EXHIBIT 10.1
$60,000,000
POSTPETITION CREDIT AGREEMENT
DATED AS OF APRIL 26, 2002
AMONG
SPECIAL METALS CORPORATION
A-1 WIRE TECH, INC.
SPECIAL METALS DOMESTIC SALES CORPORATION
INCO ALLOYS INTERNATIONAL, INC. (D/B/A HUNTINGTON ALLOYS)
AS BORROWERS
THE BANKS AND FINANCIAL INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS
AND
CREDIT LYONNAIS NEW YORK BRANCH,
AS AGENT, ISSUING BANK, AND A LENDER
POSTPETITION CREDIT AGREEMENT
This Postpetition Credit Agreement, dated as of April 26, 2002, among the
financial institutions from time to time parties hereto (such financial
institutions, together with their respective successors and assigns, are
referred to hereinafter each individually as a "Lender" and collectively as the
"Lenders"), CREDIT LYONNAIS NEW YORK BRANCH, as a Lender, as Issuing Bank with
respect to the Letters of Credit, and as agent for the Lenders and the Issuing
Bank hereunder, SPECIAL METALS CORPORATION, a Delaware corporation, in its
capacity as a debtor and a debtor in possession on behalf of the estate created
upon the commencement of the Bankruptcy Cases ("SMC"), A-1 WIRE TECH, INC., an
Illinois corporation, in its capacity as a debtor and a debtor in possession on
behalf of the estate created upon the commencement of the Bankruptcy Cases
("Wire"), SPECIAL METALS DOMESTIC SALES CORPORATION, a Delaware corporation, in
its capacity as a debtor and a debtor in possession on behalf of the estate
created upon the commencement of the Bankruptcy Cases ("Sales"), and INCO ALLOYS
INTERNATIONAL, INC. (d/b/a Huntington Alloys), a Delaware corporation, in its
capacity as a debtor and a debtor in possession on behalf of the estate created
upon the commencement of the Bankruptcy Cases ("Alloys," and together with SMC,
Wire and Sales, each a "Borrower" and collectively, the "Borrowers").
W I T N E S S E T H:
WHEREAS, the Borrowers, each of which is a debtor and debtor in possession in a
case pending under Chapter 11 of the Bankruptcy Code (the cases of the Borrowers
each, a "Bankruptcy Case" and, collectively the "Bankruptcy Cases"), have
requested the Lenders to make available to the Borrowers a revolving credit
facility for loans and letters of credit in an amount not to exceed $60,000,000,
and which extensions of credit the Borrowers will use solely for the purposes
permitted hereunder;
WHEREAS, the Lenders have agreed to make available to the Borrowers such a
revolving credit facility upon the terms and conditions set forth in this
Agreement.
WHEREAS, on the Petition Date, the Borrowers filed voluntary petitions with the
Bankruptcy Court initiating the Bankruptcy Cases;
WHEREAS, the Borrowers have continued in possession of their respective assets
and in the management of their respective businesses as debtors in possession
pursuant to Sections 1107 and 1108 of the Bankruptcy Code; and
WHEREAS, to provide security for the repayment of the loans and letters of
credit made available pursuant hereto and payment of the other obligations of
the Borrowers under the Loan Documents, the Borrowers have agreed to provide the
Agent and the Lenders (upon and after the entry of the Interim Order) with
respect to the obligations of the Borrowers hereunder and under the other Loan
Documents, an allowed superpriority administrative expense claim in each of the
Bankruptcy Cases pursuant to Section 364(c)(1) of the Bankruptcy Code having
priority over all administrative expenses of the kind specified in, or arising
or ordered under, any sections of the Bankruptcy Code, including without
limitation, Sections 503(b), 105, 326, 328, 330, 331, 506(c), 507(a), 507(b),
546(c), 726 or 1112 of the Bankruptcy Code (subject only to the Carve-Out) and
liens and security interests with priority under Section 364(c)(2) and Section
364(d)(1) of the Bankruptcy Code, all as set forth herein and in the Interim
Order and the Final Order.
1
NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth in this Agreement, and for good and valuable consideration, the receipt of
which is hereby acknowledged, the Lenders, the Agent, and the Borrowers hereby
agree as follows.
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
"ADEQUATE PROTECTION OBLIGATIONS": all Prepetition Indebtedness
granted adequate protection pursuant to the Orders
"AFFILIATE": with respect to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person, (including, but not limited
to, all directors and officers of such Person). For purposes of this
definition, "control" of a Person means the power, directly or
indirectly, either to (a) vote 5% or more of the securities having
ordinary voting power for the election of directors or other
governing body of such Person or (b) direct or cause the direction
of the management and policies of such Person, through the ownership
of Voting Stock or other ownership interests, by contract or
otherwise.
"AGENT": Credit Lyonnais New York Branch, together with its
affiliates, as the arranger of the Revolving Credit Commitments and
as the agent for itself, the Lenders and the Issuing Bank under this
Agreement and the other Loan Documents or its successor appointed
pursuant to subsection 11.9.
"AGREEMENT": this Postpetition Credit Agreement, including the
schedules and exhibits hereto, as amended, supplemented, amended and
restated or otherwise modified from time to time.
"ALLOYS": as defined in the first paragraph of this Agreement.
"APPLICABLE MARGIN": a rate of 2.00% per annum.
"ASSET SALE": any sale or other disposition (including any sale and
leaseback of assets, and any mortgage or lease of real property)
(other than a mortgage in favor of the Agent or a Permitted Asset
Sale) subsequent to the Closing Date of any property of the
Borrowers or any of their Subsidiaries.
"ASSIGNEE": as defined in subsection 12.6(c).
"ASSIGNMENT AND ACCEPTANCE": as defined in subsection 12.6(c).
2
"BANK ACCOUNT ORDER": means that certain order of the Bankruptcy
Court dated March 28, 2002 granting the Borrowers' motion to (A)
approve cash management system, certain intercompany transactions
with and transfers to nondebtors, use of existing bank accounts and
business forms and (B) to give superpriority status to all
postpetition intercompany claims.
"BANKRUPTCY CASE(S)": as defined in the recitals to this Agreement.
"BANKRUPTCY CODE": means Title 11 of the United States Code (11
▇.▇.▇.▇▇. 101 et seq.), as amended.
"BANKRUPTCY COURT": means the United States Bankruptcy Court for the
Eastern District of Kentucky, or any other court having jurisdiction
over the Bankruptcy Cases from time to time.
"BASE RATE": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day or (b) the Federal Funds Rate in
effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate"
shall mean the rate of interest per annum publicly announced from
time to time by Credit Lyonnais New York Branch as its prime rate in
effect at its principal office in New York City (the Prime Rate is
not intended to be the lowest rate of interest charged by Credit
Lyonnais New York Branch in connection with extensions of credit to
debtors); and "Federal Funds Rate" shall mean, for any day, the
weighted average of the per annum rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rates are
not so published for any day which is a Business Day, the average of
the quotations for the day of such transactions received by the
Agent from three federal funds brokers of recognized standing
selected by it. Any change in the Base Rate due to a change in the
Prime Rate or the Federal Funds Rate shall be effective as of the
opening of business on the effective day of such change in the Prime
Rate or the Federal Funds Rate.
"BOARD OF GOVERNORS": the Board of Governors of the Federal Reserve
System or any successor to the functions and powers thereof.
"BORROWER": as defined in the first paragraph of this Agreement.
"BORROWER REPRESENTATIVE": SMC.
"BORROWERS": as defined in the first paragraph of this Agreement.
"BORROWING DATE": any Business Day specified in a notice delivered
pursuant to subsection 3.3 or 4.1 as a date on which the Borrower
Representative requests the
3
Lenders to make Revolving Credit Loans hereunder or the Issuing Bank
to issue a Letter of Credit hereunder.
"BUDGET": as defined in subsection 6.1(c).
"BUSINESS": as defined in subsection 6.16.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required
by law to close.
"CAPITAL EXPENDITURES": with respect to any Person for any period,
the sum of (a) all expenditures of such Person in respect of the
purchase or other acquisition of fixed or capital assets (excluding
any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations) that
are paid or due and payable in cash during such period and (b) all
Financing Lease expenses of such Person that are paid or (without
duplication) due and payable in cash during such period.
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a
corporation, regardless of type, class, preference or designation,
any and all equivalent ownership interests in a Person other than a
corporation, including membership interests, partnership interests
or other equity interests, and any and all warrants, options,
purchase rights, conversion or exchange rights, voting rights, calls
or claims of any character with respect thereto.
"CARVE-OUT": as defined in subsection 2.5(d).
"CASH COLLATERAL ORDER": that certain Order Authorizing Debtors in
Possession to use Cash Collateral Pursuant to Sections 361 and 363
of the Bankruptcy Code, and Providing Adequate Protection, issued by
the Bankruptcy Court on April 15, 2002.
"CASH EQUIVALENTS": any of the following in which the Agent holds a
duly perfected first priority security interest: (a) securities
issued or directly and fully guaranteed or insured by the United
States Government or any agency or instrumentality thereof having
maturities of not more than one year from the date of acquisition,
(b) time deposits and certificates of deposit, having maturities of
not more than one year from the date of acquisition, of any Lender
or of any domestic commercial bank the long-term debt of which is
rated at the date of acquisition thereof at least "A" or the
equivalent thereof by Standard & Poor's Corporation or "A-2" or the
equivalent thereof by ▇▇▇▇▇'▇ Investors Service, Inc. and having
capital and surplus in excess of $500,000,000, (c) repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clauses (a) and (b) entered
into with any bank meeting the qualifications specified in clause
(b) above and (d) commercial paper rated at the date of acquisition
thereof at least "A-2" or the equivalent thereof by Standard &
Poor's Corporation or "P-2" or the equivalent thereof by ▇▇▇▇▇'▇
Investors Service, Inc. and in either case maturing within 270 days
after the date of acquisition.
4
"CASUALTY LOSS": with respect to any asset owned or used by the
Borrowers or any of their Subsidiaries: (a) any damage to or loss or
destruction of such asset; or (b) any actual condemnation or taking,
by exercise of the power of eminent domain or otherwise.
"CERCLA": the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as the same may be amended from time to
time, 42 ▇.▇.▇.▇▇. 9601 et seq.
"CHANGE OF CONTROL": one or more of the following events: (a) in any
three-year period, a majority of the members of the Board of
Directors of SMC elected during such three-year period shall have
been elected against the recommendation of the management of SMC or
the Board of Directors in office immediately prior to such election;
(b) any Person other than SIMA and its Affiliates (each, a
"Designated Person") or Persons acting in concert with them shall,
except as provided in clause (c) below, acquire (whether by merger,
consolidation, sale, assignment, lease, transfer or otherwise, in
one transaction or any series of related transactions) or otherwise
beneficially own a majority of the Voting Stock of SMC; (c) upon
consummation of a consolidation or merger of a Person with a
Designated Person in which the holders of the Voting Stock of SMC
immediately prior to such consolidation or merger would not own
Voting Stock representing at least a majority of the outstanding
Voting Stock of such Designated Person or its ultimate parent upon
consummation of such consolidation or merger; or (d) upon the sale,
transfer or assignment (it being understood that the pledge of, or
the granting of a security interest in, assets of SMC or its
Subsidiaries shall not be deemed a sale, transfer or assignment
hereunder) of all or substantially all of the assets of SMC to any
Person in a single transaction or series of related transactions;
provided, however, that a sale, transfer or assignment of all or
substantially all of the assets of SMC to the Principal Shareholders
or to any entity the holders of at least a majority of the Voting
Stock of which (or of such entity's ultimate parent) were holders of
Voting Stock of SMC immediately prior to such sale, transfer or
assignment shall not constitute a "change of control" hereunder; or
(e) at such time as the Principal Shareholders fail to beneficially
own, in the aggregate, at least 30% of the voting power of the
outstanding Voting Stock of SMC.
"CLOSING DATE": the first date on which all of the conditions set
forth in Section 7.1 shall have been satisfied or waived and the
Agent shall have so notified the Borrower's Representative.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
"COLLATERAL": all assets of the Loan Parties, whether now owned or
existing or hereafter acquired or arising and regardless of where
located, including, without limitation, the following property and
assets of the Loan Parties: all accounts; all inventory; all
contract rights; all chattel paper; all documents; all instruments;
all supporting obligations; all general intangibles; all equipment;
all investment property; all money, cash, Cash Equivalents,
securities and other property of any kind of the Loan Parties held
directly or indirectly by the Agent or any Lender; all of the
Borrowers' deposit accounts, credits, and balances with and other
claims against the Agent or any Lender or any of their Affiliates or
any other financial institution with which the Borrowers maintain
deposits; all causes
5
of action and all monies and other property of any kind received
therefrom, and all monies and other property of any kind recovered
by any Borrower; all real estate; all policies of insurance, the
cash surrender value of all policies of insurance and all rights
under each policy of insurance; all books, records and other
property related to or referring to any of the foregoing, including
books, records, account ledgers, data processing records, computer
software and other property and general intangibles at any time
evidencing or relating to any of the foregoing; and all accessions
to, substitutions for and replacements, products and proceeds of any
of the foregoing, including, but not limited to, proceeds of any
insurance policies, claims against third parties, and condemnation
or requisition payments with respect to all or any of the foregoing.
Notwithstanding the foregoing, "Collateral" shall not include (i)
any equity interest greater than 65% in a Foreign Subsidiary where
Section 956 of the Code applies to the pledge of two-thirds or more
of such Foreign Subsidiary's Capital Stock or (ii) any avoidance
claim arising under Sections 544, 546, 547, 548, 549, 550 or 553 of
the Bankruptcy Code. Terms used in this paragraph that are defined
in the UCC shall have the meaning ascribed thereto in the UCC.
"COLLATERAL ACCOUNT": as defined in subsection 8.13.
"COMMITMENT LETTER": that certain Commitment Letter, dated April 12,
2002, between Special Metals Corporation and Credit Lyonnais, New
York Branch.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not
incorporated, which is under common control with a Borrower within
the meaning of Section 4001 of ERISA or is part of a group which
includes a Borrower and which is treated as a single employer under
Section 414 of the Code.
"CONSOLIDATED ASSET COVERAGE RATIO": with respect to any Person at
any date of determination, the ratio of (a) the amount that is the
sum of (i) the net book value of accounts receivable, plus (ii) the
net book value of inventory, plus (iii) the book value of owned
land, real property, equipment, leasehold improvements and other
fixed assets, net of depreciation, plus (iv) cash on hand to (b) the
amount that is the sum of (i) all outstanding Obligations plus the
Prepetition Indebtedness, all of the foregoing as determined on a
consolidated basis with respect to such Person and its Domestic
Subsidiaries in accordance with GAAP.
"CONSOLIDATED EBITDA": with respect to any Person for any period,
the sum of (a) Consolidated Net Income plus (b) to the extent
deducted in computing such Consolidated Net Income, the sum of (i)
Consolidated Income Tax Expense, (ii) Consolidated Interest Expense,
(iii) depreciation and amortization expense, (iv) noncash charges
which will not result in a cash payment and (v) any loss which did
not result in a cash payment, minus, (c) to the extent added in
computing such Consolidated Net Income, the sum of (x) any interest
income, (y) all noncash income and (z) any gain which did not result
from a cash payment, and plus losses or minus gains incurred by a
Person which are either unusual in nature or infrequent in
occurrence, all as determined on a consolidated basis with respect
to such Person and its Subsidiaries in accordance with GAAP.
6
"CONSOLIDATED INCOME TAX EXPENSE": with respect to any Person for
any period, income taxes (and other taxes of a similar nature or
imposed in lieu thereof) paid in cash by such Person and its
consolidated Subsidiaries.
"CONSOLIDATED INTEREST EXPENSE": with respect to any Person for any
period, interest and fees paid or (without duplication) due and
payable (whether or not paid) in cash by such Person and its
consolidated Subsidiaries during such period in respect of Total
Debt, all determined on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED NET CASH FLOW": with respect to SMC at any date of
determination, an amount reflecting the actual cash balance at the
beginning of the applicable period of determination plus an amount
reflecting actual cash receipts during the applicable period of
determination minus an amount reflecting actual cash disbursements
during the applicable period of determination, all determined with
respect to SMC and its Domestic Subsidiaries on a consolidated basis
and in a manner consistent with the calculation of "Ending Cash" as
set forth in the "13-Week Cash Forecast through June 28, 2002"
included as a component of the Budget. For the avoidance of doubt,
cash balances receipts, and disbursements of any Person that is not
a Borrower on the Closing Date shall not be included in any
calculation of Consolidated Net Cash Flow.
"CONSOLIDATED NET INCOME": with respect to any Person for any period
the net income or loss of such Person and its Subsidiaries on a
consolidated basis for such period taken as a single accounting
period determined in conformity with GAAP (provided that there shall
be excluded (a) the income or loss of any Person in which any other
Person (other than SMC or any of its Subsidiaries) has an interest,
except to the extent of the amount of dividends or other
distributions actually paid to SMC or any of its Subsidiaries or the
amount of any capital calls or contributions or other fundings of
losses actually required from SMC or any of its Subsidiaries during
such period; (b) the income of any of SMC's Subsidiaries to the
extent that the declaration or payment of dividends or other
distributions by that Subsidiary is not at the time permitted by
operation of the terms of its charter or other governing documents,
or any agreement, instrument, judgment, decree, order, or
Requirements of Law applicable to such Subsidiary except to the
extent of dividends or other distributions actually paid to SMC or
any Wholly-Owned Subsidiary that is not subject to the restrictions
described in this clause (b); and (c) the net income or loss of any
Person accrued prior to the date on which it becomes a Subsidiary or
is merged into or consolidated with such Person or any of its
Subsidiaries or the date such Person's assets are acquired by SMC or
any of its Subsidiaries).
"CONSOLIDATED REVENUE": with respect to any Person at any date of
determination, the net sales of such Person and its Subsidiaries,
all determined on a consolidated basis in accordance with GAAP and
in a manner consistent with the calculation of net sales as set
forth in the Statement of Operations of SMC as set forth in SMC's
audited financial statements dated December 31, 2001; provided that
the amount of sales by such Person and its Subsidiaries to Persons
that are Affiliates of such Person and/or a Subsidiary thereof shall
not exceed, for purposes of the above determination, ten percent of
the amount of total net sales of SMC and its Subsidiaries during the
applicable period ending on the date of determination.
7
"DEEMED DIP LOANS": as defined in the Interim Order and the Final
Order.
"DEFAULT": any of the events specified in Section 10, whether or not
any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"DIP LOAN AVAILABILITY": shall mean for any period, the total amount
set forth opposite such period below:
REVOLVING CREDIT
PERIOD LOAN AVAILABILITY LETTER OF CREDIT AVAILABILITY TOTAL AVAILABILITY
------ ----------------- ----------------------------- ------------------
Closing Date - $18,000,000 $10,000,000 $28,000,000
May 12, 2002
REVOLVING CREDIT
PERIOD LOAN AVAILABILITY LETTER OF CREDIT AVAILABILITY TOTAL AVAILABILITY
------ ----------------- ----------------------------- ------------------
May 13, 2002 - $24,924,000 $10,000,000 (or, $34,924,000 (or, subject
May 31, 2002 subject to subsection to subsection 4.1(a),
4.1(a), $20,000,000) $44,924,000)
June 1, 2002 - $27,645,000 $10,000,000 (or, $37,645,000 (or, subject
June 30, 2002 subject to subsection to subsection 4.1(a),
4.1(a), $20,000,000) $47,645,000)
July 1, 2002 - $29,457,000 $10,000,000 (or, $39,457,000 (or, subject
July 31, 2002 subject to subsection to subsection 4.1(a),
4.1(a), $20,000,000) $49,457,000)
August 1, 2002 $60,000,000 $10,000,000 (or, $60,000,000
and thereafter subject to subsection
4.1(a), $20,000,000)
"DIP OBLIGATIONS": as defined in the Interim Order.
"DOLLARS" and "$": dollars in lawful currency of the United States
of America.
"DOMESTIC SUBSIDIARY": any Subsidiary of SMC which is incorporated
in any state or other jurisdiction of the United States of America.
"EFFECTIVE DATE": the date of this Agreement.
"ENVIRONMENTAL CLAIMS": any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives,
claims, Liens, notices of noncompliance or violation, investigations
or proceedings relating in any way to any Environmental Law or any
permit issued, or any approval given, under any such Environmental
Law (hereafter, "Claims"), including, without limitation, (a) any
and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions
or damages pursuant to any applicable Environmental Law, (b) any and
all Claims
8
by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief in connection with
alleged injury or threat of injury to health, safety or the
environment due to the presence of Materials of Environmental
Concern, (c) any fact, circumstance, condition or occurrence forming
the basis of any violation, or alleged violation, of any
Environmental Law and (d) any alleged injury or threat of injury to
health, safety or the environment due to the presence of Materials
of Environmental Concern.
"ENVIRONMENTAL LAWS": any and all foreign, federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances,
codes or decrees of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning Materials of
Environmental Concern or protection of human health or the
environment, as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ESTATES": each of the estates created upon the commencement of the
Bankruptcy Cases.
"EURO": the lawful currency of the European Union.
"EVENT OF DEFAULT": any of the events specified in Section 10,
provided that any requirement for the giving of notice, the lapse of
time, or both has been satisfied.
"EXCLUDED ACCOUNT": as defined in subsection 6.22.
"EXISTING CREDIT AGREEMENT": the Credit Agreement dated as of
October 28, 1998 among SMC, certain lenders, and Credit Lyonnais New
York Branch as issuing bank and agent, as amended.
"EXISTING LETTERS OF CREDIT": as defined in subsection 4.1(b).
"FDIC": the Federal Deposit Insurance Corporation or any successor
to the functions and powers thereof.
"FEDERAL FUNDS RATE": as defined in the definition of "Base Rate."
"FINAL ORDER": as defined in subsection 7.2(e).
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the
lessee.
9
"FIRST DAY ORDERS": those orders of the Bankruptcy Court, in form
and substance satisfactory to the Agent, which are entered in
response or relating to applications or motions made or filed by the
Borrowers on the Petition Date.
"FOREIGN INTERCOMPANY RECEIVABLES": with respect to any Person at
any date of determination, the aggregate amount owed to such Person
and its Subsidiaries by all Foreign Subsidiaries of SMC due to
accumulated intercompany receivables, whether or not represented by
a note or any other instrument evidencing such obligation.
"FOREIGN SUBSIDIARY": any Subsidiary of SMC which is not a Domestic
Subsidiary.
"FRENCH SUBSIDIARIES": Special Metals Services S.A., a societe
anonyme organized under the laws of the Republic of France, and
Rescal, S.A., a societe anonyme organized under the laws of the
Republic of France.
"GAAP": generally accepted accounting principles in the United
States of America in effect on the Closing Date.
"GOVERNMENTAL AUTHORITY": any supranational, national, foreign,
federal, state or other court or governmental agency, authority,
instrumentality or regulatory body.
"GUARANTEE": any guarantee by any Loan Party of the Obligations,
including the Subsidiaries' Guarantee.
"GUARANTEE OBLIGATION": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b)
another Person (including, without limitation, any bank under any
letter of credit) to induce the creation of which the guaranteeing
person has issued a reimbursement, counter indemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other third Person (the "primary
obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or
payment of any such primary obligation or (2) to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose
of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include (A)
endorsements of instruments for deposit or collection in the
ordinary course of business; (B) customary and reasonable indemnity
obligations of the Borrowers and
10
their Subsidiaries under any agreement or document pursuant to which
a Borrower or a Subsidiary thereof may indemnify a party to any such
agreement or document (which Party is not an Affiliate of a Borrower
or Subsidiary) with respect to losses incurred by such party as a
result of the failure of a representation or warranty of such
Borrower or such Subsidiary to be true or as a result of an event
occurring after the effective date of such agreement or document or
to indemnify such party as a result of the negligence or other
culpable conduct of such Borrower or its Subsidiary, as the case may
be; (C) customary "comfort letters" which do not require a Person to
make payments or to maintain working capital, equity capital, net
worth or solvency of the primary obligor; or (D) product warranties
incurred in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to
be the lower of (i) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee
Obligation is made and (ii) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person
may liable are not stated or determinable, in which case the amount
of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof.
"HEDGING AGREEMENT": any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, cap
or collar agreement or other interest rate hedge arrangement,
currency swap agreement, foreign exchange agreement or other
agreement or arrangement with respect to foreign exchange or any
foreign currency, or forward contracts for the purchase of
commodities, selected by the Borrowers and, with respect to interest
rate Hedging Agreements, with a counterparty acceptable to the
Agent, to or under which a Borrower or any Subsidiary thereof is a
party or a beneficiary on the date hereof or becomes a party or a
beneficiary after the date hereof.
"INDEBTEDNESS": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than
unsecured current liabilities not the result of the borrowing of
money or the obtaining of credit or the leasing of property for
accounts payable and expense accruals incurred or assumed in the
ordinary course of business for current purposes and not represented
by a note or other evidence of indebtedness and payable in
accordance with customary practices), (b) any other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar
instrument, (c) the principal component of all obligations of such
Person under Financing Leases, (d) all liabilities secured by (or
for which the holder has an existing right, contingent or otherwise
to be secured by) any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for
the payment thereof and (e) the net obligations of such Person under
all Hedging Agreements to the extent required to be recognized as a
liability under GAAP. Indebtedness of a Person shall include any
Indebtedness of a partnership in which such Person is a general
partner, unless such partnership Indebtedness is without recourse to
such general partner.
11
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of
ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTELLECTUAL PROPERTY": with respect to any Person, such Person's
intellectual property, including United States and foreign patents,
patent applications, registered and common law trademarks, trademark
applications, service names, service marks, service ▇▇▇▇
applications, logos, trade names, trade secrets, proprietary
technology, research records, technical knowledge and processes,
inventions (whether or not patentable and whether or not reduced to
practice), invention disclosures and improvements thereto, know-how,
formal or informal licensing arrangements, technical specifications,
computer software, registered and unregistered copyrights, copyright
applications, and all embodiments of the foregoing and all rights
with respect thereto, together with the goodwill of the business
symbolized by or connected with any of the foregoing.
"INTERCOMPANY NOTE": a promissory note executed by a Subsidiary of
SMC in favor of SMC or any Domestic Subsidiary in form and substance
satisfactory to the Agent and pledged to the Agent for the benefit
of the Lenders as provided in this Agreement and the Security
Documents.
"INTERIM ORDER": as defined in subsection 7.1(s).
"INVESTMENT": as defined in subsection 9.8.
"ISSUING BANK": Credit Lyonnais New York Branch or any Lender which,
with the approval of the Agent, may at any time issue or be
requested to issue a Letter of Credit for the account of a Borrower;
provided, that at the time of such issuance or request, as the case
may be, such additional Lender shall have a credit rating of at
least "BBB" by Standard & Poor's Corporation or "Baa" by ▇▇▇▇▇'▇
Investors Services, Inc. If there is more than one Issuing Bank, all
references to "the Issuing Bank" shall be deemed to refer to each
Issuing Bank or all Issuing Banks, as the context requires.
"ITALIAN SUBSIDIARY": Special Metals Services SpA, a corporation
organized under the laws of the Republic of Italy.
"LENDERS": as defined in the first paragraph of this Agreement. When
used with reference to the Security Documents and the Collateral,
the term "Lender" includes the Agent, the Issuing Bank, the
beneficiaries of any indemnification obligation undertaken by any
Loan Party under any Loan Document, and the successors and assigns
of any of the foregoing.
"LETTER OF CREDIT": a letter of credit issued by, and subject to
terms and conditions acceptable to, the Issuing Bank on behalf of a
Borrower pursuant to Section 4, which letter of credit shall have an
expiration date no later than the earlier of (a) one year after its
date of issuance or (b) 30 days prior to the Revolver Termination
Date.
12
"LETTER OF CREDIT REIMBURSEMENT OBLIGATION": any obligation of any
Borrower to reimburse the Issuing Bank for any amount drawn under
any Letter of Credit, as provided in subsection 4.3.
"LETTER OF CREDIT REQUEST": as defined in subsection 4.1.
"LETTER OF CREDIT SUBLIMIT": as defined in subsection 4.1.
"LETTERS OF CREDIT OUTSTANDING": any time, the sum of (a) the
aggregate stated amount of all outstanding Letters of Credit plus
(without duplication) (b) the aggregate amount of all drawings made
under any Letter of Credit for which the Issuing Bank has not
received reimbursement from the Borrowers by means of a borrowing of
Revolving Credit Loans pursuant to Section 3 or otherwise.
"LIEN": with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, encumbrance, hypothecation, preference, charge or
security interest in or on such asset, (b) the interest of a vendor
or a lessor under any conditional sale agreement, Financing Lease or
title retention agreement relating to such asset and (c) in
addition, in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"LOAN": any Revolving Credit Loan made by any Lender pursuant to
this Agreement.
"LOAN DOCUMENTS": this Agreement, the Notes, the Letters of Credit,
the Letter of Credit Requests (including the related reimbursement
agreements), the Security Documents, the Guarantees, any agreement
between a Loan Party and the Agent with respect to the payment of
fees, the Interim Order, the Final Order and each other document,
agreement, instrument or certificate delivered pursuant to the terms
hereof or thereof, as the same may be amended, supplemented, amended
and restated or otherwise modified from time to time.
"LOAN PARTIES": the Borrowers and each Subsidiary of a Borrower
which is a party to a Loan Document, and any other Person which
guarantees all or any portion of the Obligations and/or grants a
Lien on any of its assets to secure payment and/or performance of
the Obligations.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, assets, liabilities, property, performance or
condition (financial or otherwise) or prospects of SMC or any
Material Subsidiary or SMC and its Subsidiaries, taken as a whole,
or (b) the validity or enforceability of this Agreement, any Note or
any of the other Loan Documents or (c) the rights or remedies of the
Agent, the Issuing Bank or the Lenders hereunder or thereunder.
"MATERIAL SUBSIDIARY": any Subsidiary whose assets, as of the end of
the most recent fiscal quarter, were at least 10% of the total
assets of SMC and its Subsidiaries, taken as a whole, determined in
accordance with GAAP.
13
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products
or any hazardous or toxic substances, materials or wastes, defined
or regulated as such in or under any Environmental Law, including,
without limitation, asbestos, polychlorinated biphenyls,
urea-formaldehyde insulation, lead-based paint, radiation,
radioactive materials and electromagnetic fields.
"MORTGAGE": each mortgage or deed of trust executed or to be
executed and delivered by any Loan Party, covering any interest in
real property located in the United States of any of the Borrowers
for which the Agent requests a mortgage or deed of trust, in each
case as the same may be amended, supplemented, amended and restated
or otherwise modified from time to time.
"MORTGAGED PROPERTIES": all of the interests in real estate in which
Liens are purported to be granted to the Agent pursuant to this
Agreement, the Interim Order, the Final Order, or any Mortgage.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as
defined in Section 3(37) or 4001(a)(3) of ERISA.
"NASDAQ": National Association of Securities Dealers Automatic
Quotation System.
"NET PROCEEDS": (a) 100% of the cash proceeds of any Asset Sale by
the Borrowers or any of their Subsidiaries (including any cash
payments received by way of deferred payment of principal pursuant
to a note or installment receivable or purchase price adjustment
receivable or otherwise, but only as and when received) of such
Asset Sale net of (i) reasonable attorneys' fees, accountants' fees,
investment banking fees, survey costs, title insurance premiums, and
related search and recording charges, transfer taxes, deed or
mortgage recording taxes, required debt payments secured by Liens on
such assets (other than pursuant hereto), other customary expenses
and brokerage, consultant and other customary fees actually incurred
in connection therewith and (ii) taxes paid or payable as a result
thereof; (b) 100% of Qualifying Insurance Proceeds; (c) 100% of all
Pension Plan Reversion Proceeds; (d) 100% of the cash proceeds of
any issuance of equity securities of a Borrower after the Closing
Date, net of reasonable attorneys' and accounting fees, investment
banking or underwriting fees or discounts and other customary
expenses actually incurred in connection therewith; and (e) 100% of
the cash proceeds of any issuance of debt securities by a Borrower
or any of its Subsidiaries after the Closing Date (other than
Indebtedness permitted by subsection 9.2), net of reasonable
attorneys' fees and other customary expenses actually incurred in
connection therewith.
"NEW SUBSIDIARY": each Subsidiary of a Borrower organized, formed or
acquired after the Closing Date.
"NONEXCLUDED TAXES": as defined in subsection 5.6(a).
"NOTES": the collective reference to the Revolving Credit Notes.
"OBLIGATIONS": means all direct or indirect debts, liabilities and
obligations of any Person (including the Estates) of any and every
type and description at any time arising under or
14
in connection with this Agreement or any other Loan Document, to the
Agent, the Issuing Bank, Credit Lyonnais, any Lender (including in
its capacity as a counterparty to an interest rate Hedging
Agreement), or any other Person entitled to indemnification pursuant
to the Credit Agreement or any other Loan Document, in each case
whether now outstanding or hereafter created or incurred, whether or
not the right to payment in respect of any such debts, liabilities
or obligations is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured or unsecured and whether or not such claim is
discharged, stayed or otherwise affected by any bankruptcy case or
insolvency, reorganization, receivership, dissolution or liquidation
proceeding, and shall include (a) all liabilities of such Person for
principal of and interest on any and all Revolving Credit Loans at
any time outstanding under this Agreement, (b) all liabilities of
such Person in respect of Letters of Credit at any time issued
pursuant to this Agreement (including Letter of Credit Reimbursement
Obligations), (c) all liabilities of such Person under the Loan
Documents for any fees, costs, taxes, expenses, indemnification and
other amounts payable thereunder, (d) all liabilities of such Person
under any interest rate Hedging Agreement entered into with any
Lender or any of its Affiliates, and (e) all other liabilities of
such Person under or in respect of any of the Loan Documents or any
of the transactions contemplated thereby.
"ORDER": any order of the Bankruptcy Court in the Bankruptcy Cases.
"OTHER TAXES": as defined in subsection 5.6(a).
"PARTICIPANT": as defined in subsection 12.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PENSION PLAN REVERSION PROCEEDS": the amount of the cash and the
fair market value of any and all other property received (directly
or indirectly) by a Borrower or any Commonly Controlled Entity after
the Closing Date from the termination of any stock, bonus, pension
or profit-sharing plan (or trust thereunder) which was treated by a
Borrower or such Commonly Controlled Entity as a plan qualified
under Code Section 401(a) which shall not have been applied by the
Borrower or such Commonly Controlled Entity to payment of (a) taxes,
if any, imposed with respect to the receipt of such cash or other
property or (b) the payment of reasonable costs and expenses
(including legal, actuarial and accounting fees) actually incurred
in obtaining such cash or other proceeds.
"PERMITTED ASSET SALE": an Asset Sale permitted by subsections
9.6(a), (b), or (c), or an Asset Sale permitted by subsection
9.6(d), (e), or (f), but only to the extent the aggregate amount of
Asset Sales permitted by subsections 9.6(d), (e), or (f) is less
than $250,000.
"PERMITTED LIENS": as defined in subsection 9.3.
"PERSON": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity
of whatever nature.
15
"PETITION DATE": means March 27, 2002.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which a Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"POSTPETITION": the period including and after the Petition Date.
"PREPETITION": the period prior to the Petition Date.
"PREPETITION INDEBTEDNESS": all Obligations (as defined in the
Existing Credit Agreement) outstanding under the Existing Credit
Agreement.
"PRINCIPAL SHAREHOLDERS": SIMA, LWH Holdings S.A. and their
Affiliates.
"PRO RATA REVOLVING SHARE": with respect to any Revolving Credit
Lender at any time, that percentage equal to the Revolving Credit
Commitment Percentage of such Revolving Credit Lender at such time.
"QUALIFYING INSURANCE PROCEEDS": any insurance proceeds payable to a
Borrower or any of its Subsidiaries after the Closing Date on
account of a Casualty Loss which shall not have been applied by the
Borrower or such Subsidiary to the payment of the cost of repair or
replacement of the property subject to such Casualty Loss within six
months of the date such insurance proceeds are actually received by
the Borrower or such Subsidiary, or committed to such repair or
replacement which has commenced within such six months and has been
completed within the next six months minus reasonable costs and
expenses (including legal and accounting fees) actually incurred by
the Borrower or its Subsidiaries in recovering such proceeds.
"REGISTER": as defined in subsection 12.6(d).
"REGULATION U": Regulation U of the Board of Governors as in effect
from time to time.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA,
"REPORTABLE EVENT": any of the events set forth in Section 4043(b)
of ERISA, other than those events as to which the 30-day notice
period is waived pursuant to PBGC Reg.ss.4043.
"REQUIRED LENDERS": at any time, Revolving Credit Lenders the
Revolving Credit Commitment Percentages of which aggregate in excess
of 65%.
16
"REQUIREMENT OF LAW": as to any Person, the certificate of
incorporation and bylaws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property
is subject.
"RESPONSIBLE OFFICER": with respect to a Borrower or any Subsidiary,
any one of the chairman of the board, the chief executive officer,
the president and any vice president of the Borrower or such
Subsidiary or, with respect to financial matters, the chief
financial officer or treasurer of the Borrower or such Subsidiary.
"RESTRICTED PAYMENT": as defined in subsection 9.7.
"REVOLVER TERMINATION DATE": the earliest to occur of (a) ▇▇▇▇▇ ▇▇,
▇▇▇▇, (▇) the effective date of a plan of reorganization under any
of the Bankruptcy Cases, (c) without limiting the Agent's or
Lenders' rights hereunder, the date on which a sale of all or
substantially all of the assets of the Borrowers is consummated; and
(d) the date on which any of the Bankruptcy Cases is converted to a
case under Chapter 7 of the Bankruptcy Code.
"REVOLVING CREDIT COMMITMENT": with respect to each Revolving Credit
Lender, the amount set forth opposite such Revolving Credit Lender's
name on Schedule I under the heading "Revolving Credit Commitment"
or in the applicable Assignment and Acceptance, as such amount may
be reduced from time to time pursuant to this Agreement;
collectively, as to all the Revolving Credit Lenders, the "Revolving
Credit Commitments".
"REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Revolving Credit
Lender at any time, the percentage of such Revolving Credit Lender's
Revolving Credit Commitment of the aggregate outstanding Revolving
Credit Commitments of all the Revolving Credit Lenders or if the
Revolving Credit Commitments have been terminated, the percentage
which the sum of its outstanding Revolving Credit Loans plus its
proportionate share of the Letters of Credit Outstanding constitutes
of the aggregate outstanding Revolving Credit Loans and Letters of
Credit Outstanding of all Revolving Credit Lenders.
"REVOLVING CREDIT COMMITMENT PERIOD": the period from and including
the Effective Date to but not including the Revolver Termination
Date or such earlier date on which the Revolving Credit Commitments
shall terminate as provided herein.
"REVOLVING CREDIT LENDER": any Lender with an unused Revolving
Credit Commitment hereunder and/or any Revolving Credit Loan
outstanding hereunder or participation in any Letter of Credit
Outstanding; collectively, the "Revolving Credit Lenders".
"REVOLVING CREDIT LOANS": as defined in subsection 3.1.
"REVOLVING CREDIT NOTE": as defined in subsection 3.4(e).
17
"SALES": as defined in the first paragraph of this Agreement.
"SEC": the United States Securities and Exchange Commission or any
successor thereto.
"SECURITY DOCUMENTS": all security documents hereafter delivered to
the Agent from time to time granting or purporting to grant or
perfect a Lien on any asset or property of any Person to secure the
Obligations of the Borrowers and/or any other Loan Party hereunder
and/or under any of the other Loan Documents or to secure any
guarantee of any such obligations and liabilities, including any
pledge agreements, control agreements or other documents or
instruments.
"SIMA": Societe Industrielle de Materiaux Avances, a societe anonyme
organized under the laws of the Republic of France.
"SINGAPORE INTERCOMPANY RECEIVABLES": with respect to any Person at
any date of determination, the aggregate amount owed to such Person
and its Subsidiaries by Special Metals Pacific Pte. Ltd., a company
organized under the laws of the Republic of Singapore, due to
accumulated intercompany receivables, indebtedness, or otherwise,
whether or not represented by a note or any other instrument
evidencing such obligation.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"STERLING" and "(POUND)": pounds sterling in lawful currency of the
United Kingdom.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of Capital Stock having ordinary voting power
(excluding Capital Stock having such power only as a result of the
occurrence of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of SMC.
"SUBSIDIARIES' GUARANTEE": the Guarantee executed or to be executed
and delivered by each Domestic Subsidiary of the Borrower
substantially in the form of Exhibit E, in each case as the same may
be amended, supplemented, amended and restated or otherwise modified
from time to time.
"TOTAL DEBT": with respect to any Person at any time, all
Indebtedness of such Person and its Subsidiaries as determined on a
consolidated basis in accordance with GAAP, including (without
duplication), if such Person is SMC, the aggregate principal amount
of all outstanding Revolving Credit Loans.
18
"TRANSFEREE": as defined in subsection 12.6(f).
"UCC": the Uniform Commercial Code as in effect in the State of New
York on the Closing Date.
"UK SUBSIDIARY": Special Metals ▇▇▇▇▇▇ Limited, a limited company
incorporated under the laws of England and Wales.
"UNITED KINGDOM": the United Kingdom of Great Britain and Northern
Ireland.
"UNUSED REVOLVING CREDIT COMMITMENT": as to any Revolving Credit
Lender at any time, an amount equal to the excess, if any, of (a)
the amount of such Revolving Credit Lender's Revolving Credit
Commitment at such time over (b)(i) the aggregate principal amount
of all Revolving Credit Loans made by such Lender then outstanding
plus (ii) such Lender's Pro Rata Revolving Share of Letters of
Credit Outstanding at such time.
"WIRE": as defined in the first paragraph of this Agreement.
"VOTING STOCK": as to any Person, the Capital Stock of such Person
normally entitled to vote in the election of directors or other
governing body of such Person, and securities convertible into such
Capital Stock.
"WHOLLY OWNED SUBSIDIARY": a Subsidiary of SMC of which SMC owns,
directly or indirectly, all of the Capital Stock, exclusive of
Capital Stock of a Foreign Subsidiary required to be owned by
residents of the jurisdiction in which such Foreign Subsidiary is
organized or located and commonly referred to as "director's
qualifying shares."
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in any
Loan Document or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in any Loan Document and any certificate or
other document made or delivered pursuant hereto, accounting
terms relating to the Borrower and its Subsidiaries not
defined in subsection 1.1 and accounting terms partly defined
in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of
this Agreement, and Section, subsection, Schedule and Exhibit
references in this Agreement are to this Agreement unless
otherwise specified. The terms "including" "include" and
"includes" when used in this Agreement or any other Loan
Document shall be deemed to mean "including
19
without limitation," and the word "will" shall be construed to
have the meaning and effect as "shall."
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such
terms.
(e) Sections and subsections headings in this Agreement are
included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or
in any way affect the meaning or construction of any provision
of this Agreement.
(f) Unless otherwise specified herein or the context otherwise
requires, all references to (i) any Requirement of Law defined
or referred to herein shall be deemed to refer to such
Requirement of Law or any successor Requirement of Law, as the
same may have been or may be amended or supplemented from time
to time and (ii) to any document, instrument or agreement
defined or referred to herein shall be deemed to refer to such
document, instrument or agreement (and in the case of any Note
or other instrument, any instrument issued in substitution
therefor), as the same may have been or may be amended,
supplemented, amended and restated, waived or otherwise
modified from time to time (subject, however, to any
restrictions on amendments or other modifications herein).
SECTION 2. FEES; PRIORITY
2.1 UNDERWRITING FEE; FACILITY FEE. On the Effective Date, the
Borrowers shall pay to the Agent (a) an underwriting fee,
equal to one percent of the total aggregate Revolving Credit
Commitments, which fee the Agent shall distribute to the
Lenders party to this Agreement on the Effective Date for the
account of such Lenders in accordance with their respective
Pro Rata Revolving Share on such date, and (b) a facility fee,
equal to one percent of the total aggregate Revolving Credit
Commitments, which fee the Agent shall hold in escrow and
distribute to the Lenders party to this Agreement as of the
closing of the syndication period as determined by the Agent
in its sole discretion, for the account of such Lenders in
accordance with their respective Pro Rata Revolving Share on
such date. The Borrowers understand and agree that the fees
described above shall be paid as described above and are
nonrefundable in any circumstance, including a failure of the
Lenders party to this Agreement on the Effective Date to
further syndicate the Revolving Credit Commitments.
2.2 UNUSED COMMITMENT FEE. The Borrowers shall pay to the Agent
for the account of each Revolving Credit Lender during the
Revolving Credit Commitment Period a commitment fee, payable
monthly in arrears on the last day of each calendar month and
on the Revolver Termination Date or such earlier date as the
Revolving Credit Commitments shall terminate as provided
herein, commencing on the first of such days to occur after
the Effective Date, such fee to
20
be computed at the rate of 0.75% per annum on (a) the average
daily amount of the Unused Revolving Credit Commitment of such
Revolving Credit Lender during the period for which payment is
made, when the DIP Loan Availability for such period is
$60,000,000; and (b) the average daily amount of the excess,
if any, of (i) the amount of such Lender's Pro Rata Revolving
Share of the DIP Loan Availability during the period for which
payment is made over (ii) (A) the aggregate principal amount
of all Revolving Credit Loans made by such Lender and
outstanding during the period for which payment is made plus
(B) such Lender's Pro Rata Revolving Share of Letters of
Credit Outstanding during the period for which payment is
made, when the DIP Loan Availability for such period is less
than $60,000,000.
2.3 LETTER OF CREDIT FEE. The Borrowers shall pay to the Agent a
nonrefundable letter of credit fee, to be distributed by the
Agent to each Revolving Credit Lender according to its Pro
Rata Revolving Share, equal to the L/C Rate (as defined below)
on the daily amount of outstanding issued Letters of Credit,
payable monthly in arrears on the last day of each calendar
month and on the Revolver Termination Date or such earlier
date as the Revolving Credit Commitments shall terminate as
provided herein. With respect to each Letter of Credit, the
Borrowers also agree to pay to the Issuing Bank, solely for
the account of the Issuing Bank, (a) a nonrefundable issuing
fee of 0.25% per annum on the face amount of such Letter of
Credit for the term of such Letter of Credit, payable (i) in
advance on the date of issuance thereof for the three-month
period following the date of issuance and (ii) monthly in
arrears thereafter, and (b) the Issuing Bank's customary
administrative fee. "L/C Rate", as used above, means an
interest rate per annum equal to 3.50%.
2.4 AGENT'S FEE. The Borrowers shall pay to the Agent for its own
account a nonrefundable agency fee equal to $15,000 per month,
payable in advance on the first day of each calendar month
until the Revolving Credit Commitments have expired or been
terminated and all Obligations of all Loan Parties have been
paid in full in cash. In addition to the foregoing, the
Borrowers shall reimburse the Agent for all of the Agent's
out-of-pocket expenses incurred in the performance of its
obligations under this Agreement, within 10 days of receiving
the Agent's invoice therefor.
2.5 PRIORITY AND LIENS.
(a) The Obligations shall be secured by Liens under Sections
364(c)(2) and (d)(1) of the Bankruptcy Code, senior to all
other Liens (subject to subsection 2.5(d)), regardless of when
the Liens were obtained and regardless of their previous
21
priority, in all of the Collateral. The Obligations shall be
senior to the DIP Obligations to the Lenders (as defined in
the Interim Order) in connection with the Deemed DIP Loans.
(b) As to all Collateral, each of the Borrowers, subject to the
Carve-Out, hereby assigns and conveys as security, grants a
security interest in, hypothecates, mortgages, pledges and
sets over unto the Agent, for the benefit of the Agent and the
Lenders, all of the right, title and interest of such Borrower
in all of such Collateral. Each of the Borrowers acknowledges
that, pursuant to the Orders, the Liens granted in favor of
the Agent, for the benefit of the Agent and the Lenders, in
all of the Collateral shall be perfected without the
recordation of any Uniform Commercial Code financing
statements, notices of Lien, Mortgages, or other instruments
of mortgage or assignment. Each Borrower further agrees that
if requested by the Agent, or required by the Loan Documents,
the Borrowers shall enter into separate security agreements,
pledge agreements and fee and leasehold mortgages with respect
to such Collateral on terms satisfactory to the Agent.
(c) The Obligations shall have the status in the Bankruptcy Cases
of superpriority administrative expenses under Section
364(c)(1) of the Bankruptcy Code. Subject to the Carve-Out,
such administrative claims shall have priority over all other
claims, costs and expenses of the kinds specified in, or
ordered pursuant to, Sections 105, 326, 328, 330, 331, 503(b),
506(c), 507(a), 507(b), 546(c), 726 or 1112 or any other
provision of the Bankruptcy Code and shall at all times be
senior to the rights of any Borrower, any Borrower's estate,
and any successor trustee or estate representative in the
Bankruptcy Cases or any subsequent proceeding or case under
the Bankruptcy Code.
(d) The Liens on the Collateral under Sections 364(c)(2) and
(d)(1) of the Bankruptcy Code, for the benefit of Agent and
Lenders, and the superpriority administrative claim under
Section 364(c)(1) of the Bankruptcy Code afforded the
Obligations, shall be subject to the following: (i)(A) the
unpaid fees due and payable to the Clerk of the Court and the
U.S. Trustee pursuant to 28 ▇.▇.▇.▇▇. 1930, and (B) allowed,
unpaid claims for fees and expenses incurred by professionals
retained pursuant to an order of the Bankruptcy Court prior to
the occurrence of an Event of Default (as defined in the
Commitment Letter) not to exceed $1,000,000 in the aggregate
(the "Carve-Out"), other than fees and expenses incurred,
directly or indirectly, in respect of, relating to or arising
from the investigation, initiation or prosecution of any
action for preferences, fraudulent conveyances, subordination
or claims or causes of action against the Agent (as defined in
the Interim Order) or Lenders (as defined in the Interim
Order) with respect to the Prepetition Indebtedness or the DIP
Obligations, and (ii) existing validly perfected liens that
were Permitted Liens (as defined in the Existing Credit
Agreement but not including Permitted Liens under subsection
9.3(h) thereof) under the Existing Credit Agreement; provided,
that any payments actually made to such professionals under
Sections 330, 331 and 503 of the Bankruptcy Code in respect of
fees and expenses incurred or accrued (x) prior to the
occurrence of an Event of Default, shall not reduce the
Carve-Out and (y) from and after the occurrence of an Event of
Default, shall reduce Dollar-for-Dollar the Carve-Out;
provided,
22
further, that in no event shall any of the Carve-Out (A) be
utilized to prosecute or cause to be prosecuted any such
claims, causes of action, actions or proceedings against any
Agent or Lender, (B) be paid from amounts on deposit in the
Collateral Account or (C) include any fees or expenses arising
after the conversion of a Bankruptcy Case under Chapter 11 of
the Bankruptcy Code to a case under Chapter 7 of the
Bankruptcy Code.
(e) Notwithstanding the foregoing, the Borrowers shall be
permitted to pay, as the same may become due and payable (i)
administrative expenses of the kind specified in Section
503(b) of the Bankruptcy Code incurred in the ordinary course
of their businesses, (ii) subject to the provisions of the
Interim Order, the Final Order, and this subsection 2.5 and
provided that no Event of Default has occurred and is
continuing, compensation and reimbursement of expenses to
professionals allowed by the Bankruptcy Court and payable
under Sections 330 and 331 of the Bankruptcy Code, and (iii)
any other Prepetition or Postpetition expenses of the
Borrowers, including adequate protection payments, to the
extent approved by the Bankruptcy Court and not otherwise
prohibited by the terms of this Agreement or the other Loan
Documents. Except for the Carve-Out, no costs or expenses of
administration shall be imposed against Agent and Lenders or
the Collateral under Sections 105, 506(c) or 552 of the
Bankruptcy Code, or otherwise.
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
3.1 REVOLVING CREDIT COMMITMENTS. Subject to the terms and
conditions hereof, each Revolving Credit Lender severally (and
not jointly) agrees to make revolving credit loans ("Revolving
Credit Loans") to the Borrowers from time to time during the
Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to its
Pro Rata Revolving Share of Letters of Credit Outstanding,
does not exceed the lesser of (a) the amount of such Revolving
Credit Lender's Revolving Credit Commitment and (b) the amount
of such Revolving Credit Lender's Pro Rata Revolving Share of
the DIP Loan Availability. Subject to the foregoing and to the
satisfaction of all conditions for borrowing, during the
Revolving Credit Commitment Period, the Borrowers may use the
Revolving Credit Commitments within the limits set forth
herein and in the Interim Order and the Final Order by
borrowing and prepaying the Revolving Credit Loans in whole or
in part, and reborrowing, all in accordance with the terms and
conditions hereof.
3.2 JOINT AND SEVERAL LIABILITY. Notwithstanding any other
provision of this Agreement to the contrary, each Borrower
acknowledges and agrees that:
(a) all Obligations (including without limitation the Borrowers'
Obligations in respect of the Revolving Credit Loans and in
respect of any Letter of Credit) shall be the primary and
joint and several obligations (and not the obligation of a
surety) of each Borrower, regardless of whether any Borrower
actually receives Revolving Credit Loans, Letters of Credit,
other extensions of credit hereunder or the benefit
23
thereof or the amounts of such Revolving Credit Loans or Letters of
Credit or other extensions of credit received or the manner in which
the Agent and/or any Lender accounts for such Revolving Credit
Loans, Letters of Credit or other extensions of credit on its books
and records; and
(b) a separate action or actions may be brought and prosecuted
against each Borrower whether or not any action is brought
against any other Borrower and whether or not any other
Borrower is joined in any such action or actions.
3.3 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Borrowers may
borrow under the Revolving Credit Commitments during the
Revolving Credit Commitment Period on any Business Day;
provided that the Borrower Representative shall give the Agent
irrevocable notice (which notice must be received by the Agent
prior to 12:00 noon New York City time, one Business Day prior
to the requested Borrowing Date), specifying the amount to be
borrowed and the requested Borrowing Date. Each borrowing
under the Revolving Credit Commitments shall be in an amount
equal to $100,000 or a whole multiple thereof. Upon receipt of
any such notice from the Borrower Representative, the Agent
shall promptly notify each Revolving Credit Lender thereof.
Each Revolving Credit Lender will make the amount of its pro
rata share of each borrowing available to the Agent for the
account of the Borrowers at the office of the Agent specified
in subsection 12.2 prior to 11:00 A.M., New York City time, on
the Borrowing Date requested by the Borrower Representative
and in funds immediately available to the Agent. Such
borrowing will then be made available by 1:00 P.M., New York
City time, to the Borrowers by the Agent crediting (subject to
subsection 8.13) the account of the Borrowers on the books of
such office or such other account as specified by the Borrower
Representative with the aggregate of the amounts made
available to the Agent by the Revolving Credit Lenders and in
like funds as received by the Agent.
3.4 REPAYMENT OF REVOLVING CREDIT LOANS; EVIDENCE OF DEBT.
(a) Each Borrower hereby unconditionally promises to pay to the
Agent for the account of each Revolving Credit Lender the
then-unpaid principal amount of each Revolving Credit Loan
made by such Lender on the Revolver Termination Date (or such
earlier date on which the Revolving Credit Loans become due
and payable pursuant to this Agreement). Each Borrower hereby
further agrees to pay interest on the unpaid principal amount
of the Revolving Credit Loans from time to time outstanding
from the date of borrowing thereof until payment in full
thereof at the rates per annum, and on the dates, set forth in
subsection 5.2.
(b) Each Revolving Credit Lender shall maintain in accordance with
its usual practice an account or accounts evidencing
indebtedness of the Borrowers to such Revolving Credit Lender
resulting from each Revolving Credit Loan made by such
Revolving Credit Lender from time to time, including the
amounts of principal and interest payable and paid to such
Revolving Credit Lender from time to time under this
Agreement.
24
(c) The Agent shall maintain the Register pursuant to subsection
12.6(d), and a subaccount therein for each Revolving Credit
Lender, in which shall be recorded (i) the amount of each
Revolving Credit Loan made hereunder, (ii) the amount of any
principal or interest due and payable or to become due and
payable from the Borrowers to each Revolving Credit Lender
hereunder and (iii) both the amount of any sum received by the
Agent hereunder from the Borrowers and each Revolving Credit
Lender's share thereof, if any.
(d) The entries made in the Register and the accounts of each
Revolving Credit Lender maintained by the Agent pursuant to
subsection 3.4(c) shall, to the extent permitted by applicable
law, be prima facie evidence of the existence and amounts of
the obligations of the Borrowers therein recorded; provided,
however, that the failure of any Revolving Credit Lender or
the Agent to maintain any such account or the Register, or any
error therein, shall not in any manner affect the obligation
of the Borrowers to repay (with applicable interest) the
Revolving Credit Loans made to the Borrowers by such Revolving
Credit Lender in accordance with the terms of this Agreement.
(e) The Borrowers agree that at the closing on the Closing Date,
the Borrowers will execute and deliver to each Revolving
Credit Lender a promissory note of the Borrowers evidencing
the Revolving Credit Loans made by such Revolving Credit
Lender, substantially in the form of Exhibit H (a "Revolving
Credit Note"), dated the Closing Date and payable to the order
of such Revolving Credit Lender and in a principal amount
equal to the amount of the Revolving Credit Commitment of such
Revolving Credit Lender. Each Revolving Credit Lender is
hereby authorized to record the date and amount of each
Revolving Credit Loan made by such Revolving Credit Lender and
the date and amount of each payment or prepayment of principal
thereof, on the schedule annexed to and constituting a part of
its Revolving Credit Note; provided, however, that the failure
to make any such recordation (or any error therein) shall not
in any manner affect the obligation of the Borrowers to repay
(with applicable interest) the Revolving Credit Loans made to
the Borrowers in accordance with the term of this Agreement.
3.5 TERMINATION OR REDUCTION OF REVOLVING CREDIT COMMITMENTS. The
Borrowers shall have the right, upon not less than five
Business Days' prior written notice from the Borrower
Representative to the Agent, which notice shall be
irrevocable, to terminate the Revolving Credit Commitments or,
from time to time, to reduce the amount of the Revolving
Credit Commitments. Any such reduction shall be in a minimum
amount equal to $1,000,000 or an integral multiple thereof or,
if less, the entire remaining balance of the Revolving Credit
Commitments and shall reduce permanently the Revolving Credit
Commitments then in effect; provided, that no such termination
or reduction shall be permitted if, after giving effect
thereto and to any prepayments of the Revolving Credit Loans
made on the effective date thereof, the aggregate principal
amount of the Revolving Credit Loans plus the aggregate
Letters of Credit Outstanding would exceed the
25
Revolving Credit Commitments then in effect. All reductions
shall be made ratably among all Revolving Credit Lenders in
accordance with their respective Revolving Credit Commitments.
3.6 USE OF PROCEEDS OF REVOLVING CREDIT LOANS.
(a) The proceeds of the Revolving Credit Loans shall be used by
the Borrowers for working capital and general corporate
purposes in the ordinary course of the Borrowers' and their
Subsidiaries' business and consistent with the Budget.
(b) For the avoidance of doubt, no portion of the proceeds of the
Revolving Credit Loans shall be used, directly or indirectly:
(i) to finance or make any payment not permitted under this
Agreement, (ii) to pay any fees or similar amounts payable to
any Person who has proposed or may propose to purchase
interests in any Borrower or who otherwise has proposed or may
propose to invest in any Borrower (including so-called
"break-up fees," "topping fees," "exit fees," "success fees"
and similar amounts), (iii) to make any distribution under a
plan of reorganization in any Bankruptcy Case, (iv) except as
otherwise expressly provided in the Interim Order or the Final
Order, to finance in any way any adversary action, suit,
arbitration, proceeding, application, motion or other
litigation of any type relating to or in connection with the
Existing Credit Agreement or any of the loan documents or
instruments entered into in connection therewith, including,
without limitation, any challenges to the obligations under
the Existing Credit Agreement or the validity, perfection,
priority or enforceability of any Lien securing such claims or
any payment made thereunder; (v) except as otherwise expressly
provided in the Interim Order or the Final Order, to finance
in any way any action, suit, arbitration, proceeding,
application, motion or other litigation of any type adverse to
the interests of the Agent and the Lenders or their rights and
remedies under this Agreement and the other Loan Documents;
(vi) to make any payment in settlement of any claim, action or
proceeding, before any court, arbitrator or other governmental
body without the prior written consent of Agent; or (vii) to
reduce, terminate, or otherwise be applied to any Prepetition
Indebtedness of any Borrower or any other Loan Party without
the prior written consent of Agent.
SECTION 4. LETTERS OF CREDIT
4.1 ISSUANCE.
(a) Subject to the terms and conditions hereof, the Issuing Bank
on behalf of the Revolving Credit Lenders agrees to issue on
any Business Day any Letter of Credit (or amendments thereof)
requested by the Borrower Representative during the period
from the Closing Date until the date 60 days prior to the
Revolver Termination Date; provided, however, that the Issuing
Bank shall have no obligation to issue any such Letter of
Credit (or amendments thereof) (i) to the extent that the
issuance thereof would cause the aggregate amount of all
Letters of
26
Credit Outstanding, when added to all Revolving Credit Loans
outstanding, to exceed the lesser of (a) the aggregate amount
of the Revolving Credit Commitments and (b) the applicable DIP
Loan Availability, or (ii) such issuance would cause the
aggregate amount outstanding at any time of all Letters of
Credit Outstanding to exceed $10,000,000 (such amount, the
"Letter of Credit Sublimit"); provided, that the Letter of
Credit Sublimit may be increased to $20,000,000 with the
consent of the Required Lenders and each Issuing Lender (such
consent to be granted in such parties' sole discretion) upon
the request of the Borrower Representative; provided, further,
that the Borrowers shall provide to the Lenders any and all
documents, agreements, and other information, financial and
otherwise, requested by the Lenders in order to evaluate such
request of the Borrower's Representative. Each Letter of
Credit shall be issued pursuant to a request, given not later
than 12:00 noon, New York City time, on the fourth Business
Day prior to the date of any proposed issuance, by the
Borrower Representative to the Agent, which shall give to the
Issuing Bank and each Revolving Credit Lender prompt notice
thereof by telecopy, telex or cable. Such request by the
Borrower Representative for the issuance of a Letter of Credit
(or amendments thereof) shall be made by telephone, telecopy,
telex or cable, confirmed immediately in writing if by
telephone, in substantially the form of Exhibit I, together
with a signed letter of credit application (including the
related reimbursement agreement) on the Issuing Bank's
then-standard form (or other form acceptable to the Issuing
Bank and appropriate, in the sole opinion of the Issuing Bank,
in the circumstances) (a "Letter of Credit Request") duly
executed by the Borrower Representative and may be cancelled
by notice thereof prior to issuance of such Letter of Credit
by telephone, telecopy, telex or cable, confirmed immediately
in writing if by telephone, to the Issuing Bank and the Agent.
Within the limits of the DIP Loan Availability and each
Revolving Credit Lender's Unused Revolving Credit Commitment
and the other restrictions set forth herein, the Borrowers'
ability to request the issuance of Letters of Credit shall be
fully revolving.
(b) All letters of credit issued under the Existing Credit
Agreement and outstanding on the Closing Date (the "Existing
Letters of Credit") shall, upon request of the Borrowers and
consent of the Agent in its sole discretion, automatically be
deemed Letters of Credit under this Agreement, and subject to
the terms hereof for all purposes.
4.2 PARTICIPATION BY REVOLVING CREDIT LENDERS. Immediately upon
issuance or amendment by the Issuing Bank of any Letter of
Credit in accordance with the procedures set forth in this
Section 4, each Revolving Credit Lender shall be deemed to
have irrevocably and unconditionally purchased and received
from the Issuing Bank, without recourse or warranty, an
undivided interest and participation to the extent of such
Revolving Credit Lender's Pro Rata Revolving Share of such
Letter of Credit (including, without limitation, all
Obligations of the Borrowers with respect thereto, other than
amounts owing to the Issuing Bank under subsection 2.3, and
any security therefor or guaranty pertaining thereto).
27
4.3 DRAWINGS. In the event that any drawing shall be made under a
Letter of Credit, by demand or claim (including, without
limitation, any draft), the Issuing Bank shall notify the
Borrower Representative via telephone, telecopy or telex of
such drawing and the Borrowers shall (whether or not the
Issuing Bank has notified the Borrower Representative of such
drawing, and on a joint and several and primary basis, as more
fully provided in subsection 3.2) reimburse the Issuing Bank
in immediately available funds for any amount paid or to be
paid by the Issuing Bank under such Letter of Credit on the
date of such payment. In the event that any drawing under a
Letter of Credit is not reimbursed by the Borrowers on the
date of payment by the Issuing Bank, the Borrowers shall be
deemed to have requested a borrowing of Revolving Credit Loans
in an aggregate amount equal to such unreimbursed payment. The
Revolving Credit Lenders shall make the requested Revolving
Credit Loans as of the date of such payment by the Issuing
Bank, and the proceeds of such Revolving Credit Loans shall
automatically be applied to repay the Issuing Bank for such
drawing in full. In the event that any drawing under a Letter
of Credit is not reimbursed by the Borrowers on the date of
payment by the Issuing Bank and such Revolving Credit Loans
are not made hereunder for any reason, an Event of Default
specified in subsection 10.1(a) shall have occurred and the
Issuing Bank shall promptly notify the Agent thereof, and the
Agent shall promptly notify each Lender. Immediately upon
receipt of such notice, the Revolving Credit Lenders will pay
to the Issuing Bank the amount of their respective
participations in the Letter of Credit. In the event that any
Revolving Credit Lender fails timely to make the Revolving
Credit Loan or pay the amount of its participation as required
by this subsection 4.3, interest shall accrue thereon at the
Federal Funds Rate for the first three Business Days following
the date of payment by the Issuing Bank and the Federal Funds
Rate plus 1% for the period thereafter to the date of payment
thereof by such Revolving Credit Lender. The Issuing Bank
shall distribute to each Revolving Credit Lender which has
paid all amounts payable by it under this subsection 4.3 with
respect to any Letter of Credit such Revolving Credit Lender's
Pro Rata Revolving Share of all payments received by the
Issuing Bank in reimbursement of drawings honored by the
Issuing Bank under such Letter of Credit when such payments
are received.
4.4 OBLIGATIONS ABSOLUTE. The obligations of the Borrowers and the
Revolving Credit Lenders under subsection 4.3 shall be
absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms hereof, under
all circumstances whatsoever, including, without limitation,
the circumstances listed below:
(a) any lack of validity or enforceability of this Agreement, any
of the other Loan Documents, any Letter of Credit, any
drawings thereunder or any related contract;
(b) any amendment or waiver of or any consent to any departure
from all or any of this Agreement or any of the other Loan
Documents;
(c) the existence of any claim, set-off, defense or other right
which any Borrower at any time may have against the Issuing
Bank, the Agent, any of the Lenders, any beneficiary or
transferee of any Letter of Credit, or any other Person,
whether in
28
connection with this Agreement, the other Loan Documents, any
Letter of Credit or any unrelated transactions;
(d) any statement or any other document presented under any Letter
of Credit that proves to be forged, fraudulent or invalid or
insufficient in any respect or any statement therein that
proves to be untrue or inaccurate in any respect whatsoever;
(e) payment by the Issuing Bank under any Letter of Credit against
presentation of a draft or certificate or other document that
does not comply with the terms of such Letter of Credit; or
(f) any other circumstances or happening whatsoever whether or not
similar to any of the foregoing;
provided, however, that neither the Borrowers nor the
Revolving Credit Lenders shall have any obligation to the
Issuing Bank pursuant to subsection 4.3 if, but for the
willful misconduct or gross negligence of the Issuing Bank (as
determined in a final, nonappealable judgment by a court of
competent jurisdiction), the obligations for which the Issuing
Bank seeks reimbursement or payment would not have arisen.
4.5 OTHER LENDERS. Any action taken or omitted to be taken by the
Issuing Bank under or in connection with any Letter of Credit,
if taken or omitted in the absence of gross negligence or
willful misconduct, shall not put the Issuing Bank under any
resulting liability to any Revolving Credit Lender or relieve
any Revolving Credit Lender of its obligations hereunder to
the Issuing Bank. In determining whether to pay under any
Letter of Credit, the Issuing Bank shall have no obligation to
the Revolving Credit Lenders other than to confirm that any
documents required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to comply
on their face with the requirements of such Letter of Credit.
4.6 INDEMNIFICATION. The Borrowers shall jointly and severally
indemnify and hold harmless the Issuing Bank from and against
any and all claims, damages, losses, liabilities, reasonable
costs and expenses of any kind whatsoever, including
reasonable fees and expenses of attorneys and paralegals that
the Issuing Bank may incur (or that may be claimed against the
Issuing Bank by any Person), together with all reasonable
costs and expenses resulting from the compromise or defense of
any claims or liabilities hereinafter described, by reason of
or in connection with (a) the execution and delivery or
transfer of, or payment or failure to pay under, any Letter of
Credit, (b) any suit, action or proceeding brought by any
person to require or prevent payment under any Letter of
Credit, or (c) any breach by any Borrower of any warranty,
covenant, term or condition in, or the occurrence of any
default under, any of the Loan Documents (to the extent
related to Letters of Credit), any Letter of Credit or any
related contract, together with all reasonable expenses
resulting from the compromise or defense of any claims or
liabilities arising as a result of any such breach or default
and defense against any legal action commenced to challenge
the validity of any of such documents; provided, however, that
the Borrowers shall not be required to indemnify the
29
Issuing Bank for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent,
caused by (i) the gross negligence or willful misconduct (as
determined in a final, nonappealable judgment in a court of
competent jurisdiction) of the Issuing Bank in determining
whether a draft, certificate or other documents presented
under any Letter of Credit complied with the terms of such
Letter of Credit, or (ii) the Issuing Bank's willful failure
to pay under any Letter of Credit after the presentation to it
by the beneficiary thereof of a draft, certificate or other
document strictly complying with the terms and conditions of
such Letter of Credit. Nothing in this subsection 4.6 is
intended to limit or modify in any way the reimbursement
obligations of the Borrowers set forth in subsection 4.3. In
case any action or proceeding is brought against the Issuing
Bank in respect of which indemnity may be sought under this
Agreement, the Issuing Bank shall promptly give notice of any
such action or proceeding to the Borrower Representative and
may require the Borrowers, upon such notice, to assume the
defense of the action or proceeding; provided that failure of
the Issuing Bank to give such notice shall not relieve the
Borrowers of any of their obligations under this subsection
4.6. Upon receipt of such notice from the Issuing Bank
requesting that the Borrowers assume such defense, the
Borrowers shall resist and defend such action or proceeding at
the Borrowers' sole cost and expense. The obligations of the
Borrowers under this subsection 4.6 shall survive the
termination of the Letters of Credit and this Agreement.
4.7 LIABILITY OF THE ISSUING BANK. The Borrowers assume all risks
of the acts or omissions of the users of any Letter of Credit
and all risks of the misuse of any Letter of Credit. Neither
the Issuing Bank, nor any of its officers, directors,
employees or agents shall be liable or responsible for: (a)
the use which may be made of any Letter of Credit or for any
acts or omissions of any Person and any transferee in
connection therewith; (b) the validity, sufficiency or
genuineness of documents, or of any endorsement or
endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (c) payment against presentation of
documents which do not comply with the terms of the applicable
Letter of Credit, including failure of any documents to bear
any reference or adequate reference to such Letter of Credit;
or (d) any other circumstances whatsoever in making or failing
to make payment under any Letter of Credit, except only that
the Borrowers shall have a claim against the Issuing Bank, and
the Issuing Bank shall be liable to the Borrowers to the
extent, but only to the extent, of damages suffered by the
Borrowers which were caused by (i) the Issuing Bank's gross
negligence or willful misconduct (as determined in a final,
nonappealable judgment by a court of competent jurisdiction)
in determining whether documents presented under any Letter of
Credit comply with the terms of such Letter of Credit (it
being understood that any such noncompliance in any immaterial
respect shall not be deemed gross negligence or willful
misconduct of the Issuing Bank) or (ii) the Issuing Bank's
willful failure to pay under any Letter of Credit after the
presentation to it by the beneficiary thereof of a draft,
certificate or other document strictly complying with the
terms and conditions of such Letter of Credit. In furtherance
and not in limitation of the foregoing, the Issuing Bank may
accept documents that appear on
30
their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the
contrary unless the Issuing Bank shall have been ordered not
to accept such documents by a court of competent jurisdiction.
SECTION 5. GENERAL PROVISIONS APPLICABLE TO COMMITMENTS AND LOANS
5.1 PREPAYMENTS.
(a) The Borrowers may at any time and from time to time, upon at
least one Business Day's irrevocable written notice to the
Agent, prepay the Revolving Credit Loans, in whole or in part,
without premium or penalty, which notices shall specify the
date and amount of prepayment. Upon receipt of any such notice
from the Borrower Representative, the Agent shall promptly
notify each affected Lender. If any such notice is given, the
amount specified in such notice shall be due and payable on
the date specified therein, together with any amounts payable
pursuant to subsection 5.7, if any. Such partial prepayments
shall be in an aggregate principal amount of $100,000 or a
whole multiple thereof.
(b) All Net Proceeds shall be deposited in the Collateral Account
and applied toward the prepayment of the Revolving Credit
Loans in the order specified below, and shall permanently
reduce the Revolving Credit Commitments; provided that the
first $30,000,000 of Net Proceeds from Asset Sales shall not
be required to be so applied if such Net Proceeds are used to
repay Prepetition Indebtedness consistent with the Interim
Order or Final Order. All amounts used to prepay Revolving
Credit Loans pursuant to this subsection 5.l(b) shall be
applied as follows:
FIRST, to the prepayment in full of all outstanding Revolving Credit
Loans ratably among the Revolving Credit Lenders, and
SECOND, to the Collateral Account maintained with the Agent in
respect of the Letters of Credit Outstanding for the purpose of
cash-collateralizing such Letters of Credit Outstanding.
(c) The Borrowers shall immediately make a mandatory prepayment as
specified in subsection 5.1(b) in the amount equal to the
positive excess (if any), on any date, of: (i) the aggregate
principal amount of Revolving Credit Loans outstanding on such
date plus the amount of Letters of Credit Outstanding on such
date minus (ii) the lesser of (1) the aggregate Revolving
Credit Commitments on such date and (2) the DIP Loan
Availability on such date.
(d) The Borrowers shall immediately make any prepayment required
by any Order, in the order specified in subsection 5.1(b)
unless otherwise provided in such Order.
31
5.2 INTEREST RATES AND PAYMENT DATES.
(a) Subject to the provisions of subsection 5.2(b), each Revolving
Credit Loan and Letter of Credit Reimbursement Obligation (if
not reimbursed by the Borrowers on the date of payment by the
Issuing Bank or if not refunded through a borrowing of
Revolving Credit Loans, in either case as provided in
subsection 4.3) shall bear interest at a rate per annum equal
to the Base Rate plus the Applicable Margin.
(b) If an Event of Default has occurred and is continuing, the
Revolving Credit Loans and each Letter of Credit Reimbursement
Obligation (if not reimbursed by the Borrowers on the date of
payment by the Issuing Bank or if not refunded through a
borrowing of Revolving Credit Loans, in either case as
provided in subsection 4.3) shall bear interest at a rate per
annum which is 2.50% over the rate otherwise applicable
thereto.
(c) Interest shall be payable by the Borrowers in arrears on the
last day of each calendar month without notice or invoice from
the Agent; provided that interest accruing pursuant to
paragraph (b) of this subsection shall be payable from time to
time on demand.
5.3 COMPUTATION OF INTEREST AND FEES.
(a) Commitment fees, Letter of Credit fees and interest shall be
calculated on the basis of a 360-day year for the actual days
elapsed. Any change in the interest rate on a Revolving Credit
Loan or Letter of Credit Reimbursement Obligation resulting
from a change in the Base Rate shall become effective as of
the opening of business on the day on which such change
becomes effective. The Agent shall as soon as practicable
notify the Borrower Representative and the affected Lenders of
the effective date and the amount of each such change in
interest rate.
(b) Each determination of an interest rate by the Agent pursuant
to any provision of this Agreement shall be conclusive and
binding on the Borrowers and the affected Lenders in the
absence of manifest error.
5.4 PRO RATA TREATMENT AND PAYMENTS.
(a) All payments (including prepayments) to be made by the
Borrowers hereunder, whether on account of principal,
interest, fees or otherwise, shall be made without set-off or
counterclaim and shall be made prior to 12:00 Noon, New York
City time, on the due date thereof to the Agent, for the
account of the Revolving Credit Lenders, the Issuing Bank or
the Agent, as the case may be, at the Agent's office specified
in subsection 12.2, in Dollars and in immediately available
funds. Payments received by the Agent after such time shall be
deemed to have been received on the next Business Day. The
Agent shall distribute such payments to the Lenders entitled
to receive the same promptly upon receipt in like funds as
received. If any payment hereunder becomes due and payable on
a day other than a Business Day, such payment shall be
extended to the next succeeding Business
32
Day, and, with respect to payments of principal, interest
thereon shall be payable at the then-applicable rate during
such extension.
(b) Unless the Agent shall have been notified in writing by any
Revolving Credit Lender prior to a Borrowing Date for
Revolving Credit Loans that such Lender will not make the
amount that would constitute its share of such borrowing on
such Borrowing Date available to the Agent, the Agent may
assume that such Lender is making such amount available to the
Agent, and the Agent may, in reliance upon such assumption,
make available to the Borrowers a corresponding amount. If
such amount is not made available to the Agent by the required
time on the Borrowing Date therefor, such Lender shall pay to
the Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Rate for the
period until such Lender makes such amount immediately
available to the Agent. A certificate of the Agent submitted
to any Lender with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest
error. If such Lender's share of such borrowing is not made
available to the Agent by such Lender within three Business
Days of such Borrowing Date, the Agent shall also be entitled
to recover such amount with interest thereon at the rate per
annum applicable to Revolving Credit Loans hereunder, on
demand, from the Borrowers, without prejudice to any rights of
the Borrowers against the Lender which has failed to make its
share of any borrowing available to the Agent.
(c) Each borrowing by the Borrower of Revolving Credit Loans shall
be made ratably from the Revolving Credit Lenders in
accordance with their respective Revolving Credit Commitment
Percentages.
5.5 REQUIREMENTS OF LAW.
(a) If after the date of this Agreement the adoption of or any
change in applicable law or regulation or in the
interpretation or administration thereof by any Governmental
Authority charged with the administration or interpretation
thereof (whether or not having the force of law):
(i) shall change the basis of taxation of payments to any Lender
in respect of the principal of or interest on such Lender's
Revolving Credit Loans or issuance of any Letter of Credit or
participation in Letters of Credit Outstanding or any fees or
other amounts payable hereunder (other than taxes imposed on
or measured by the overall net income of such Lender by the
jurisdiction in which such Lender has its principal office (or
lending office) or by any political subdivision or taxing
authority therein);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or other similar requirement against
assets of, deposits with or for the account of, or other
extensions of credit by, any office of such Lender; or
(iii) shall impose on such Lender any other condition affecting this
Agreement or such Lender's Revolving Credit Loans or issuance
of any Letter of Credit or
33
participation in Letters of Credit Outstanding;
and the result of any of the foregoing is to increase the cost to such Lender by
an amount which such Lender deems to be material of making Revolving Credit
Loans or issuing Letters of Credit or participations in Letters of Credit
Outstanding or to reduce any amount receivable hereunder in respect thereof by
an amount deemed by such Lender to be material, then, in any such case, the
Borrowers shall pay to such Lender within two Business Days after demand, any
additional amounts necessary to compensate such Lender for such increased cost
incurred or reduction suffered. If any Lender becomes entitled to claim any
additional amounts pursuant to this subsection, it shall promptly notify the
Borrower Representative, with a copy to the Agent, of the event by reason of
which it has become so entitled. This covenant shall survive the termination of
this Agreement and the payment of the Revolving Credit Loans and all other
amounts payable hereunder.
(b) If any Lender shall have determined that the adoption after
the date hereof of any law, rule, regulation or guideline
regarding capital adequacy, or any change in any of the
foregoing or in the interpretation or administration of any of
the foregoing by any Governmental Authority, central bank or
comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender or any
Lender's holding company with any request or directive
regarding capital adequacy (whether or not having the force of
law) of any such Governmental Authority, central bank or
comparable agency, has or would have the effect of increasing
the amount or cost of capital required to be maintained by
such Lender or such holding company or reducing the rate of
return on such Lender's or such holding company's capital as a
consequence of its obligations hereunder to a level below that
which such Lender or such holding company could have achieved
but for such adoption, change or compliance (taking into
consideration such Lender's or such holding company's policies
with respect to capital adequacy) by an amount deemed by such
Lender to be material, then from time to time the Borrowers
shall pay to such Lender such additional amount or amounts as
will compensate such Lender for any such reduction suffered.
This covenant shall survive the termination of this Agreement
and the payment of the Revolving Credit Loans and all other
amounts payable hereunder.
(c) A certificate of each Lender setting forth such amount or
amounts as shall be necessary to compensate such Lender or its
holding company as specified in subsection 5.5(a) or (b)
above, as the case may be, shall be delivered to the Borrower
Representative (with a copy to the Agent) and shall be
conclusive absent manifest error. The Borrowers shall pay each
Lender the amount shown as due on any such certificate
delivered by it within 10 Business Days after its receipt of
the same.
5.6 TAXES.
(a) All payments made by the Borrowers under this Agreement and
the Notes shall be made free and clear of, and without
deduction or withholding for or on account of, any present or
future taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority,
excluding (i) net income taxes, franchise taxes, or
34
any other taxes imposed on or measured by the net income or
profits of the Agent or the applicable Lender, in each case by
the jurisdiction under the laws of which the Agent or such
Lender is organized or any political subdivision thereof or by
the jurisdiction in which the applicable lending or issuing
office of the Agent or such Lender is located or any political
subdivision thereof and (ii) U.S. withholding taxes payable
with respect to payments hereunder under laws (including any
treaty, ruling, determination or regulation) in effect on the
date hereof, but not any increase in U.S. withholding tax
resulting from any subsequent change in such laws occurring
(x) after the date hereof in the case of the Agent and any
Lender as of the date of this Agreement, and (y) in the case
of any other Lender, the date of Assignment and Acceptance
pursuant to which it became a Lender (all such nonexcluded
taxes, levies, imposts, duties, charges, fees, deductions and
withholdings the "Nonexcluded Taxes"). In addition, the
Borrowers agree to pay to the relevant Governmental Authority
in accordance with applicable law any current or future stamp
or documentary taxes or any other excise or property taxes,
charges or similar levies that arise from any payment made
hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement ("Other Taxes").
If any Nonexcluded Taxes or Other Taxes are required by law to
be withheld from any amounts payable to the Agent or any
Lender hereunder (including with respect to Letters of Credit)
or under the Notes, the amounts so payable to the Agent or
such Lender shall be increased to the extent necessary to
yield to the Agent or such Lender interest or any such other
amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the Notes. Whenever any
Nonexcluded Taxes or Other Taxes are payable by the Borrowers,
upon receipt thereof the Borrower Representative shall send to
the Agent for its own account or for the account of such
Lender, as the case may be, a certified copy of any original
official receipt received by the Borrower showing payment
thereof. The Borrowers shall indemnify the Agent and the
Lenders for the full amount of Nonexcluded Taxes, Other Taxes
and any taxes imposed by any jurisdiction on amounts payable
under this subsection 5.6(a) that are paid by such Lender or
Agent, (including penalties, incremental taxes, interest and
expenses arising therefrom or with respect thereto), whether
or not such Nonexcluded Taxes or Other Taxes were correctly or
legally imposed. If the Borrowers determine in good faith that
a reasonable basis exists for contesting any Nonexcluded Taxes
or Other Taxes, such Lender or the Agent shall cooperate with
the Borrower Representative in challenging such Nonexcluded
Taxes or Other Taxes at the Borrowers' expense if requested by
the Borrower Representative (it being understood and agreed
that the Agent or such Lender shall have no obligation to
contest or responsibility for contesting such Nonexcluded
Taxes or Other Taxes). If any Lender receives a refund in
respect of any Nonexcluded Taxes or Other Taxes for which such
Lender has received payment from the Borrowers hereunder, such
Lender shall, within 30 days of receipt by such Lender, repay
such refund to the Borrower Representative, provided that the
Borrowers, upon the request of such Lender, agree to return
such refund (plus any penalties, interest or other charges) to
the Lender in the event such Lender is required to repay such
refund. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Revolving
Credit Loans and all other amounts payable hereunder.
35
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) in the case of each Lender:
(1) on or before the date of the first payment to such Lender
pursuant to this Agreement following the Closing Date or on or
before the effective date of the Assignment and Acceptance,
deliver to the Borrower Representative and the Agent two duly
completed copies of United States Internal Revenue Service
Form W-8BEN (establishing application of a treaty) or W-8ECI,
or successor applicable form, as the case may be;
(2) deliver to the Borrower Representative and the Agent two
further copies of any such form or certification on or before
the date that any such form or certification expires or
becomes obsolete and promptly upon the occurrence of any event
requiring a change in the most recent form previously
delivered by it to the Borrower Representative; and
(3) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the
Borrower Representative or the Agent; or
(ii) in the case of a Lender that is not a "bank" under Section
881(c)(3)(A) of the Code:
(1) deliver to the Borrower Representative and the Agent (A) a
statement under penalties of perjury that such Lender (x) is
not a "bank" under Section 881(c)(3)(A) of the Code, is not
subject to regulatory or other legal requirements as a bank in
any jurisdiction, and has not been treated as a bank for
purposes of any tax, securities law or other filing or
submission made to any Governmental Authority, any application
made to a rating agency or qualification for any exemption
from tax, securities law or other legal requirements, (y) is
not a 10-percent shareholder within the meaning of Section
881(c)(3)(B) of the Code and (z) is not a controlled foreign
corporation receiving interest from a related person within
the meaning of Section 881(c)(3)(C) of the Code and (B) an
Internal Revenue Service Form W-8BEN (regarding the Lender's
foreign status);
(2) deliver to the Borrower Representative and the Agent a further
copy of said Form W-8BEN, or any successor applicable form or
other manner of certification on or before the date that any
such Form W-8BEN expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent
form previously delivered by such Lender; and
(3) obtain such extensions of time for filing and complete such
forms or certifications as may be reasonably requested by the
Borrower Representative or the Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders any
36
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender so advises the
Borrower Representative and the Agent. Each Person that shall become a
Participant pursuant to subsection 12.6 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms and statements
required pursuant to this subsection to the Lender from which the related
participation shall have been purchased.
5.7 INDEMNITY. The Borrowers agree to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such
Lender may sustain or incur as a consequence of default by a
Borrower for any reason in making any payment when due,
including after the Borrower Representative has given a notice
of prepayment in accordance with the provisions of this
Agreement. Such loss or expense may include any loss,
including loss of anticipated profits, costs or expenses
incurred by reason of the liquidation or reemployment of
deposits or other funds in order to fund or maintain such
Revolving Credit Loans. This covenant shall survive the
termination of this Agreement and the payment of the Revolving
Credit Loans and all other amounts payable hereunder.
5.8 CHANGE OF LENDING OFFICE. Each Lender agrees that it will use
all reasonable efforts (so long as such designation would not
be adverse to it, as determined in its sole judgment) to
designate a lending office or a different lending office if
the making of such a designation would reduce or obviate the
need for the Borrowers to make payments under subsection 5.5
or 5.6(a).
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce the Agent, the Issuing Bank and the Lenders to enter into
this Agreement, to make the Revolving Credit Loans and to issue
Letters of Credit, each of the Borrowers hereby represents and
warrants to the Agent, the Issuing Bank and each Lender that:
6.1 FINANCIAL CONDITION.
The audited consolidated balance sheets of SMC and its
consolidated Subsidiaries, as of December 31, 2001 and
December 31, 2000 and the related audited consolidated
statements of income, shareholders' equity and cash flows for
the two years then ended, copies of which have heretofore been
furnished to the Agent, have been certified by Ernst & Young
LLP and present fairly the consolidated financial condition of
SMC and its consolidated Subsidiaries as at such dates and the
consolidated results of their operations and their cash flows
for the two years then ended in conformity with GAAP.
Neither SMC nor any of its consolidated Subsidiaries has, on
the Closing Date, any material Guarantee Obligation,
contingent liability or liability for taxes, or any long-term
Financing Lease or unusual forward or long-term commitment,
including, without limitation, any Hedging Agreement required
to be reflected on a balance sheet (or in the notes thereto)
prepared in accordance with GAAP, which is not (i) reflected
in the financial statements relating to the year ended
December 31, 2001 described in subclause 6.1(a) above (or in
the notes thereto) or (ii) disclosed on Schedule 6.1(b).
Except as set forth on Schedule 6.1(b), during the period from
December 31, 2001 to and including the date hereof there has
been no sale, transfer or other disposition by the Borrowers
or any of the Subsidiaries of any material part of their
business or property and no purchase or other acquisition of
any business or property (including any Capital Stock of any
other
37
Person) material in relation to the consolidated financial
condition of the Borrowers and the consolidated Subsidiaries
at December 31, 2001.
The Borrower Representative has delivered to each Lender the
budget dated April 6, 2002, including projected income
statements, cash flow statements and balance sheets, for the
months ending April 2002 through March 2003, all as attached
hereto as Exhibit P (the "Budget"). The Budget was prepared by
the Borrowers in good faith and on the basis of the best
information available at that time and on the assumptions
stated therein, which assumptions the Borrowers believe to be
reasonable.
6.2 NO CHANGE. Since December 31, 2001 (a) there has been no
material adverse change, or any development involving a
prospective material adverse change, in the business,
operations, properties, assets, liabilities, performance or
condition (financial or otherwise) or prospects of any
Borrower or any of its Material Subsidiaries (other than the
filing of the Bankruptcy Cases, the defaults referenced in
subsection 6.7, and as shown in the Budget), and (b) no
dividends or other distributions have been declared, paid or
made upon the Capital Stock of the Borrowers nor has any of
the Capital Stock of the Borrowers been redeemed, retired,
purchased or otherwise acquired for value by the Borrowers or
any of the Subsidiaries except as permitted by subsection 9.7.
6.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Borrower and
Subsidiary (a) is duly organized, validly existing and (where
applicable) in good standing under the laws of the
jurisdiction of its organization, (b) has the corporate power
and authority and all licenses, permits and other approvals of
any Governmental Authority to own and operate its property, to
lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly
qualified as a foreign corporation and (where applicable) in
good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of
its business requires such qualification except where the
failure to so qualify or be in good standing could not,
individually or in the aggregate, have a Material Adverse
Effect and (d) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith
could not, individually or in the aggregate, have a Material
Adverse Effect.
6.4 CORPORATE POWER, AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each
Borrower and Subsidiary has the corporate power and authority
to make, deliver and perform the Loan Documents to which it is
a party, in the case of the Borrower, to borrow hereunder and
to enter into Letter of Credit Requests, and has taken all
necessary corporate action to authorize the borrowings on the
terms and conditions of this Agreement and any Notes and to
authorize the execution, delivery and performance of the Loan
Documents to which it is a party. As of the date of the
Interim Order, no consent, approval or authorization of,
filing with, notice to or other act by any Governmental
Authority or any other Person is required in connection with
the Revolving Credit Loans and Letters of Credit and all other
related transactions, other than such orders, consents,
approvals and authorizations of, and all notices and all
written assumptions of obligations to,
38
Governmental Authorities and any other Persons which have been
heretofore obtained, made or given and are in full force and
effect, and complete and correct copies of which have
heretofore been furnished to the Agent. This Agreement has
been, and each other Loan Document to which any Borrower or
Subsidiary is or will be a party will be, duly executed and
delivered on behalf of such Person that is a party thereto.
This Agreement constitutes, and each other Loan Document to
which any Borrower or any Subsidiary is or will be a party
when executed and delivered will constitute, a legal, valid
and binding obligation of each such Person enforceable against
it in accordance with its terms, and in the case of the
Borrowers, also constitutes (or will constitute, as
applicable) a legal, valid and binding obligation enforceable
against the Estates.
6.5 NO LEGAL BAR. The execution, delivery and performance of the
Loan Documents to which any Borrower or Subsidiary is a party,
the borrowings hereunder and the use of the proceeds thereof,
will not violate any Requirement of Law or result in a
material violation of any indenture, agreement or other
instrument to which any Borrower or Subsidiary is a party or
by which it or any of its property is bound and will not
result in, or require, the creation or imposition of any Lien
(except in favor of the Agent) on any of their respective
properties or revenues pursuant to any such Requirement of Law
or any such indenture, agreement or other instrument.
6.6 NO MATERIAL LITIGATION. Except as set forth on Schedule 6.6,
no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the
knowledge of any Loan Party, threatened by or against any
Borrower or Subsidiary or against any of their respective
properties or revenues (a) with respect to any of the Loan
Documents or the making of Revolving Credit Loans and issuing
of Letters of Credit and all other related transactions
contemplated hereby or thereby or (b) which could reasonably
be expected to have a Material Adverse Effect.
6.7 NO DEFAULT. Except as caused solely by the filing of the
Bankruptcy Cases, the failure to make the principal repayments
due as of March 31, 2002 with respect to the Prepetition
Indebtedness, the qualified opinion of Ernst & Young LLP with
respect to the consolidated financial statements of SMC and
its consolidated Subsidiaries as of December 31, 2000 and
2001, the failure to comply with subsection 9.1(f) of the
Existing Credit Agreement for the five fiscal quarters ending
March 31, 2002, and the delisting of SMC's common stock from
the NASDAQ, no Borrower or Subsidiary is in default under or
with respect to any indenture, agreement or other instrument
to which such Person is a party or by which it or any of its
property is bound in any respect which could reasonably be
expected to have a Material Adverse Effect except for any such
indenture, agreement or other instrument related to
Indebtedness that will be satisfied and from which the
relevant Person will be released on the Closing Date. No
Default or Event of Default has occurred and is continuing.
6.8 OWNERSHIP OF PROPERTY; LIENS. Each Borrower and Subsidiary has
good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real
39
property, and good title to, or a valid leasehold interest in,
all its other material property except for such minor defects
in title and other matters disclosed in any title insurance
policies delivered to the Agent pursuant to this Agreement
that do not affect the ability to use such property in the
conduct of its business, and none of such property is subject
to any Lien except Permitted Liens.
6.9 INTELLECTUAL PROPERTY. Each Borrower and Subsidiary owns, or
is licensed to use, all Intellectual Property necessary for
the conduct of its business as currently conducted except for
that Intellectual Property, the failure to own or license
could not reasonably be expected to have a Material Adverse
Effect. Schedule 6.9 sets forth all interests of the Borrower
and its Subsidiaries in all material Intellectual Property
existing as of the Closing Date and the registration
information for all such Intellectual Property. To the best of
the Borrowers' knowledge, except as set forth on Schedule 6.6,
no claim has been asserted or is pending by any Person
challenging or questioning the use of any such material
Intellectual Property by any Borrower and Subsidiary or the
validity or effectiveness of any such Intellectual Property
except for such claims which even if successful could not
reasonably be expected to have a Material Adverse Effect, nor
do the Borrowers know of any valid basis for any such claim.
To the best knowledge of the Borrowers, the use of such
Intellectual Property by the Borrowers and the Subsidiaries
does not infringe on the rights of any Person, except for such
claims and infringements that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
6.10 NO BURDENSOME RESTRICTIONS. After giving effect to the making
of any Revolving Credit Loan or issuing of any Letter of
Credit contemplated hereunder and all other related
transactions, no indenture, agreement or other instrument to
which any Borrower or Subsidiary is a party or by which it or
any of its property is bound could reasonably be expected to
have a Material Adverse Effect.
6.11 TAXES. Except as set forth on Schedule 6.11, each Borrower and
Subsidiary has filed or caused to be filed all material
foreign, federal, state and local tax returns which, to the
knowledge of the Borrowers, are required to be filed, taking
into account all applicable extensions, and has paid all taxes
shown to be due and payable on said returns or on any
assessments made against it or any of its property and all
other material taxes, fees or other charges imposed on it or
any of its property by any Governmental Authority (other than
any such taxes or assessments the amount or validity of which
are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity
with GAAP have been provided on the books of such Person). No
tax Lien has been filed against any Borrower or Subsidiary
and, to the knowledge of the Borrower, except as set forth on
Schedule 6.11, no claim is being asserted with respect to any
taxes, fees, or other charges.
6.12 FEDERAL REGULATIONS. No part of the proceeds of any Revolving
Credit Loan or Letter of Credit will be used for "purchasing"
or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U as
40
now and from time to time hereafter in effect. Neither the
making of any Revolving Credit Loan or issuing of any Letter
of Credit nor the use of the proceeds thereof will violate or
be inconsistent with the provisions of Regulation T, U or X of
the Board of Governors. If requested by any Lender or the
Agent, the Borrowers will furnish to the Agent and each Lender
a statement to the foregoing effect in conformity with the
requirements of FR Form U-1 referred to in said Regulation U.
6.12 ERISA. Except for the events described in subsection 6.7,
neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or
Section 302 of ERISA and whether or not waived) has occurred
during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan
that remains outstanding in any respect and that could
reasonably be expected to have a Material Adverse Effect, and
each Plan has complied in all material respects with the
applicable provisions of ERISA and the Code. No termination of
a Single Employer Plan has occurred, and no Lien in favor of
the PBGC or a Plan has arisen, during such five-year period
that has resulted in any material liability. Except as set
forth on Schedule 6.13, the present value of all accrued
benefits under each Single Employer Plan (based on those
assumptions used to fund such Plans) did not, as of the last
annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the
assets of such Plan allocable to such accrued benefits.
Neither any Borrower nor any Commonly Controlled Entity has
had a complete or partial withdrawal from any Multiemployer
Plan, and neither any Borrower nor any Commonly Controlled
Entity would become subject to any liability under ERISA if
such Borrower or Commonly Controlled Entity were to withdraw
completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this
representation is made or deemed made and no such
Multiemployer Plan is in Reorganization or Insolvent, except
in each instance where such liability, reorganization or
insolvency could not reasonably be expected to have a Material
Adverse Effect. Except as set forth on Schedule 6.13, the
present value (determined using actuarial and other
assumptions which are reasonable in respect of the benefits
provided and the employees participating) of the liability of
a Borrower for post retirement benefits to be provided to its
current and former employees under Plans which are welfare
benefit plans (as defined in Section 3(l) of ERISA) does not,
in the aggregate, exceed the assets under all such Plans
allocable to such benefits by an amount which could reasonably
be expected to have a Material Adverse Effect. Each Commonly
Controlled Entity that has liability for postretirement
benefits has adopted Financial Accounting Standard No. 106.
All benefit plans or arrangements covering non-U.S. employees
comply in all material respects with applicable Requirements
of Law. Each benefit plan or arrangement covering non-U.S.
employees, including expatriate employees, has been funded, if
required by local law, in accordance with reasonable actuarial
assumptions and methods in the relevant jurisdiction, to
provide all benefits accrued thereunder by reference to
service completed prior to the date hereof. Each benefit plan
or arrangement covering non-U.S. employees has received all
applicable approvals or certifications of appropriate
Governmental Authorities,
41
and no events or circumstances have occurred, to the best
knowledge of Borrowers, which are likely to prejudice such
approval or certification.
6.14 INVESTMENT COMPANY ACT; OTHER REGULATIONS. None of the
Borrowers is an "investment company," or a company
"controlled" by an "investment company," within the meaning of
the Investment Company Act of 1940 as amended. No Borrower is
subject to regulation under any Requirement of Law which
limits its ability to incur Indebtedness.
6.15 CAPITAL STOCK; SUBSIDIARIES; INVESTMENTS.
(a) The authorized, issued and outstanding shares of Capital Stock
of the Borrowers are as set forth on Schedule 6.15. All such
outstanding shares have been duly authorized, are validly
issued and outstanding and are fully paid and nonassessable.
To the best of the Borrower's knowledge, there are no
outstanding options or other rights pertaining to the Capital
Stock of the Borrowers, other than as set forth on Schedule
6.15. Except as set forth on Schedule 6.15, the Borrower has
no obligation to repurchase or redeem any shares of its
Capital Stock.
(b) The Persons listed on Schedule 6.15 constitute all the
Subsidiaries of the Borrowers and all other Persons
constituting Investments by the Borrowers and its Subsidiaries
in Capital Stock at the date hereof. Such Schedule identifies
the state or country of organization of each such Subsidiary
or Investment and the percentage ownership of such Subsidiary
or Investment directly or indirectly owned by the Borrowers
and the ownership chain for such Subsidiary or Investment, and
the number of authorized and outstanding shares of Capital
Stock. Except as set forth on Schedule 6.15, there are no
preemptive rights with respect to the Capital Stock of such
Subsidiaries or Investments and no options, warrants or other
rights to acquire the Capital Stock of any such Subsidiary or
Investment, and no securities convertible into such Capital
Stock.
(c) Controlled Products Group International, Inc., a Delaware
corporation, and a Subsidiary of SMC, has no material
Indebtedness or other liability to any Person.
6.16 ENVIRONMENTAL MATTERS.
(a) Except as disclosed on Schedule 6.16, no real estate currently
or formerly owned or leased by any Borrower or Subsidiary
contains, nor, to the best of the Borrowers' knowledge, has
previously contained, any Materials of Environmental Concern
in amounts or concentrations which could reasonably be
expected to give rise to a material liability under any
Environmental Law.
(b) Except as disclosed in Schedule 6.16, all real estate
currently or formerly owned or leased by the Borrowers and
their Subsidiaries and all operations thereon are in material
compliance with all applicable Environmental Laws, and there
is no contamination at, under or about such real estate or
violation of any Environmental Law with respect to such real
estate or the business operated by the Borrowers or any of
their Subsidiaries (the "Business") which could reasonably be
expected to have a Material Adverse Effect or interfere with
the continued operation of such real estate.
(c) Except as disclosed in Schedule 6.16, there are no existing
or, to the knowledge of the Borrowers, threatened
Environmental Claims against any Borrower or any Subsidiary,
42
and no Borrower or Subsidiary has received any notice of
violation, alleged violation, noncompliance, liability or
potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the
real estate currently or formerly owned, leased or operated by
a Borrower or any Subsidiary or the Business, which in either
case could reasonably be expected to have a Material Adverse
Effect.
(d) Except as disclosed in Schedule 6.16, Materials of
Environmental Concern have not been transported or disposed
of, from the real estate currently or formerly owned, leased
or operated by any Borrower or Subsidiary, by any Borrower or
Subsidiary in violation of, or in a manner or to a location
which could give rise to material liability under, any
Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, released, stored or disposed
of at, on or under any of such real estate in violation of, or
in a manner that could reasonably be expected to give rise to
liability under, any applicable Environmental Law which could
reasonably be expected to have a Material Adverse Effect.
(e) Except as disclosed in Schedule 6.16, no judicial proceeding
or governmental or administrative action is pending or, to the
knowledge of the Borrowers, threatened, under any
Environmental Law to which any Borrower or Subsidiary is or
will be named as a party with respect to any real estate
currently or formerly owned, leased or operated by a Borrower
or any Subsidiary or the Business which could reasonably be
expected to have a Material Adverse Effect, nor are there any
consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental
Law with respect to such real estate or the Business which
could reasonably be expected to have a Material Adverse
Effect.
6.17 REGULATION H. No real property owned by a Borrower or
Subsidiary is located in an area that has been identified by
the Secretary of Housing and Urban Development as an area
having special flood hazards and in which flood insurance has
been made available under the National Flood Insurance Act of
1968, except for the real property located in Huntington, West
Virginia as to which the Borrower has obtained and maintains
such flood insurance.
6.18 ACCURACY OF INFORMATION. All factual information furnished by
or on behalf of the Borrowers or Subsidiaries in writing to
the Agent or any Lender on or prior to the Closing Date in
connection with this Agreement, the other Loan Documents and
the making of Revolving Credit Loans and issuing of Letters of
Credit and all other related transactions is, and all other
factual information hereafter furnished by or on behalf of the
Borrowers or Subsidiaries in writing to the Agent or any
Lender will be, true and accurate in all material respects on
the date as of which such information is dated or furnished
and not incomplete by omitting to state any material fact
necessary to make such information not misleading.
6.19 INSURANCE. Schedule 6.19 lists all insurance maintained by the
Loan Parties as of the Closing Date.
43
6.20 LABOR RELATIONS. None of the Borrowers nor any Subsidiary is
engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Effect and, except as set
forth on Schedule 6.20, there is (a) no unfair labor practice
complaint pending against any Borrower or Subsidiary or, to
the best knowledge of the Borrowers, threatened against any of
them, before the National Labor Relations Board or any other
Governmental Authority, and no material grievance or
arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against a Borrower or any
Subsidiary or, to the best knowledge of the Borrowers,
threatened against any of them, (b) no strike, labor dispute,
slow down or stoppage pending against a Borrower or any
Subsidiary or, to the best knowledge of the Borrowers,
threatened against a Borrower or any Subsidiary and (c) no
Borrower or Subsidiary is subject to a collective bargaining
agreement and, to the best knowledge of the Borrowers, no
union representation proceeding is pending with respect to the
employees of a Borrower or any Subsidiary, except (with
respect to any matter specified in clause (a), (b) or (c)
above, either individually or in the aggregate) such as could
not reasonably be expected to have a Material Adverse Effect.
6.21 INDEBTEDNESS. Schedule 6.21 sets forth a true and complete
list of all Indebtedness (excluding the Revolving Credit Loans
and the Letters of Credit Outstanding) of the Borrower and its
respective Subsidiaries as of the Closing Date and which is to
remain outstanding after giving effect to the Revolving Credit
Loans to be made and Letters of Credit to be issued hereunder
and all other related transactions, in each case showing the
aggregate principal amount thereof and the name of the
respective Borrower and any other entity which directly or
indirectly guaranteed such debt.
6.22 BANK ACCOUNTS. Schedule 6.22 sets forth a true and complete
list of all accounts of whatever nature maintained with a bank
or other financial institution by any Borrower or Subsidiary,
including setting forth separately those maintained for ▇▇▇▇▇
cash and similar purposes with a bank or other financial
institution that is not a Lender hereunder (each such account,
an "Excluded Account").
SECTION 7. CONDITIONS PRECEDENT
7.1 CONDITIONS TO INITIAL LOANS. The agreement of each Lender to
make the initial Revolving Credit Loans requested to be made
by it and of the Issuing Bank to issue the initial Letters of
Credit requested to be issued hereunder are subject to the
satisfaction, prior to the making of any such Revolving Credit
Loan or issuance of any such Letter of Credit, of the
following conditions precedent:
(a) Loan Documents. The Agent shall have received (i) this
Agreement, executed and delivered by one or more duly
authorized officers of each of the Borrowers, with a
counterpart for each Lender, (ii) for the account of each
Revolving Credit Lender, a Revolving Credit Note conforming to
the requirements hereof and executed by one or more duly
authorized officers of each Borrower, and (iii) the Security
Documents, if any, each executed and delivered by one or more
duly authorized officers of each Loan Party thereto, with a
44
counterpart for the Agent and a counterpart or a conformed
copy for each Lender. In the event that any Letters of Credit
are to be issued on the Closing Date, the Agent shall have
received a Letter of Credit Request from the Borrower
Representative with respect to each such Letter of Credit as
provided in subsection 4.1.
(b) Closing Certificate. The Agent shall have received, with a
counterpart for each Lender, a certificate of each Borrower,
dated the Closing Date, substantially in the form of Exhibit
J, with appropriate insertions and attachments, executed by a
Responsible Officer of such Borrower.
(c) Corporate Proceedings of the Borrowers. The Agent shall have
received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance reasonably satisfactory to
the Agent, of the Board of Directors of each Borrower
authorizing (i) the execution, delivery and performance of
this Agreement and the other Loan Documents to which it is a
party, (ii) the borrowings contemplated hereunder, and (iii)
the granting by it of the Liens created pursuant to this
Agreement, certified by the Secretary or an Assistant
Secretary of such Borrower as of the Closing Date, which
certificate shall be in form and substance reasonably
satisfactory to the Agent and shall state that the resolutions
thereby certified have not been amended, modified, revoked or
rescinded.
(d) Borrower Incumbency Certificates. The Agent shall have
received, with a counterpart for each Lender, a certificate of
each Borrower, dated the Closing Date, as to the incumbency
and signature of the officers of such Borrower executing any
Loan Document, reasonably satisfactory in form and substance
to the Agent, executed by a Responsible Officer and the
Secretary or any Assistant Secretary of such Borrower.
(e) [Reserved].
(f) [Reserved].
(g) Corporate Documents. The Agent shall have received, with a
copy for each Lender, such documents as the Agent or any
Lender may reasonably request relating to the organization,
existence and good standing of SMC and its Domestic
Subsidiaries and any material Foreign Subsidiary whose Capital
Stock is pledged pursuant to any Security Document, including
true and complete copies of the certificate of incorporation
and bylaws (or other governing documents) of the Borrower and
each of such Subsidiaries, certified as of the Closing Date as
complete and correct copies thereof by an officer of such
Person, and all such documents shall be satisfactory to the
Agent and the Lenders.
(h) Borrower Financial Statements. The Lenders shall have received
copies of the audited consolidated financial statements of SMC
for the fiscal years ended
45
December 31, 2001 and December 31, 2000 which financial
statements shall have been prepared in accordance with GAAP.
(i) Corporate and Capital Structure. The corporate, legal and
capital structure of the Borrowers and Subsidiaries after
giving effect to the making of Revolving Credit Loans and
issuing of Letters of Credit hereunder and all other related
transactions shall be satisfactory to the Agent and the
Lenders.
(j) Consents, Approvals, etc. The Agent shall have received, with
a copy for each Lender, a certificate of a Responsible Officer
of each Borrower attaching a true and correct copy of each
governmental and third-party approval (including, without
limitation, any consents required to pledge the Capital Stock
of the Subsidiaries and Investments of the Borrowers and
Subsidiaries pledged pursuant to this Agreement or the
Security Documents, each in form and substance satisfactory to
the Agent) necessary in connection with the transactions
contemplated by the Loan Documents or certifying that true and
correct copies of all such approvals have been delivered by
the Borrower Representative to the Agent, with a copy for each
of the Lenders, and that such approvals have not been
rescinded, amended or modified in any manner; provided that
the foregoing shall not apply as of the Closing Date with
respect to the consents of the board of directors of each of
Inco Alloys Foreign Sales Corporation, a company organized
under the laws of Barbados, Special Metals Pacific Pte. Ltd.,
a company organized under the laws of the Republic of
Singapore, and Huntington Alloys Canada Ltd., a company
organized under the laws of Canada, each of which consents
shall be obtained by the date that is 30 days after the
Closing Date. Each such approval shall have been obtained, be
in full force and effect and no action shall have been taken
or threatened by any competent authority, and no Requirement
of Law shall (in the judgment of the Agent) be applicable,
which would restrain, prevent or otherwise impose materially
adverse conditions on the transactions contemplated by the
Loan Documents. The Revolving Credit Loans shall be in
compliance with Regulations T, U and X of the Board of
Governors.
(k) Fees and Expenses. The Agent shall have received reasonably
satisfactory evidence that the fees and expenses to be
incurred by the Borrowers and Subsidiaries in connection with
the execution and delivery of this Agreement and the other
Loan Documents, and the making of Revolving Credit Loans and
issuing of Letters of Credit hereunder and all other related
transactions, will not exceed an aggregate amount reasonably
acceptable to the Agent.
(l) Lien Searches. The Agent shall have received the results of a
recent search by a Person satisfactory to the Agent of the
UCC, judgment and tax lien filings (or equivalent searches
with respect to material Foreign Subsidiaries) which may have
46
been filed with respect to personal property of the Borrower
and such Subsidiaries, and the results of such search shall
reveal no Liens on any of the assets of the Borrower or its
Subsidiaries except for Permitted Liens and Liens to be
released on the Closing Date.
(m) Insurance. The Agent shall have received evidence in form and
substance reasonably satisfactory to it of all insurance
coverage as required by this Agreement and the other Loan
Documents.
(n) Legal Opinions. The Agent shall have received, with a
counterpart for each Lender, the executed legal opinion of (i)
Bond, ▇▇▇▇▇▇▇▇▇ & King, LLP, New York counsel to the Borrowers
and the other Loan Parties, substantially in the form of
Exhibit L-1, and covering such other matters as the Agent may
request and (ii) McGuireWoods LLP, special bankruptcy counsel
to the Borrowers and the other Loan Parties, substantially in
the form of Exhibit L-2, and covering such other matters as
the Agent may request.
(o) Agent's Fees and Expenses. The Agent shall have received all
fees, expenses and other consideration required to be paid or
delivered on or prior to the Closing Date under any Loan
Document, and all fees and expenses of counsel to the Agent,
including any local or foreign counsel.
(p) No Material Adverse Change. There shall have occurred no
material adverse change, and no development involving a
prospective material adverse change, (i) in the business,
condition (financial or otherwise), operations, performance,
properties or prospects of any Borrower or Material Subsidiary
(other than as set forth in subsection 6.2(a)) or (ii) in the
loan syndication or financial or capital market conditions
generally, and all information provided to the Agent and the
Lenders by or on behalf of the Borrowers with respect to the
making of Revolving Credit Loans and issuing of Letters of
Credit hereunder and all other related transactions, and the
business, condition (financial or otherwise), operations,
performance, and properties of the Borrowers and Subsidiaries,
shall be true and correct in all material respects.
(q) No Litigation. There shall exist no action, suit,
investigation, litigation or proceeding pending or threatened
in any court or before any arbitrator or Governmental
Authority that (i) would reasonably be likely to have a
Material Adverse Effect or (ii) purports to materially affect
the making of Revolving Credit Loans and issuing of Letters of
Credit hereunder and all other related transactions or the
rights and remedies of the Agent and the Lenders.
(r) ERISA; Retiree Benefits. The Lenders shall be satisfied that
the Borrowers and their Subsidiaries will be able to meet
their respective obligations under all employee and retiree
welfare benefit plans, that such plans are in all material
respects funded in accordance with the minimum statutory
requirements under ERISA or other applicable Requirements of
Law (subject to Schedule 6.13), that no material Reportable
Event has occurred as to any such plan (except for the events
described in subsection 6.7) and that no termination of, or
withdrawal
47
from, any such employee benefit plan has occurred or is
contemplated that could result in a material liability of any
Borrower or Subsidiary.
(s) Interim Order. The Agent shall have received a signed copy of
the interim order (the "Interim Order") of the Bankruptcy
Court in the form of Exhibit O authorizing and approving the
making of Revolving Credit Loans and issuance of Letters of
Credit contemplated hereby and the Loan Documents and the
granting of the superpriority claim status and liens as
described in subsection 2.5 and the Interim Order. The Interim
Order (i) shall be in form and substance satisfactory to the
Agent, (ii) shall be certified by the Clerk of the Bankruptcy
Court as having been duly entered, (iii) shall have authorized
extensions of credit by the Lenders in amounts up to
$18,000,000 of Revolving Credit Loans and $10,000,000 of
Letters of Credit, (iv) shall approve the payment by the
Borrowers of all of the fees set forth in subsections 2.1,
2.2, 2.3, and 2.4, and (v) shall be in full force and effect
and shall not have been vacated, reversed, modified, amended
or stayed.
(t) Audit. The Agent and the Lenders shall have had an
opportunity, if they so choose, to examine the books of
account and other records and files of the Borrowers and to
make copies thereof, and to conduct a prefunding audit which
shall include, without limitation, verification of inventory
and accounts, and the results of such examination and audit
shall have been satisfactory to the Agent and the Lenders in
all respects.
(u) Proceedings and Documentation. All proceedings taken in
connection with the execution of this Agreement, the Revolving
Credit Notes (if any), all other Loan Documents and all
documents and papers relating thereto shall be satisfactory in
form, scope, and substance to the Agent and the Lenders.
(v) Bankruptcy Matters. The Bankruptcy Cases shall have been
commenced by the Borrowers, and the Borrowers shall each be a
debtor and debtor in possession. All First Day Orders and all
other Orders entered in the Bankruptcy Cases shall be in form
and substance reasonably satisfactory to the Agent.
(w) Dissolution of Subsidiary. The Agent shall have received
evidence in form and substance reasonably satisfactory to it
of the dissolution of Controlled Products Group International,
Inc., a Delaware corporation.
7.2 CONDITIONS TO EACH LOAN. The agreement of each Lender to make
any Revolving Credit Loan requested to be made by it on any
date (including, without limitation, its initial Revolving
Credit Loan, but excluding at all times Revolving Credit Loans
made pursuant to subsection 4.3), and of the Issuing Bank to
issue any Letter of Credit, is subject to (i) the making of
such Revolving Credit Loan complying in all respects with the
margin regulations of the Board of Governors and (ii) the
satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations
and warranties made by the Borrowers or their Subsidiaries in
or pursuant to the Loan Documents shall be true and correct in
all material respects on and as of such date immediately prior
48
to, and after giving effect to the Revolving Credit Loan or
Letter of Credit as if made on and as of such date (except
that any such representation or warranty that is expressly
stated as being made only as of a specified earlier date shall
be true and correct in all material respects as of such
earlier date).
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the
Revolving Credit Loans requested to be made on such date or to
the issuance of the Letter of Credit to be issued on such
date.
(c) Additional Matters. The Agent shall have received a timely
notice of borrowing or request for a Letter of Credit.
(d) Bankruptcy Cases. None of the Bankruptcy Cases shall have been
dismissed or converted to Chapter 7 of the Bankruptcy Code, no
Person shall have filed an application for an order dismissing
any Borrower's Bankruptcy Case or converting any Borrower's
Bankruptcy Case to a case under Chapter 7 of the Bankruptcy
Code, and no trustee under Chapter 7 or Chapter 11 of the
Bankruptcy Code or responsible officer or examiner with powers
beyond the duty to investigate and report, as set forth in
Section 1106(a)(3) and (4) of the Bankruptcy Code shall have
been appointed in any of the Bankruptcy Cases. No application
shall have been filed by any Borrower for the approval of any
other superpriority administrative claim in any Bankruptcy
Case which is pari passu with or senior to the claims of the
Agent and/or any Lender against the Borrowers (and, other than
the Carve-Out, no such claim or lien has arisen) and neither
the Interim Order nor the Final Order, as applicable, shall
have been stayed, modified, amended, reversed, rescinded or
vacated.
(e) Final Order. If such Revolving Credit Loan is to be made or
such Letter of Credit is to be issued prior to the time at
which the Bankruptcy Court shall have entered a final order
(the "Final Order") in form and substance satisfactory to the
Agent in its sole discretion, certified by the Clerk of the
Bankruptcy Court as having been duly entered, the Interim
Order shall be in full force and effect and shall not have
been vacated, reversed, modified, amended or stayed, and if
such Revolving Credit Loan is to be made or such Letter of
Credit is to be issued after May 13, 2002, the Final Order
shall be in full force and effect and shall not have been
vacated, reversed, modified, amended or stayed.
(f) Additional Lien Searches. If, after giving effect to such
Revolving Credit Loan or such Letter of Credit, the aggregate
outstanding principal amount of all Revolving Credit Loans
plus the aggregate outstanding undrawn amount of all Letters
of Credit shall exceed $40,000,000 and if the Agent shall so
request, the Borrowers shall have delivered to the Agent the
results of any Lien searches of the type requested by the
Agent, in all applicable jurisdictions, against the Borrowers
(in each case dated as of a date reasonably satisfactory to
the Agent), which searches shall reflect the absence of Liens
on assets of the Borrowers, other than Liens (a) which are
Permitted Liens, (b) which are otherwise reasonably
satisfactory to
49
the Agent or (c) for which termination statements and releases
reasonably satisfactory to the Agent have been tendered.
Each borrowing by the Borrowers hereunder and each issuance of
a Letter of Credit shall constitute a representation and
warranty by each Borrower as of the date of such Revolving
Credit Loan or Letter of Credit that the conditions contained
in this subsection 7.2 have been satisfied. Each Lender agrees
to make Revolving Credit Loans in the circumstances
contemplated by subsection 4.3 whether or not the conditions
contained in this subsection 7.2 have been satisfied.
SECTION 8. AFFIRMATIVE COVENANTS
The Borrowers hereby agree that, from and after the date of this
Agreement, so long as the Revolving Credit Commitments remain in effect, any
Letter of Credit remains outstanding, any Revolving Credit Loan remains
outstanding and unpaid or any other amount is owing to any Lender, the Issuing
Bank or the Agent hereunder unless the Required Lenders (and the Issuing Bank,
if any Letter of Credit shall be outstanding) shall have otherwise consented in
writing, the Borrowers shall and (where applicable) shall cause each of their
Subsidiaries to:
8.1 FINANCIAL STATEMENTS. Furnish to the Agent, with a copy for
each Lender:
(a) as soon as available, but in any event within 90 days after
the end of each fiscal year of SMC, (i) a copy of the
consolidated and consolidating balance sheet of SMC and its
consolidated Subsidiaries as at the end of such year, (ii) a
copy of the consolidated balance sheet of SMC and its Domestic
Subsidiaries as at the end of such year and (iii) the related
consolidated and consolidating statements of income and
retained earnings and of cash flows for such year, setting
forth in each case in comparative form the figures for the
previous year, certified by Ernst & Young LLP or other
independent certified public accountants of nationally
recognized standing acceptable to the Agent as presenting
fairly, in all material respects the consolidated financial
condition of SMC and its Subsidiaries for such years;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of
each fiscal year of SMC, (i) the unaudited consolidated and
consolidating balance sheet of SMC and its consolidated
Subsidiaries as at the end of such quarter, (ii) the unaudited
consolidated balance sheet of SMC and its Domestic
Subsidiaries as at the end of such quarter and (iii) the
related unaudited consolidated and consolidating statements of
income and retained earnings and of cash flows of SMC and its
consolidated Subsidiaries for such quarter and the portion of
the fiscal year through the end of such quarter, setting forth
in each case in comparative form the figures for the previous
year, certified by a Responsible Officer as fairly presenting
the financial condition and results of operations of SMC and
its consolidated Subsidiaries (subject to normal year-end
audit adjustments and the absence of certain notes); and
50
(c) as soon as available, but in any event not later than 30 days
after the end of each fiscal month of SMC, (i) the unaudited
consolidated and consolidating balance sheet of SMC and its
consolidated Subsidiaries as at the end of such month, (ii)
the unaudited consolidated balance sheet of SMC and its
Domestic Subsidiaries as at the end of such month and (iii)
the related unaudited consolidated and consolidating
statements of income and retained earnings and of cash flows
of SMC and its consolidated Subsidiaries for such month
(including a listing by item and amount of the five largest
components of SG&A expenses reflected therein), setting forth
in each case in comparative form the figures in the
projections set forth in the Budget, together with a variance
report containing explanations for all material variances from
such projections, certified by a Responsible Officer of SMC as
fairly presenting the financial condition and results of
operations of SMC and its consolidated Subsidiaries (subject
to normal year-end audit adjustments and the absence of
certain notes).
All such financial statements shall be prepared in accordance with
generally accepted accounting principles (subject, in the case of
interim financial statements, to normal year-end audit adjustments
and the absence of certain notes) applied consistently throughout
the periods reflected therein and with prior periods (except as
approved by such accountants or officer, as the case may be, and
disclosed therein). Notwithstanding the foregoing, so long as SMC is
required to file periodic and other reports with the SEC under the
Securities Exchange Act of 1934, as amended, (x) it may satisfy the
requirements of subsection 8.1(b) by delivering to the Lenders
within two Business Days after the filing thereof with the SEC but
in any event no later than 45 days after the end of each of the
first three quarterly periods of each fiscal year of SMC, SMC's
Quarterly Report on Form 10-Q for such quarter and (y) it may
satisfy the requirement of subsection 8.1(a) by delivering to the
Lenders within two Business Days after the filing thereof with the
SEC but in any event no later than 90 days after the end of each
fiscal year of SMC, SMC's Annual Report on Form 10-K for such fiscal
year, and SMC's annual report to shareholders, when available.
8.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Agent, with a
copy for each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 8.1(a), a written statement of the
independent certified public accountants reporting on such
financial statements (unless such accountants are prohibited
by law or the Financial Accounting Standards Board (or any
successor) from providing such statement) to the effect that
in the course of the audit upon which their certification of
such financial statements was based (but without any special
or additional audit procedures for the purpose) they obtained
knowledge of no condition or event relating to the financial
covenants set forth in subsection 9.1 which constitutes a
Default or an Event of Default or, if such accountants shall
have obtained in the course of such audit knowledge of any
Default or Event of Default, disclosing in such written
statement the nature and period of existence thereof, it being
understood that such accountants shall be under no liability,
directly or indirectly, to the Lenders for failure to obtain
knowledge of any such condition or event;
(b) concurrently with the delivery of the financial statements
referred to in subsections 8.1(a) and 8.1(b), a certificate of
a Responsible Officer of SMC certifying that, to the best of
such officer's knowledge, each of the Borrowers and their
Subsidiaries during such period has observed or performed all
of its covenants and other agreements, and
51
satisfied every condition contained in this Agreement and the
other Loan Documents to which it is a party to be observed,
performed or satisfied by it, and that such officer has no
knowledge of any Default or Event of Default except as
specified in such certificate;
(c) concurrently with the delivery of the financial statements
referred to in subsections 8.1(a), 8.1(b) and 8.1(c), a
certificate of a Responsible Officer of SMC, substantially in
the form of Exhibit M hereto (the "Compliance Certificate"),
showing in detail satisfactory to the Agent (including, where
applicable, differences in the application of generally
accepted accounting principles used in such financial
statements and the application of GAAP) compliance by the
Borrowers with the covenants contained in subsections 9.1,
9.2, 9.6, 9.7, 9.8 and 9.9 hereof and a computation of the
amount of the Borrowers' and Subsidiaries' Capital
Expenditures made during such period and during the portion of
the fiscal year through the end of the period covered by such
Compliance Certificate;
(d) not later than 90 days after the end of each fiscal year of
SMC, subject to the provisions of subsection 12.16, a copy of
the projections by SMC of the budget of the Borrowers and
their Subsidiaries for the current fiscal year, which shall
included projected quarterly income statements, cash flow
statements and balance sheets, such projections to be
accompanied by a certificate of a Responsible Officer of SMC
to the effect that such projections have been prepared in good
faith and based upon reasonable assumptions and that such
officer has no reason to believe they are incorrect or
misleading in any material respect;
(e) within two Business Days after the same are sent, copies of
all financial statements and other financial information,
proxy materials and other information and reports (including
reports on Form 8K) which SMC or any other Borrower files with
the SEC or any securities exchange on which SMC's or any
Borrower's common stock is traded or delivers to its
stockholders or to holders of its Indebtedness (or any
trustee, agent or other representative therefor);
(f) immediately upon receipt of the same, copies of all pleadings,
proceedings, or other documents in connection with the
Bankruptcy Cases or any other proceedings in any other court
exercising jurisdiction over the Debtors;
(g) promptly after the receipt thereof by any Borrower or
Subsidiary, subject to the provisions of subsection 12.16, a
copy of any "management letter" received by any such Person
from its certified public accountants and the management's
responses thereto;
(h) promptly upon, and in any event within ten Business Days
after, an officer of any Borrower or Subsidiary obtains
knowledge thereof, notice of one or more of the following
environmental matters, unless such officer reasonably
concludes that such environmental matters would not,
individually or when aggregated with all other such
environmental matters, have a Material Adverse Effect:
(i) any pending or threatened Environmental Claim against any
Borrower or Subsidiary or any real property owned or operated,
or formerly owned or operated, by any Borrower or Subsidiary;
(ii) any condition or occurrence on or arising from any real
property currently or formerly owned or operated by any
Borrower or Subsidiary that (a) results in noncompliance by
any Borrower or Subsidiary with any applicable Environmental
Law or (b) could
52
reasonably be expected to form the basis of an Environmental
Claim against any Borrower or Subsidiary or any such real
property;
(iii) any condition or occurrence on any real property currently or
formerly owned or operated by any Borrower or Subsidiary that
could reasonably be expected to cause such real property to be
subject to any restrictions on the ownership, occupancy, use
or transferability by any Borrower or Subsidiary of such real
property under any Environmental Laws; and
(iv) the taking of any removal or remedial action in response to
the actual or alleged presence of any Material of
Environmental Concern on any real property currently or
formerly owned or operated by any Borrower or Subsidiary as
required by any Environmental Law or any Governmental
Authority except the removal of any Material of Environmental
Concern in the ordinary course of business; provided that in
any event the Borrower Representative shall deliver to each
Lender all material notices received by it or any of its
Subsidiaries from any Governmental Authority under, or
pursuant to, CERCLA;
All such notices shall describe in reasonable detail the nature of
the claim, investigation, condition, occurrence or removal or
remedial action and the applicable Borrower's or Subsidiary's
response thereto. In addition, the Borrower Representative will
provide the Lenders with copies of all material communications with
any Governmental Authority relating to Environmental Laws, all
communications with any Person (other than its attorneys) relating
to any Environmental Claim of which notice is required to be given
pursuant to this subsection 8.2(h), and such detailed reports (not
subject to attorney-client or attorney work product privileges) of
any such Environmental Claim as may reasonably be requested by any
Lender;
(i) the following monthly reports and certificates, in form and
detail reasonably satisfactory to the Agent:
(i) as soon as practical, but in no event later than 30 days after
the end of each calendar month, a report detailing Capital
Expenditures made by the Borrowers and their Subsidiaries
during the period from April 1, 2002 through the end of such
calendar month;
(ii) as soon as practical, but in no event later than 30 days after
the end of each calendar month, a liquid assets report,
including (A) an aging report as to the accounts receivable of
the Borrowers and their Subsidiaries, including supporting
detail as to the ten largest account debtors, (B) an inventory
report setting forth by location and book value the raw
materials, work-in-process and finished goods inventories of
the Borrowers and their Subsidiaries, and (C) an aging report
as to the accounts payable of the Borrowers and their
Subsidiaries;
(iii) as soon as practical, but in no event later than 30 days after
the end of each calendar month, a customer sales order backlog
report for the Borrowers and their Subsidiaries;
(iv) as soon as practical, but in no event later than 30 days after
the end of each calendar month, a report detailing the amount
of Singapore Intercompany Receivables and Foreign Intercompany
Receivables as of the last day of the immediately preceding
53
month;
(v) as soon as practical, but in no event later than the 30th day
of each calendar month, a certificate of a Responsible Officer
of SMC demonstrating in reasonable detail compliance with each
of the covenants set forth in subsections 9.1(a), (b), (c),
(e) and (f) hereof as of the last day of the immediately prior
month;
(vi) as soon as practical, but in no event later than the 30th day
of each calendar month, a certificate of a Responsible Officer
of SMC demonstrating in reasonable detail compliance with the
covenant set forth in subsection 9.1(c) hereof as of the 15th
day of such month; and
(vii) as soon as practical, but in no event later than the 30th day
of each January, April, July, and October, a certificate of a
Responsible Officer of SMC demonstrating in reasonable detail
compliance with the covenant set forth in subsection 9.1(d)
hereof as of the last day of the immediately prior calendar
quarter;
(j) the following weekly reports and certificates, in form and
detail reasonably satisfactory to the Agent:
(i) as soon as practical, but in no event later than 12:00 p.m.
New York City time on Friday of each week, a 14-week rolling
forecast of Consolidated Net Cash Flow for SMC and its
Domestic Subsidiaries in the form set forth in the Budget (but
showing (A) actual results for the week immediately prior to
the week during which such forecast is delivered and (B)
current projections for the 13 weeks subsequent to such prior
week), together with a variance report containing explanations
for all material variances from projections and prior
forecasts; provided that the foregoing shall be provided to
the Agent or its designee in draft form no later than 6:00
p.m. New York City time on Thursday of each week;
(ii) as soon as practical, but in no event later than 12:00 p.m.
New York City time on Friday of each week, a comparison of (A)
actual results and performance of the Borrowers for the week
immediately prior to the week during which such comparison is
delivered to (B) the projections set forth in the Budget for
the Borrowers for such prior week, together with a variance
report containing explanations for all material variances from
such projections; provided that the foregoing shall be
provided to the Agent or its designee in draft form no later
than 6:00 p.m. New York City time on Thursday of each week;
(iii) as soon as practical, but in no event later than 12:00 p.m.
New York City time on Friday of each week, a comparison of (A)
actual results and performance of the Borrowers from the
Petition Date through the end of the week immediately prior to
the week during which such comparison is delivered to (B) the
projections set forth in the Budget for the Borrowers for such
period, together with a variance report containing
explanations for all material variations from such
projections; provided that the foregoing shall be provided to
the Agent or its designee in draft form no later than 6:00
p.m. New York City time on Thursday of each week;
(iv) as soon as practical, but in no event later than 12:00 p.m.
New York City time on Friday of each week, a report on the
status of trade credit for the Borrowers;
54
(v) as soon as practical, but in no event later than 12:00 p.m.
New York City time on Friday of each week, a sales flash
report outlining sales results by location for the Borrowers;
and
(vi) as soon as practical, but in no event later than 12:00 p.m.
New York City time on Friday of each week, a flash report
outlining significant issues (including material Asset Sales)
for the Borrowers from the prior week to the extent not set
forth in another report required to be delivered by the
Borrowers pursuant to this subsection 8.2; provided that if
there are no such issues to report, the Borrowers shall
deliver to the Agent a certificate of a Responsible Officer of
SMC so stating as of the date and time set forth above;
(k) not later than the fifth Business Day after the end of any
calendar month in which a change occurred with respect to the
bank accounts maintained by the Borrowers, an updated copy of
Schedule 6.22, current as of the last day of the immediately
preceding month;
(l) as soon as practical, and in any event within a reasonable
time after request therefore by Agent, copies of each of the
reports prepared for the Borrowers by Hilco or such other
appraiser as shall be acceptable to Agent, with respect to the
valuation of the Borrowers' and the Subsidiaries' property,
plant and equipment and inventory;
(m) and promptly, such additional financial and other information
which is in the Borrowers' or the Subsidiaries' possession as
any Lender may from time to time reasonably request through
the Agent.
Notwithstanding anything to the contrary herein, each of the
financial statements and reports required to be delivered pursuant
to this subsection 8.2 shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in
accordance with generally accepted accounting principles.
8.3 PAYMENT OF TAXES AND OTHER OBLIGATIONS. Pay, discharge or
otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all of their taxes and other
obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with
generally accepted accounting principles with respect thereto
have been provided on the books of the applicable Borrowers or
Subsidiaries.
8.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to
engage in business of the same general type as conducted by
the Borrowers and their Subsidiaries on the date hereof, and
preserve, renew and keep in full force and effect their
corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable
in the normal conduct of their business except as otherwise
permitted pursuant to subsection 9.5; comply with all
Requirements of Law and any indenture, agreement or other
instrument to which the Borrowers or any of their Subsidiaries
is a party or by which they are (or any of their property is)
bound except where such noncompliance could not have a
Material Adverse Effect.
55
8.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property and
assets including, without limitation, all Collateral useful
and necessary in their business in good working order and
condition, normal wear and tear excepted; maintain with
financially sound and reputable insurance companies insurance
with respect to their property and assets (including all
Collateral) in at least such amounts and against at least such
risks (but including in any event public liability, product
liability and business interruption) as are usually insured
against in the same general area by companies engaged in the
same or a similar business; deliver to the Agent and the
Lenders a report of a reputable insurance broker with respect
to such insurance no later than 30 days after the Closing
Date, and furnish to each Lender such supplemental reports
with respect thereto as such Lender may from time to time
reasonably request, all of which shall be in form and
substance satisfactory to the Agent or the applicable Lender.
All such insurance shall provide that no cancellations,
material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days after
receipt by the Agent of written notice thereof, and shall name
the Agent as an additional insured and loss payee on all
casualty insurance with respect to any Collateral and as an
additional insured on all business interruption insurance
(including, with respect to the casualty insurance for any
real property, a standard noncontributory mortgagee clause or
endorsement naming the Agent (and/or such other party as may
be designated by the Agent) as the party to which all payments
made by such insurance company shall be paid) and the Agent
and the Lenders as additional insureds on all commercial
general liability insurance.
8.6 INSPECTION OF PROPERTY, BOOKS AND RECORDS; DISCUSSIONS. Keep
proper books of records and account in conformity with
generally accepted accounting principles and applicable
regulatory standards; and permit representatives of any Lender
to visit and inspect any of their properties and examine and
make copies of or abstracts from any of their books and
records at any reasonable time upon reasonable prior notice
and as often as may be reasonably required and to discuss the
business, operations, properties and financial and other
condition of the Borrowers and their Subsidiaries with
officers of the Borrowers and their Subsidiaries and with
their independent certified public accountants.
8.7 NOTICES. Promptly give written notice to the Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any indenture,
agreement or other instrument to which any Borrower or any
Subsidiary is a party or by which it or any of its property is
bound which is material to any Borrower or to any Material
Subsidiary or to the Borrowers and their Subsidiaries taken as
a whole, or (ii) litigation, investigation or proceeding which
may exist at any time between the any Borrower or any of the
Subsidiaries and any Governmental Authority, which in either
case of clauses (i) or (ii) of this paragraph (b), if not
cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation or other proceeding affecting any Borrower or
any Subsidiary in which the amount involved is $500,000 or
more and not covered by insurance or in which
56
injunctive or similar relief is sought or which could
reasonably be expected to have a Material Adverse Effect;
(d) the following events, as soon as possible and in any event
within 30 days after an officer of any Borrower knows thereof:
(i) the occurrence or expected occurrence of any Reportable
Event with respect to any Plan, a failure to make any required
contribution to a Plan, the creation of any lien (within the
meaning of Section 4068 of ERISA) in favor of the PBGC or a
Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan, (ii)
the institution of proceedings or the taking of any other
action by the PBGC or any Borrower or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or
Insolvency of, any Plan or (iii) analogous events (if any)
under any foreign Requirement of Law, in each case which could
result in a liability of the Borrowers or any of their
Subsidiaries greater than $500,000;
(e) any development or event which in the reasonable judgment of
any Borrower has had or could reasonably be expected to have a
Material Adverse Effect;
(f) any Environmental Claim asserted by any Governmental Authority
or third party or any discovery by any Borrower or Subsidiary
of any occurrence or condition with respect to any Material of
Environmental Concern that is reasonably likely to involve
remediation costs or liability greater than $250,000;
(g) any Casualty Loss with respect to any material portion of the
Collateral;
(h) the filing of each motion, application or similar filing
relating to one or more of the Bankruptcy Cases and promptly
upon the entry of each order, decree or judgment relating to
one or more of the Bankruptcy Cases, the Borrowers shall
provide the Agent and its counsel with a copy of each such
motion, application, filing, order, decree or judgment; and
(i) the occurrence of any transaction described in subsection
9.6(e) or 9.6(f).
Each notice pursuant to the foregoing paragraphs of this subsection
shall be accompanied by a statement of a Responsible Officer of SMC
setting forth details of the occurrence referred to therein and
stating what action the relevant Borrower or Subsidiary proposes to
take with respect thereto.
8.8 ENVIRONMENTAL LAW.
(a) Comply in all material respects with, and use reasonable
efforts to ensure compliance in all material respects by all
tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply in all material
respects with and maintain, and ensure that all tenants and
subtenants, if any, obtain and comply in all material respects
with and maintain, any and all material licenses, approvals,
notifications, registrations or permits required by applicable
Environmental Laws.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required
under Environmental Laws (the "Remedial Work") and diligently
comply in all material respects with all lawful orders and
directives of all Governmental Authorities regarding
Environmental Laws except to the extent that the
57
same are being contested in good faith and with due diligence
by appropriate proceedings and the pendency of such
proceedings could not reasonably be expected to have a
Material Adverse Effect and reserves in conformity with
generally accepted accounting principles with respect thereto
have been provided on the books of the relevant Borrower or
Subsidiary, as the case may be.
(c) If such Borrower or Subsidiary does not within a reasonable
period of time (and in any event within such period as
required by any Requirement of Law) commence and diligently
prosecute to completion the Remedial Work, and is not
contesting the need to perform Remedial Work as provided in
subsection 8.8(b) above, the Agent may with the consent of the
Required Lenders (but shall not be obligated to), upon 30
days' prior written notice to the Borrower of its intention to
do so, cause such Remedial Work to be performed. The Borrower
shall pay or reimburse the Agent on demand for all expenses
(including attorneys' fees and disbursements), reasonably
relating to or incurred by the Agent in connection with
monitoring, reviewing or performing any Remedial Work.
8.9 MAINTENANCE OF LIENS.
(a) Each Borrower shall, and shall cause its Loan Party to, at its
expense, perform all steps requested by the Agent at any time
to perfect, maintain, protect, and enforce the Lenders' and
Agent's Liens, including, without limitation: (i) executing,
delivering and/or filing and recording of mortgage(s),
copyright security agreements and patent and trademark
agreements and executing and filing financing or continuation
statements, and amendments thereof, all in form and substance
reasonably satisfactory to the Agent; (ii) delivering to the
Agent the originals of all instruments, documents, and chattel
paper, and all other Collateral of which the Agent determines
it should have physical possession in order to perfect and
protect the Agent's security interest therein, duly pledged,
endorsed or assigned to the Agent without restriction; (iii)
delivering to the Agent warehouse receipts covering any
portion of the Collateral located in warehouses and for which
warehouse receipts are issued and certificates of title
covering any portion of the Collateral for which certificates
of title have been issued; (iv) when an Event of Default has
occurred and is continuing, transferring inventory to
warehouses or other locations designated by the Agent; (v)
placing notations on such Borrower's books of account to
disclose the Agent's security interest; (vi) obtaining control
agreements from securities intermediaries with respect to
financial assets in the possession of securities
intermediaries; (vii) assigning and delivering to the Agent
all supporting obligations, including letters of credit on
which any Borrower is named beneficiary with the written
consent of the issuer thereof; and (viii) taking such other
steps as are deemed necessary or desirable by the Agent to
maintain and protect such Liens. To the extent permitted by
applicable law, the Agent may file, without any Borrower's
signature, one or more financing statements or any Order
disclosing the Liens. The Borrowers agree that a carbon,
photographic, photostatic, or other reproduction of this
Agreement or of a financing statement is sufficient as a
financing statement. Terms used in this subsection 8.9 that
are defined in the UCC shall have the meaning ascribed thereto
in the UCC.
(b) Upon request by the Agent, each Borrower shall, and shall
cause each Loan Party to, (i) deliver to the Agent the
certificates representing the shares of Capital Stock pledged
58
pursuant to this Agreement and each of the Security Documents,
together with an undated stock power for each such certificate
executed in blank by a duly authorized officer of the pledgor
thereof (or, in the case of the Foreign Subsidiaries, the
applicable action required to perfect the Agent's pledge),
(ii) deliver to the Agent all instruments required to be
pledged pursuant to this Agreement and the Security Documents,
together with an undated endorsement for each such instrument
executed in blank by a duly authorized officer of the pledgor
thereof, (iii) deliver to the Agent in respect of each parcel
of real property owned by a Borrower or Domestic Subsidiary a
title policy in form and substance satisfactory to the Agent
and/or a certified ALTA/ACSM survey prepared by a registered
independent surveyor and in form and substance satisfactory to
the Agent and the company issuing the title insurance policy
for such parcel, (iv) deliver to the Agent a policy of flood
insurance which covers any parcel of improved real property
owned by a Borrower or Domestic Subsidiary and located in a
flood plain having a term ending not earlier than the Revolver
Termination Date together with a confirmation that the
Borrowers have received the notice required pursuant to
Section 208(e)(3) of Regulation H of the Board of Governors,
(v) deliver to the Agent, with a copy for each Lender copies
of the results of all Phase I environmental audits of such of
the properties and operations of the Borrowers and its
Subsidiaries as the Agent shall specify (for purposes of this
clause, the "Reports"), from an environmental consulting firm
satisfactory to the Agent, such Reports to be in form and
substance reasonably satisfactory to the Agent.
(c) The Borrower Representative shall promptly give the Agent
written notice of any change (i) in any Loan Party's corporate
name or in any trade name used to identify it in the conduct
of its business or in the ownership of its properties, (ii) in
the location of any Loan Party's chief executive office, its
principal place of business, any office in which it maintains
books or records relating to Collateral or any office or
facility at which Collateral is located (including the
establishment of any such new office or facility), (iii) in
any Loan Party's identity or corporate structure, (iv)
resulting in any tangible Collateral being located in any
jurisdiction in which a financing statement must be, but has
not been, filed in order to perfect the Lenders' and Agent's
Liens (disregarding the effect of any Order for purposes of
this clause (iv)), (v) in respect of any newly acquired
Intellectual Property or applications therefor in the United
States owned by or licensed to any Loan Party, or (vi) in any
Loan Party's federal taxpayer identification number. The
Borrowers will not effect or permit any change, and will cause
their Subsidiaries not to effect or permit any change,
referred to in the preceding sentence unless all filings have
been made under the UCC or otherwise that are required in
order for the Agent to continue at all times following such
change to have a valid, legal and perfected security interest
in all the Collateral.
(d) For the avoidance of doubt, no failure by the Agent or Lenders
to request and/or file any agreement or document or to take
any other action that it is or they are, as applicable,
entitled to request and/or file or take under this subsection
8.9 or otherwise under this Agreement shall be deemed to
impair in any way the validity and priority of the Liens
granted hereunder and/or under the Interim Order and the Final
Order.
8.10 PLEDGE OF AFTER-ACQUIRED PROPERTY. If at any time following
the Closing Date the Borrowers or any of their Domestic
Subsidiaries shall acquire at any time property of any nature
whatsoever which is required by the terms hereof or of the
applicable Security Document, or the Interim Order or the
Final Order, to be and
59
is not otherwise subject to the Lien created hereby or by each
Security Document, as soon as possible and in no event later
than 30 days after the relevant acquisition date grant to the
Agent for the ratable benefit of the Lenders a first priority
Lien on such property as collateral security for the
Obligations pursuant to documentation reasonably satisfactory
in form and substance to the Agent. The Borrowers, at their
own expense, shall execute, acknowledge and deliver, or cause
the execution, acknowledgment and delivery of, and thereafter
register, file or record in an appropriate governmental
office, any document or instrument (including legal opinions,
title insurance, consents and corporate documents) and take
all such actions requested by the Agent to ensure the
creation, priority and perfection of such Lien, as described
in subsection 8.9.
8.11 FOREIGN SUBSIDIARIES SECURITY. If, following a change in the
relevant sections of the Code or the regulations, rules,
rulings, notices or other official pronouncements issued or
promulgated thereunder, counsel for the Borrowers reasonably
acceptable to the Agent and the Required Lenders does not
within 30 days after a request from the Agent or the Required
Lenders deliver evidence, in form and substance reasonably
satisfactory to the Agent and the Required Lenders, with
respect to any Foreign Subsidiary which has not already had
all of its stock pledged pursuant to the applicable pledge
Agreement that Section 956 of the Code does not apply to the
pledge of more than 66 2/3% of the Capital Stock and no other
materially adverse consequences would result, under applicable
tax laws from a pledge of such Capital Stock, then that
portion of such Foreign Subsidiary's outstanding Capital Stock
not theretofore pledged pursuant to such pledge agreement
shall be pledged to the Agent for the benefit of the Lenders
pursuant to a pledge agreement in form and substance
reasonably satisfactory to the Agent and the Required Lenders,
to the extent that the entering into such pledge agreement is
permitted by the laws of the respective foreign jurisdiction,
and with all other related documents to be delivered pursuant
to this subsection 8.11 to be in form and substance reasonably
satisfactory to the Agent and the Required Lenders.
8.12 COLLATERAL ACCOUNT. In the event that any Borrower or any
Subsidiary (a) receives any insurance proceeds on account of
Casualty Losses in excess of $500,000 in the aggregate in any
fiscal year (provided that such first $500,000 shall be used
solely to repair or replace, or to commence the repair or
replacement of, the asset subject to such Casualty Loss within
six months of the date received or be deposited in the
Collateral Account (as defined below) and provided further
that such first $500,000 shall be paid to the Agent if an
Event of Default shall have occurred and be continuing), or
(b) is required to deposit cash in a cash collateral account
on account of the Letters of Credit as contemplated herein,
all such proceeds and payments shall promptly be deposited the
Collateral Account. The amounts deposited into the Collateral
Account pursuant to clause (a) shall be released to the
Borrowers upon receipt by the Agent of a certificate from the
Borrower Representative that such amounts under clause (a)
shall be used immediately upon receipt to repair or replace
property subject to a Casualty Loss or to reimburse the
Borrower for losses, costs and expenses sustained or incurred
60
by the Borrower or one of its Subsidiaries. Any Qualifying
Insurance Proceeds in the Collateral Account shall be applied
in accordance with subsection 5.1(b).
8.13 BANK ACCOUNTS. All cash and Cash Equivalents of the Borrowers
(including Cash Collateral as defined in the Cash Collateral
Order) and proceeds of Revolving Credit Loans (together with
any other amounts required by this Agreement or any Order to
be deposited in the Collateral Account) shall be deposited and
maintained in only such accounts as are permitted by the Cash
Collateral Order and the Bank Account Order (such accounts,
collectively, the "Collateral Account"), and applied in
accordance with the Interim Order, the Final Order, and the
Cash Collateral Order. The Borrowers and their Subsidiaries
shall, at their expense, at the request of the Agent enter
into controlled account agreements pursuant to which all
remittances and payments received by any Borrower or its
Subsidiaries shall be deposited into concentration accounts
under the sole dominion and control of the Agent for the
benefit of the Lenders.
8.14 LANDLORDS' AGREEMENTS; MORTGAGEE AGREEMENTS; BAILEE LETTERS
AND REAL ESTATE PURCHASES.
(a) If requested by the Agent, each Loan Party shall use
commercially reasonable efforts to obtain a landlord's
agreement, mortgagee agreement or bailee letter, as
applicable, from the lessor of each leased property, the
mortgagee of owned property or the bailee with respect to any
warehouse or processing or conversion facility or other
location where Collateral is stored or located, which
agreement or letter shall contain a waiver or subordination of
all Liens or claims that such landlord, mortgagee or bailee
may assert against the Collateral at that location, and shall
otherwise be reasonably satisfactory in form and substance to
the Agent.
(b) After the Closing Date, no real property or warehouse space
(other than temporary parking space for trailers and
immaterial office space) shall be leased by any Loan Party and
no inventory shall be shipped to a processor or converter
under arrangements established after the Closing Date without
the prior written consent of Agent or, if requested by Agent,
until a satisfactory landlord agreement or bailee letter, as
appropriate, shall first have been obtained with respect to
such location. The Agent, in its discretion, shall determine
whether to waive the above requirements that a landlord's
agreement be obtained with respect to any Loan Party's leased
real properties.
(c) Each Loan Party shall timely and fully pay and perform its
obligations under all leases and other agreements with respect
to each leased location or public warehouse where any
Collateral is or may be located.
(d) To the extent otherwise permitted hereunder, if any Loan Party
proposes to acquire a fee ownership interest in real property
after the Closing Date, it shall contemporaneously therewith
provide to the Agent a Mortgage granting the Agent a
first-priority Lien on such real property, together with an
environmental audit, mortgage title insurance commitment, real
property survey, local counsel opinion, and, if required by
the Agent, supplemental casualty insurance and flood
insurance, and such other documents, instruments or agreements
reasonably requested by the Agent, in each case, in form and
substance reasonably satisfactory to the Agent. The Agent, in
its discretion, shall
61
determine whether to waive any or all of the requirements set
forth in the immediately preceding sentence with respect to
any fee ownership interest in real estate acquired by any Loan
Party after the Closing Date.
8.15 BUSINESS PLAN. By August 1, 2002, the Borrowers shall provide
to the Agent a strategic overview and three-year business plan
(the "Business Plan") that describes in reasonable detail the
strategic, operational and financial status, goals and
projections for the Loan Parties and their businesses and
operations, taken as a whole (including, by way of example and
without limitation, information on capacity rationalization,
asset divestitures, planned Capital Expenditures, research
requirements, and personnel issues). In addition, the
Borrowers will provide the Agent with a certificate from a
"Big Five" accounting firm to the effect that the assumptions
in the Business Plan are reasonable and fair in light to the
conditions then known and that the methodologies used in the
Business Plan are correct. The Borrower will, and will cause
such accounting firm to, present the Business Plan to the
Agent and Lenders at a mutually agreed time and location.
8.16 BANKRUPTCY PROCEEDINGS.
(a) The Borrowers shall use their best efforts to obtain the
approval of the Bankruptcy Court of this Agreement and the
other Loan Documents and shall deliver or cause to be
delivered to the Agent and the Agent's counsel all pleadings,
motions and other documents filed on behalf of all of the Loan
Parties with the Bankruptcy Court.
(b) The Borrowers shall provide to the Agent a detailed term sheet
outlining their proposal for a plan of reorganization no later
than August 1, 2002. The Borrowers shall provide to the Agent
a proposed disclosure statement in the Bankruptcy Cases and a
plan of reorganization no later than September 15, 2002. The
Borrowers shall file the final disclosure statement and plan
of reorganization with the Bankruptcy Court no later than
November 1, 2002.
(c) The Borrowers shall use their best efforts to ensure that the
following occurs: (i) an order approving the adequacy of such
disclosure statement and otherwise finding such disclosure
statement in compliance with 11 U.S.C. ss. 1125 shall be
entered in the Bankruptcy Cases on or before January 1, 2003,
(ii) an order of the Bankruptcy Court shall be entered on or
before April 1, 2003 confirming the plan of reorganization and
(iii) the plan of reorganization shall become effective on or
before April 30, 2003.
(d) The Borrowers shall retain and continue to employ a
restructuring manager or crisis manager acceptable to the
Lenders.
SECTION 9. NEGATIVE COVENANTS
Each Borrower hereby agrees that, from and after the Closing Date,
so long as the Revolving Credit Commitments remain in effect, any
Letter of Credit remains outstanding, any Revolving Credit Loan
remains outstanding and unpaid or any other amount is owing to any
Lender, the Issuing Bank or the Agent hereunder, unless the Required
Lenders, and the Issuing Bank if any Letter of Credit is
outstanding, shall have
62
otherwise consented in writing such Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly:
9.1 FINANCIAL CONDITION COVENANTS.
(a) Revenue Maintenance. (i) Permit Consolidated Revenue of SMC
for each period beginning on April 1, 2002 and ending on each
of the dates specified below to be less than the amount set
forth opposite such date below:
PERIOD ENDING CONSOLIDATED REVENUE
------------- --------------------
April 30, 2002 48,057,000
May 31, 2002 97,218,000
June 30, 2002 143,068,000
July 31, 2002 189,877,000
August 31, 2002 232,150,000
September 30, 2002 282,500,000
October 31, 2002 334,780,000
November 30, 2002 385,432,000
December 31, 2002 435,130,000
January 31, 2003 485,332,000
February 28, 2003 535,534,000
March 31, 2003 585,735,000
(ii) As of the last day of each month ending after March 31,
2003, permit Consolidated Revenue for the last twelve months
then ended to be less than $585,735,000.
(b) EBITDA Maintenance. (i) Permit Consolidated EBITDA of SMC for
each period beginning on April 1, 2002 and ending on each of
the dates specified below to be less than the amount set forth
opposite such date below:
PERIOD ENDING CONSOLIDATED EBITDA
------------- -------------------
April 30, 2002 (652,000)
May 31, 2002 356,000
June 30, 2002 1,186,000
July 31, 2002 2,364,000
August 31, 2002 3,448,000
September 30, 2002 6,383,000
October 31, 2002 10,243,000
November 30, 2002 14,038,000
December 31, 2002 19,044,000
January 31, 2003 22,900,000
February 28, 2003 26,756,000
March 31, 2003 30,612,000
(ii) As of the last day of each month ending after March 31,
2003, permit Consolidated EBITDA for the last twelve months
then ended to be less than
63
$30,612,000.
(c) Asset Coverage. Permit the Consolidated Asset Coverage Ratio
of SMC on the last day of each calendar month to be less than
1.55:1.00.
(d) Capital Expenditures. Make (by way of the acquisition of
securities of a Person or otherwise) Capital Expenditures (i)
during any period set forth below that, in the aggregate for
SMC and its Domestic Subsidiaries, exceed the amount set forth
opposite such period below:
PERIOD CAPITAL EXPENDITURES
------ --------------------
April 1, 2002 - June 30, 2002 3,648,000
April 1, 2002 - September 30, 2002 7,360,000
April 1, 2002 - December 31, 2002 11,953,000
April 1, 2002 - March 31, 2003 16,546,000
or (ii) that are otherwise not consistent with the Budget or
not in the ordinary course of business; or
(e) Net Cash Flow. (i) Permit the Consolidated Net Cash Flow of
SMC for each period beginning on April 1, 2002 and ending on
each of the dates specified below to be less than the amount
set forth opposite such date below:
PERIOD ENDING CONSOLIDATED NET CASH FLOW
------------- --------------------------
April 30, 2002 (16,469,000)
May 31, 2002 (19,924,000)
June 30, 2002 (22,645,000)
July 31, 2002 (24,457,000)
August 31, 2002 (23,392,000)
September 30, 2002 (24,917,000)
October 31, 2002 (25,161,000)
November 30, 2002 (24,703,000)
December 31, 2002 (25,610,000)
January 31, 2003 (26,576,000)
February 28, 2003 (26,305,000)
March 31, 2003 (23,636,000)
(f) Receivables. Permit (i) the aggregate amount of Singapore
Intercompany Receivables incurred after the Petition Date to
exceed $15,500,000 at the last day of any calendar month, or
(ii) the aggregate amount of Foreign Intercompany Receivables
incurred after the Petition Date to exceed $27,500,000 at the
last day of any calendar month.
9.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except:
64
(a) the Obligations;
(b) Indebtedness (i) of a Borrower to any Subsidiary and (ii) of
any Wholly-Owned Subsidiary that is a Borrower to SMC;
provided that any such Indebtedness referred to in clause (i)
of this subsection 9.2(b) shall be expressly subordinated to
the Obligations on terms and conditions reasonably
satisfactory to the Agent; provided further that each Borrower
which is a borrower under clause (ii) of this subsection
9.2(b) shall have executed a note in favor of SMC evidencing
such Indebtedness and such note shall have been pledged to the
Agent (for the ratable benefit of the Lenders) pursuant to
this Agreement or an applicable Security Document.
(c) Indebtedness under currency and commodity Hedging Agreements
entered into the ordinary course of business to hedge currency
fluctuations and commodity prices (and not for speculation);
(d) Indebtedness of the UK Subsidiary to one or more lenders
located in the United Kingdom under the credit facilities
described on Schedule 6.21 entered into for working capital
purposes in the ordinary course of business; provided that the
aggregate amount of such Indebtedness may not at any time (i)
exceed for the UK Subsidiary 14,500,000, (ii) be secured by
any assets (real, personal or mixed) of the UK Subsidiary
other than any current assets or of any other Person, or (iii)
be supported by any Guarantee Obligation of any Borrower or
any Subsidiary;
(e) Indebtedness of the Italian Subsidiary to one or more lenders
located in the Republic of Italy under the credit facilities
described on Schedule 6.21 entered into for working capital
purposes in the ordinary course of business; provided that the
aggregate amount of such Indebtedness may not at any time (i)
exceed for the Italian Subsidiary 5,200,000 Euros, (ii) be
secured by any assets (real, personal or mixed) of the Italian
Subsidiary other than any current assets or of any other
Person, or (iii) be supported by any Guarantee Obligation of
any Borrower or any Subsidiary (other than the UK Subsidiary);
(f) Indebtedness of the French Subsidiaries to one or more lenders
located in the Republic of France under the credit facilities
described on Schedule 6.21 entered into for working capital
purposes in the ordinary course of business; provided that the
aggregate amount of such Indebtedness may not at any time (i)
exceed for the French Subsidiaries 4,320,000 Euros, (ii) be
secured by any assets (real, personal or mixed) of either
French Subsidiary other than any current assets or of any
other Person, or (iii) be supported by any Guarantee
Obligation of any Borrower or any Subsidiary; and
(g) Indebtedness existing as of the date hereof described on
Schedule 6.21, and the Deemed DIP Loans, but excluding any
refinancing of such Indebtedness;
9.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, except for the following
(collectively, the "Permitted Liens"):
65
(a) Liens imposed by law for taxes not yet due or which are being
contested in good faith by appropriate proceedings, provided
that adequate reserves with respect thereto are maintained on
its books or the books of its Subsidiaries, as the case may
be, in conformity with generally accepted accounting
principles;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, lessors', landlords' or other like Liens arising
in the ordinary course of business which are not overdue for a
period of more than 30 days or which are being contested in
good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation
and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case incurred in
the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount and
which do not in any case materially detract from the value of
the property subject thereto or materially interfere with the
ordinary conduct of the business of such Borrower or its
Subsidiaries;
(f) Liens created pursuant to the Loan Documents, subsection 2.5
and the Orders, including, without limitation, Liens securing
the Deemed DIP Loans;
(g) Liens existing on the Closing Date set forth on Schedule 9.3
securing Indebtedness permitted by subsection 9.2(e), and
covering only the assets set forth on Schedule 9.3, provided
(i) that each such Lien is not enforceable against any other
property or asset, (ii) that each such Lien secures only those
obligations that it secures on the Closing Date, (iii) that no
such Lien is amended after the Closing Date to cover any
additional property or to secure additional Indebtedness, and
(iv) that each such Lien shall at all times be junior to the
Liens securing the Obligations hereunder (except as provided
in subsection 2.5);
(h) Liens permitted by subsection 9.2(d)(ii), 9.2(e)(ii), and
9.2(f)(ii).
9.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation except, the
Obligations and those Guarantee Obligations in existence on
the Closing Date that are listed on Schedule 6.1(b).
9.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or
dissolve itself or any of its Subsidiaries (or
66
suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, all or
substantially all of its property, business or assets, except:
(a) any Wholly Owned Subsidiary of SMC may be merged or
consolidated with or into SMC (provided that SMC shall be the
continuing or surviving corporation) or with or into any
Wholly Owned Subsidiary of SMC that is also a Borrower
(provided that such Wholly Owned Subsidiary shall be the
continuing or surviving corporation); provided that in each
case, after giving effect to such merger or consolidation, (i)
the continuing or surviving Person's net worth shall not be
less than that of either of the Persons so consolidated or
merged immediately prior to such merger or consolidation and
(ii) no Default or Event of Default exists; and
(b) any Subsidiary may sell, lease, transfer or otherwise dispose
of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or any other Wholly Owned Domestic
Subsidiary of SMC that is a Borrower.
9.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business
or assets (including, without limitation, receivables and
leasehold interests), whether now owned or hereafter acquired,
or, in the case of any Subsidiary, issue or sell any shares of
such Subsidiary's Capital Stock to any Person other than the
Borrowers, except:
(a) the sale of inventory in the ordinary course of business;
(b) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with
the compromise or collection thereof in the ordinary course of
business and on commercially reasonable terms, provided that
such accounts receivable sold or discounted in such manner
shall not exceed $10,000,000 (on a presale or prediscount
basis) in any fiscal quarter of the Borrower;
(c) as permitted by subsection 9.5;
(d) sales of equipment and other property, including leasehold
interests, in the ordinary
(e) the sale, transfer or other disposition of any asset in the
ordinary course of business which is obsolete for its intended
use or is otherwise no longer used or useful in the business
of the Borrower or any of its Subsidiaries, provided that such
sales, transfers or other dispositions shall not exceed
$250,000 individually or $1,000,000 in the aggregate for all
Borrowers during the term of this Agreement; and
(f) leases or subleases of excess space in any facility of the
Borrower or any of its Subsidiaries entered into in the
ordinary course of business for space which is not material in
area or nature to such facility, provided that the payments
under such leases or subleases shall not exceed $250,000
individually or $1,000,000 in the aggregate for all Borrowers
during the term of this Agreement.
67
9.7 RESTRICTED PAYMENTS. Declare or pay any dividend (other than
dividends payable by any Subsidiary to the Borrower, directly
or indirectly) on, or make any payment on account of, or set
apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock or
any warrants or options to purchase any such Capital Stock,
whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of
the Borrower or any of its Subsidiaries (each, a "Restricted
Payment").
9.8 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, extension of credit or capital contribution to,
or purchase or acquire any Capital Stock, bonds, notes,
debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person
(collectively, "Investments"), except:
(a) extensions of trade credit and accounts receivable generated
in the ordinary course of business;
(b) Investments in Cash Equivalents in which the Agent has a duly
perfected first priority Lien; and
(c) Subject to subsection 9.17, Investments by SMC in the
Borrowers and Investments by the Borrowers in SMC and in other
Wholly-Owned Domestic Subsidiaries which are Borrowers;
provided that no Investment may be made by the Borrowers and
their Domestic Subsidiaries in any Foreign Subsidiary.
9.9 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS AND CAPITAL STOCK.
(a) Make any optional payment or prepayment or any purchase or
redemption of any Indebtedness for borrowed money (other than
the Revolving Credit Loans and the repayment of working
capital lines and overdraft facilities permitted under
subsection 9.2(d)) or (b) amend, modify or change, or consent
or agree to any amendment, modification or change to any of
the terms of any such Indebtedness for borrowed money (other
than any such amendment, modification or change which would
extend the maturity or reduce the amount of any payment of
principal thereof or which would reduce the rate or extend the
date for payment of interest thereon) or (c) amend the
Certificate of Incorporation (or other governing document) of
the Borrower or any Material Subsidiary thereof.
9.10 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any purchase,
sale, lease or exchange of property or the rendering of any
service, with any Affiliate unless such transaction is (a)
otherwise permitted under this Agreement, (b) in the ordinary
course of the Borrower's or such Subsidiary's business and (c)
upon fair and reasonable terms no less favorable to the
Borrower or such Subsidiary, as the case may be, than it would
obtain in a comparable arm's-length transaction with a Person
which is not an Affiliate, provided that the foregoing
restriction shall not apply to (i) the
68
indemnification of directors of the Borrower and its
Subsidiaries in accordance with customary practice or (ii) the
granting of extended payment terms to Subsidiaries or
Affiliates of the Borrower in the ordinary course of business.
9.11 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement
with any Person providing for the leasing by the Borrower or
such Subsidiary of real or personal property which has been or
is to be sold or transferred by the Borrower or such
Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security
of such property or rental obligations of the Borrower or such
Subsidiary.
9.12 LIMITATION ON CHANGES IN FISCAL YEAR AND ACCOUNTING POLICIES.
Permit the fiscal year of the Borrower to end on a day other
than December 31, or change its accounting policies or
reporting practices from those of the Borrower in effect on
the Closing Date, except to the extent such change is required
by generally accepted accounting principles.
9.13 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any
Person any agreement after the Closing Date, other than (a)
this Agreement, (b) operating leases with respect to any
leased asset, (c) purchase money mortgages or Financing Leases
permitted by this Agreement (in the case of clauses (b) and
(c), any prohibition or limitation shall only be effective
against the assets financed thereby), which prohibits or
limits the ability of the Borrower or any of its Subsidiaries
to create, incur, assume or suffer to exist any Lien upon any
of its property, assets or revenues, whether now owned or
hereafter acquired or of any of the Subsidiaries to declare or
pay dividends or to make loans or other advances to the
Borrower, directly or indirectly.
9.14 LIMITATION ON LINES OF BUSINESS. Enter into any business
either directly or through any Subsidiary, except for those
businesses in which the Borrower and its Subsidiaries are
engaged on the date of this Agreement, the manufacture and
sale of engineered ceramic materials and composites and other
similar businesses which are directly related thereto.
9.15 LIMITATION ON NEW BANK ACCOUNTS. Open any new bank account,
except bank accounts in the United States that are Excluded
Accounts, provided that any such new Excluded Account shall
not cause the aggregate average monthly balance of all
Excluded Accounts maintained by the Borrowers and their
Subsidiaries to exceed $100,000 for any month during the term
of this Agreement.
9.16 LIMITATION ON ISSUANCE OF CAPITAL STOCK. Issue or grant any
Capital Stock, or permit any direct or indirect Subsidiary of
the Borrower to issue or grant any Capital Stock of such
Subsidiary, to any Person, other than a Borrower, and with
respect to Foreign Subsidiaries, other than as required by
applicable Requirements of Law.
69
9.17 NEW SUBSIDIARIES. Organize, create, acquire or permit to exist
any New Subsidiary other than those New Subsidiaries which are
Wholly Owned Subsidiaries and become Borrowers hereunder (and
have granted or caused to be granted a lien on all of their
assets and Capital Stock to the Agent to secure the
Obligations), in each case pursuant to documentation
acceptable to the Agent.
9.18 ORDERS. Make or permit to be made any change, amendment or
modification, or any application or motion for any change,
amendment or modification, to either the Interim Order or the
Final Order or to any First Day Order without the prior
written consent of the Required Lenders.
SECTION 10. EVENTS OF DEFAULT
10.1 EVENTS OF DEFAULT. The occurrence and continuance of any of
the following events shall be an "Event of Default" hereunder:
(a) Any Borrower shall fail to pay any principal of any Revolving
Credit Loan when due; or any Borrower shall fail (i) to
reimburse any drawing on any Letter of Credit when due or (ii)
to provide any or all of the cash collateral required to be
deposited with the Issuing Bank pursuant to a Letter of Credit
Request strictly in accordance with the terms thereof; or any
Borrower shall fail to pay any interest on any Revolving
Credit Loan or Letter of Credit Reimbursement Obligation, or
any fee or other amount payable hereunder within three days
after any such interest, fees or other amount becomes due; or
(b) Any representation or warranty made or deemed made by or on
behalf of any Borrower or any Subsidiary herein or in any
other Loan Document or which is contained in any certificate,
document or financial or other written statement furnished by
it pursuant to the Loan Documents shall prove to have been
false or misleading in any material respect on or as of the
date made or deemed made; or
(c) any Borrower or any Subsidiary shall default in the observance
or performance of any agreement contained in subsections 8.1,
8.2(b), (c) or (i), 8.7(a) or (h), 8.9, 8.10, 8.11, 8.12,
8.13, 8.14 or 8.16 or Section 9, or any material agreement
contained in any Security Document; or
(d) any Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in
this Agreement or any other Loan Document (other than as
provided in paragraphs (a) through (c) of this Section), and
such default shall continue unremedied for a period of 10 days
after notice thereof from the Agent or any Lender to the
Borrower Representative; or
(e) (i) Any Borrower or any Material Subsidiary (other than
Controlled Products Group International, Inc., a Delaware
corporation) shall file a certificate of dissolution under
applicable state law or shall be liquidated, dissolved or
wound-up or shall commence any action or proceeding for
dissolution, winding-up or liquidation, or shall take any
corporate action in furtherance thereof, (ii) any Material
Subsidiary (other than the Borrowers that are party to the
Bankruptcy Cases) shall become insolvent, admit in writing its
inability to pay its debts, or make an assignment for the
benefit of creditors, or (iii) insolvency, bankruptcy or
70
receivership proceedings shall be commenced by or against any
Material Subsidiary (other than the Borrowers that are party
to the Bankruptcy Cases); or
(f) (i) Any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of a Borrower or any Commonly
Controlled Entity, (ii) any Person shall engage in any
"prohibited transaction" (as defined in Section 406 of ERISA
or Section 4975 of the Code) involving any Plan, (iii) a
Reportable Event (except for the events described in
subsection 6.7) shall occur with respect to, or proceedings
shall commence to have a trustee appointed, or a trustee shall
be appointed, to administer or to terminate, any Single
Employer Plan, (iv) any Single Employer Plan shall terminate
for purposes of Title IV of ERISA, (v) a Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion
of the Required Lenders is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other
similar event or condition shall occur or exist with respect
to any foreign employee benefit plan, program or arrangement;
and in each case in clauses (ii) through (vi) above, such
event or condition, together with all other such events or
conditions, if any, could reasonably be expected to have a
Material Adverse Effect; or
(g) One or more judgments or decrees shall be entered against a
Borrower or any Subsidiary involving in the aggregate a
liability (to the extent not paid or covered by insurance) of
$500,000 or more, and all such judgments or decrees shall not
have been satisfied, vacated, discharged, stayed or bonded
pending appeal within 30 days from the entry thereof; or
(h) Except in connection with an Asset Sale permitted under
subsection 9.6, any Lien created under this Agreement shall
cease to be enforceable and of the same effect and priority
purported to be created hereunder; or
(i) A Change of Control shall have occurred; or
(j) all or any material part of the property of the Borrowers,
taken as a whole, shall be nationalized, expropriated or
condemned, seized or otherwise appropriated, or custody or
control of such property or of any Borrower shall be assumed
by any Governmental Authority or any court of competent
jurisdiction at the instance of any Governmental Authority,
except where contested in good faith by proper proceedings
diligently pursued where a stay of enforcement is in effect;
or
(k) Any Loan Document shall be terminated, revoked, declared void,
invalid or unenforceable, or challenged by any Borrower or
other Loan Party; or
(l) any loss, theft, damage or destruction of any item or items of
Collateral or other property of any Borrower occurs, or any
judicial, administrative, arbitral or similar action is
commenced against any Borrower, that would reasonably be
expected to cause a Material Adverse Effect and is not
adequately covered by insurance; or
71
(m) for any reason any Loan Document ceases to be in full force
and effect or any Lien with respect to any material portion of
the Collateral intended to be secured thereby ceases to be, or
is not, valid, perfected and prior to all other Liens (other
than Permitted Liens) or is terminated (other than as
permitted hereby), revoked or declared void; or
(n) either of ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ or T. ▇▇▇▇▇ ▇▇▇▇ shall fail to hold
the positions of Chairman of the Board and President of SMC,
respectively; or
(o) (i) any of the Bankruptcy Cases shall be dismissed or
converted to a case under Chapter 7 of the Bankruptcy Code, or
any Borrower shall file an application for an order dismissing
any of the Bankruptcy Cases or converting any of the
Bankruptcy Cases to a case under Chapter 7 of the Bankruptcy
Code; or (ii) an application shall be filed by any Borrower
for the approval of any other superpriority administrative
claim or lien in any Bankruptcy Case (other than the
Carve-Out) which is pari passu with or senior to the claims or
liens of the Agent and/or any Lender against the Borrowers, or
there shall arise any such pari passu or senior superpriority
administrative claim or lien (other than the Carve-Out); or
(iii) an application shall be filed by any Borrower for the
approval of any other superpriority administrative claim or
lien in any Bankruptcy Case (other than the Carve-Out or
pursuant to clause (ii) above) which is pari passu with or
senior to the claims or liens with respect to Adequate
Protection Orders or the Deemed DIP Loans, or there shall
arise any such pari passu or senior superpriority
administrative claim or lien (other than the Carve-Out or
pursuant to clause (ii) above); or
(p) the Bankruptcy Court shall enter an order or orders that are
not vacated, reversed, rescinded or stayed pending appeal
granting relief from the automatic stay applicable under
Section 362 of the Bankruptcy Code to the holder or holders of
any security interest to permit foreclosure (or the granting
of a deed in lieu of foreclosure or the like) in any assets of
any Borrower with a value equal to or in excess of $500,000;
or an order shall be entered by the Bankruptcy Court granting
relief from the automatic stay applicable under Section 362 of
the Bankruptcy Code to permit the creation, perfection or
enforcement of any judgment, lien, levy or attachment based on
any judgment, whether or not such judgment arises from or
gives rise to a prepetition or postpetition claim with a value
equal to or in excess of $1,000,000; or an order shall be
entered by the Bankruptcy Court that is not stayed pending
appeal otherwise granting relief from the automatic stay to
any creditor of any Borrower (other than the Agent and the
Lenders in their capacities as such) with respect to any claim
with a value equal to or in excess of $1,000,000; provided,
however, that it shall not be an Event of Default if relief
from the automatic stay is lifted solely for the purpose of
(i) allowing such creditor to determine the liquidated amount
of its claim against any Borrower; or (ii) seeking payment
from a source other than any Borrower or any of their assets;
or
(q) any Borrower shall propose a plan of reorganization in any of
the Bankruptcy Cases that does not include a provision for
termination of the Revolving Credit Commitments and
indefeasible payment in full in cash of all Obligations of the
Borrowers hereunder and under the other Loan Documents
(including the cancellation and return of all Letters of
Credit or the delivery of cash collateral with respect to such
Letters of Credit in an amount equal to the aggregate undrawn
amount of such Letters of Credit) on or before the effective
date of such plan of reorganization; or
(r) an order by the Bankruptcy Court shall be entered, or any
Borrower shall file an application for an order, dismissing
any of the Bankruptcy Cases, which order does not
72
require a provision for termination of the Revolving Credit
Commitments and indefeasible payment in full in cash of all
Obligations of the Borrowers hereunder and under the other
Loan Documents (including the cancellation and return of all
Letters of Credit or the delivery of cash collateral with
respect to such Letters of Credit) prior to any such
dismissal; or
(s) an order by the Bankruptcy Court shall be entered in or with
respect to any of the Bankruptcy Cases or any Borrower shall
file an application for an order with respect to any
Bankruptcy Case, (i) to revoke, reverse, stay, rescind,
modify, vacate, supplement or amend the Interim Order or the
Final Order, (ii) to permit any administrative expense or any
claim (now existing or hereafter arising, of any kind or
nature whatsoever) to have an administrative priority as to
any Borrower equal or superior to the priority of the claims
of the Agent and the Lenders in respect of the Obligations
(other than the Carve-Out), or (iii) to grant or permit the
grant of a Lien on the property of any Borrower (other than
Permitted Liens); or
(t) an application for any of the orders described in any or all
of subsections 10(o), (p), (q), (r), (s) or (v) shall be made
by a Person other than any Borrower and such application is
not contested by the applicable Borrower in good faith and the
relief requested is granted in an order that is not vacated,
reversed, rescinded or stayed pending appeal; or
(u) the Interim Order shall cease to be in full force and effect
and the Final Order shall not have been entered prior to such
cessation, or (ii) the Final Order shall not have been entered
by the Bankruptcy Court on or before May 13, 2002, or (iii)
from and after the date of entry thereof, the Final Order
shall cease to be in full force and effect, or (iv) any
Borrower shall fail to comply with the terms of the Interim
Order or the Final Order in any material respect, or (v) the
Interim Order or the Final Order shall be amended,
supplemented, stayed, reversed, vacated or otherwise modified
(or any Borrower shall apply for authority to do so); or
(v) the Bankruptcy Court shall enter an order appointing a trustee
in any of the Bankruptcy Cases or appointing a responsible
officer or an examiner with powers beyond the duty to
investigate and report, as set forth in Section 1106(a)(3) and
(4) of the Bankruptcy Code, in any of the Bankruptcy Cases; or
(w) the Borrowers shall fail, by the date that is ten Business
Days after the Closing Date, to have filed any necessary
document or taken any other necessary step to cause the
dissolution of Controlled Products Group International, Inc.,
a Delaware corporation.
10.2 REMEDIES.
(a) If a Default or an Event of Default shall have occurred and be
continuing, the Agent may, in its discretion, and shall, at
the direction of the Required Lenders, without further order
of or application to the Bankruptcy Court as permitted by the
Interim Order or the Final Order, do one or more of the
following at any time or times and in any order, without
notice to or demand on any Borrower: (i) restrict the amount
of or refuse to make Revolving Credit Loans; (ii) restrict or
refuse to provide Letters of Credit, or (iii) change the rates
of interest applicable to Revolving Credit Loans and Letters
of Credit made hereunder. If an Event of Default shall have
occurred and be continuing, the Agent may, in its discretion,
and shall, at the direction of the Required Lenders, do one or
more of the
73
following, in addition to the actions described in the
preceding sentence, at any time or times and in any order,
without notice to or demand on any Borrower: (A) terminate the
Revolving Credit Commitments and this Agreement; (B) declare
any or all Obligations to be immediately due and payable;
provided, however, that upon the occurrence of any Event of
Default described in subsections 10.1(o), (p), (q), (r), (s),
(u), or (v), the Revolving Credit Commitments shall
automatically and immediately expire and all Obligations shall
automatically become immediately due and payable without
notice or demand of any kind; (C) require the Borrowers to
cash-collateralize all outstanding Letters of Credit; and (D)
pursue its other rights and remedies under the Loan Documents
and applicable law.
(b) If an Event of Default shall have occurred and be continuing,
subject only to any notice requirements set forth in the
Interim Order or the Final Order as the case may be, all stays
and injunctions, including the automatic stay pursuant to
Section 362 of the Bankruptcy Code, shall be vacated and
terminated to the extent necessary to permit the Agent and the
Lenders full exercise of all of their rights and remedies,
including, without limitation, all of their rights and
remedies with respect to the Borrowers' property under all
applicable bankruptcy and nonbankruptcy law.
(c) Except as otherwise provided for in this Agreement or under
applicable law, each Borrower waives for all purposes of the
Loan Documents (including for purposes of this Section 10):
presentment, demand and protest and notice of presentment,
dishonor, intent to accelerate, acceleration, protest, default
or nonpayment. Each Borrower hereby further waives, for the
benefit of the Agent and the Lenders: (i) any right to require
Agent or the Lenders, as a condition of payment or performance
by such Borrower, to (A) proceed against any other Borrower or
any other Person, (B) proceed against or exhaust any security
held from any other Borrower or any other Person, (C) proceed
against or have resort to any balance of any deposit account
or credit on the books of any Lender in favor of any Borrower,
or any other Person, or (D) pursue any other remedy in the
power of Agent or any Lender whatsoever; (ii) any rights to
set-offs, recoupments and counterclaims, and any requirement
that the Agent or any Lender protect, secure, perfect or
insure any security interest or lien or any property subject
thereto; and (iii) any defenses or benefits that may be
derived from or afforded by law which limit the liability of
or exonerate guarantors or sureties, or which may conflict
with the terms hereof.
(d) Until all Obligations shall have been indefeasibly paid in
full and the Revolving Credit Commitments shall have
terminated and all Letters of Credit shall have expired or
been cancelled, each Borrower hereby waives any claim, right
or remedy, direct or indirect, that such Borrower now has or
may hereafter have against any other Borrower whether such
claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise and including, without
limitation, (i) any right of subrogation, reimbursement or
indemnification that such Borrower now has or may hereafter
have against any other Borrower with respect to any
Obligations, (ii) any right to enforce, or to participate in,
any claim, right or remedy that the Agent or the Lenders now
have or may hereafter have against any other Borrower and
(iii) any benefit of, and any right to participate in, any
Collateral or security now or hereafter held by Agent or any
Lender. In addition, until all Obligations shall have been
indefeasibly paid in full and the Revolving Credit Commitments
shall have terminated and all Letters of Credit shall have
expired or been cancelled, each Borrower shall withhold
exercise of
74
any right of contribution such Borrower may have against any
other Borrower of any Obligations. Each Borrower further
agrees that, to the extent the waiver or agreement to withhold
the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found
by a court of competent jurisdiction to be void or voidable
for any reason, any rights of subrogation, reimbursement or
indemnification such Borrower may have against any other
Borrower or against any Collateral or security, and any rights
of contribution such Borrower may have against any such other
Borrower, shall be junior and subordinate to any rights the
Agent or any Lender may have against any Borrower, to all
right, title and interest the Agent or any Lender may have in
any such Collateral or security, and to any right the Agent or
any Lender may have against such other Borrower. If any amount
shall be paid to any Borrower on account of any such
subrogation, reimbursement, indemnification or contribution
rights at any time when all Obligations shall not have been
finally and indefeasibly paid in full, such amount shall be
held in trust for the Agent on behalf of the Lenders and shall
forthwith be paid over to Agent for the benefit of the Lenders
as their interest may appear to be credited and applied
against the respective Obligations, whether matured or
unmatured, in accordance with the terms hereof.
10.3 REMEDIES WITH RESPECT TO COLLATERAL; APPLICATION OF PROCEEDS.
(a) Upon the occurrence and during the continuance of an Event of
Default, to the extent any such action is not inconsistent
with the Orders and any mandatory requirements of applicable
law, the Agent, in addition to any rights now or hereafter
existing under applicable law, and without application to or
order of the Bankruptcy Court, shall have all rights as a
secured creditor under the Uniform Commercial Code in all
relevant jurisdictions and may:
(i) personally, or by agents or attorneys, immediately retake
possession of the Collateral (including all cash) or any part
thereof, from any Loan Party or any other Person who then has
possession of any part thereof with or without notice or
process of law (but subject to any Requirements of Law), and
for that purpose may enter upon any Loan Party's premises
where any of the Collateral is located and remove the same and
use in connection with such removal any and all services,
supplies, aids and other facilities of the Loan Parties;
(ii) instruct the obligor or obligors on any agreements, instrument
or other obligation constituting the Collateral to make any
payment required by the terms of such instrument or agreement
directly to the Collateral Account;
(iii) withdraw all monies, securities and instruments in the
Collateral Account for application to the Obligations;
(iv) sell, assign or otherwise liquidate, or direct any Loan Party
to sell, assign or otherwise liquidate, any or all of the
Collateral or any part thereof, and take possession of the
proceeds of any such sale or liquidation;
75
(v) take possession of the Collateral or any part thereof, by
directing any Loan Party in writing to deliver the same to the
Agent at any place or places designated by the Agent, in which
event such Loan Party shall at its own expense forthwith cause
the same to be moved to the place or places so designated by
the Agent and there delivered to the Agent, store and keep any
Collateral so delivered to the Agent at such place or places
pending further action by the Agent, and while the Collateral
shall be so stored and kept, provide such guards and
maintenance services as shall be necessary to protect the same
and to preserve and maintain them in good condition; it being
understood that each Loan Party's obligation so to deliver the
Collateral is of the essence of this Agreement and that,
accordingly, upon application to the Bankruptcy Court, the
Agent shall be entitled to a decree requiring specific
performance by such Loan Party of such obligation.
(b) Upon the occurrence and during the continuance of an Event of
Default, and to the extent not inconsistent with the Orders,
without application to or order of the Bankruptcy Court, any
Collateral repossessed by the Agent under or pursuant to
Section 10 or the Orders or otherwise, and any other
Collateral whether or not so repossessed by the Agent, may be
sold, assigned, leased or otherwise disposed of under one or
more contracts or as an entirety, and without the necessity of
gathering at the place of sale the property to be sold, and in
general in such manner, at such time or times, at such place
or places and on such terms as the Agent may, in compliance
with any Requirements of Law, determine to be commercially
reasonable. Any of the Collateral may be sold, leased or
otherwise disposed of, in the condition in which the same
existed when taken by the Agent or after any overhaul or
repair which the Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale
or other private proceeding permitted by applicable
Requirements of Law shall be made upon not less than 10 days'
written notice to the Loan Parties specifying the time at
which such disposition is to be made and the intended sale
price or other consideration therefor, and shall be subject,
for the 10 days after the giving of such notice, to the right
of the Loan Parties or any nominee thereof to acquire the
Collateral involved at a price or for such other consideration
at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall
be a public sale permitted by applicable Requirements of Law
shall be made upon not less than 10 days' written notice to
the Loan Parties specifying the time and place of such sale
and, in the absence of applicable Requirement of Law, shall be
by public auction (which may, at the Agent's option, be
subject to reserve), after publication of notice of such
auction not less than 10 days prior thereto in two newspapers
in general circulation in Syracuse, New York and Huntington,
West Virginia. To the extent permitted by any such Requirement
of Law, the Agent on behalf of the Lenders may bid for and
become the purchaser of the Collateral or any item thereof,
offered for sale in accordance with this Section 10.3 without
accountability to the Loan Parties or the holders of
Prepetition Indebtedness (except to the extent of surplus
money received). If, under mandatory Requirements of Law, the
Agent shall be required to make disposition of the Collateral
within a period of time which does not permit the giving of
notice to the Loan Parties as hereinabove specified, the Agent
need give the Loan Parties only such notice of disposition as
shall be reasonably practicable.
(c) Notwithstanding anything to the contrary contained in this
Agreement or any other Loan Document, (i) if the Agent takes
action under this subsection 10.3, any payment by the Loan
Parties on account of principal of and interest on the
Revolving Credit Loans and Letter of Credit Reimbursement
Obligations and any proceeds arising out of any realization
(including after foreclosure) upon the Collateral shall be
applied, subject to the Carve-Out, as follows: first, to the
76
payment in full of all costs and expenses (including without
limitation, reasonable attorneys' fees and disbursements) paid
or incurred by the Agent or any of the Lenders in connection
with any such realization upon the Collateral, second, as a
permanent reduction of the Revolving Credit Commitments, pro
rata to the payment in full of the Revolving Credit Loans
(including any accrued and unpaid interest thereon, and any
fees and other Obligations in respect thereof), third, as a
permanent reduction of the Revolving Credit Commitments, to
the payment in full of all Obligations constituting
unreimbursed drawings under any Letter of Credit, fourth, as a
permanent reduction of the Revolving Credit Commitments, to
cash collateralize all outstanding Letters of Credit, fifth,
to the payment in full of the Deemed DIP Loans, sixth, to the
payment in full of the Adequate Protection Obligations, and
seventh, to the payment in full of the Prepetition
Indebtedness and (ii) any payments or distributions of any
kind or character, whether in cash, property or securities,
made by the Loan Parties or otherwise in a manner inconsistent
with this Section 10.3 shall be held in trust and paid over or
delivered to the Agent so that the priorities and requirements
set forth in this subsection are satisfied.
(d) It is understood that the Loan Parties shall remain jointly
and severally liable to the extent of any deficiency between
the amount of the proceeds of the Collateral and the amount of
the Obligations.
SECTION 11. THE AGENT
11.1 APPOINTMENT. Each Lender and the Issuing Bank hereby
irrevocably designates and appoints Credit Lyonnais New York
Branch as the Agent of such Lender and the Issuing Bank under
this Agreement and the other Loan Documents, and each such
Lender and the Issuing Bank irrevocably authorizes Credit
Lyonnais New York Branch, as the Agent for such Lender and the
Issuing Bank, to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and
to exercise such powers and perform such duties as are
expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such
other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Lender or the Issuing
Bank, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist
against the Agent.
11.2 DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence
or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.
11.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken
or omitted to be taken by it or such Person under or in
connection
77
with this Agreement or any other Loan Document (except for its
or such Person's own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders and
the Issuing Bank for, or have any duty to ascertain or inquire
as to, any recitals, statements, representations or warranties
made by any Borrower or any of the Subsidiaries or any officer
thereof contained in this Agreement or any other Loan Document
or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agent under
or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement
or any other Loan Document or the creation, enforceability,
perfection or priority of any Lien or for any failure of any
Borrower or any of its Subsidiaries to perform its obligations
hereunder or thereunder. The Agent shall not be under any
obligation to any Lender and the Issuing Bank to ascertain or
to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or
any other Loan Document, or to inspect the properties, books
or records of any Borrower or any of its Subsidiaries, or,
except as expressly set forth in any Loan Document, to
disclose (and shall not be liable for any failure to disclose)
any information relating to a Borrower or any of its
Subsidiaries or Affiliates that is communicated to the Agent
or any of its Affiliates in any capacity.
11.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal
counsel (including, without limitation, counsel to the
Borrowers), independent accountants and other experts selected
by the Agent. The Agent shall treat the payee of any Note as
the owner thereof for all purposes unless the assignment or
transfer shall have been recorded in the Register. The Agent
shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless
it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other
Loan Documents in accordance with a request of the Required
Lenders, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders and
the Issuing Bank and all future holders of the Notes.
11.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event
of Default hereunder unless the Agent has received notice from
a Lender or the Borrower Representative referring to this
Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the
event that the Agent receives such a notice, the Agent shall
promptly give notice thereof to the Lenders and the Issuing
Bank.
78
The Agent shall take such action with respect to such Default
or Event of Default as shall be reasonably directed by the
Required Lenders; provided that unless and until the Agent
shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default
as it shall deem advisable in the best interests of the
Lenders and the Issuing Bank.
11.6 NONRELIANCE ON AGENT AND OTHER LENDERS. Each Lender and the
Issuing Bank expressly acknowledges that neither the Agent nor
any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrowers
and/or any of their Subsidiaries, shall be deemed to
constitute any representation or warranty by the Agent to any
Lender and the Issuing Bank. Each Lender and the Issuing Bank
represents to the Agent that it has, independently and without
reliance upon the Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business,
operations, property, financial and other condition and
creditworthiness of the Borrowers and their Subsidiaries and
made its own decision to make its Revolving Credit Loans
hereunder and enter into this Agreement. Each Lender and the
Issuing Bank also represents that it will, independently and
without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition
and creditworthiness of the Borrowers and their Subsidiaries.
Except for notices, reports and other documents expressly
required to be furnished to the Lenders or the Issuing Bank by
the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender or the Issuing Bank with
any credit or other information concerning the business,
operations, property, condition (financial or otherwise),
prospects or creditworthiness of the Borrowers and their
Subsidiaries which may come into the possession of the Agent
or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
11.7 INDEMNIFICATION. The Lenders agree to indemnify the Agent in
its capacity as such (to the extent not reimbursed by the
Borrowers and without limiting the obligation of the Borrowers
to do so to the extent required by the terms of any Loan
Document), ratably according to their respective Revolving
Credit Commitment Percentages in effect on the date on which
indemnification is sought under this subsection (or, if
indemnification is sought after the date upon which the
Revolving Credit Commitments shall have terminated and the
Revolving Credit Loans shall have been paid in full, ratably
in accordance with their Revolving Credit Commitment
Percentages immediately prior to such date), from and against
any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the
payment of the Notes) be imposed on, incurred by or asserted
against the Agent in any way
79
relating to or arising out of this Agreement, any of the other
Loan Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Agent under or
in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting
solely from the Agent's gross negligence or willful misconduct
(as determined in a final, nonappealable judgment by a court
of competent jurisdiction). The agreements in this subsection
shall survive the payment of the Notes and all other amounts
payable hereunder.
11.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates
may make loans to, accept deposits from and generally engage
in any kind of business with the Borrowers and their
Subsidiaries and Affiliates as though the Agent were not the
Agent hereunder and under the other Loan Documents. With
respect to its Revolving Credit Loans made or renewed by it,
the Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not the Agent, and the
terms "Lender" and "Lenders" shall include the Agent in its
individual capacity.
11.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 30 days'
written notice to the Lenders and the Borrower's
Representative. If the Agent shall resign as Agent under this
Agreement and the other Loan Documents, then the Required
Lenders shall appoint from among the Lenders a successor agent
for the Lenders, with the consent of the Borrower
Representative (which consent will not be unreasonably
withheld or delayed) whereupon such successor agent shall
succeed to the rights, powers and duties of the Agent, and the
term "Agent" shall mean such successor agent effective upon
such appointment and approval, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent
or any of the parties to this Agreement or any holders of the
Notes. If no successor shall have been appointed by the
Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent's notice hereunder,
then the retiring Agent may, on behalf of the Lenders, appoint
a successor Agent, which shall be a bank with an office in New
York City or an Affiliate of such bank. After any retiring
Agent's resignation as Agent, the provisions of this
subsection shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this
Agreement and the other Loan Documents.
11.10 CONCERNING THE COLLATERAL.
(a) The Agent, the Issuing Bank and each of the Lenders authorizes
and directs the Agent to enter into the Security Documents for
its benefit and the benefit of the Lenders and the Issuing
Bank and to perform all obligations of the Agent thereunder,
including (without limitation) obligations to release
Collateral. Each holder of any Obligations agrees that any
action taken by the Required Lenders (or, where required by
the express terms of this Agreement, a greater or lesser
proportion of the Lenders) in accordance with the provisions
of this Agreement or the Security Documents, and the exercise
by the Required Lenders (or, where so required, such greater
or lesser proportion) of the powers
80
set forth herein or therein, together with such other powers
as are reasonably incidental thereto, shall be authorized and
binding upon all of the holders of Obligations.
(b) Each Lender hereby agrees that it will, upon request of the
Borrower Representative or the Agent, confirm the Agent's
authority to release, or direct the Agent to release, any Lien
held by the Agent:
(i) against all of the Collateral, upon payment in full of the
Obligations and expiration or termination of the obligations
of the Lenders under this Agreement;
(ii) against any part of the Collateral sold or disposed of by a
Borrower or any Subsidiary, if such sale or disposition is
permitted by and is made in accordance with this Agreement;
and against any Collateral which the Agent is required to
release pursuant to the Security Documents or applicable law.
(c) The Agent shall not be accountable or liable for any release
of Collateral which (i) the Agent in good faith believes is
required under the Security Documents or any other Loan
Document, or (ii) results from any failure to give, or delay
in giving, any notice of termination of any rights of the
Borrowers pursuant to the Security Documents or any other Loan
Document.
SECTION 12. MISCELLANEOUS
12.1 AMENDMENTS AND WAIVERS. Neither this Agreement, any Note or
any other Loan Document, nor any terms hereof or thereof may
be amended, supplemented or modified except in accordance with
the provisions of this subsection. The Required Lenders may
or, with the written consent of the Required Lenders, the
Agent may, from time to time, (a) enter into with the
Borrowers or any applicable Loan Party written amendments,
supplements or modifications hereto and to the other Loan
Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any
manner the rights of the Lenders or of the Borrowers or any
applicable Loan Party hereunder or thereunder or otherwise
amending the terms of this Agreement or any other Loan
Document or (b) waive, on such terms and conditions as the
Required Lenders or the Agent, as the case may be, may specify
in such instrument, any of the requirements of this Agreement
or the other Loan Documents or any Default or Event of Default
and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall (i)
reduce the amount or extend the scheduled date of maturity of
any Revolving Credit Loan or of any installment thereof, or
extend any Letter of Credit beyond the Revolver Termination
Date, or reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment thereof
or increase the aggregate amount or extend the expiration date
of any Lender's Revolving Credit Commitments, in each case
without the consent of each Lender affected thereby, (ii)
amend, modify or waive any provision of subsection 3.4, 3.5 or
12.1 or reduce the percentage specified in the definition of
Required Lenders, or consent to the assignment or transfer by
the Borrowers of any of their rights and obligations under
this Agreement and the other Loan Documents or release all or
any substantial portion of the Collateral (except as otherwise
provided in any Loan Document) or release any Borrower
81
from its obligations under any this Agreement or modify the
terms of any Loan Document to change the ratable sharing of
Collateral among the Lenders, in each case without the written
consent of all the Lenders and the Issuing Bank, (iii) amend,
modify or waive any provision of Section 3 or the order of
application of prepayments in subsection 5.1 without the prior
written consent of the Required Lenders or reduce the
percentage in the definition of Required Lenders without the
consent of all the Revolving Credit Lenders, (vi) amend,
modify or waive any provision of Section 4 without the prior
written consent of both the Issuing Bank and the Required
Lenders or (iv) amend, modify or waive any provision of
Section 11 without the written consent of the then Agent
(provided that the rights of any prior Agent or Agents shall
not be adversely affected thereby). Any such waiver and any
such amendment, supplement or modification shall apply equally
to each of the Lenders and the Issuing Bank, and shall be
binding upon the Borrowers, or any applicable Loan Party, the
Lenders, the Issuing Bank and the Agent. In the case of any
waiver, the Borrowers, or any applicable Loan Party, the
Lenders, the Issuing Bank and the Agent shall be restored to
their former position and rights hereunder and under the
outstanding Notes and any other Loan Documents, and any
Default or Event of Default waived shall be deemed to be cured
and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any
right consequent thereon.
12.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or
made when delivered by hand, one Business Day after being
deposited with an overnight courier, or five Business Days
after being deposited in the mail, postage prepaid, or, in the
case of telecopy notice, when received, addressed as follows
in the case of the Borrowers and the Agent, and as set forth
in Schedule I in the case of the other parties hereto, or to
such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Notes:
The Borrowers: Special Metals Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Special Metals Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
82
The Agent: Credit Lyonnais New York Branch
1301 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Asset Recovery (▇▇▇▇-▇▇▇▇▇▇▇ van Essche)
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
provided that any notice, request or demand to or upon the
Agent or the Lenders pursuant to subsections 3.3, 3.4, 4.1,
4.5, 5.1, or 5.4 shall not be effective until received.
12.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Lender,
any right, remedy, power or privilege hereunder or under the
other Loan Documents shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
12.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder, in the other
Loan Documents and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall
survive the execution and delivery of this Agreement and the
making of the Revolving Credit Loans and issuing of Letters of
Credit hereunder.
12.5 PAYMENT OF EXPENSES AND TAXES; INDEMNITY. The Borrowers agree
(a) to pay or reimburse the Agent for all its out-of-pocket
costs and expenses incurred in connection with the preparation
and execution of, and any amendment, supplement, modification
or waiver to, this Agreement and the other Loan Documents and
any other documents prepared in connection herewith or
therewith, including, without limitation, the fees and
disbursements of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special counsel to the
Agent, as well as local and foreign counsel to the Agent, (b)
to pay or reimburse each Lender, the Issuing Bank and the
Agent for all its costs and expenses incurred in connection
with the enforcement or preservation of any rights under this
Agreement or the other Loan Documents or the making of
83
Revolving Credit Loans and issuing of Letters of Credit
hereunder and all other related transactions (including during
any workout or restructuring of the Revolving Credit Loans or
during the pendency of any bankruptcy, insolvency or similar
proceeding), including, without limitation, the fees and
disbursements of counsel to the Agent and to each Lender and
any advisors, appraisers, consultants or other professionals
engaged by them or such counsel, including Zolfo ▇▇▇▇▇▇ LLC,
and (without duplication) allocated costs of in-house counsel,
and (c) to pay, indemnify, and hold each Lender, the Issuing
Bank and the Agent harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, documentary stamp, excise
and other taxes, if any, which may be payable or determined to
be payable by reason of the execution and delivery of this
Agreement and the other Loan Documents and any such other
documents, or any amendment, supplement or modification of, or
any waiver or consent under or in respect thereof and (d) to
indemnify, and hold each Lender, the Issuing Bank and the
Agent and their respective affiliates, officers, directors,
employees, agents and advisors (each, an "Indemnified Party")
harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever (including legal fees and other charges) with
respect to the execution, delivery, performance and
consummation of this Agreement, the other Loan Documents and
any such other documents, including, without limitation, any
of the foregoing relating to, or arising out of (i) the
preparation for a defense of, or participation in, any
investigation, litigation, proceeding or other action related
to or arising out of the Loan Documents or any other such
documents, or the making of Revolving Credit Loans and issuing
of Letters of Credit hereunder and all other related
transactions (whether or not such Indemnified Party is a party
to such proceeding or other action and whether any such
investigation, litigation or proceeding or other action is
brought by a Borrower, its stockholders or creditors, by an
Indemnified Party or by any other Person) or (ii) the
violation of, noncompliance with or liability under, any
Environmental Law applicable to any Borrower, any of its
Subsidiaries or any of the real property that is part of the
Collateral (all the foregoing in this clause (d),
collectively, the "indemnified liabilities"), provided, that
the Borrowers shall have no obligation hereunder to an
Indemnified Party with respect to indemnified liabilities
arising solely from the gross negligence or willful misconduct
of such Indemnified Party (as determined in a final
nonappealable judgment by a court of competent jurisdiction).
A certificate as to any amounts payable pursuant to this
subsection 12.5 submitted to the Borrower Representative by
the Agent, any Lender or an Indemnified Party shall be
conclusive in the absence of manifest error. The Borrowers
further agree that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or
otherwise) to the Borrowers or any of their Affiliates,
security holders or creditors except to the extent such
liability is found in a final nonappealable judgment by a
court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct or
the Indemnified Party's breach of its obligations under the
Loan Documents. The agreements in this subsection shall
survive repayment of the Revolving Credit Loans and all other
amounts payable hereunder.
84
12.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
(a) This Agreement shall be binding upon and inure to the benefit
of the Borrowers, the Lenders, the Issuing Bank, the Agent and
their respective successors and assigns, except that no
Borrower may assign or transfer any of its rights or
obligations under this Agreement without the prior written
consent of each Lender and the Issuing Bank.
(b) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or
more banks or other entities ("Participants") participating
interests in any Revolving Credit Loan owing to such Lender,
any Revolving Credit Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan
Documents (which participations may be on a non-pro rata
basis) with the consent of the Agent but without the consent
of the Borrowers. In the event of any such sale by a Lender of
a participating interest to a Participant, such Lender's
obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain
solely responsible to the other parties for the performance
thereof, such Lender shall remain the holder of any such
Revolving Credit Loan for all purposes under this Agreement
and the other Loan Documents, and the Borrowers, the Agent and
the Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents.
The Borrowers also agree that each Participant shall be
entitled to the benefits of subsections 5.5, 5.6 and 5.7 with
respect to its participation in the Revolving Credit
Commitments and the Revolving Credit Loans outstanding from
time to time as if it was a Lender; provided that no
Participant shall be entitled to any greater payment under
such subsections than the applicable Lender would have been
entitled to receive with respect to the interest sold. The
Borrowers agree that if any Obligations are due and unpaid, or
shall have been declared or shall have become due and payable
upon the occurrence and during the continuance of an Event of
Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts
owing under this Agreement and any Note to the same extent as
if the amount of its participating interest were owing
directly to it as a Lender under this Agreement or any Note;
provided that such right of set-off shall be subject to the
obligations of such Participant to share with the Lenders, and
the Lenders agree to share with such Participant, as provided
in subsection 12.7. Each Lender agrees that any agreement
between such Lender and any such Participant in respect of
such participating interest shall not restrict such Lender's
right to agree to any amendment, supplement, waiver or
modification to this Agreement or any other Loan Document,
except where the result of any of the foregoing would be to
extend the final maturity of any Revolving Credit Loan in
which the Participant has an interest or reduce the rate or
extend the time of payment of interest thereon or reduce the
principal amount thereof or release all or substantially all
of the Collateral (except as expressly provided in the Loan
Documents).
(c) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time and from time to
time assign to any existing Lender or any Affiliate thereof
or, with the consent of the Agent (which consent shall not be
unreasonably
85
withheld or delayed), to another Person (an "Assignee") all or
any part of its rights and obligations under this Agreement
and the other Loan Documents (which assignments may be on a
non-pro rata basis) pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit N (an "Assignment and
Acceptance"), executed by such Assignee, such assigning Lender
(and, in the case of an Assignee that is not then a Lender or
an affiliate thereof, by the Agent) and delivered to the Agent
for its acceptance and recording in the Register, provided
that, in the case of any such assignment to an additional
Assignee, the sum of the aggregate principal amount of the
Revolving Credit Loans and the aggregate amount of the unused
Revolving Credit Commitments being assigned and, if such
assignment is of less than all of the rights and obligations
of the assigning Lender, the sum of the aggregate principal
amount of the Revolving Credit Loans and the aggregate amount
of the unused Revolving Credit Commitments remaining with the
assigning Lender are each not less than $1,000,000.
Assignments may be made on a non pro rata basis of a Lender's
Revolving Credit Commitment and Revolving Credit Loans. Upon
such execution, delivery, acceptance and recording, from and
after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Assignee thereunder shall
be a party hereto and, to the extent of the interest assigned
to it in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Revolving Credit
Commitment as set forth therein, and (y) the assigning Lender
thereunder shall, to the extent of the interest assigned to it
in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under
this Agreement, such assigning Lender shall cease to be a
party hereto), (but shall continue to be entitled to the
benefits of subsections 5.5, 5.6, 5.7 and 12.5).
Notwithstanding any provision of paragraph (e) of this
subsection, unless requested by the Assignee and/or the
assigning Lender, Notes shall not be required to be executed
and delivered by the Borrowers, for any assignment which
occurs at any time when any of the events described in
subsection 10(f) shall have occurred and be continuing.
(d) The Agent, on behalf of the Borrowers, shall maintain at the
address of the Agent referred to in subsection 12.2 a copy of
each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and
addresses of the Lenders and the Revolving Credit Commitments
of, and principal amounts of the Revolving Credit Loans owing
to, each Lender from time to time. The entries in the Register
shall be conclusive, in the absence of manifest error, and the
Borrowers, the Agent and the Lenders shall treat each Person
whose name is recorded in the Register as the owner of a
Revolving Credit Loan or other obligation hereunder as the
owner thereof for all purposes of this Agreement and the other
Loan Documents, notwithstanding any notice to the contrary.
Any assignment of any Revolving Credit Loan or other
obligation hereunder shall be effective only upon appropriate
entries with respect thereto being made in the Register. The
Register shall be available for inspection by the Borrowers or
any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an Assignee (and, in the case of an
Assignee that is not then a Lender or an Affiliate thereof, by
the Agent) together with payment by the Assignee or the
assigning Lender to the Agent of a registration and processing
fee of $5,000, the Agent shall (i) promptly accept such
Assignment and Acceptance and (ii) on the effective date
determined
86
pursuant thereto record the information contained therein in
the Register and give notice of such acceptance and
recordation to the Lenders and the Borrower Representative.
(f) Subject to the provisions of subsection 12.16, the Borrowers
authorize each Lender to disclose to any Participant or
Assignee (each, a "Transferee") and any prospective Transferee
any and all financial information in such Lender's possession
concerning the Borrowers, their Subsidiaries and its
Affiliates which has been delivered to such Lender by or on
behalf of the Borrowers pursuant to this Agreement or which
has been delivered to such Lender by or on behalf of the
Borrowers in connection with such Lender's credit evaluation
of the Borrowers, their Subsidiaries and their Affiliates
prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning
assignments of Revolving Credit Loans and Notes relate only to
absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any
Revolving Credit Loan or Note to any Federal Reserve Bank or
any other Person in accordance with applicable law, provided
that no such assignment shall release a Lender from any of its
obligations hereunder.
12.7 ADJUSTMENTS; SET-OFF.
(a) If any Lender (a "Benefited Lender") shall at any time receive
any payment of all or part of its Revolving Credit Loans, or
interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to
events or proceedings of the nature referred to in subsection
10(f), or otherwise), in a greater proportion than any such
payment to or collateral received by any other Lender, if any,
in respect of such other Lender's Revolving Credit Loans, or
interest thereon, such Benefited Lender shall purchase for
cash from the other Lenders a participating interest in such
portion of each such other Lender's Revolving Credit Loan, or
shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to
cause such Benefited Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of
the Lenders; provided, however, that if all or any portion of
such excess payment or benefits is thereafter recovered from
such Benefited Lender, such purchase shall be rescinded, and
the purchase price and benefits returned, to the extent of
such recovery, but without interest. The provisions of this
subsection 12.7(a) shall not be construed to apply to any
payment made by the Borrowers pursuant to and in accordance
with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Revolving Credit Loans
to any assignee or participant, other than to the Borrowers or
any of their Subsidiaries or Affiliate thereof (as to which
the provisions of this subsection 12.7(a) shall apply). The
Borrowers agree that each Lender so purchasing a portion of
another Lender's Revolving Credit Loan may exercise all rights
of payment (including, without limitation, rights of set-off)
with respect to such portion as fully as if such Lender were
the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, without prior notice
to the Borrowers, any such notice
87
being expressly waived by the Borrowers to the extent
permitted by applicable law, upon any amount becoming due and
payable by the Borrowers hereunder (whether at the stated
maturity, by acceleration or otherwise after the occurrence of
an Event of Default) to set off and appropriate and apply
against such amount any and all deposits (general or special,
time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender
or any branch or agency thereof to or for the credit or the
account of the Borrowers. Each Lender agrees promptly to
notify the Borrower Representative and the Agent after any
such set-off and application made by such Lender, provided
that the failure to give such notice shall not affect the
validity of such set-off and application.
12.8 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate
counterparts (including by telecopy), and all of said
counterparts taken together shall be deemed to constitute one
and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with the Borrower
Representative and the Agent.
12.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
12.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Borrowers and the Subsidiaries,
the Agent, the Issuing Bank and the Lenders with respect to
the subject matter hereof, and there are no promises,
undertakings, representations or warranties of any party
hereto relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.
Any previous agreement with respect to the subject matter
hereof is superseded by this Agreement and the other Loan
Documents.
12.11 GOVERNING LAW. THIS AGREEMENT AND THE REVOLVING CREDIT LOANS
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
AGREEMENT AND THE REVOLVING CREDIT LOANS SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL
LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS THEREOF THAT WOULD DIRECT THE
APPLICATION OF THE LAW OF ANOTHER JURISDICTION, ALL TO THE
EXTENT NOT PREEMPTED BY THE FEDERAL BANKRUPTCY LAWS OF THE
UNITED
88
STATES; PROVIDED, THAT THE LENDERS AND AGENTS SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
12.12 SUBMISSION TO JURISDICTION; WAIVERS. Each Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan
Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the
jurisdiction of the Bankruptcy Court, or, if a Bankruptcy Case
is dismissed or a Borrower is no longer subject to the
jurisdiction of the Bankruptcy Court, to the nonexclusive
general jurisdiction of the courts of the State of New York,
the courts of the United States of America for the Southern
District of New York, and appellate courts from any thereof
(but in such case only to the extent of such dismissal or with
respect to such Borrower);
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was
brought in an inconvenient court and agrees not to plead or
claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar
form of mail), postage prepaid, to it at its address set forth
in subsection 12.2 or at such other address of which the Agent
shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or
shall limit the right to ▇▇▇ in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or
proceeding referred to in this subsection any special,
exemplary, punitive or consequential damages.
12.13 ACKNOWLEDGMENTS. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents;
(b) neither the Agent nor the Issuing Bank nor any Lender has any
fiduciary relationship with or duty to it arising out of or in
connection with this Agreement or any of the other Loan
Documents, and the relationship between Agent, Issuing Bank
and Lenders, on one hand, and it, on the other hand, in
connection herewith or therewith is solely that of debtor and
creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders (including the Issuing
Bank) or among it and the Lenders (including the Issuing
Bank).
12.14 WAIVERS OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENT, THE
ISSUING BANK AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
89
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY AND FOR ANY COUNTERCLAIM
THEREIN. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this
transaction, including without limitation contract claims,
tort claims, breach of duty claims, and all other common law
and statutory claims. Each of the parties to this Agreement
acknowledges that this waiver is a material inducement for
each of the parties to this Agreement to enter into a business
relationship, that each of the parties to this Agreement have
already relied on this waiver in entering into this Agreement
and that each will continue to rely on this waiver in their
related future dealings. Each party hereto further warrants
and represents that it has reviewed this waiver with its legal
counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT. In the event of litigation,
this Agreement may be filed as a written consent to a trial by
the court.
12.15 INTEREST RATE LIMITATION. Notwithstanding anything herein or
in the Notes to the contrary, if at any time the applicable
interest rate, together with all fees and charges which are
treated as interest under applicable law (collectively, the
"Charges"), as provided for herein or in any other document
executed in connection herewith, or otherwise contracted for,
charged, received, taken or reserved by any Lender, shall
exceed the maximum lawful rate (the "Maximum Rate") which may
be contracted for, charged, taken, received or reserved by
such Lender in accordance with applicable law, the rate of
interest payable under the Note held by such Lender, together
with all Charges payable to such Lender, shall be limited to
the Maximum Rate.
12.16 CONFIDENTIALITY. The Lenders shall hold in confidence all
nonpublic information obtained pursuant to the requirements of
this Agreement or furnished at the request of a Lender which
has been identified as such in writing by the Borrowers,
provided that any Lender may make disclosure (i) reasonably
required by any Transferee or prospective Transferee pursuant
to subsection 12.6 (subject to the execution by such
Transferee or prospective Transferee of a confidentiality
letter of the same scope as this subsection 12.16) or (ii) as
required or requested by any governmental agency or
representative thereof or required by law, rule or regulation
or (iii) pursuant to legal process or (iv) to its employees,
directors, agents, attorneys, accountants and other
professional advisors; provided, further, that in no event
shall any Lender be obligated or required to return any
materials furnished by the Borrowers.
12.17 APPOINTMENT OF BORROWER REPRESENTATIVE. The Borrowers hereby
designate the Borrower Representative as their representative
and agent on their behalf for the purposes of issuing notices
hereunder, giving instructions with respect to the
disbursement of proceeds of the Revolving Credit Loans, and
requesting Letters of
90
Credit, and each Borrower hereby appoints the Borrower
Representative as its representative and agent on its behalf
for the purposes of giving and receiving all other notices and
consents hereunder or under any of the other Loan Documents
and taking all other actions (including in respect of
compliance with covenants) on behalf of any Borrower under the
Loan Documents. The Borrower Representative hereby accepts
such appointment. The Agent and each Lender may regard any
notice or other communication pursuant to any Loan Document
from the Borrower Representative signed by any authorized
officer thereof as a notice or communication from all the
Borrowers, and may give any notice or communication required
or permitted to be given to the Borrowers hereunder to the
Borrower Representative. The Borrowers agree that each notice,
election, representation and warranty, covenant, agreement and
undertaking made on their behalf by the Borrower
Representative shall be deemed for all purposes to have been
made by each Borrower and shall be binding upon and
enforceable against each Borrower to the same extent as if
same had been made directly by each Borrower.
[Signature pages follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
SPECIAL METALS CORPORATION,
a Delaware corporation, as debtor and debtor in
possession on behalf of the estate created upon the
commencement of the Bankruptcy Cases
By: ______________________________________________
Name:_________________________________________
Title:________________________________________
A-1 WIRE TECH, INC.,
an Illinois corporation, as debtor and debtor in
possession on behalf of the estate created upon the
commencement of the Bankruptcy Cases
By: ______________________________________________
Name:_________________________________________
Title:________________________________________
SPECIAL METALS DOMESTIC SALES
CORPORATION,
91
a Delaware corporation, as debtor and debtor in
possession on behalf of the estate created upon the
commencement of the Bankruptcy Cases
By: ______________________________________________
Name:_________________________________________
Title:________________________________________
INCO ALLOYS INTERNATIONAL, INC.
(D/B/A HUNTINGTON ALLOYS),
a Delaware corporation, as debtor and debtor in
possession on behalf of the estate created upon the
commencement of the Bankruptcy Cases
By: ______________________________________________
Name:_________________________________________
Title:________________________________________
CREDIT LYONNAIS NEW YORK BRANCH,
as Agent, as a Lender and as Issuing Bank
By: ______________________________________________
Name:_________________________________________
Title:________________________________________
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Lender
By: ______________________________________________
Name:_________________________________________
Title:________________________________________
THE BANK OF NOVA SCOTIA,
as Lender
92
By: ______________________________________________
Name:_________________________________________
Title:________________________________________
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
By: ______________________________________________
Name:_________________________________________
Title:________________________________________
93