8 to the Information Certificate, whenever Lender
reasonably determines that there is non-compliance, or any condition which
requires any Remedial Action by or on behalf of any Borrower in order to avoid
any material non-compliance, with any Environmental Law, such Borrower shall, at
Lender's request and such Borrower's expense: (i) cause an
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environmental engineer acceptable to Lender to conduct such tests of the site
where such Borrower's material non-compliance or alleged material non-compliance
with such Environmental Laws has occurred as to such non-compliance and prepare
and deliver to Lender a report as to such material non-compliance setting forth
the results of such tests, a proposed Remedial Action to respond to a release,
and an estimate of the costs thereof and (ii) provide to Lender a supplemental
report of such engineer whenever the scope of such material non-compliance, or
such Borrower's response thereto or the estimated costs thereof, shall change in
any material respect.
(iv) Each Borrower shall indemnify and hold harmless Lender,
its directors, officers, employees, agents, invitees, representatives,
successors and assigns, from and against any and all losses, claims, damages,
liabilities, costs, and expenses (including attorneys' fees and legal expenses)
directly or indirectly arising out of or attributable to the use, generation,
manufacture, storage, Release, disposal or presence of a Hazardous Material
(except for liabilities directly resulting from acts or omissions of Lender),
including the costs of any required or necessary Remedial Action with respect to
any Real Property and the preparation and implementation of any Remedial Action
plans. All indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
(v) Each Borrower has established a corporate environmental
audit program and maintains, at its expense, a system to monitor its continued
compliance with all Environmental Laws that is acceptable to Lender. Copies of
all environmental surveys, audits, assessments, feasibility studies and results
of remedial investigations shall be promptly furnished, or caused to be
furnished, by each Borrower to Lender, except where the furnishing of such
documents would cause Borrowers to lose or waive an applicable legal privilege.
Each Borrower shall take prompt and appropriate action to respond to any
non-compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.
Section 9.04 Payment of Taxes and Claims.
Each Borrower shall, and shall cause any Subsidiary to, duly pay and
discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower or such Subsidiary, as the case may be, and with
respect to which adequate reserves have been set aside on its books. Each
Borrower shall be liable for any tax or penalties imposed on Lender as a result
of the financing arrangements provided for herein and such Borrower agrees to
indemnify and hold Lender harmless with respect to the foregoing, and to repay
to Lender on demand the amount thereof, and until paid by such Borrower such
amount shall be added and deemed part of the Loans, provided, that, nothing
contained herein shall be construed to require such Borrower to pay any income
or franchise taxes attributable to the income of Lender from any amounts charged
or paid hereunder to Lender. The foregoing indemnity shall survive the payment
of the Obligations and the termination or non-renewal of this Agreement.
Section 9.05 Insurance.
Borrowers shall, and shall cause any Subsidiary to, at all times,
maintain with financially sound and reputable insurers insurance with respect to
the Collateral against loss or
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damage and all other insurance of the kinds and in the amounts customarily
insured against or carried by corporations of established reputation engaged in
the same or similar businesses and similarly situated. Said policies of
insurance shall be satisfactory to Lender as to form, amount and insurer.
Borrowers shall furnish certificates, policies or endorsements to Lender as
Lender shall require as proof of such insurance, and, if Borrowers fail to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrowers. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrowers in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrowers shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrowers shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrowers or any of their Affiliates.
At its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations. Notwithstanding the foregoing terms of this Section 9.5, Lender
acknowledges that the proceeds of an Environmental Insurance Claim shall be
applied in accordance with the terms of the applicable Settlement Note.
Section 9.06 Financial Statements and Other Information.
(i) Each Borrower shall, and shall cause any Subsidiary and
each Special Purpose Company to, keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of such Borrower and its Subsidiaries in
accordance with GAAP. Each Borrower shall promptly furnish to Lender all such
financial and other information as Lender shall reasonably request relating to
the Collateral and the assets, business and operations of such Borrower, and to
notify the auditors and accountants of such Borrower that Lender is authorized
to obtain such information directly from them. Without limiting the foregoing,
each Borrower shall furnish or cause to be furnished to Lender, the following:
(i) within thirty (30) days after the end of each fiscal month, monthly
unaudited consolidated financial statements, and unaudited consolidating
financial statements (including in each case balance sheets, statements of
income and loss, statements of cash flow, and statements of shareholders'
equity), all in
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reasonable detail, fairly presenting the financial position and the results of
the operations of such Borrower and its Subsidiaries and the Special Purpose
Companies as of the end of and through such fiscal month, certified to be
correct by the chief financial officer of such Borrower, subject to normal
year-end adjustments and accompanied by a compliance certificate substantially
in the form of Exhibit B hereto, along with a schedule in form reasonably
satisfactory to Lender of the calculations used in determining, as of the end of
such month, whether such Borrower was in compliance with the covenants set forth
in Sections 9.17 of this Agreement for such month and (ii) within ninety (90)
days after the end of each fiscal year, audited consolidated financial
statements and audited consolidating financial statements of such Borrower and
its Subsidiaries and the Special Purpose Companies (including in each case
balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), and the accompanying notes thereto, all in
reasonable detail, fairly presenting the financial position and the results of
the operations of such Borrower and its Subsidiaries and the Special Purpose
Companies as of the end of and for such fiscal year, together with the opinion
of independent certified public accountants that is unqualified (as to scope),
which accountants shall be an independent accounting firm selected by such
Borrower and reasonably acceptable to Lender, that such financial statements
have been prepared in accordance with GAAP, and present fairly the results of
operations and financial condition of such Borrower and its Subsidiaries and the
Special Purpose Companies as of the end of and for the fiscal year then ended.
(ii) Each Borrower shall promptly notify Lender in writing of
the details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in such
Borrower's business, properties, assets, goodwill or condition, financial or
otherwise, (ii) any Material Contract of such Borrower being terminated or
amended or any new Material Contract entered into (in which event such Borrower
shall provide Lender with a copy of such Material Contract), (iii) any order,
judgment or decree in excess of $100,000 shall have been entered against such
Borrower or any of its properties or assets, (iv) any notification of violation
of laws or regulations received by such Borrower, (v) any ERISA Event, and (vi)
the occurrence of any Default or Event of Default.
(iii) Each Borrower shall promptly after the sending or filing
thereof furnish or cause to be furnished to Lender copies of all reports which
such Borrower sends to its stockholders generally and copies of all reports and
registration statements which such Borrower files with the Securities and
Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(iv) Each Borrower shall furnish or cause to be furnished to
Lender such budgets, forecasts, projections and other information respecting the
Collateral and the business of such Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of any
Borrower to any court or other Governmental Authority or to any participant or
assignee or prospective participant or assignee. Each Borrower hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Lender, at such Borrower's expense, copies of the financial statements of such
Borrower and any reports or management letters prepared by such accountants or
auditors on behalf of such Borrower and to disclose to Lender such information
as they may have regarding the business of such Borrower. Any documents,
schedules, invoices or other papers delivered to Lender may be destroyed or
otherwise disposed of by Lender one (1) year after the same are delivered to
Lender, except as otherwise designated by Borrower Representative to Lender in
writing.
Section 9.07 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
No Borrower shall, and shall not permit any of its Subsidiaries to (and
Lender does not authorize any Borrower to), directly or indirectly,
(i) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it; or
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(ii) sell, assign, lease, transfer, abandon or otherwise
dispose of any Capital Stock or Indebtedness to any other Person or any of its
assets to any other Person, except for (i) sales of Inventory in the ordinary
course of business on an arms'-length basis, (ii) the disposition of worn-out or
obsolete Equipment (excluding in all cases any Eligible Equipment) in the
ordinary course of business on an arms'-length basis so long as (A) any proceeds
are paid to Lender and (B) such sales do not involve Equipment having an
aggregate fair market value in excess of $500,000 for all such Equipment
disposed of in any fiscal year of Borrower and (iii) any other sale with respect
to which Lender has provided its prior written consent;
(iii) wind up, liquidate or dissolve; or
(iv) agree to do any of the foregoing.
Notwithstanding the foregoing terms of this Section 9.7, Lender
acknowledges and agrees that the terms of the letter agreement dated November 7,
2003 among Lender, Fansteel and Phoenix Aerospace Corp. shall apply with respect
to the Fansteel Asset Sale (as defined in the Plan or Reorganization) and the
application of the proceeds thereof.
Section 9.08 Encumbrances.
No Borrower shall and shall not permit any of its Subsidiaries to,
create, incur, assume, suffer or permit to exist any security interest,
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or properties, including the Collateral, except: (a) the
security interests and liens of Lender; (b) liens securing the payment of taxes,
either not yet overdue or the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to the
applicable Borrower or Subsidiary, as the case may be and with respect to which
adequate reserves have been set aside on its books; (c) non-consensual statutory
liens (other than liens securing the payment of taxes) arising in the ordinary
course of the applicable Borrower's or Subsidiary's business to the extent: (i)
such liens secure Indebtedness which is not overdue, (ii) such liens consist of
inchoate liens in favor of a landlord with respect to rent not yet due and
payable by a Borrower in connection with a real estate lease or (iii) such liens
secure Indebtedness relating to claims or liabilities which are fully insured
and being defended at the sole cost and expense and at the sole risk of the
insurer or being contested in good faith by appropriate proceedings diligently
pursued and available to the applicable Borrower or Subsidiary, in each case
prior to the commencement of foreclosure or other similar proceedings and with
respect to which adequate reserves have been set aside on its books; (d) zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of Real Property which do not interfere in any material respect with the
use of such Real Property or ordinary conduct of the business of the applicable
Borrower or Subsidiary as presently conducted thereon or materially impair the
value of the Real Property which may be subject thereto; (e) purchase money
security interests in Equipment (including Capital Leases) and purchase money
mortgages on Real Property to secure Indebtedness permitted under Section 9.9(b)
hereof and (f) the security interests and liens set forth on Schedule 8.4 to the
Information Certificate.
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Section 9.09 Indebtedness.
No Borrower shall, nor shall it permit any of its Subsidiaries to,
incur, create, assume, become or be liable in any manner with respect to, suffer
or permit to exist, any Indebtedness or guarantee, assume, endorse, or otherwise
become responsible for (directly or indirectly) the performance, dividends or
other obligations of any Person, except:
(i) the Obligations;
(ii) purchase money Indebtedness (including Capital Leases)
arising after the date hereof to the extent secured by purchase money security
interests in Equipment (including Capital Leases) and purchase money mortgages
on Real Property not to exceed $1,000,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to any
property of such Borrower other than the Equipment or Real Property so acquired,
and the Indebtedness secured thereby does not exceed the cost of the Equipment
or Real Property so acquired, as the case may be;
(iii) guarantees by any Subsidiaries of such Borrower of the
Obligations in favor of Lenders;
(iv) unsecured Indebtedness of Fansteel evidenced by the
Settlement Notes; provided, that, (i) Fansteel shall not make any prepayments or
other payments in respect of the Settlement Notes, except for regularly
scheduled payments under the Settlement Notes, mandatory prepayments under the
FMRI Primary Note and the FMRI Contingent Note and payments of the proceeds of
the Environmental Insurance Claims under the applicable Settlement Note pursuant
to Section 9.5 hereof, (ii) Fansteel shall not voluntarily redeem, retire,
defease, purchase or otherwise acquire such Indebtedness or set aside or
otherwise deposit or invest any sums for any such purpose, (iii) Fansteel shall
not, directly or indirectly, amend, modify, alter or change the terms of such
Indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof except, that, Fansteel may, after prior written notice
to Lender, amend, modify, alter or change the terms thereof so as to extend the
maturity thereof, or defer the timing of any payments in respect thereof, or to
forgive or cancel any portion of such Indebtedness (other than pursuant to
payments thereof), or to reduce the interest rate or any fees in connection
therewith, (iv) except for the lien and security interest granted to the PBGC in
respect of the Real Property, Inventory and Equipment of Fansteel de Mexico
pursuant to the Pledge and Bailment Agreement between Fansteel and the PBGC,
dated January 23, 2004, Fansteel shall not grant any security interest,
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or properties to secure the Indebtedness evidenced by any
Settlement Note; and (v) Fansteel shall furnish to Lender all notices or demands
in connection with such Indebtedness either received by Fansteel or on its
behalf, promptly after the receipt thereof, or sent by Fansteel or on its
behalf, concurrently with the sending thereof, as the case may be; and
(v) the Indebtedness set forth on Schedule 9.9 to the
Information Certificate; provided, that, (i) the applicable Borrower may not
make any payments in respect of such Indebtedness, (ii) the applicable Borrower
shall not, directly or indirectly, (A) amend, modify, alter or change the terms
of such Indebtedness or any agreement, document or instrument related thereto as
in effect on the date hereof except, that, the applicable Borrower
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may, after prior written notice to Lender, amend, modify, alter or change the
terms thereof so as to extend the maturity thereof, or defer the timing of any
payments in respect thereof, or to forgive or cancel any portion of such
Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) the applicable
Borrower shall furnish to Lender all notices or demands in connection with such
Indebtedness either received by such Borrower or on its behalf, promptly after
the receipt thereof, or sent by such Borrower or on its behalf, concurrently
with the sending thereof, as the case may be.
Section 9.10 Loans, Investments, Etc.
No Borrower shall, nor shall it permit any of its Subsidiaries to,
directly or indirectly, make, or suffer or permit to exist, any loans, or
advance money or property, to any person, or make any investment in (by capital
contribution, dividend or otherwise) or purchase or repurchase the Capital Stock
or Indebtedness or all or a substantial part of the assets or property of any
person, or form or acquire any Subsidiaries, or agree to do any of the
foregoing, except:
(i) the endorsement of instruments for collection or deposit
in the ordinary course of business;
(ii) investments in cash or Cash Equivalents, provided, that,
(i) no Revolving Loans are then outstanding and (ii) the terms and conditions of
Section 5.2 hereof shall have been satisfied with respect to the deposit account
or investment account in which such cash or Cash Equivalents are held;
(iii) the existing equity investments of such Borrower as of
the date hereof in its Subsidiaries, provided, that, such Borrower shall have no
obligation to make any other investment in, or loans to, or other payments in
respect of, any such Subsidiaries;
(iv) stock or obligations issued to such Borrower by any
Person (or the representative of such Person) in respect of Indebtedness of such
Person owing to such Borrower in connection with the insolvency, bankruptcy,
receivership or reorganization of such Person or a composition or readjustment
of the debts of such Person; provided, that, the original of any such stock or
instrument evidencing such obligations shall be promptly delivered to Lender,
upon Lender's request, together with such stock power, assignment or endorsement
by such Borrower as Lender may request;
(v) obligations of account debtors to such Borrower arising
from Accounts which are past due evidenced by a promissory note made by such
account debtor payable to such Borrower; provided, that, promptly upon the
receipt of the original of any such promissory note by such Borrower, such
promissory note shall be endorsed to the order of Lender by such Borrower and
promptly delivered to Lender as so endorsed;
(vi) the loans and advances set forth on Schedule 9.10 to the
Information Certificate; provided, that, as to such loans and advances, (i) no
Borrower shall, directly or indirectly, amend, modify, alter or change the terms
of such loans and advances or any agreement, document or instrument related
thereto and (ii) the applicable Borrower shall
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furnish to Lender all notices or demands in connection with such loans and
advances either received by such Borrower or on its behalf, promptly after the
receipt thereof, or sent by such Borrower or on its behalf, concurrently with
the sending thereof, as the case may be;
(vii) intercompany loans and advances made by Fansteel to
▇▇▇▇▇▇▇; provided, that at Lender's request, the same shall be evidenced by one
or more promissory notes endorsed to the order of and delivered to Lender;
(viii) intercompany loans and advances made by ▇▇▇▇▇▇▇ to
Fansteel; provided, that (A) the outstanding amount of such intercompany loans
and advances shall not exceed $300,000 at any time, (B) Excess Availability
shall be at least $250,000 both before and after the making of any such
intercompany loan or advance and (C) no such intercompany loan or advance shall
be made by ▇▇▇▇▇▇▇ unless (1) no Default or Event of Default is in existence
both before and after the making thereof and (2) ▇▇▇▇▇▇▇ is Solvent both before
and after the making thereof (as evidenced, to the extent requested by Lender,
by a written certification that is delivered by Borrowers and approved by Lender
prior to the making thereof); and provided, further, that at Lender's request,
such intercompany loans and advances shall be evidenced by one or more
promissory notes endorsed to the order of and delivered to Lender; and
(ix) the formation of the Special Purpose Companies in
accordance with the Plan of Reorganization and the delivery and performance of
the Settlement Notes in accordance with the Plan or Reorganization and the
provisions hereof.
Section 9.11 Dividends and Redemptions; Payments to Unsecured
Creditors.
No Borrower shall, directly or indirectly, declare or pay any dividends
on account of any shares of class of its Capital Stock now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of
any class of Capital Stock (or set aside or otherwise deposit or invest any sums
for such purpose) for any consideration or apply or set apart any sum, or make
any other distribution (by reduction of capital or otherwise) in respect of any
such shares or agree to do any of the foregoing, except in any case in the form
of shares of Capital Stock consisting of common stock and except that each
Borrower that is a Subsidiary of another Borrower may pay dividends to such
other Borrower.
Section 9.12 Transactions with Affiliates.
(i) With respect to Affiliates other than the Special Purpose
Companies, no Borrower shall, directly or indirectly, (a) purchase, acquire or
lease any property from, or sell, transfer or lease any property to, any such
Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of such Borrower's business and upon fair and reasonable terms no
less favorable to the such Borrower than such Borrower would obtain in a
comparable arm's length transaction with a Person that is not any Affiliate of
such Borrower or (b) make any payments of management, consulting or other fees
for management or similar services, or of any Indebtedness owing to any officer,
employee, shareholder, director or other Affiliate of such Borrower except
reasonable compensation to officers, employees and directors for services
rendered to such Borrower in the ordinary course of business.
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(b) With respect to the Special Purpose Companies, no Borrower shall,
directly or indirectly, purchase, acquire or lease any property from, sell,
transfer or lease any property to, make any loans to, make any investments in,
make any payments to, or otherwise enter into any contractual or other
arrangement with, any such Special Purpose Company, except for (i) the issuance
of the Settlement Notes and the making of regularly scheduled payments under the
Settlement Notes and mandatory prepayments under the FMRI Primary Note and the
FMRI Contingent Note in accordance with the terms of Section 9.9(d) and (ii) the
office lease of the North Chicago Facility by Fansteel from NCI.
Section 9.13 Compliance with ERISA.
Each Borrower shall and shall use its reasonable best efforts to cause
each of its ERISA Affiliates to: (a) maintain each Plan (other than a
Multiemployer Plan) in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal and state law; (b) cause each
Plan which is qualified under Section 401(a) of the Code to maintain such
qualification; (c) not terminate any of such Plans so as to incur any liability
to the Pension Benefit Guaranty Corporation; (d) not allow or suffer to exist
any prohibited transaction involving any of such Plans or any trust created
thereunder which would subject such Borrower or such ERISA Affiliate to a tax or
penalty or other liability on prohibited transactions imposed under Section 4975
of the Code or ERISA; (e) make all required contributions to any Plan which it
is obligated to pay under Section 302 of ERISA, Section 412 of the Code or the
terms of such Plan; (f) not allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such Plan; or (g) not
allow or suffer to exist any occurrence of a reportable event (as defined in
Section 4043 of ERISA) or any other event or condition which presents a material
risk of termination by the Pension Benefit Guaranty Corporation of any such Plan
that is a single employer plan, which termination could result in any liability
to the Pension Benefit Guaranty Corporation.
Section 9.14 End of Fiscal Years: Fiscal Quarters.
Each Borrower shall, for financial reporting purposes, cause its, and
each of its Subsidiaries' (a) fiscal years to end on December 31 of each year
and (b) fiscal quarters to end on March 31, June 30, September 30 and December
31 of each year.
Section 9.15 Change in Business.
No Borrower shall engage in any business other than the business of
such Borrower on the date hereof and any business reasonably related, ancillary
or complimentary to the business in which such Borrower is engaged on the date
hereof.
Section 9.16 Limitation of Restrictions Affecting Subsidiaries.
No Borrower shall, directly, or indirectly, create or otherwise cause
or suffer to exist any encumbrance or restriction which prohibits or limits the
ability of any Subsidiary of such Borrower to (a) pay dividends or make other
distributions or pay any Indebtedness owed to such Borrower or any Subsidiary of
such Borrower; (b) make loans or advances to such Borrower or any Subsidiary of
such Borrower, (c) transfer any of its properties or assets to such Borrower or
any Subsidiary of such Borrower; or (d) create, incur, assume or suffer to exist
any
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lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, other than encumbrances and restrictions arising under (i)
applicable law, (ii) this Agreement, (iii) customary provisions restricting
subletting or assignment of any lease governing a leasehold interest of such
Borrower or any of its Subsidiaries, (iv) customary restrictions on dispositions
of Real Property interests found in reciprocal easement agreements of such
Borrower or any of its Subsidiaries, (v) any agreement relating to permitted
Indebtedness incurred by a Subsidiary of such Borrower prior to the date on
which such Subsidiary was acquired by such Borrower and outstanding on such
acquisition date, and (vi) the extension or continuation of contractual
obligations in existence on the date hereof; provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no
less favorable to Lender than those encumbrances and restrictions under or
pursuant to the contractual obligations so extended or continued.
Section 9.17 Financial Covenants.
(i) EBITDA Covenant.
Borrowers shall maintain EBITDA for each period set forth below of at
least the amount set forth opposite such period:
Period Amount
------ ------
Six (6) months ended June 30, 2004 ($100,000)
Nine (9) months ended September 30, 2004 $550,000
Twelve (12) months ended December 31, 2004 $1,950,000
Twelve (12) months ended March 31, 2005 and the twelve (12) $2,750,000
months ended on the last day of each calendar quarter
thereafter
(ii) Capital Expenditure Covenant. Borrowers shall not permit
their capital expenditures in any period set forth below to be in excess of the
amount set forth opposite period:
Period Amount
------ ------
Fiscal year ending December, 2004 $1,500,000
Fiscal year ending December 31, 2005 $4,000,000
Fiscal year ending December 31, 2006 and each fiscal year $2,300,000
thereafter
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Section 9.18 License Agreements.
(i) Each Borrower shall (i) promptly and faithfully observe
and perform all of the material terms, covenants, conditions and provisions of
the material License Agreements to be observed and performed by it, at the times
set forth therein, if any, (ii) not do, permit, suffer or refrain from doing
anything could reasonably be expected to result in a default under or breach of
any of the terms of any material License Agreement, (iii) not cancel, surrender,
modify, amend, waive or release any material License Agreement in any material
respect or any term, provision or right of the licensee thereunder in any
material respect, or consent to or permit to occur any of the foregoing; except,
that, subject to Section 9.19(b) below, a Borrower may cancel, surrender or
release any material License Agreement in the ordinary course of the business of
such Borrower; provided, that, such Borrower shall give Lender not less than
thirty (30) days prior written notice of its intention to so cancel, surrender
and release any such material License Agreement, (iv) give Lender prompt written
notice of any material License Agreement entered into by such Borrower after the
date hereof, together with a true, correct and complete copy thereof and such
other information with respect thereto as Lender may request, (v) give Lender
prompt written notice of any material breach of any obligation, or any default,
by any party under any material License Agreement, and deliver to Lender
(promptly upon the receipt thereof by such Borrower in the case of a notice to
such Borrower, and concurrently with the sending thereof in the case of a notice
from such Borrower) a copy of each notice of default and every other notice and
other communication received or delivered by such Borrower in connection with
any material License Agreement which relates to the right of such Borrower to
continue to use the property subject to such License Agreement, and (vi) furnish
to Lender, promptly upon the request of Lender, such information and evidence as
Lender may require from time to time concerning the observance, performance and
compliance by such Borrower or the other party or parties thereto with the
terms, covenants or provisions of any material License Agreement.
(ii) Each Borrower will either exercise any option to renew or
extend the term of each material License Agreement in such manner as will cause
the term of such material License Agreement to be effectively renewed or
extended for the period provided by such option and give prompt written notice
thereof to Lender or give Lender prior written notice that such Borrower does
not intend to renew or extend the term of any such material License Agreement or
that the term thereof shall otherwise be expiring, not less than sixty (60) days
prior to the date of any such non-renewal or expiration. In the event of the
failure of any Borrower to extend or renew any material License Agreement,
Lender shall have, and is hereby granted, the irrevocable right and authority,
at its option, to renew or extend the term of such material License Agreement,
whether in its own name and behalf, or in the name and behalf of a designee or
nominee of Lender or in the name and behalf of such Borrower, as Lender shall
determine at any time that an Event of Default shall exist or have occurred and
be continuing. Lender may, but shall not be required to, perform any or all of
such obligations of any Borrower under any of the License Agreements, including,
but not limited to, the payment of any or all sums due from such Borrower
thereunder. Any sums so paid by Lender shall constitute part of the Obligations.
Section 9.19 After Acquired Real Property.
If a Borrower hereafter acquires any Real Property, fixtures or any
other property that is of the kind or nature described in the Mortgages and such
Real Property, fixtures or other
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property at any one location has a fair market value in an amount equal to or
greater than $50,000, individually, or $250,000, in the aggregate together with
all other such Real Property or other property of Borrowers not subject to a
Mortgage (or if a Default or Event of Default exists, then regardless of the
fair market value of such assets), without limiting any other rights of Lender,
or duties or obligations of such Borrower, upon Lender's request, such Borrower
shall execute and deliver to Lender a mortgage, deed of trust or deed to secure
debt, as Lender may determine, in form and substance substantially similar to
the Mortgages and as to any provisions relating to specific state laws
satisfactory to Lender and in form appropriate for recording in the real estate
records of the jurisdiction in which such Real Property or other property is
located granting to Lender a first and only lien and mortgage on and security
interest in such Real Property, fixtures or other property (except as such
Borrower would otherwise be permitted to incur hereunder or under the Mortgages
or as otherwise consented to in writing by Lender) and such other agreements,
documents and instruments as Lender may require in connection therewith.
Section 9.20 Costs and Expenses.
Borrowers shall pay to Lender on demand all costs, expenses, filing
fees and taxes paid or payable in connection with the preparation, negotiation,
execution, delivery, recording, administration, collection, liquidation,
enforcement and defense of the Obligations, Lender's rights in the Collateral,
this Agreement, the other Financing Agreements and all other documents related
hereto or thereto, including any amendments, supplements or consents which may
hereafter be contemplated (whether or not executed) or entered into in respect
hereof and thereof, including: (a) all costs and expenses of filing or recording
(including Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) costs and expenses and fees for insurance premiums,
environmental audits, surveys, assessments, engineering reports and inspections,
appraisal fees and search fees, costs and expenses of remitting loan proceeds,
collecting checks and other items of payment, and establishing and maintaining
the Blocked Accounts, together with Lender's customary charges and fees with
respect thereto; (c) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (d) costs and expenses of
preserving and protecting the Collateral; (e) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (f)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Lender during the course of periodic field examinations of the
Collateral and Borrowers' operations, plus a per diem charge at the rate of $800
per person per day for Lender's examiners in the field and office; and (g) the
reasonable fees and disbursements of counsel (including legal assistants) to
Lender in connection with any of the foregoing.
Section 9.21 Compliance with Plan of Reorganization.
Each Borrower shall comply with its obligations under the Plan of
Reorganization and consummate the Plan of Reorganization in accordance with its
terms. No Borrower shall agree to, or suffer to occur, any amendment, supplement
or addition to, or any other modification
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of, the Plan of Reorganization or the Confirmation Order that is material in any
respect or that would have an adverse effect upon Lender or the Collateral.
Section 9.22 Special Purpose Companies.
Borrowers shall not permit any Special Purpose Company to enter into
any contractual or other arrangements, or engage in any business or other
activities (other than those provided for in and/or necessary to carry out the
Plan of Reorganization).
Section 9.23 Further Assurances.
At the request of Lender at any time and from time to time, Borrowers
shall, at their expense, duly execute and deliver, or cause to be duly executed
and delivered, such further agreements, documents and instruments, and do or
cause to be done such further acts as may be reasonably necessary or proper to
evidence, perfect, maintain and enforce the security interests and the priority
thereof in the Collateral and to otherwise effectuate the provisions or purposes
of this Agreement or any of the other Financing Agreements. Lender may at any
time and from time to time reasonably request a certificate from an officer of
any Borrower representing that all conditions precedent to the making of Loans
and providing Letter of Credit Accommodations contained herein are satisfied. In
the event of such request by Lender, Lender may, at its option, cease to make
any further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has reasonably
determined that such conditions are satisfied. Without limiting in any way the
foregoing requirements of this Section 9.23, Borrowers agree to cause the Starck
UCC to be terminated within forty-five (45) days of the date hereof.
ARTICLE X
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
Section 10.01 Events of Default.
The occurrence or existence of any one or more of the following events
are referred to herein individually as an "Event of Default", and collectively
as "Events of Default":
(i) (i) any Borrower fails to pay when due any of the
Obligations, (ii) any Borrower fails to perform any of the covenants contained
in Sections 9.3, 9.4, 9.13 and 9.19 of this Agreement and such failure shall
continue for ten (10) days; provided, that, such ten (10) day period shall not
apply in the case of: (A) any failure to observe any such covenant which is not
capable of being cured at all or within such ten (10) day period or which has
been the subject of a prior failure within a six (6) month period, or (B) an
intentional breach by such Borrower of any such covenant or (iii) any Borrower
fails to perform any of the terms, covenants, conditions or provisions contained
in this Agreement or any of the other Financing Agreements other than those
described in Section 10.1(a)(i) and 10.1(a)(ii) above;
(ii) any representation, warranty or statement of fact made by
any Borrower to Lender in this Agreement, the other Financing Agreements or any
other
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agreement, schedule, confirmatory assignment or otherwise shall when made or
deemed made be false or misleading in any material respect;
(iii) any Obligor revokes, terminates or fails to perform any
of the terms, covenants, conditions or provisions of any guarantee, endorsement
or other agreement of such party in favor of Lender;
(iv) any judgment for the payment of money is rendered against
any Borrower or any Obligor in excess of $100,000 in any one case or in excess
of $250,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against any
Borrower or any Obligor or any of their assets;
(v) any Obligor (being a natural person or a general partner
of an Obligor which is a partnership) dies or any Borrower or any Obligor, which
is a partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(vi) any Borrower or any Obligor fails to be Solvent, makes an
assignment for the benefit of creditors, makes or sends notice of a bulk
transfer or calls a meeting of its creditors or principal creditors;
(vii) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within thirty
(30) days after the date of its filing or any Borrower or any Obligor shall file
any answer admitting or not contesting such petition or application or indicates
its consent to, acquiescence in or approval of, any such action or proceeding or
the relief requested is granted sooner;
(viii) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or any Obligor or for all or any part of its
property;
(ix) (i) any default by any Borrower or any Obligor under any
agreement, document or instrument relating to any Indebtedness for borrowed
money owing to any person other than Lender, or any capitalized lease
obligations, contingent Indebtedness in connection with any guarantee, letter of
credit, indemnity or similar type of instrument in favor of any person other
than Lender, in any case in an amount in excess of $100,000, which default
continues for more than the applicable cure period, if any, with respect
thereto, or any default by any Borrower or any Obligor under any Material
Contract, which default continues for more than the applicable cure period, if
any, with respect thereto or (ii) any "Default" under and as defined in a
Settlement Note (to the extent that such "Default" does not otherwise result in
an Event of Default under the foregoing clause (i) of this Section 10.1(i));
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(x) any bank at which any deposit account of any Borrower is
maintained shall fail to comply with any of the terms of any Deposit Account
Control Agreement to which such bank is a party or any securities intermediary,
commodity intermediary or other financial institution at any time in custody,
control or possession of any investment property of any Borrower shall fail to
comply with any of the terms of any Investment Property Control Agreement to
which such person is a party;
(xi) any material provision hereof or of any of the other
Financing Agreements shall for any reason cease to be valid, binding and
enforceable with respect to any party hereto or thereto (other than Lender) in
accordance with its terms, or any such party shall challenge the enforceability
hereof or thereof, or shall assert in writing, or take any action or fail to
take any action based on the assertion that any provision hereof or of any of
the other Financing Agreements has ceased to be or is otherwise not valid,
binding or enforceable in accordance with its terms, or any security interest
provided for herein or in any of the other Financing Agreements shall cease to
be a valid and perfected first priority security interest in any of the
Collateral purported to be subject thereto (except as otherwise permitted herein
or therein);
(xii) an ERISA Event shall occur which results in a material
adverse effect on the assets, business or prospects of Borrowers taken as a
whole;
(xiii) any Change of Control;
(xiv) the indictment by any Governmental Authority, or as
Lender may reasonably and in good faith determine, the threatened indictment by
any Governmental Authority of any Borrower of which any Borrower or Lender
receives notice, in either case, as to which there is a reasonable possibility
of an adverse determination, in the good faith determination of Lender, under
any criminal statute, or commencement or threatened commencement of criminal or
civil proceedings against any Borrower, pursuant to which statute or proceedings
the penalties or remedies sought or available include forfeiture of (i) any of
the Collateral having a value in excess of $250,000 or (ii) any other property
of such Borrower which is necessary or material to the conduct of its business;
(xv) there shall be a material adverse change in the business
or assets of the Borrowers and the Obligors (taken as a whole) after the date
hereof; or
(xvi) there shall be an event of default under any of the
other Financing Agreements.
Section 10.02 Remedies.
(i) At any time an Event of Default exists or has occurred and
is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the UCC and other applicable law, all
of which rights and remedies may be exercised without notice to or consent by
any Borrower or any Obligor, except as such notice or consent is expressly
provided for hereunder or required by applicable law. All rights, remedies and
powers granted to Lender hereunder, under any of the other Financing Agreements,
the UCC or other applicable law, are cumulative, not exclusive and enforceable,
in Lender's
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discretion, alternatively, successively, or concurrently on any one or more
occasions, and shall include, without limitation, the right to apply to a court
of equity for an injunction to restrain a breach or threatened breach by any
Borrower of this Agreement or any of the other Financing Agreements. Lender may,
at any time or times, proceed directly against any Borrower or any Obligor to
collect the Obligations without prior recourse to the Collateral.
(ii) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any Real
Property on or in which any of the Collateral may be located and take possession
of the Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrowers, at Borrowers' expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any Real Property on or in which the same may be
located for the purpose of effecting the sale, foreclosure or other disposition
thereof or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
any Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrowers, and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Lender to Borrowers designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrowers waive any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrowers waive the posting of any bond
which might otherwise be required. At any time an Event of Default exists or has
occurred and is continuing, upon Lender's request, Borrowers will either, as
Lender shall specify, furnish cash collateral to the issuer to be used to secure
and fund Lender's reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations. Such cash collateral shall be in the amount
equal to one hundred ten percent (110%) of the amount of the Letter of Credit
Accommodations plus the amount of any fees and expenses payable in connection
therewith through the end of the expiration of such Letter of Credit
Accommodations.
(iii) Lender may, at any time or times that an Event of
Default exists or has occurred and is continuing, enforce any Borrower's rights
against any account debtor, secondary obligor or other obligor in respect of any
of the Accounts or other Receivables. Without limiting the generality of the
foregoing, Lender may at such time or times (i) notify any
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or all account debtors, secondary obligors or other obligors in respect thereof
that the Receivables have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors, secondary
obligors and other obligors to make payment of Receivables directly to Lender,
(ii) extend the time of payment of, compromise, settle or adjust for cash,
credit, return of merchandise or otherwise, and upon any terms or conditions,
any and all Receivables or other obligations included in the Collateral and
thereby discharge or release the account debtor or any secondary obligors or
other obligors in respect thereof without affecting any of the Obligations,
(iii) demand, collect or enforce payment of any Receivables or such other
obligations, but without any duty to do so, and Lender shall not be liable for
its failure to collect or enforce the payment thereof nor for the negligence of
its agents or attorneys with respect thereto and (iv) take whatever other action
Lender may deem necessary or desirable for the protection of its interests. At
any time that an Event of Default exists or has occurred and is continuing, at
Lender's request, all invoices and statements sent to any account debtor shall
state that the Accounts and such other obligations have been assigned to Lender
and are payable directly and only to Lender and the applicable Borrower shall
deliver to Lender such originals of documents evidencing the sale and delivery
of goods or the performance of services giving rise to any Accounts as Lender
may require. In the event any account debtor returns Inventory when an Event of
Default exists or has occurred and is continuing, the applicable Borrower shall,
upon Lender's request, hold the returned Inventory in trust for Lender,
segregate all returned Inventory from all of its other property, dispose of the
returned Inventory solely according to Lender's instructions, and not issue any
credits, discounts or allowances with respect thereto without Lender's prior
written consent.
(iv) To the extent that applicable law imposes duties on
Lender to exercise remedies in a commercially reasonable manner (which duties
cannot be waived under such law), each Borrower acknowledges and agrees that it
is not commercially unreasonable for Lender (i) to fail to incur expenses
reasonably deemed significant by Lender to prepare Collateral for disposition or
otherwise to complete raw material or work in process into finished goods or
other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain consents of any Governmental Authority
or other third party for the collection or disposition of Collateral to be
collected or disposed of, (iii) to fail to exercise collection remedies against
account debtors, secondary obligors or other persons obligated on Collateral or
to remove liens or encumbrances on or any adverse claims against Collateral,
(iv) to exercise collection remedies against account debtors and other persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other persons, whether or
not in the same business as such Borrower, for expressions of interest in
acquiring all or any portion of the Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Lender against risks
of loss, collection or disposition of Collateral or to provide to Lender a
guaranteed return from the collection or disposition of Collateral, or (xii) to
the extent deemed appropriate by Lender, to obtain the
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services of other brokers, investment bankers, consultants and other
professionals to assist Lender in the collection or disposition of any of the
Collateral. Each Borrower acknowledges that the purpose of this Section is to
provide non-exhaustive indications of what actions or omissions by such Borrower
would not be commercially unreasonable in Lender's exercise of remedies against
the Collateral and that other actions or omissions by Lender shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section. Without limitation of the foregoing, nothing contained in this Section
shall be construed to grant any rights to any Borrower or to impose any duties
on Lender that would not have been granted or imposed by this Agreement or by
applicable law in the absence of this Section.
(v) For the purpose of enabling Lender to exercise the rights
and remedies hereunder, each Borrower hereby grants to Lender, to the extent
assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to such Borrower) to use, assign, license or
sublicense any of the trademarks, service-marks, trade names, business names,
trade styles, designs, logos and other source of business identifiers and other
Intellectual Property and general intangibles now owned or hereafter acquired by
such Borrower, wherever the same maybe located, including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout thereof.
(vi) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrowers shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including reasonable attorneys' fees and legal expenses.
(vii) Without limiting the foregoing, upon the occurrence of a
Default or Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrowers and/or (ii) terminate any provision of
this Agreement providing for any future Loans or Letter of Credit Accommodations
to be made by Lender to Borrowers.
ARTICLE XI
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
Section 11.01 Governing Law; Choice of Forum; Service of Process; Jury
Trial Waiver.
(i) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements (other than the Mortgages to the
extent provided therein) and any dispute arising out of the relationship between
the parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of Illinois (without giving effect to
principles of conflicts of law).
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(ii) Each Borrower and Lender irrevocably consent and submit
to the non-exclusive jurisdiction of the Circuit Court of ▇▇▇▇ County, Illinois
and the United States District Court for the Northern District of Illinois,
whichever Lender may elect, and waive any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against any Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against any Borrower or its
property).
(iii) Each Borrower hereby waives personal service of any and
all process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth
herein and service so made shall be deemed to be completed five (5) days after
the same shall have been so deposited in the U.S. mails, or, at Lender's option,
by service upon such Borrower in any other manner provided under the rules of
any such courts. Within thirty (30) days after such service, such Borrower shall
appear in answer to such process, failing which such Borrower shall be deemed in
default and judgment may be entered by Lender against such Borrower for the
amount of the claim and other relief requested.
(iv) EACH BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER
THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH
BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT SUCH BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(v) Lender shall not have any liability to any Borrower
(whether in tort, contract, equity or otherwise) for losses suffered by any
Borrower in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on Lender, that the
losses were the result of acts or omissions constituting gross negligence or
willful misconduct of Lender. In any such litigation, Lender shall be entitled
to the benefit of the rebuttable presumption that it acted in good faith and
with the exercise of ordinary care in the performance
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by it of the terms of this Agreement. Except as prohibited by law, each Borrower
waives any right which it may have to claim or recover in any litigation with
Lender any special, exemplary, punitive or consequential damages or any damages
other than, or in addition to, actual damages. Each Borrower: (i) certifies that
neither Lender nor any representative, agent or attorney acting for or on behalf
of Lender has represented, expressly or otherwise, that Lender would not, in the
event of litigation, seek to enforce any of the waivers provided for in this
Agreement or any of the other Financing Agreements and (ii) acknowledges that in
entering into this Agreement and the other Financing Agreements, Lender is
relying upon, among other things, the waivers and certifications set forth in
this Section 11.1 and elsewhere herein and therein.
Section 11.02 Waiver of Notices.
Each Borrower hereby expressly waives demand, presentment, protest and
notice of protest and notice of dishonor with respect to any and all instruments
and chattel paper, included in or evidencing any of the Obligations or the
Collateral, and any and all other demands and notices of any kind or nature
whatsoever with respect to the Obligations, the Collateral and this Agreement,
except such as are expressly provided for herein. No notice to or demand on any
Borrower which Lender may elect to give shall entitle such Borrower to any other
or further notice or demand in the same, similar or other circumstances.
Section 11.03 Amendments and Waivers.
Neither this Agreement nor any provision hereof shall be amended,
modified, waived or discharged orally or by course of conduct, but only by a
written agreement signed by an authorized officer of Lender, and as to
amendments, as also signed by an authorized officer of each Borrower. Lender
shall not, by any act, delay, omission or otherwise be deemed to have expressly
or impliedly waived any of its rights, powers and/or remedies unless such waiver
shall be in writing and signed by an authorized officer of Lender. Any such
waiver shall be enforceable only to the extent specifically set forth therein. A
waiver by Lender of any right, power and/or remedy on any one occasion shall not
be construed as a bar to or waiver of any such right, power and/or remedy which
Lender would otherwise have on any future occasion, whether similar in kind or
otherwise.
Section 11.04 Waiver of Counterclaims.
Each Borrower waives all rights to interpose any claims, deductions,
setoffs or counterclaims of any nature (other than compulsory counterclaims) in
any action or proceeding with respect to this Agreement, the Obligations, the
Collateral or any matter arising therefrom or relating hereto or thereto.
Section 11.05 Indemnification.
Each Borrower shall indemnify and hold Lender, and its directors,
agents, employees and counsel, harmless from and against any and all losses,
claims, damages, liabilities, costs or expenses imposed on, incurred by or
asserted against any of them in connection with any litigation, investigation,
claim or proceeding commenced or threatened related to the negotiation,
preparation, execution, delivery, enforcement, performance or administration of
this Agreement, any other Financing Agreements, or any undertaking or
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proceeding related to any of the transactions contemplated hereby or any act,
omission, event or transaction related or attendant thereto, including amounts
paid in settlement, court costs, and the reasonable fees and expenses of
counsel. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in this Section may be unenforceable because it violates any law or
public policy, each Borrower shall pay the maximum portion which it is permitted
to pay under applicable law to Lender in satisfaction of indemnified matters
under this Section. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
ARTICLE XII
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
Section 12.01 Term.
(i) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three (3) years
from the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof. Lender or Borrowers may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other parties hereto at least sixty (60) days prior written notice;
provided, that, this Agreement and all other Financing Agreements must be
terminated simultaneously. In addition, Borrowers may terminate this Agreement
at any time upon ten (10) days prior written notice to Lender (which notice
shall be irrevocable) and Lender may terminate this Agreement at any time on or
after an Event of Default. Upon the effective date of termination or non-renewal
of this Agreement, Borrowers shall pay to Lender, in full, all outstanding and
unpaid Obligations and shall furnish cash collateral to Lender (or at Lender's
option, a letter of credit issued for the account of Borrowers and at Borrowers'
expense, in form and substance satisfactory to Lender, by an issuer acceptable
to Lender and payable to Lender as beneficiary) in such amounts as Lender
determines are reasonably necessary to secure (or reimburse) Lender from loss,
cost, damage or expense, including reasonable attorneys' fees and legal
expenses, in connection with any contingent Obligations, including issued and
outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment. Such payments in respect of the
Obligations and cash collateral shall be remitted by wire transfer in Federal
funds to such bank account of Lender, as Lender may, in its discretion,
designate in writing to Borrowers for such purpose. Interest shall be due until
and including the next business day, if the amounts so paid by Borrowers to the
bank account designated by Lender are received in such bank account later than
12:00 noon, Chicago time.
(ii) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid. Accordingly, each Borrower waives any
rights which it may
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have under the UCC to demand the filing of termination statements with respect
to the Collateral, and Lender shall not be required to send such termination
statements to such Borrower, or to file them with any filing office, unless and
until this Agreement is terminated in accordance with its terms and all of the
Obligations are paid and satisfied in full in immediately available funds.
(iii) If for any reason this Agreement is terminated prior to
the end of the then current term or renewal term of this Agreement, in view of
the impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrowers agree to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
Amount Period
------ ------
Three percent (3%) of the Maximum From the date hereof to but not including the
Credit first anniversary of the date hereof.
Two percent (2%) of the Maximum Credit From and after the first anniversary of the
date hereof to but not including the second
anniversary of the date hereof.
One percent (1%) of the Maximum Credit From and after the second anniversary of the
date hereof, to but not including the third
anniversary of the date hereof, or if the term
of this Agreement is extended, at any time
prior to the end of the then current term.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers agree
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrowers or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
Section 12.02 Interpretative Provisions.
(i) All terms used herein which are defined in Article 1 or
Article 9 of the UCC shall have the meanings given therein unless otherwise
defined in this Agreement.
(ii) All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires.
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(iii) All references to each Borrower and Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns.
(iv) The words "hereof", "herein", "hereunder", "this
Agreement" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not any particular provision of this Agreement
and as this Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
(v) The word "including" when used in this Agreement shall
mean "including, without limitation".
(vi) All references to the term "good faith" used herein when
applicable to Lender shall mean, notwithstanding anything to the contrary
contained herein or in the UCC, honesty in fact in the conduct or transaction
concerned. Borrowers shall have the burden of proving any lack of good faith on
the part of Lender alleged by any Borrower at any time.
(vii) An Event of Default shall exist or continue or be
continuing until such Event of Default is waived in accordance with Section 11.3
or is cured in a manner satisfactory to Lender, if such Event of Default is
capable of being cured as determined by Lender.
(viii) Any accounting term used in this Agreement shall have,
unless otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Borrowers most recently
received by Lender prior to the date hereof.
(ix) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including", the
words "to" and "until" each mean "to but excluding" and the word "through" means
"to and including".
(x) Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(xi) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(xii) This Agreement and other Financing Agreements may use
several different limitations, tests or measurements to regulate the same or
similar matters. All
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such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.
(xiii) This Agreement and the other Financing Agreements are
the result of negotiations among and have been reviewed by counsel to Lender and
the other parties, and are the products of all parties. Accordingly, this
Agreement and the other Financing Agreements shall not be construed against
Lender merely because of Lender's involvement in their preparation.
Section 12.03 Notices.
All notices, requests and demands hereunder shall be in writing and
deemed to have been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next Business Day, one (1)
Business Day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing. All notices, requests and demands upon the parties
are to be given to the following addresses (or to such other address as any
party may designate by notice in accordance with this Section):
If to Borrowers: c/o Fansteel Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender Congress Financial Corporation (Central)
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇; ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 12.04 Partial Invalidity.
If any provision of this Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this
Agreement as a whole, but this Agreement shall be construed as though it did not
contain the particular provision held to be invalid or unenforceable and the
rights and obligations of the parties shall be construed and enforced only to
such extent as shall be permitted by applicable law.
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Section 12.05 Successors.
This Agreement, the other Financing Agreements and any other document
referred to herein or therein shall be binding upon and inure to the benefit of
and be enforceable by Lender, Borrowers and their respective successors and
assigns, except that Borrowers may not assign their rights under this Agreement,
the other Financing Agreements and any other document referred to herein or
therein without the prior written consent of Lender. Lender may, after notice to
Borrower Representative, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
Section 12.06 Borrower Representative.
Each Borrower hereby irrevocably appoints Fansteel as the borrowing
agent and attorney-in-fact for all Borrowers ("Borrower Representative"), which
appointment shall remain in full force and effect unless and until Lender shall
have received prior written notice signed by each Borrower indicating that such
appointment has been revoked and that another Borrower has been appointed
Borrower Representative (and further indicating the identity of such new
Borrower Representative). Each Borrower hereby irrevocably appoints and
authorizes the Borrower Representative (i) to provide Lender with all notices
with respect to Revolving Loans and Letter of Credit Accommodations obtained for
the benefit of any Borrower and all other notices and instructions under this
Agreement and (ii) to take such action as the Borrower Representative deems
appropriate on its behalf to obtain Revolving Loans and Letter of Credit
Accommodations and to exercise such other powers as are reasonably incidental
thereto to carry out the purposes of this Agreement. It is understood that the
handling of Borrowers' loan account and Collateral of Borrowers in a combined
fashion, as more fully set forth herein, is done solely as an accommodation to
Borrowers in order to utilize the collective borrowing powers of Borrowers in
the most efficient and economical manner and at their request, and that Lender
shall not incur liability to any Borrower as a result hereof. Each Borrower
expects to derive benefit, directly or indirectly, from the handling of
Borrowers' loan account and the Collateral in a combined fashion since the
successful operation of each Borrower is dependent on the continued successful
performance of the integrated group. To induce Lender to do so, and in
consideration thereof, each Borrower hereby jointly and severally agrees to
indemnify Lender harmless against any and all liability, expense, loss or claim
of damage or injury, made against Lender by any Borrower or by any third party
whosoever, arising from or incurred by reason of (a) the handling of Borrowers'
loan account and Collateral of Borrowers as herein provided, (b) Lender's
relying on any instructions of the Borrower Representative, or (c) any other
action taken by Lender hereunder or under the other Financing Agreements.
Section 12.07 Entire Agreement.
This Agreement, the other Financing Agreements, any supplements hereto
or thereto, and any instruments or documents delivered or to be delivered in
connection herewith or therewith represents the entire agreement and
understanding concerning the subject matter hereof
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and thereof between the parties hereto, and supersede all other prior
agreements, understandings, negotiations and discussions, representations,
warranties, commitments, proposals, offers and contracts concerning the subject
matter hereof, whether oral or written. In the event of any inconsistency
between the terms of this Agreement and any schedule or exhibit hereto, the
terms of this Agreement shall govern.
Section 12.08 Counterparts, Etc.
This Agreement or any of the other Financing Agreements may be executed
in any number of counterparts, each of which shall be an original, but all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of this Agreement or any of the other Financing Agreements
by telefacsimile shall have the same force and effect as the delivery of an
original executed counterpart of this Agreement or any of such other Financing
Agreements. Any party delivering an executed counterpart of any such agreement
by telefacsimile shall also deliver an original executed counterpart, but the
failure to do so shall not affect the validity, enforceability or binding effect
of such agreement.
ARTICLE XIII
SECTION 13. JOINT AND SEVERAL OBLIGATIONS
Section 13.01 Joint and Several Obligations.
Each Borrower hereby agrees that such Borrower is jointly and severally
liable for the full and prompt payment (whether at stated maturity, by
acceleration or otherwise) and performance of, all Obligations owed or hereafter
owing to Lender by each other Borrower. Each Borrower agrees that its obligation
hereunder is a continuing obligation of payment and performance and not of
collection, that its obligations under this Section 13 shall not be discharged
until payment and performance, in full, of the Obligations has occurred, and
that its obligations under this Section 13 shall be absolute and unconditional,
irrespective of, and unaffected by,
(i) the genuineness, validity, regularity, enforceability or
any future amendment of, or change in, this Agreement, any other Financing
Agreement or any other agreement, document or instrument to which any Borrower
is or may become a party;
(ii) the absence of any action to enforce this Agreement
(including this Section 13) or any other Financing Agreement or the waiver or
consent by Lender with respect to any of the provisions thereof;
(iii) the existence, value or condition of, or failure to
perfect its lien against, any security for the Obligations or any action, or the
absence of any action, by Lender in respect thereof (including the release of
any such security);
(iv) the insolvency of any Borrower or any Obligor; or
(v) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
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Each Borrower shall be regarded, and shall be in the same position, as principal
debtor with respect to the Obligations hereunder.
Section 13.02 Waivers by Borrowers.
Each Borrower expressly waives all rights it may have now or in the
future under any statute, or at common law, or at law or in equity, or
otherwise, to compel Lender to ▇▇▇▇▇▇▇▇ assets or to proceed in respect of the
Obligations hereunder against any other Borrower or any Obligor, any other party
or against any security for the payment and performance of the Obligations
before proceeding against, or as a condition to proceeding against, such
Borrower. It is agreed among each Borrower and Lender that the foregoing waivers
are of the essence of the transaction contemplated by this Agreement and the
other Financing Agreements and that, but for the provisions of this Section 13
and such waivers, Lender would decline to enter into this Agreement.
Section 13.03 Benefit of Joint and Several Obligations.
Each Borrower agrees that the provisions of this Section 13 are for the
benefit of Lender and its successors, transferees, endorsees and assigns, and
nothing herein contained shall impair, as between any other Borrower and Lender,
the obligations of such other Borrower under the Financing Agreements.
Section 13.04 Subordination of Subrogation, Etc.
Notwithstanding anything to the contrary in this Agreement or in any
other Financing Agreement, and except as set forth in Section 13.7, each
Borrower hereby expressly and irrevocably subordinates to payment of the
Obligations any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off and any and
all defenses available to a surety, guarantor or accommodation co-obligor until
the Obligations are indefeasibly paid in full in cash. Each Borrower
acknowledges and agrees that this subordination is intended to benefit Lender
and shall not limit or otherwise affect such Borrower's liability hereunder or
the enforceability of this Section 13, and that Lender and its successors and
assigns are intended third party beneficiaries of the waivers and agreements set
forth in this Section 13.4.
Section 13.05 Election of Remedies.
If Lender may, under applicable law, proceed to realize its benefits
under any of the Financing Agreements giving Lender a lien upon any Collateral,
whether owned by any Borrower or by any other Person, either by judicial
foreclosure or by non-judicial sale or enforcement, Lender may, at its sole
option, determine which of its remedies or rights it may pursue without
affecting any of its rights and remedies under this Section 13. If, in the
exercise of any of its rights and remedies, Lender shall forfeit any of its
rights or remedies, including its right to enter a deficiency judgment against
any Borrower or any other Person, whether because of any applicable laws
pertaining to "election of remedies" or the like, each Borrower hereby consents
to such action by Lender and waives any claim based upon such action, even if
such action by Lender shall result in a full or partial loss of any rights of
subrogation that each Borrower might otherwise have had but for such action by
Lender. Any election of remedies
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that results in the denial or impairment of the right of Lender to seek a
deficiency judgment against any Borrower shall not impair any other Borrower's
obligation to pay the full amount of the Obligations. In the event Lender shall
bid at any foreclosure or trustee's sale or at any private sale permitted by law
or the Financing Agreements, Lender may bid all or less than the amount of the
Obligations and the amount of such bid need not be paid by Lender but shall be
credited against the Obligations. The amount of the successful bid at any such
sale, whether Lender or any other party is the successful bidder, shall be
conclusively deemed to be the fair market value of the Collateral and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations under this
Section 13, notwithstanding that any present or future law or court decision or
ruling may have the effect of reducing the amount of any deficiency claim to
which Lender might otherwise be entitled but for such bidding at any such sale.
Section 13.06 Limitation.
Notwithstanding any provision herein contained to the contrary, each
Borrower's liability under this Section 13 shall be limited to an amount not to
exceed as of any date of determination the greater of:
(i) the net amount of all Loans advanced to such Borrower or
to any other Borrower under this Agreement and then re-loaned or otherwise
transferred to, or for the benefit of, such Borrower; and
(ii) the amount that could be claimed by Lender from such
Borrower under this Section 13 without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law after taking into account, among other
things, such Borrower's right of contribution and indemnification from each
other Borrower under Section 13.7.
Section 13.07 Contribution with Respect to Joint and Several
Obligations.
(i) To the extent that any Borrower shall make a payment under
this Section 13 of all or any of the Obligations (other than Loans made to that
Borrower for which it is primarily liable) (a "Joint and Several Payment") that,
taking into account all other Joint and Several Payments then previously or
concurrently made by any other Borrower, exceeds the amount that such Borrower
would otherwise have paid if each Borrower had paid the aggregate Obligations
satisfied by such Joint and Several Payment in the same proportion that such
Borrower's "Allocable Amount" (as defined below) (as determined immediately
prior to such Joint and Several Payment) bore to the aggregate Allocable Amounts
of each of Borrowers as determined immediately prior to the making of such Joint
and Several Payment, then, following indefeasible payment in full in cash of the
Obligations and termination of the Commitments, such Borrower shall be entitled
to receive contribution and indemnification payments from, and be reimbursed by,
each other Borrower for the amount of such excess, pro rata based upon their
respective Allocable Amounts in effect immediately prior to such Joint and
Several Payment.
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(ii) As of any date of determination, the "Allocable Amount"
of any Borrower shall be equal to the maximum amount of the claim that could
then be recovered from such Borrower under this Section 13 without rendering
such claim voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law.
(iii) This Section 13.7 is intended only to define the
relative rights of Borrowers and nothing set forth in this Section 13.7 is
intended to or shall impair the obligations of Borrowers, jointly and severally,
to pay any amounts as and when the same shall become due and payable in
accordance with the terms of this Agreement, including Section 13.1. Nothing
contained in this Section 13.7 shall limit the liability of any Borrower to pay
the Loans made directly or indirectly to that Borrower and accrued interest,
Fees and expenses with respect thereto for which such Borrower shall be
primarily liable.
(iv) The parties hereto acknowledge that the rights of
contribution and indemnification hereunder shall constitute assets of the
Borrower to which such contribution and indemnification is owing.
(v) The rights of the indemnifying Borrowers against other
Borrowers and Obligors under this Section 13.7 shall be exercisable upon the
full and indefeasible payment of the Obligations and the termination of the
Commitments.
Section 13.08 Liability Cumulative.
The liability of Borrowers under this Section 13 is in addition to and
shall be cumulative with all liabilities of each Borrower to Lender under this
Agreement and the other Financing Agreements to which such Borrower is a party
or in respect of any Obligations or obligation of the other Borrower, without
any limitation as to amount, unless the instrument or agreement evidencing or
creating such other liability specifically provides to the contrary.
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IN WITNESS WHEREOF, Lender and Borrowers have caused these presents to
be duly executed as of the day and year first above written.
LENDER BORROWERS
CONGRESS FINANCIAL CORPORATION FANSTEEL INC.
(CENTRAL)
By By
-------------------------------- --------------------------------
Title Title
------------------------------ ------------------------------
Address: Chief Executive Office:
Congress Financial Corporation (Central) One Tantalum Place
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇; ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ DYNAMICS CORPORATION
By
--------------------------------
Title
------------------------------
Chief Executive Office:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
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FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This First Amendment to Loan and Security Agreement (the "First
Amendment") is made as of January 19, 2005, between Congress Financial
Corporation (Central) ("Lender") and Fansteel Inc., a Delaware corporation
("Fansteel") and ▇▇▇▇▇▇▇ Dynamics Corporation, a Delaware corporation
("▇▇▇▇▇▇▇"; Fansteel and ▇▇▇▇▇▇▇ are collectively "Borrowers" and each
individually a "Borrower").
RECITALS
WHEREAS, Borrowers and Lender are parties to that certain Loan and
Security Agreement dated January 23, 2004 (as the same has been amended,
supplemented or otherwise modified, the "Loan Agreement") and various other
documents, instruments and agreements (as amended, supplemented or otherwise
modified from time to time, the "Financing Agreements");
WHEREAS, Borrowers have requested that the Lender agree to addition of
a component for Eligible Inventory under the Borrowing Base set forth in the
Loan Agreement; and
WHEREAS, Lender has agreed to such request on and subject to the terms
and conditions hereof;
NOW THEREFORE, in consideration of the provisions set forth herein, and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE XIV
Defined Terms. Unless otherwise defined herein, capitalized terms used
herein shall have the same meanings herein as given to such terms in the Loan
Agreement.
ARTICLE XV
Amendments to Loan Agreement. Subject to the satisfaction of the
conditions set forth herein, the Loan Agreement is amended as follows:
Section 15.01 The definition of the term "Borrowing Base" set forth in
Section 1 of the Loan Agreement is amended and restated in its entirety, as
follows:
"Borrowing Base" shall mean, at any time, as to each Borrower, the
amount equal to: (a) eighty-five percent (85%) of the Net Amount of Eligible
Accounts of such Borrower, plus (b) the lesser of (i) seventy percent (70%) of
the Net Orderly Liquidation Value of the Eligible Equipment of such Borrower and
(ii) the Equipment Sublimit for such Borrower, plus (c) the lesser of (i)
eighty-five percent of the Net Recovery Rate of the Value of the Eligible
Inventory of such Borrower or (ii) the Inventory Sublimit for such Borrower less
(d) any Reserves attributable to such Borrower. For purposes only of applying
the sublimit on Revolving Loans based on Eligible Inventory that is set forth in
clause (c)(ii) above, Lender may treat the then undrawn amounts of outstanding
Letter of Credit Accommodations for the purpose of purchasing Eligible Inventory
as Revolving Loans to the extent Lender is in effect basing the issuance of the
Letter of Credit Accommodations on the Value of the Eligible Inventory being
purchased with
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such Letter of Credit Accommodations. In determining the actual amounts of such
Letter of Credit Accommodations to be so treated for purposes of the sublimit,
the outstanding Revolving Loans and Reserves shall be attributed first to any
components of the lending formulas set forth above that are not subject to such
sublimit, before being attributed to the components of the lending formulas
subject to such sublimit; provided, that at the time of any such determination
no Revolving Loan or any portion thereof or Reserve or any portion thereof shall
be attributed to more than one such component of the lending formulas set forth
above.
Section 15.02 The definition of the term "Equipment Cap" set forth in
Section 1 of the Loan Agreement is amended and restated in its entirety, as
follows:
"Equipment Cap" shall mean
(i) with respect to Fansteel, $840,000, provided that (a) the
Equipment Cap of Fansteel will be reduced by $18,000 on the first day of
each month (commencing February 1, 2005) and (b) in addition to the monthly
reduction set forth in the foregoing clause (a), the Equipment Cap of
Fansteel will be reduced by the amount of any proceeds received from the
disposition of any Equipment for such Borrower (excluding any Fansteel Asset
Sale Proceeds).
(ii) with respect to ▇▇▇▇▇▇▇, $400,000, provided that (a) the
Equipment Cap of ▇▇▇▇▇▇▇ will be reduced by $8,333 on the first day of each
month (commencing February 1, 2005) and (b) in addition to the monthly
reduction set forth in the foregoing clause (a), the Equipment Cap of
▇▇▇▇▇▇▇ will be reduced by the amount of any proceeds received from the
disposition of any Equipment for such Borrower.
Section 15.03 The definition of the term "Equipment Sublimit" set forth
in Section 1 of the Loan Agreement is amended and restated in its entirety, as
follows:
"Equipment Sublimit" shall mean, as to each Borrower, its Equipment
Cap.
Section 15.04 The defined terms "Eligible Inventory", "Inventory Cap",
"Inventory Sublimit", "Net Recovery Rate" and "Value" are each added to Section
1 of the Loan Agreement in their appropriate respective alphabetical order, as
follows:
"Eligible Inventory" shall mean with respect to a Borrower, Inventory
of such Borrower consisting of (i) finished goods held for resale in the
ordinary course of the business of such Borrower and (ii) raw materials for such
finished goods, in each case which are acceptable to Lender based on the
criteria set forth below. In general, Eligible Inventory shall not include (a)
work-in-process; (b) components which are not part of finished goods; (c) spare
parts for equipment; (d) packaging and shipping materials; (e) supplies used or
consumed in such Borrower's business; (f) Inventory at premises other than those
owned and controlled by such Borrower, except any Inventory which would
otherwise be deemed Eligible Inventory that is not located at premises owned and
operated by such Borrower may nevertheless be considered Eligible Inventory: (i)
as to locations which are leased by such Borrower if Lender shall have received
a Collateral Access Agreement from the owner and lessor of such location, duly
authorized, executed and delivered by such owner and lessor or if Lender shall
not have received such Collateral Access Agreement (or Lender shall determine to
accept a Collateral Access
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Agreement which does not include all required provisions or provisions in the
form otherwise required by Lender), Lender may, at is option, nevertheless
consider Inventory at such location to be Eligible Inventory to the extent
Lender shall have established such Reserves in respect of amounts at any time
payable by such Borrower to the owner and lessor thereof as Lender shall
reasonably determine, and (ii) as to locations owned and operated by a third
person, if Lender shall have received a Collateral Access Agreement from such
owner and operator with respect to such location, duly authorized, executed and
delivered by such owner and operator or if Lender shall not have received such
Collateral Access Agreement (or Lender shall determine to accept a Collateral
Access Agreement which does not include all required provisions or provisions in
the form otherwise required by Lender), Lender may, at its option, nevertheless
consider Inventory at such location to be Eligible Inventory to the extent
Lender shall have established such Reserves in respect of amounts at any time
payable by such Borrower to the owner and operator thereof as Lender shall
reasonably determine, and, in addition, as to locations owned and operated by a
third person, Lender shall have received, if required by Lender: (A) UCC-1
financing statements between the owner and operator, as consignee or bailee and
such Borrower, as consignor or ▇▇▇▇▇▇, in form and substance satisfactory to
Lender, which are duly assigned to Lender and (B) a written notice to any lender
to the owner and operator of the first priority security interest in such
Inventory of Lender; (g) Inventory subject to a security interest or lien in
favor of any person other than Lender except those permitted in this Agreement;
(h) ▇▇▇▇ and hold goods; (i) unserviceable or obsolete Inventory or Inventory
that is slow moving (taking into account the historical operations of Borrowers
and the nature of Borrowers' business); (j) Inventory which is not subject to
the first priority, valid and perfected security interest of Lender; (k)
returned, damaged and/or defective Inventory; (l) Inventory purchased or sold on
consignment and (m) Inventory located outside the United States of America. The
criteria for Eligible Inventory set forth above may only be changed and any new
criteria for Eligible Inventory may only be established by Lender in good faith
based on either: (i) an event, condition or other circumstance arising after the
date hereof, or (ii) an event, condition or other circumstance existing on the
date hereof to the extent Lender has no written notice thereof from such
Borrower prior to the date hereof, in either case under clause (i) or (ii) which
adversely affects or could reasonably be expected to adversely affect the
Inventory in the good faith determination of Lender. Any Inventory which is not
Eligible Inventory shall nevertheless be part of the Collateral.
"Inventory Cap" shall mean $1,000,000.
"Inventory Sublimit" shall mean, as to each Borrower, at any time, the
amount equal to the Inventory Cap minus the then outstanding principal amount of
Loans to the other Borrower based on Eligible Inventory.
"Net Recovery Rate" shall mean the fraction, expressed as a percentage,
(a) the numerator of which is the amount equal to the amount of the recovery in
respect of the Eligible Inventory at such time on a "net orderly liquidation
value" basis as set forth in the most recent acceptable appraisal of Inventory
received by Agent in accordance with Section 7.3, net of liquidation expenses
and commissions, and (b) the denominator of which is the applicable cost of the
aggregate amount of the Eligible Inventory subject to such appraisal.
"Value" shall mean, as determined by Lender in good faith, with respect
to Inventory, the lower of (a) cost computed on a first-in first-out basis in
accordance with GAAP
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or (b) market value provided, that, for purposes of the calculation of the
Borrowing Base, (i) the Value of the Inventory shall not be affected by: (A) the
portion of the value of Inventory equal to the profit earned by any Affiliate on
the sale thereof to a Borrower or (B) write-ups or write-downs in value with
respect to currency exchange rates and (ii) notwithstanding anything to the
contrary contained herein, the cost of the Inventory shall be computed in the
same manner and consistent with the most recent appraisal of the Inventory
received and accepted by Lender in accordance with the terms hereof.
Section 15.05 The penultimate sentence set forth in the definition of
the term "Reserves" in Section 1 of the Loan Agreement is amended and restated
in its entirety, as follows:
" To the extent Lender may revise the lending formulas used to
determine the Borrowing Base or establish new criteria or revise existing
criteria for Eligible Accounts or Eligible Inventory so as to address any
circumstances, condition, event or contingency in a manner satisfactory to
Lender, Lender shall not establish a Reserve for the same purpose. "
Section 15.06 Section 2.1(b) of the Loan Agreement is amended and
restated in its entirety, as follows:
" Lender may, in its good faith discretion, from time to time, upon not
less than five (5) days prior notice to Borrower Representative, (i) reduce the
lending formula with respect to Eligible Accounts to the extent that Lender
determines in good faith that: (A) the dilution with respect to the Accounts for
any period (based on the ratio of (1) the aggregate amount of reductions in
Accounts other than as a result of payments in cash to (2) the aggregate amount
of total sales) has increased or may be reasonably anticipated to increase above
historical levels, or (B) the general creditworthiness of account debtors has
declined, or (ii) reduce the lending formula(s) with respect to Eligible
Inventory to the extent that Lender determines that: (A) the number of days of
the turnover of the Inventory for any period has changed or (B) the liquidation
value of the Eligible Inventory, or any category thereof, has decreased,
including any such decrease attributable to any change in the nature, quality or
mix of the Inventory. The amount of any decrease in the lending formulas shall
have a reasonable relationship to the event, condition or circumstance which is
the basis for such decrease as determined by Lender in good faith. In
determining whether to reduce the lending formula(s), Lender may consider
events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory or in establishing Reserves. "
Section 15.07 Section 2.2(d) of the Loan Agreement is amended and
restated in its entirety, as follows:
" In addition to being subject to the satisfaction of the applicable
conditions precedent contained in Section 4 hereof and the other terms and
conditions contained herein, no Letter of Credit Accommodations shall be
available unless each of the following conditions precedent have been satisfied
in a manner satisfactory to Lender: (i) Borrower Representative shall have
delivered to the proposed issuer of such Letter of Credit Accommodation at such
times and in such manner as such proposed issuer may require, an application in
form and substance satisfactory to such proposed issuer and Lender for the
issuance of the Letter of Credit Accommodation and such other documents as may
be required pursuant to the terms thereof, and
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the form and terms of the proposed Letter of Credit Accommodation shall be
satisfactory to Lender and such proposed issuer, (ii) as of the date of
issuance, no order of any court, arbitrator or other Governmental Authority
shall purport by its terms to enjoin or restrain money center banks generally
from issuing letters of credit of the type and in the amount of the proposed
Letter of Credit Accommodation, and no law, rule or regulation applicable to
money center banks generally and no request or directive (whether or not having
the force of law) from any Governmental Authority with jurisdiction over money
center banks generally shall prohibit, or request that the proposed issuer of
such Letter of Credit Accommodation refrain from, the issuance of letters of
credit generally or the issuance of such Letters of Credit Accommodation; and
(iii) the Letter of Credit Availability, prior to giving effect to any Reserves
with respect to such Letter of Credit Accommodations, on the date of the
proposed issuance of any Letter of Credit Accommodations, shall be equal to or
greater than: (A) if the proposed Letter of Credit Accommodation is for the
purpose of purchasing Eligible Inventory and the documents of title with respect
thereto are consigned to the issuer, the sum of (1) the percentage equal to one
hundred percent (100%) minus the then applicable percentage with respect to
Eligible Inventory set forth in the definition of the term Borrowing Base
multiplied by the Value of such Eligible Inventory, plus (2) freight, taxes,
duty and other amounts which Lender estimates must be paid in connection with
such Inventory upon arrival and for delivery to one of the locations for
Eligible Inventory within the United States of America and (B) if the proposed
Letter of Credit Accommodation is for any other purpose or the documents of
title are not consigned to the issuer in connection with a Letter of Credit
Accommodation for the purpose of purchasing Inventory, an amount equal to one
hundred percent (100%) of the face amount thereof and all other commitments and
obligations made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodation, a Reserve shall be established
in the applicable amount set forth in Section 2.2(d)(iii)(A) or Section
2.2(d)(iii)(B). "
Section 15.08 Section 8.11 of the Loan Agreement is amended by adding a
new sentence at the end thereof, as follows:
" No trademark, servicemark or other Intellectual Property at any time
used by any Borrower which is owned by another person, or owned by such Borrower
subject to any security interest, lien, collateral assignment, pledge or other
encumbrance in favor of any person other than Lender, is affixed to any Eligible
Inventory, except to the extent permitted under the term of the License
Agreements listed on Schedule 8.11 to the Information Certificate. "
Section 15.09 Section 9.9(e) of the Loan Agreement is amended by
amending and restating clause (i) of the proviso thereto, as follows:
" (i) any payments in respect of such Indebtedness shall be made in a
manner that is consistent with the terms of the Plan of Reorganization (and, in
the case of the Settlement Notes, any such payments shall be subject to the
proviso to Section 9.9(d) above), "
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ARTICLE XVI
Condition. This First Amendment shall be effective upon its execution
and delivery by all parties hereto.
ARTICLE XVII
Representations and Warranties. To induce the Lender to enter into this
First Amendment, each Borrower hereby represents and warrants to the Lender as
follows:
Section 17.01 The execution, delivery and performance by such Borrower
of this Amendment and each of the other agreements, instruments and documents
contemplated hereby are within its power, have been duly authorized by all
necessary action, have received all necessary governmental approval (if any
shall be required), and do not and will not contravene or conflict with any
provision of law applicable to such Borrower, the organizational documents of
such Borrower, any order, judgment or decree of any court or governmental
agency, or any agreement, instrument or document binding upon such Borrower or
any of its property;
Section 17.02 Each of the Loan Agreement and the other Financing
Agreements, as amended by this Amendment, are the legal, valid and binding
obligation of such Borrower enforceable against such Borrower in accordance with
its terms, except as the enforcement thereof may be subject to (i) the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditor's rights generally, and (ii) general principles of
equity;
Section 17.03 The representations and warranties contained in the Loan
Agreement and the other Financing Agreements are true and accurate as of the
date hereof with the same force and effect as if such had been made on and as of
the date hereof, except to the extent that any such representation or warranty
expressly relates solely to an earlier date (in which case any such
representation or warranty shall be true and correct on and as of such earlier
date); and
Section 17.04 Such Borrower has performed all of its obligations under
the Loan Agreement and the Financing Agreements to be performed by it on or
before the date hereof and as of the date hereof, such Borrower is in compliance
with all applicable terms and provisions of the Loan Agreement, and each of the
Financing Agreements to be observed and performed by it, and no Default or Event
of Default is in existence.
ARTICLE XVIII
Miscellaneous.
Section 18.01 Expenses. Borrowers agree to pay, on demand, all costs
and expenses of Lender (including the fees and expenses of outside counsel for
Lender) in connection with the preparation, negotiation, execution, delivery and
administration of this First Amendment and all other instruments or documents
provided for herein or delivered or to be delivered hereunder or in connection
herewith. All obligations provided in this Section 3(a) shall survive any
termination of the Loan Agreement as amended hereby.
Section 18.02 Governing Law. This First Amendment shall be a contract
made under and governed by the internal laws of the State of Illinois.
Section 18.03 Counterparts. This First Amendment may be executed in any
number of counterparts, and by the parties hereto on the same or separate
counterparts, and each
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such counterpart, when executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same amendment.
Section 18.04 Successors. This First Amendment shall be binding upon
Borrowers and Lender and their respective successors and assigns, and shall
inure to the benefit of Borrowers, Lender and their respective successors and
assigns.
Section 18.05 Ratification. Except as herein amended, the Loan
Agreement shall remain unchanged and in full force and effect, and is hereby
ratified in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be executed by their respective officers thereunto duly authorized and
delivered at Chicago, Illinois as of the date first above written.
LENDER BORROWERS
CONGRESS FINANCIAL CORPORATION FANSTEEL INC.
(CENTRAL)
By By
-------------------------------- --------------------------------
Title Title
------------------------------ ------------------------------
▇▇▇▇▇▇▇ DYNAMICS CORPORATION
By
--------------------------------
Title
------------------------------
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SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This Second Amendment to Loan and Security Agreement (the "Second
Amendment") is made as of March 31, 2005, between Congress Financial Corporation
(Central) ("Lender") and Fansteel Inc., a Delaware corporation ("Fansteel") and
▇▇▇▇▇▇▇ Dynamics Corporation, a Delaware corporation ("▇▇▇▇▇▇▇"; Fansteel and
▇▇▇▇▇▇▇ are collectively "Borrowers" and each individually a "Borrower").
RECITALS
WHEREAS, Borrowers and Lender are parties to that certain Loan and
Security Agreement dated January 23, 2004 (as the same has been amended,
supplemented or otherwise modified, the "Loan Agreement") and various other
documents, instruments and agreements (as amended, supplemented or otherwise
modified from time to time, the "Financing Agreements");
WHEREAS, Borrowers have requested that the Lender agree to modify the
minimum EBITDA covenant set forth in the Loan Agreement; and
WHEREAS, Lender has agreed to such request on and subject to the terms
and conditions hereof;
NOW THEREFORE, in consideration of the provisions set forth herein, and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE XIX
Defined Terms. Unless otherwise defined herein, capitalized terms used
herein shall have the same meanings herein as given to such terms in the Loan
Agreement.
ARTICLE XX
Amendment to Loan Agreement. Subject to the satisfaction of the
conditions set forth herein, the Loan Agreement is amended as follows:
Section 20.01 Clause (a) of Section 9.17 of the Loan Agreement is
amended and restated in its entirety, as follows:
" (a) EBITDA Covenant.
Borrowers shall maintain EBITDA for each period set forth below of at
least the amount set forth opposite such period:
Period Amount
------ ------
Six (6) months ended June 30, 2004 ($100,000)
Nine (9) months ended September 30, 2004 $550,000
Twelve (12) months ended December 31, 2004 $1,950,000
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Twelve (12) months ended March 31, 2005 and the twelve (12)
months ended on the last day of each calendar quarter $1,900,000 "
thereafter
ARTICLE XXI
Condition. This Second Amendment shall be effective upon its execution
and delivery by all parties hereto.
ARTICLE XXII
Representations and Warranties. To induce the Lender to enter into this
Second Amendment, each Borrower hereby represents and warrants to the Lender as
follows:
Section 22.01 The execution, delivery and performance by such Borrower
of this Amendment and each of the other agreements, instruments and documents
contemplated hereby are within its power, have been duly authorized by all
necessary action, have received all necessary governmental approval (if any
shall be required), and do not and will not contravene or conflict with any
provision of law applicable to such Borrower, the organizational documents of
such Borrower, any order, judgment or decree of any court or governmental
agency, or any agreement, instrument or document binding upon such Borrower or
any of its property;
Section 22.02 Each of the Loan Agreement and the other Financing
Agreements, as amended by this Amendment, are the legal, valid and binding
obligation of such Borrower enforceable against such Borrower in accordance with
its terms, except as the enforcement thereof may be subject to (i) the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditor's rights generally, and (ii) general principles of
equity;
Section 22.03 The representations and warranties contained in the Loan
Agreement and the other Financing Agreements are true and accurate as of the
date hereof with the same force and effect as if such had been made on and as of
the date hereof, except to the extent that any such representation or warranty
expressly relates solely to an earlier date (in which case any such
representation or warranty shall be true and correct on and as of such earlier
date); and
Section 22.04 Such Borrower has performed all of its obligations under
the Loan Agreement and the Financing Agreements to be performed by it on or
before the date hereof and as of the date hereof, such Borrower is in compliance
with all applicable terms and provisions of the Loan Agreement, and each of the
Financing Agreements to be observed and performed by it, and no Default or Event
of Default is in existence.
ARTICLE XXIII
Miscellaneous.
Section 23.01 Expenses. Borrowers agree to pay, on demand, all costs
and expenses of Lender (including the fees and expenses of outside counsel for
Lender) in connection with the preparation, negotiation, execution, delivery and
administration of this Second Amendment and all other instruments or documents
provided for herein or delivered or to be delivered hereunder or in connection
herewith. All obligations provided in this Section 5(a) shall survive any
termination of the Loan Agreement as amended hereby.
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Section 23.02 Governing Law. This Second Amendment shall be a contract
made under and governed by the internal laws of the State of Illinois.
Section 23.03 Counterparts. This Second Amendment may be executed in
any number of counterparts, and by the parties hereto on the same or separate
counterparts, and each such counterpart, when executed and delivered, shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same amendment.
Section 23.04 Successors. This Second Amendment shall be binding upon
Borrowers and Lender and their respective successors and assigns, and shall
inure to the benefit of Borrowers, Lender and their respective successors and
assigns.
Section 23.05 Ratification. Except as herein amended, the Loan
Agreement shall remain unchanged and in full force and effect, and is hereby
ratified in all respects.
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IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their respective officers thereunto duly authorized
and delivered at Chicago, Illinois as of the date first above written.
LENDER BORROWERS
CONGRESS FINANCIAL CORPORATION FANSTEEL INC.
(CENTRAL)
By By
-------------------------------- --------------------------------
Title Title
------------------------------ ------------------------------
▇▇▇▇▇▇▇ DYNAMICS CORPORATION
By
--------------------------------
Title
------------------------------
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