AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND GUARANTY AGREEMENT

 

EXHIBIT 10.6

 

 

AMENDED AND RESTATED

REVOLVING CREDIT, TERM LOAN AND GUARANTY AGREEMENT

 

 

Among

 

FEDERAL-MOGUL CORPORATION AND CERTAIN OF ITS SUBSIDIARIES,

Debtors and Debtors-in-Possession under Chapter 11 of the Bankruptcy Code,

 

as Borrowers,

 

and

 

THE LENDERS PARTY HERETO,

 

and

 

JPMORGAN CHASE BANK,

formerly known as THE CHASE MANHATTAN BANK,

 

as Administrative Agent

 

 

Dated as of August 7, 2003

AMENDED AND RESTATED

REVOLVING CREDIT, TERM LOAN AND GUARANTY AGREEMENT

TABLE OF CONTENTS

 

 

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AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND GUARANTY

AGREEMENT

Dated as of August 7, 2003

 

AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND GUARANTY AGREEMENT, dated as of August 7, 2003, among FEDERAL-MOGUL CORPORATION, a Michigan corporation (“ Parent ”), each of the direct and indirect Domestic Subsidiaries of the Parent party to this Agreement (each individually a “ Borrower ” and collectively 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 “ Case ” and collectively, the “ Cases ” ), JPMORGAN CHASE BANK, formerly known as The Chase Manhattan Bank, a New York banking corporation (“ JPMCB ”), and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party hereto (together with JPMCB, the “ Lenders ”), J.P. MORGAN SECURITIES INC. (“ JPMorgan ”), as lead arranger and sole book runner, and JPMORGAN CHASE BANK, as administrative agent (in such capacity, the “ Administrative Agent ”) for the Lenders

 

INTRODUCTORY STATEMENT

 

WHEREAS, on October 1, 2001, the Borrowers filed voluntary petitions with the Bankruptcy Court initiating the Cases and have continued in the possession of their assets and in the management of their businesses pursuant to Sections 1107 and 1108 of the Bankruptcy Code; and

 

WHEREAS, the Borrowers and the Lenders entered into a Revolving Credit, Term Loan and Guaranty Agreement dated as of October 1, 2001 (as amended to date, the “ Existing Credit Agreement ”), pursuant to which the Lenders made available to the Borrowers a revolving credit, letter of credit, and term loan facility in an aggregate principal amount not to exceed $675,000,000 (subject to the terms and conditions of the Existing Credit Agreement), composed of two separate tranches as follows: (i) Tranche A being a revolving credit commitment of $475,000,000 with a sublimit of $75,000,000 for standby and documentary Letters of Credit to be issued for purposes satisfactory to the Administrative Agent, and (ii) Tranche B being a term loan commitment of $200,000,000; and

 

WHEREAS, in accordance with the Existing Credit Agreement, the proceeds of the Revolving Loans and the Term Loans were used for (i) working capital; (ii) other general corporate purposes of the Borrowers; (iii) the repurchase of accounts receivable in connection with the termination of the Prepetition Securitization Facilities; and (iv) payment of any related transaction costs, fees and expenses; and

 

WHEREAS, in accordance with the Existing Credit Agreement, to provide for the repayment of the Loans, the reimbursement of any draft drawn under a Letter of Credit and the payment of the other obligations of the Borrowers hereunder and under the other Loan Documents (including, without limitation, the Obligations of the Borrowers under Section 6.3(v)) , the Borrowers have provided to the Administrative Agent and the Lenders the following (each as more fully described herein):

 

(a) an allowed Superpriority Claim;

 

(b) a perfected first priority Lien, pursuant to Section 364(c)(2) of the Bankruptcy Code, upon all unencumbered property of the Borrowers and on all cash and cash equivalents in the Letter of Credit Account, provided that following the Termination Date, amounts in the Letter of Credit Account shall not be subject to the Carve-Out hereinafter referred to;

 

(c) a perfected Lien, pursuant to Section 364(c)(3) of the Bankruptcy Code, upon all property of the Borrowers that is subject to valid and perfected Permitted Liens in existence on the Filing Date (including the perfected liens on the stock of certain subsidiaries of the Parent (“ Stock Liens ”) in favor of (x) the trustee for the holders of Indebtedness of the Parent under the Indentures, and (y) the holders of obligations of the Borrowers under the Prepetition Agreements) or that is subject to valid Permitted Liens in existence on the Filing Date that are perfected subsequent to the Filing Date as permitted by Section 546(b) of the Bankruptcy Code;

 

(d) a perfected first priority priming Lien, pursuant to Section 364(d)(1) of the Bankruptcy Code, upon all property of the Borrowers (including, without limitation, inventory, accounts receivable, rights under license agreements, property, plant and equipment, interests in leaseholds), that is subject to the existing Liens (the “ Primed Liens ”, it being understood that the Stock Liens shall not be primed or constitute part of the Primed Liens) which secure (i) on a pari passu basis the obligations of the Borrowers to the lenders party to the Prepetition Credit Agreement and the obligations of the Borrowers in connection with the Surety Bonds, and (ii) other obligations or indebtedness of the Borrowers pursuant to the Prepetition Agreements other than the Prepetition Credit Agreement and the Surety Bonds, which first priority priming Liens in favor of the Administrative Agent and the Lenders shall be senior in all respects to all of the Primed Liens; and

 

(e) a guaranty from the Borrowers of the due and punctual payment and performance of the obligations of any Foreign Subsidiaries in respect of any letters of credit issued hereunder for the account thereof; and

 

WHEREAS, the Borrowers have requested that the Lenders amend the Existing Credit Agreement to extend the term of the Existing Credit Agreement and to make certain other modifications to the Existing Credit Agreement, including reducing the Total Tranche A Commitment to $350,000,000 and increasing the Total Tranche B Commitment to $250,000,000; and

 

WHEREAS, the Borrowers and the Lenders desire to amend and restate the Existing Credit Agreement and to reflect the modifications requested by the Borrowers; and

 

WHEREAS, all of the claims granted hereunder in the Cases to the Administrative Agent and the Lenders shall be subject to the Carve-Out to the extent provided in Section 2.23 .

 

Accordingly, the parties hereto hereby agree as follows:

 

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DEFINITIONS

 

SECTION 1.1 Defined Terms.

 

As used in this Agreement, the following terms shall have the meanings specified below.

 

“ ABR Loan ” shall mean any Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Section 2 .

 

“ Account ” shall mean any right to payment for goods sold in the ordinary course of business, regardless of how such right is evidenced and whether or not it has been earned by performance.

 

“ Account Debtor ” means, with respect to any Account, the obligor with respect to such Account.

 

“ Adjusted Eligible Accounts Receivable ” shall mean Eligible Accounts Receivable, minus the Dilution Reserve.

 

“ Adjustment Date ” shall have the meaning set forth in Section 6.5(a) .

 

“ Adjusted LIBOR Rate ” shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the quotient of (a) the LIBOR Rate in effect for such Interest Period divided by (b) a percentage (expressed as a decimal) equal to 100% minus Statutory Reserves. For purposes hereof, the term “ LIBOR Rate ” shall mean the rate (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits approximately equal in principal amount to such Eurodollar Borrowing and for a maturity comparable to such Interest Period are offered to the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period.

 

“ Administrative Agent ” shall have the meaning set forth in the Introduction.

 

“ Affected Lender ” shall have the meaning given such term in Section 2.29 .

 

“ Affiliate ” shall mean, as 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. For purposes of this definition, a Person (a “ Controlled Person ”) shall be deemed to be “controlled by” another Person (a “ Controlling Person ”) if the Controlling Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of the Controlled Person whether by contract or otherwise.

 

“ Agreement ” shall mean this Amended and Restated Revolving Credit, Term Loan and Guaranty Agreement, as the same may from time to time be amended, restated, modified or supplemented.

 

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“ Alternate Base Rate ” shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective 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 the Administrative Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced. “ Base CD Rate ” shall mean the sum of (a) the quotient of (i) the Three-Month Secondary CD Rate divided by (ii) a percentage expressed as a decimal equal to 100% minus Statutory Reserves and (b) the Assessment Rate. “ Three-Month Secondary CD Rate ” shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Administrative Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it. “ Federal Funds Effective Rate ” shall mean, for any day, the weighted average of the 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 rate is 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 Administrative Agent from three Federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively.

 

“ AM Finished Goods ” shall mean Finished Goods, manufactured by Borrowers for sale to an Account Debtor that is an after-market retailer or distributor of goods of that kind, as determined by the Administrative Agent in its sole discretion.

 

“ Amendment Order ” shall have the meaning given such term in Section 4.1(b) .

 

“ Amounts ” shall have the meaning given such term in Section 2.18(a) .

 

“ Approved Fund ” means, with respect to any Lender that is a fund that invests m bank loans and similar commercial extensions of credit, any other fund that invests in bank

 

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loans and similar commercial extensions of credit and is managed by the same investment advisor as such Lender or by a Lender Affiliate of such investment advisor.

 

“ Assessment Rate ” shall mean for any date the annual rate (rounded upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the Administrative Agent as the then current net annual assessment rate that will be employed in determining amounts payable by the Administrative Agent to the Federal Deposit Insurance Corporation (or any successor) for insurance by such Corporation (or any successor) of time deposits made in dollars at the Administrative Agent’s domestic offices.

 

“ Asset Sale ” shall mean a sale, lease or sub-lease (as lessor or sublessor), sale and leaseback, assignment, conveyance, transfer or other disposition to, or any exchange of property with, any Person (other than a Borrower), in one transaction or series of transactions, of all or any part of (i) the Borrowers’ or any of their Subsidiaries’ businesses, assets or properties of any kind, whether real, personal, or mixed and whether tangible or intangible, whether now owned or hereafter acquired, including, without limitation, the capital stock of any of the Borrowers (other than Parent) or their Subsidiaries in each case other than (x) Inventory, including scrap or obsolete Inventory, sold in the ordinary course of business and (y) sales of assets for aggregate consideration of less than $1,000,000 with respect to any transaction or series of related transactions.

 

“ Assignment and Acceptance ” shall mean an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, substantially in the form of Exhibit E .

 

“ Available AM Finished Goods ” at any date of determination shall be equal to the lesser of (i) an amount equal to 60% of Eligible AM Finished Goods and (ii) 85% of the product of (x) the Net Orderly Liquidation Rate in effect (based on the then most recent independent inventory appraisal) on such date of determination multiplied by (y) the aggregate amount of gross domestic AM Finished Goods (as reported in accordance with the Borrowers’ perpetual inventory system at such date of determination) as set forth in the most recent Borrowing Base Certificate.

 

“ Available OE Finished Goods ” at any date of determination shall be equal to the lesser of (i) an amount equal to 65% of Eligible OE Finished Goods and (ii) 85% of the product of (x) the Net Orderly Liquidation Rate in effect (based on the then most recent independent inventory appraisal) on such date of determination multiplied by (y) the aggregate amount of gross domestic OE Finished Goods (as reported in accordance with the Borrowers’ perpetual inventory system at such date of determination) as set forth in the most recent Borrowing Base Certificate.

 

“ Available Raw Materials ” at any date of determination shall be equal to the lesser of (i) an amount equal to 25% of Eligible Raw Materials and (ii) 85% of the product of (x) the Net Orderly Liquidation Rate in effect (based on the then most recent independent inventory appraisal) on such date of determination multiplied by (y) the aggregate amount of gross domestic Raw Materials (as reported in accordance with the Borrowers’ perpetual

 

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inventory system at such date of determination) as set forth in the most recent Borrowing Base Certificate.

 

“ Bankruptcy Code ” shall mean The Bankruptcy Reform Act of 1978, as heretofore and hereafter amended, and codified as 11 U.S.C. Section 101 et seq .

 

“ Bankruptcy Court ” shall mean the United States Bankruptcy Court for the District of Delaware or any other court having jurisdiction over the Cases from time to time.

 

“ Board ” shall mean the Board of Governors of the Federal Reserve System of the United States.

 

“ Borrower ” and “Borrowers” shall have the respective meanings set forth in the Introduction.

 

“ Borrowing ” shall mean the incurrence of Revolving or Term Loans of a single Type made from all the Tranche A or Tranche B Lenders, as applicable, on a single date and having, in the case of Eurodollar Loans, a single Interest Period (with any ABR Loan made pursuant to Section 2.16 being considered a part of the related Borrowing of Eurodollar Loans).

 

“ Borrowing Base ” shall mean, at the time of any determination, an amount equal to the sum, without duplication, of (a) 85% of Adjusted Eligible Accounts Receivable plus (b) Available Raw Materials, plus (c) Available OE Finished Goods, plus (d) Available AM Finished Goods, plus (e) the PP&E Component, minus the Carve-Out. The Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered to the Administrative Agent pursuant to Section 5.8 of the Agreement. Subject to the limitations and requirements set forth in Section 10.10(a) of the Agreement, standards of eligibility and reserves and advance rates of the Borrowing Base may be revised and adjusted from time to time by the Administrative Agent in its sole discretion, with any changes in such standards to be effective three (3) Business Days after delivery of notice thereof to the Borrowers.

 

“ Borrowing Base Certificate ” shall mean a certificate substantially in the form of Exhibit C hereto (with such changes therein as may be required by the Administrative Agent from time to time to reflect the components of and reserves against the Borrowing Base as provided for hereunder from time to time), executed and certified as accurate and complete by a Financial Officer of the Parent, which shall include appropriate exhibits, schedules and supporting documentation, and additional reports as (i) outlined in Exhibit C , (ii) as requested by the Administrative Agent, and (iii) as provided in Section 5.8 .

 

“ Business Day ” shall mean any day other than a Saturday, Sunday or other day on which banks in the State of New York are required or permitted to close (and, for a Letter of Credit, other than a day on which the Fronting Bank issuing such Letter of Credit is closed); provided, however, that when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits on the London interbank market.

 

“ Canadian Dollars ” shall mean lawful currency of the Dominion of Canada.

 

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“ Capital Expenditures ” shall mean, for any period, the aggregate of all expenditures (whether paid in cash and not theretofore accrued subsequent to the date of this Agreement or accrued as liabilities during such period and including that portion of Capitalized Leases which is capitalized on the consolidated balance sheet of the Borrowers and their Subsidiaries) by the Borrowers and their Subsidiaries during such period that, in conformity with GAAP, are required to be included in or reflected by the property, plant, equipment or intangibles or similar fixed asset accounts reflected in the consolidated balance sheet of the Borrowers and their Subsidiaries (including equipment which is purchased simultaneously with the trade-in of existing equipment owned by any of the Borrowers or their Subsidiaries to the extent of the gross amount of such purchase price less the book value of the equipment being traded in at such time), but excluding expenditures made in connection with the replacement or restoration of assets, to the extent reimbursed or financed from insurance proceeds paid on account of the loss of or the damage to the assets being replaced or restored, or from awards of compensation arising from the taking by condemnation or eminent domain of such assets being replaced.

 

“ Capitalized Lease ” shall mean, as applied to any Person, any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP.

 

“ Carve-Out ” shall have the meaning set forth in Section 2.23 .

 

“ Cases ” shall mean the Chapter 11 Cases of each of the Borrowers pending in the Bankruptcy Court.

 

“ Change of Control ” shall mean: (i) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of shares representing more than 25% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of Parent; or (ii) the occupation of a majority of the seats (other than vacant seats) on the board of directors of Parent, after the Filing Date, by Persons who were neither (A) nominated by the board of directors of Parent nor (B) appointed by the directors so nominated.

 

“ Code ” shall mean the Internal Revenue Code of 1986, as amended.

 

“ Collateral ” shall mean the Collateral described in the Security and Pledge Agreement.

 

“ Commitment ” shall mean, collectively, the Tranche A Commitments and the Tranche B Commitments, and, with respect to each Tranche A or Tranche B Lender, as applicable, the Commitment of each such Lender hereunder in the amount set forth opposite its name on Annex A-l or Annex A-2 hereto or as may subsequently be set forth in the Register from time to time, and as the same may be reduced from time to time pursuant to this Agreement.

 

“ Commitment Fee ” shall have the meaning set forth in Section 2.20 .

 

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“ Commitment Letter ” shall mean that certain Commitment Letter dated September 21, 2001 among the Administrative Agent, JPMorgan and the Borrowers.

 

“ Commitment Percentage ” shall mean at any time, with respect to each Lender, the percentage obtained by dividing its Tranche A Commitment or its Tranche B Commitment, as applicable, at such time by the Total Tranche A Commitment or Total Tranche B Commitment, as applicable, at such time.

 

“ Confidential Information Memorandum ” shall mean the Confidential Information Memorandum dated July 2003 and furnished to certain Lenders.

 

“ Consolidated EBITDA ” shall mean, for any period, all as determined in accordance with GAAP, the consolidated net income (or net loss) of the Borrowers and their Subsidiaries for such period, plus (a) the sum of (i) depreciation expense, (ii) amortization expense, (iii) other non-cash charges, (iv) provision for LIFO adjustment for inventory valuation, (v) net total Federal, state and local income tax expense, (vi) gross interest expense for such period less gross interest income for such period, (vii) extraordinary losses, (viii) any non-recurring charge or restructuring charge which in accordance with GAAP is excluded from operating income, (ix) the cumulative effect of any change in accounting principles, and “Chapter 11 and U.K. Administration expenses” (or “administrative costs reflecting Chapter 11 and U.K. Administration expenses”) as shown on the Borrowers’ consolidated statement of income for such period and (x) costs under employee retention programs approved by the Bankruptcy Court (after notice and a hearing) less (b) extraordinary gains minus (c) the credit, if any, attributable to Minority Interests plus or minus (d) the amount of cash received or expended in such period in respect of any amount which, under clause (viii) above, was taken into account in determining Consolidated EBITDA for such or any prior period.

 

“ Consummation Date ” shall mean the date of the substantial consummation (as defined in Section 1101 of the Bankruptcy Code and which for purposes of this Agreement shall be no later than the effective date) of a Reorganization Plan of the Borrowers that is confirmed pursuant to an order of the Bankruptcy Court in the Cases.

 

“ Contra Reserve ” shall mean, at any date, a reserve determined in the Administrative Agent’s sole discretion, based upon the estimated amount of Accounts wherein the Account Debtor (i) is a creditor of a Borrower, (ii) has, may assert, has asserted or is reasonably expected to assert a right of set-off against a Borrower or (iii) has disputed or is reasonably expected to dispute its liability (whether by chargeback or otherwise) or made, may make or is reasonably expected to make any claim with respect to the Account or any other Account of a Borrower which has not been resolved, in each case, without duplication, to the extent of the amount owed by such Borrower to the Account Debtor, the amount of such actual or asserted right of set-off, or the amount of such dispute or claim, as the case may be.

 

“ Converted Term Loans ” shall have the meaning set forth in Section 2.1(b) .

 

“ Critical Trade Vendors ” shall mean those vendors that provide materials or goods that are either actually or practically available only from such vendor, as described in more detail in the Motion of the Debtors For Entry of an Order Authorizing, but not Requiring,

 

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Payment of Certain Critical Prepetition Trade Vendor Claims , filed with the Bankruptcy Court on October 1, 2001.

 

“ Dilution Factors ” shall mean, without duplication, with respect to any period, the aggregate amount of all deductions, credit memos, returns, adjustments, allowances, bad debt write-offs and other non-cash credits which are recorded to reduce accounts receivable in a manner consistent with current and historical accounting practices of the Borrowers.

 

“ Dilution Ratio ” shall mean, at any date, the amount (expressed as a percentage) equal to (a) the aggregate amount of the applicable Dilution Factors for the twelve (12) most recently ended fiscal months divided by (b) total gross sales for the twelve (12) most recently ended fiscal months or such other amount as may be determined by the Administrative Agent in its reasonable discretion in the event the Borrowers are unable to calculate dilution effectively in the manner contemplated.

 

“ Dilution Reserve ” shall mean, at any date, the applicable Dilution Ratio multiplied by the Eligible Accounts Receivable on such date.

 

“ Dollars ” and “ $ ” shall mean lawful money of the United States of America.

 

“ Domestic EBITDA ” shall mean, for any period, all as determined in accordance with GAAP, the consolidated net income (or net loss) of the Parent and its Domestic Subsidiaries only (expressly excluding the income and expenses of all Foreign Subsidiaries of the Borrowers) for such period plus (a) the sum of (i) depreciation expense, (ii) amortization expense, (iii) other non-cash charges, (iv) provisions for LIFO adjustment for inventory valuation, (v) net total Federal, state and local income tax expense, (vi) gross interest expense for such period less gross interest income for such period, (vii) extraordinary losses, (viii) any non-recurring charge or restructuring charge which in accordance with GAAP is excluded from operating income, (ix) the cumulative effect of any change in accounting principles, and “Chapter 11 and U.K. Administration expenses” (or “administrative costs reflecting Chapter 11 and U.K. Administration expenses”) as shown on the Borrowers’ consolidated statement of income for such period and (x) costs under employee retention programs approved by the Bankruptcy Court (after notice and a hearing) less (b) extraordinary gains minus (c) the credit, if any, attributable to Minority Interest in Domestic Subsidiaries plus or minus (d) the amount of cash received or expended in such period in respect of any amount which, under clause (viii) above, was taken into account in determining Domestic EBITDA for such or any prior period.

 

“ Domestic Subsidiary ” shall mean any Subsidiary incorporated, organized or formed under the laws of any jurisdiction of the United States.

 

“ Eligible Accounts Receivable ” means, at the time of any determination thereof, each Account that satisfies the following criteria at the time of creation and continues to meet the same at the time of such determination: such Account (i) has been invoiced to, and represents the bona fide amounts due to the Borrowers from, the purchaser of goods or services, in each case originated in the ordinary course of business of the Borrowers and (ii) in each case is subject to the Borrowers’ corporate accounts receivable credit and collection policies, procedures and practices and (iii) is not ineligible for inclusion in the calculation of the Borrowing Base

 

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pursuant to any of clauses (a) through (r) below or otherwise deemed by the Administrative Agent in good faith to be ineligible for inclusion in the calculation of the Borrowing Base as described below. Eligible Accounts Receivable shall exclude the Contra Reserve, the Rebate Reserve and Non-Core Accounts Receivable. Without limiting the foregoing, to qualify as Eligible Accounts Receivable, an Account shall indicate no person other than a Borrower as payee or remittance party. In determining the amount to be so included, the face amount of an Account shall be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances (including any amount that the Borrowers, as applicable, may be obligated to rebate to a customer pursuant to the terms of any agreement or understanding (written or oral)), (ii) the aggregate amount of all limits and deductions provided for in this definition and elsewhere in this Agreement and (iii) the aggregate amount of all cash received in respect of such Account but not yet applied by the Borrowers to reduce the amount of such Account. Unless otherwise approved from time to time in writing by the Administrative Agent (subject to the limitations and requirements set forth in Section 10.10(a)) , no Account shall be an Eligible Account Receivable if, without duplication:

 

(a) the relevant Borrower does not have sole lawful and absolute title to such Account; or

 

(b) except for Accounts subject to the Extended Terms Reserve, (i) it is unpaid more than ninety (90) days from the original date of invoice or sixty (60) days from the original due date or (ii) it has been written off the books of the Borrowers or has been otherwise designated on such books as uncollectible; or

 

(c) more than 50% in face amount of all Accounts of the same Account Debtor are ineligible pursuant to clause (b) above; or

 

(d) the Account Debtor is insolvent or the subject of any bankruptcy case or insolvency proceeding of any kind or is of uncertain credit quality, as determined by the Administrative Agent in its sole discretion; or

 

(e) the Account is not payable in Dollars or Canadian Dollars or the Account Debtor is either not organized under the laws of the United States of America or Canada, any State or Province thereof, or the District of Columbia or is located outside or has its principal place of business or substantially all of its assets outside the United States or Canada, except to the extent the Account is supported by an irrevocable letter of credit satisfactory to the Administrative Agent (as to form, substance and issuer) and assigned to and directly drawable by the Administrative Agent; or

 

(f) the Account Debtor is the United States of America or any department, agency or instrumentality thereof, unless the relevant Borrower duly assigns its rights to payment of such Account to the Administrative Agent pursuant to the Assignment of Claims Act of 1940, as amended, which assignment and related documents and filings shall be in form, and substance satisfactory to the Administrative Agent; or

 

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(g) the Account is supported by a security deposit (to the extent received from the applicable Account Debtor), progress payment, retainage or other similar advance made by or for the benefit of the applicable Account Debtor, in each case to the extent thereof; or

 

(h) (i) it is not subject to a valid and perfected first priority Lien in favor of the Administrative Agent for the benefit of the Secured Parties, subject to no other Liens other than Liens (if any) permitted by the Loan Documents or (ii) it does not otherwise conform in all material respects to the representations and warranties contained in the Loan Documents relating to Accounts; or

 

(i) such Account was invoiced (i) in advance of goods or services provided, or (ii) twice, or (iii) the associated income has not been earned; or

 

(j) such Account is classified as a note receivable by the Borrowers in accordance with the Borrowers’ current and historical practices; or

 

(k) the sale to the Account Debtor is on a bill-and-hold, guaranteed sale, sale-and-return, ship-and-return, sale on approval or consignment or other similar basis or made pursuant to any other written agreement providing for repurchase or return of any merchandise which has been claimed to be defective or otherwise unsatisfactory; or

 

(l) the Account represents a progress-billing or otherwise does not represent a completed sale; or

 

(m) the Account Debtor is an Affiliate of the Borrowers; or

 

(n) such Account was not paid in full, and the Borrower created a new receivable for the unpaid portion of the Account, without the agreement of the customer, and other Accounts constituting chargebacks, debit memos and other adjustments for unauthorized deductions; or

 

(o) the Account is due and payable more than one hundred eighty (180) days from the original date of invoice;

 

(p) the Account is created on cash on delivery terms;

 

(q) the Account does not comply in all material respects with the requirements of all applicable laws and regulations, whether Federal, state or local; or

 

(r) as to all or any part of such Account, a check, promissory note, draft, trade acceptance of other instrument for the payment of money has been received, presented for payment and returned uncollected for any reason.

 

Notwithstanding the foregoing, all Accounts of any single Account Debtor and its Affiliates which, in the aggregate exceed (i) 20% in respect of Account Debtors whose securities are rated Investment Grade by any of Moody’s or S&P or (ii) 5% in respect of all other Account Debtors, of the total amount of all Eligible Accounts Receivable at the time of any determination shall be deemed not to be Eligible Accounts Receivable to the extent of such excess. In

 

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determining the aggregate amount of Accounts from the same Account Debtor that are unpaid more than ninety (90) days from the date of invoice or more than sixty (60) days from the due date pursuant to clause (b) above, there shall be excluded the amount of any net credit balances relating to Accounts with invoice dates more than ninety (90) days prior to the date of determination or more than sixty (60) days from the due date. Furthermore, no Account shall be an Eligible Account Receivable if it is for goods that have been sold under a purchase order or pursuant to the terms of a contract or other agreement or understanding (written or oral) that indicates that any Person other than a Borrower has or has had or has purported to have or have had an ownership interest in such goods.

 

“ Eligible AM Finished Goods ” shall mean, on any date, Eligible Inventory composed of AM Finished Goods on such date as shown on the Borrowers’ perpetual inventory records in accordance with their current and historical accounting practices, minus Inventory Reserves.

 

“ Eligible Assignee ” shall mean (i) a commercial bank having total assets in excess of $1,000,000,000; (ii) a finance company, insurance company or other financial institution or fund, in each case acceptable to the Administrative Agent, which in the ordinary course of business extends credit of the type contemplated herein and has total assets in excess of $200,000,000 and whose becoming an assignee would not constitute a prohibited transaction under Section 4975 of ERISA; (iii) an Approved Fund; (iv) a Lender Affiliate; and (v) any other financial institution satisfactory to the Borrowers and the Administrative Agent, provided , however , that the Borrowers’ consent shall not be required if an Event of Default shall have occurred and be continuing.

 

“ Eligible Inventory ” shall mean, on any date, the Inventory Value of the Borrowers on such date deemed by the Administrative Agent in good faith to be eligible for inclusion in the calculation of the Borrowing Base. Without limiting the foregoing, to qualify as “Eligible Inventory”, no Person other than the Borrowers shall have any direct or indirect ownership interest or title to such Inventory. Eligible Inventory shall exclude remanufactured parts and Inventory referred to as cores inventory. Unless otherwise from time to time approved in writing by the Administrative Agent (subject to the limitations and requirements set forth in Section 10.10(a)) , no Inventory shall be deemed Eligible Inventory if (and without duplication):

 

(a) it is not owned solely by the Borrowers or the Borrowers do not have sole and good, valid and unencumbered title thereto; or

 

(b) it is not located in the United States; or

 

(c) it is not located on property owned or leased by the Borrowers or in a contract warehouse specified on a schedule attached to the Security and Pledge Agreement and segregated or otherwise separately identifiable from goods of all others, if any, stored on the premises: or

 

(d) it is not subject to a valid and perfected first priority Lien in favor of the Administrative Agent, except, with respect to Inventory stored at sites described in clause (c)

 

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above, for Liens for unpaid rent or normal and customary warehousing charges, in each case, not yet paid, to the extent of such unpaid rent or charges; or

 

(e) it is goods returned or rejected due to quality issues by the Borrowers’ customers or goods in transit to third parties (other than to warehouse sites described in clause (c) above); or

 

(f) it is not in good condition, does not meet all material standards imposed by any Governmental Authority having regulatory authority over it, is defective, is seconds or thirds or stale, or is obsolete or slow moving or unmerchantable, or does not otherwise conform to the representations and warranties contained in the Loan Documents; or

 

(g) it is located at any operating facility that the Borrowers plan to close, or at any operating facility that is closed, within thirty (30) days from the date of determination of the most recent Borrowing Base; or

 

(h) it is comprised of film, pallets, and/or other shipping materials or supplies, repair parts, fuel, cartons used in production or other containers, and any other such material not considered used for sale by the Administrative Agent from time to time, in the Administrative Agent’s sole discretion; or

 

(i) the Borrowers classify such item as a sample item on their perpetual inventory records, or the Borrowers use such item for display; or

 

(j) it is a discontinued product or component thereof; or

 

(k) any portion of the Inventory Value thereof is attributable to intercompany profit among the Borrowers or their Affiliates; or

 

(l) any Inventory that is damaged or marked for return to vendor;

 

(m) any Inventory that is Work-In-Process; or

 

(n) it is consigned but still accounted for in the Borrowers’ perpetual inventory records.

 

“ Eligible OE Finished Goods ” shall mean, on any date, Eligible Inventory composed of OE Finished Goods on such date as shown on the Borrowers’ perpetual inventory records in accordance with their current and historical accounting practices, minus Inventory Reserves

 

“ Eligible Raw Materials ” shall mean, on any date, Eligible Inventory composed of Raw Materials to be used in the production of finished goods inventory for sale, as determined by the Administrative Agent in its sole discretion, on such date as shown on the Borrowers’ perpetual inventory records in accordance with current and historical accounting practices, minus Inventory Reserves.

 

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“ Environmental Lien ” shall mean a Lien in favor of any Governmental Authority for (i) any liability under federal or state environmental laws or regulations, or (ii) damages arising from or costs incurred by such Governmental Authority in response to a release or threatened release of a hazardous or toxic waste, substance or constituent, or other substance into the environment.

 

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

 

“ ERISA Affiliate ” shall mean any trade or business (whether or not incorporated) which is a member of a group of which any of the Borrowers is a member and which is under common control within the meaning of Section 414(b) or (c) of the Code and the regulations promulgated and rulings issued thereunder.

 

“ Eurocurrency Liabilities ” shall have the meaning assigned thereto in Regulation D issued by the Board, as in effect from time to time.

 

“ Eurodollar Borrowing ” shall mean a Borrowing comprised of Eurodollar Loans.

 

“ Eurodollar Loan ” shall mean any Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate in accordance with the provisions of Section 2 .

 

“ Event of Default ” shall have the meaning given such term in Section 7 .

 

“ Existing Credit Agreement ” shall have the meaning assigned thereto in the Introductory Statement.

 

“ Existing Letters of Credit ” shall mean the letters of credit listed on Schedule 1.1 .

 

“ Existing Term Loans ” shall mean Term Loans outstanding under the Existing Credit Agreement that shall not have been repaid on or prior to the Restatement Effectiveness Date.

 

“ Extended Terms Amount ” shall mean, on any date, for each Extended Terms Customer. Accounts which are otherwise Eligible Accounts Receivable, arising as a result of the sale of goods with payment terms in excess of ninety (90) days and not greater than one hundred eighty (180) days.

 

“ Extended Terms Customer ” shall mean, on any date, Account Debtors which (i) have terms of sales greater than ninety (90) days, but not greater than one hundred eighty (180) days, and (ii) which are not rated Investment Grade.

 

“ Extended Terms Reserve ” shall mean, on any date, 25% of the Extended Terms Amount.

 

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“ Fees ” shall collectively mean the Commitment Fees, Letter of Credit Fees and other fees referred to in Sections 2.19 , 2.20 and 2.21 .

 

“ Filing Date ” shall mean October 1, 2001.

 

“ Final Order ” shall mean the Final Order (I) Authorizing Debtors to Obtain Post-Petition Financing Pursuant to 11 U.S.C. §§105, 361, 362, 363, 364(c)(1), 364(c)(2), 364(c)(3) and 364(d), (II) Authorizing use of Cash Collateral Pursuant to 11 U.S.C. §363 and Granting Adequate Protection to the Holders of the Existing Obligations Referred to Below entered by the Bankruptcy Court on November 21, 2001, a copy of which Final Order is attached hereto as Exhibit A-1 .

 

“ Financial Officer ” shall mean the Chief Financial Officer, Controller, Treasurer or Assistant Treasurer of a Borrower.

 

“ Finished Goods ” shall mean goods to be sold by the Borrowers in the ordinary course of business.

 

“ Foreign Subsidiary ” shall mean a Subsidiary which is incorporated or organized under the laws of a jurisdiction outside of the United States.

 

“ Fronting Bank ” shall mean JPMCB, or such other commercial bank as may agree with JPMCB to act in such capacity for the Tranche A Lenders.

 

“ GAAP ” shall mean accounting principles generally accepted in the United States and applied in accordance with Section 1.2 .

 

“ Governmental Authority ” shall mean any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality or any court, in each case whether of the United States or foreign.

 

“ Guaranteed Obligations ” shall have the meaning set forth in Section 9.1(a) .

 

“ Indebtedness ” shall mean, at any time and with respect to any Person, (i) all indebtedness of such Person for borrowed money, (ii) all indebtedness of such Person for the deferred purchase price of property or services (other than property, including inventory, and services purchased, and expense accruals and deferred compensation items arising, in the ordinary course of business), (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeal bonds arising in the ordinary course of business), (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases, to the extent required to be so recorded, (vi) all reimbursement, payment or similar obligations of such Person, contingent or otherwise, under acceptance, letter of credit or similar facilities and all obligations of such Person in respect of (x) currency swap agreements, currency future or option contracts and other similar agreements designed to hedge against fluctuations in

 

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foreign currency exchange rates and (y) interest rate swap, cap or collar agreements and interest rate future or option contracts and other similar agreements designed to hedge against fluctuations in interest rates; (vii) all indebtedness referred to in clauses (i) through (vi) above guaranteed directly or indirectly by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (A) to pay or purchase such indebtedness or to advance or supply funds for the payment or purchase of such indebtedness, (B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such indebtedness or to assure the holder of such indebtedness against loss in respect of such indebtedness, (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (D) otherwise to assure a creditor against loss in respect of such indebtedness, and (viii) all indebtedness referred to in clauses (i) through (vii) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness.

 

“ Indemnified Party ” shall have the meaning given such term in Section 10.6 .

 

“ Indentures ” shall mean, collectively, (i) the Indenture, dated as of August 12, 1994, between Parent and U.S. Bank Trust National Association (as successor to Continental Bank), as trustee, together with the First Supplemental Indenture thereto, dated as of July 8, 1998, the Second Supplemental Indenture thereto, dated as of October 9, 1998, and the Third Supplemental Indenture thereto, dated as of December 29, 2000, (ii) the Indenture, dated as of June 29, 1998, between Parent and The Bank of New York, as trustee, together with the First Supplemental Indenture thereto, dated as of June 30, 1998, the Second Supplemental Indenture thereto, dated as of July 21, 1998, the Third Supplemental Indenture thereto, dated as of October 9, 1998, and the Fourth Supplemental Indenture thereto, dated as of December 29, 2000, and (iii) the Indenture, dated as of January 20, 1999, among Parent, the guarantors and The Bank of New York, as trustee, together with the First Supplemental Indenture thereto, dated as of December 29, 2000. each as subsequently amended in accordance with the terms hereof and thereof.

 

“ Insufficiency ” shall mean, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities within the meaning of Section 4001(a)(18) of ERISA.

 

“ Intercompany Indebtedness ” shall mean any claim of an Affiliate of Parent against any other Affiliate of Parent, any claim of Parent against any of its Affiliates, and any claim of any Affiliate of Parent against Parent.

 

“ Intercompany Loans ” shall mean Intercompany Indebtedness for borrowed money.

 

“ Interest Payment Date ” shall mean (i) as to any Eurodollar Loan, the last day of the applicable Interest Period, provided that with respect to Interest Periods exceeding three months, interest shall be payable on the three-month anniversary of the first day of the Interest Period and on the last day of the Interest Period, and (ii) as to all ABR Loans, the last calendar

 

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day of each month and the date on which any ABR Loans are refinanced with Eurodollar Loans pursuant to Section 2.12 .

 

“ Interest Period ” shall mean, as to any Borrowing of Eurodollar Loans, the period commencing on the date of such Borrowing (including as a result of a refinancing of ABR Loans) or on the last day of the preceding Interest Period applicable to such Borrowing and ending on the numerically corresponding day (or if there is no corresponding day, the last day) in the calendar month that is one, three or six months thereafter, as the Borrowers may elect in the related notice delivered pursuant to Section 2.6(b) or 2.12 ; provided , however , that (i) if any Interest Period would end on a day which shall not be a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (ii) no Interest Period shall end later than the Termination Date.

 

“ Inventory ” shall mean all Raw Materials, Work-in-Process, and Finished Goods held by the Borrowers in the normal course of business.

 

“ Inventory Reserves ” means the following, each as determined by the Administrative Agent from time to time:

 

(a) a reserve for shrink, or discrepancies that arise pertaining to inventory quantities on hand between the Borrowers perpetual accounting system, and physical counts of the Inventory, but not less than 2% of the Eligible Inventory; or

 

(b) a reserve for slow move, obsolete or excess Inventory; or

 

(c) a reserve for favorable standard cost variances; or

 

(d) a reserve for amounts owing to landlords or warehousemen for Inventory stored at leased facilities or public warehouses which are not the subject of an access agreement acceptable to the Administrative Agent, in the amount of (i) to the extent Borrowers’ are able to determine the Borrowers’ average rental expense for such facility, three (3) times the Borrower’s average monthly rental expense for such facility plus (ii) in all other events, the Inventory Value of the Inventory stored at such leased facilities or public warehouses; or

 

(e) a reserve for Inventory located at contractors’ or vendors’ facilities in the amount of the Inventory Value of such Inventory; or

 

(f) any other reserve as deemed appropriate by the Administrative Agent in its sole discretion, from time to time; or

 

(g) a reserve for vendor rebates.

 

“ Inventory Value ” shall mean a dollar amount equal to the lesser of (i) the actual cost of Inventory determined on a basis consistent with GAAP and with the Borrowers’ current and historical accounting practice or (ii) the market value of such Inventory.

 

“ Investments ” shall have the meaning given such term in Section 6.10 .

 

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“ Investment Grade ” shall mean either (i) at least Baa3 by Moody’s (or the then equivalent) or (ii) at least BBB- by S&P (or the then equivalent).

 

“ JPMCB ” shall have the meaning set forth in the Introduction.

 

“ JPMorgan ” shall have the meaning set forth in the Introduction.

 

“ Lenders ” shall have the meaning set forth in the Introduction.

 

“ Lender Affiliate ” shall mean, (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in loans and similar extensions of credit, any other fund that invests in loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

 

“ Letter of Credit ” shall mean any irrevocable letter of credit issued under Tranche A pursuant to Section 2.3 , which letter of credit shall be (i) a standby or import documentary letter of credit, (ii) issued for purposes that are consistent with the ordinary course of business of the Borrowers or for such other purposes as are reasonably acceptable to the Administrative Agent, (iii) denominated in Dollars and (iv) otherwise in such form as may be reasonably approved from time to time by the Administrative Agent and the applicable Fronting Bank.

 

“ Letter of Credit Account ” shall mean the account established by the Borrowers under the sole and exclusive control of the Administrative Agent maintained at the office of the Administrative Agent at 270 Park Avenue, New York, New York 10017 designated as the “Federal-Mogul Corporation Letter of Credit Account” that shall be used solely for the purposes set forth in Sections 2.3(a) and 2.13 .

 

“ Letter of Credit Fees ” shall mean the fees payable in respect of Letters of Credit pursuant to Section 2.21 .

 

“ Letter of Credit Outstandings ” shall mean, at any time, the sum of (i) the aggregate undrawn stated amount of all Letters of Credit then outstanding plus (ii) all amounts theretofore drawn under Letters of Credit and not then reimbursed.

 

“ Lien ” shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind whatsoever (including any conditional sale or other title retention agreement or any lease in the nature thereof).

 

“ Loan ” and “ Loans ” shall mean, as applicable, the Revolving Loans and the Term Loans.

 

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“ Loan Documents ” shall mean this Agreement, the Letters of Credit, the Security and Pledge Agreement and any other instrument or agreement executed and delivered in connection herewith.

 

“ Maturity Date ” shall mean February 6, 2005.

 

“ Minority Interests ” shall mean any shares of stock of any class of a Subsidiary of the Borrowers (other than directors’ qualifying shares if required by law) that are not owned by Borrowers or one of their Subsidiaries; Minority Interest shall be valued in accordance with GAAP.

 

“ Minority Lenders ” shall have the meaning given such term in Section 10.10(b) .

 

“ Moody’s ” shall mean Moody’s Investors Service, Inc. or any successor to the rating agency business thereof.

 

“ Multiemployer Plan ” shall mean a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which any Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions.

 

“ Multiple Employer Plan ” shall mean a Single Employer Plan, which (i) is maintained for employees of a Borrower or an ERISA Affiliate and at least one Person other than such Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which a Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such Plan has been or were to be terminated.

 

“ Net Orderly Liquidation Rate ” means, at any time with respect to any domestic Inventory, the quotient (expressed as a percentage) of (i) the Net Orderly Liquidation Value of such Inventory divided by (ii) the gross inventory cost of such Inventory, determined on the basis of the then most recently conducted inventory appraisal performed by an independent inventory appraisal firm satisfactory to the Administrative Agent.

 

“ Net Orderly Liquidation Value ” means, at any time, with respect to any domestic Inventory, the net liquidation value of such Inventory as then most recently determined, based on the then most recently conducted inventory appraisal performed by an independent inventory appraisal firm satisfactory to the Administrative Agent.

 

“ Net Proceeds ” shall mean, in respect of any sale of assets, the proceeds of such sale after the payment of or reservation for expenses that are directly related to the sale, including, but not limited to, related severance costs, taxes payable, brokerage commissions, professional expenses, other similar costs that are directly related to the sale and the amount secured by valid and perfected Liens, if any, that are senior to the Liens on such assets held by the Administrative Agent on behalf of the Lenders.

 

“ New Subsidiary ” shall have the meaning given such term in Section 6.10(xv) .

 

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“ Non-Core Accounts Receivable ” shall mean, at the time of any determination, without duplication, (i) receivables arising from transactions that are not in the ordinary course of business, including equipment and equipment parts sales, (ii) Accounts arising from transactions other than sales to customers who are not Affiliates of any of the Borrowers of automobile, truck, aviation, farm or construction vehicle parts manufactured by the Borrowers, on usual and customary terms, in a manner consistent with historical sales practices, (iii) non-trade receivables and (iv) miscellaneous and sundry receivables.

 

“ Non-Debtor Foreign Subsidiary ” shall mean the Foreign Subsidiaries of the Borrowers other than the U.K. Subsidiaries, as set forth on Schedule 3.5 .

 

“ Obligations ” shall mean (a) the due and punctual payment of principal of and interest on the Loans and the reimbursement of all amounts drawn under Letters of Credit (whether such Letters of Credit are issued for the account of the Borrowers of the Non-Debtor Foreign Subsidiaries and including, without limitation, the Guaranteed Obligations), and (b) the due and punctual payment of the Fees and all other present and future, fixed or contingent, monetary obligations of the Borrowers to the Lenders and the Administrative Agent under the Loan Documents.

 

“ OE Finished Goods ” shall mean Finished Goods, manufactured by Borrowers pursuant to an order by an Account Debtor, for use in such Account Debtor’s (original equipment) manufacturing processes, as determined by the Administrative Agent in its sole discretion.

 

“ Orders ” shall mean the Final Order and the Amendment Order of the Bankruptcy Court.

 

“ Organizational Documents ” shall mean (i) with respect to any corporation, its certificate or articles of incorporation, as amended, and its by-laws, as amended, (ii) with respect to any limited partnership, its certificate of limited partnership or formation, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, (iv) with respect to any limited liability company, its certificate of formation or articles of organization, as amended, and its operating agreement, as amended, and (v) with respect to any unlimited liability company, its certificate of formation, as amended, and its memorandum and articles of association, as amended. In the event any term or condition of this Agreement or any other Loan Document requires any Organizational Document to be certified by a secretary of state of similar governmental official, the reference to any such “Organizational Document” shall only be to a document of a type customarily certified by such governmental official.

 

“ Other Taxes ” shall have the meaning given such term in Section 2.18 .

 

“ Parent ” shall mean have the meaning set forth in the Introduction.

 

“ PBGC ” shall mean the Pension Benefit Guaranty Corporation, or any successor agency or entity performing substantially the same functions.

 

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“ Pension Plan ” shall mean a defined benefit pension or retirement plan which meets and is subject to the requirements of Section 401(a) of the Code.

 

“ Permitted Investments ” shall mean:

 

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within twelve months from the date of acquisition thereof;

 

(b) without limiting the provisions of paragraph (d) below, investments in commercial paper maturing within six months from the date of acquisition thereof and having, at such date of acquisition, a rating of at least “A-2” or the equivalent thereof from Standard & Poor’s Rating Group or of at least “P-2” or the equivalent thereof from Moody’s Investors Service, Inc.;

 

(c) investments in certificates of deposit, banker’s acceptances and time deposits (including Eurodollar time deposits) maturing within six months from the date of acquisition thereof issued or guaranteed by or placed with (i) any domestic office of the Administrative Agent or the bank with whom the Borrowers maintain their cash management system, provided, that if such bank is not a Lender hereunder, such bank shall have entered into an agreement with the Administrative Agent pursuant to which such bank shall have waived all rights of setoff and confirmed that such bank does not have, nor shall it claim, a security interest therein or (ii) any domestic office of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $250,000,000 and is the principal banking Subsidiary of a bank holding company having a long-term unsecured debt rating of at least “A-2” or the equivalent thereof from Standard & Poor’s Rating Group or at least “P-2” or the equivalent thereof from Moody’s Investors Service, Inc.;

 

(d) investments in commercial paper maturing within six months from the date of acquisition thereof and issued by (i) the holding company of the Administrative Agent or (ii) the holding company of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has (A) a combined capital and surplus in excess of $250,000,000 and (B) commercial paper rated at least “A-2” or the equivalent thereof from Standard & Poor’s Rating Group or of at least “P-2” or the equivalent thereof from Moody’s Investors Service, Inc.;

 

(e) investments in repurchase obligations with a term of not more than seven (7) days for underlying securities of the types described in clause (a) above entered into with any office of a bank or trust company meeting the qualifications specified in clause (c) above;

 

(f) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (a) through (e) above;

 

(g) to the extent owned on the Filing Date, investments in the capital stock of any direct or indirect Subsidiary of the Borrowers as disclosed in Schedule 3.5 ; and

 

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(h) to the extent owned on the Filing Date, investments in joint ventures as disclosed in Schedule 6.10 ;

 

(i) additional investments in joint ventures disclosed in Schedule 6.10 during each fiscal year listed below in an aggregate amount not to exceed the amount specified opposite such fiscal year; provided that each such additional investment shall, for purposes of this Agreement, constitute a Capital Expenditure and shall be subject to the limitations on Capital Expenditures set forth in Section 6.4 ; and

 

 

(j) subject to the limitations of Section 6.4 , a Capital Expenditure in the form of an equity investment in either a new-formed Domestic Subsidiary organized as a limited liability company and wholly-owned by Federal-Mogul World Wide, Inc., which would register to do business in Japan as a U.S. branch, or, directly or indirectly, in an existing Non-Debtor Foreign Subsidiary organized in Japan, not to exceed $13,000,000 in the aggregate, in connection with the establishment of a technical center in Yokohama, Japan.

 

“ Permitted Liens ” shall mean (i) Liens in favor of the Administrative Agent on behalf of the Lenders; (ii) Liens imposed by law (other than Environmental Liens and any Lien imposed under ERISA) for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (iii) Liens of landlords and Liens of statutory carriers, warehousemen, mechanics, materialmen and other Liens (other than Environmental Liens and any Lien imposed under ERISA) in existence on the Filing Date or thereafter imposed by law and created in the ordinary course of business; (iv) Liens (other than any Lien imposed under ERISA) incurred or deposits made (including, without limitation, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations incurred in the ordinary course of business; (v) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded) and interest of ground lessors, which do not interfere with the ordinary conduct of the business of any Borrower, and which do not detract from the value of the property to which they attach or materially impair the use thereof to any Borrower; (vi) purchase money Liens (including Capitalized Leases) upon or in any property acquired or held in the ordinary course of business to secure the purchase price of such property or to secure Indebtedness permitted by Section 6.3(iii) solely for the purpose of financing the acquisition of such property; (vii) Liens set forth on Schedule 3.6 ; (viii) Liens on the assets of Non-Debtor Foreign Subsidiaries (excluding the U.K. Subsidiaries) granted to secure Intercompany Loans from the Borrowers permitted by

 

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Sections 6.10(iv) and (v) ; (ix) Liens on the assets of the U.K. Subsidiaries granted to secure Intercompany Loans from the Borrowers permitted by Section 6.10(vi) ; (x) Liens consisting of deposits with derivatives traders as may be required pursuant to the terms of the International Swap Dealers Association Master Agreement(s) executed in the ordinary course of business in connection with the Borrowers’ foreign exchange, commodities and interest hedging programs in an aggregate amount not to exceed at any time $15,000,000; (xi) Liens junior to the senior liens contemplated hereby that are granted by the Final Order or the Amendment Order as adequate protection to the Primed Parties, provided that the Final Order and the Amendment Order provide that the holders of such junior liens shall not be permitted to take any action to enforce their rights with respect to such junior liens as long as any amounts are outstanding under the Agreement or the Lenders have any Commitment thereunder, and (xii) Liens created in connection with extensions, renewals or replacements, including replacement Liens granted by the Bankruptcy Court, of any Lien referred to in clauses (i) through (x) above, provided that the principal amount of the obligation secured thereby is not increased and that any such extension, renewal or replacement is limited to the property originally encumbered thereby.

 

“ Person ” shall mean any natural person, corporation, division of a corporation, partnership, trust, joint venture, association, company, estate, unincorporated organization or government or any agency or political subdivision thereof.

 

“ Plan ” shall mean a Single Employer Plan or a Multiemployer Plan.

 

“ PP&E Component ” shall mean, at the time of any determination, an amount equal to the lesser of (i) 80% of the liquidation value in place of certain machinery and equipment owned by the Borrowers, all as determined in the Administrative Agent’s sole discretion from time to time, (ii) $125,000,000, or (iii) 20% of the Borrowing Base inclusive of the PP&E Component.

 

“ Prepetition Agreements ” shall mean the Prepetition Credit Agreement, the Surety Bonds and agreements relating to other obligations or indebtedness of the Borrowers in an aggregate amount in excess of $20,000,000.

 

“ Prepetition Credit Agreement ” shall mean that certain Fourth Amended and Restated Credit Agreement dated as of December 29, 2000, as amended, among Parent, each Foreign Subsidiary Borrower (as defined therein), the banks and other financial institutions from time to time parties thereto, and JPMCB, as lead arranger, book manager and administrative agent.

 

“ Prepetition Payment ” shall mean a payment (by way of adequate protection or otherwise) of principal or interest or otherwise on account of any prepetition Indebtedness or trade payables or other prepetition claims against the Borrowers, including, without limitation, reclamation claims, materialmen’s liens and prepetition claims of Critical Trade Vendors.

 

“ Prepetition Securitization Facilities ” shall mean, collectively, (i) the Eighth Amended and Restated Receivable Interest Purchase Agreement, dated as of June 13, 2001, among Federal-Mogul Funding Corporation, a Michigan corporation, as the seller, the Parent, as the servicer, Blue Ridge Asset Funding Corporation and Falcon Asset Securitization

 

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Corporation, as purchasers, the financial institutions from time to time party thereto, as investors, Bank One. NA, as the administrative agent and as agent for Falcon Asset Securitization Corporation, and Wachovia Bank, N.A., as agent for Blue Ridge Asset Funding Corporation; (ii) the Seventh Amended and Restated Receivables Sale and Contribution Agreement dated as of June 13, 2001, between Federal-Mogul Funding Corporation, a Michigan corporation, as the purchaser, and the Parent, as the seller; (iii) the Fourth Amended and Restated Receivables Purchase Agreement dated as of June 13, 2001, among the Parent, as purchaser, and certain of its affiliates, each as a seller; and (iv) all other documents entered into in connection with any of the foregoing, as each of the foregoing are amended, restated, supplemented, renewed, refinanced or otherwise modified from time to time.

 

“ Primed Liens ” shall have the meaning set forth in Section 2.23 .

 

“ Quarterly Adjustment Date ” shall have the meaning set forth in Section 6.5(b) .

 

“ Raw Materials ” shall mean any raw materials or Supplies used or consumed in the manufacture, packing or shipping of goods to be sold by the Borrowers in the ordinary course of business.

 

“ Rebate Reserve ” shall mean, at any time of determination, an amount owing or payable to Account Debtors pursuant to incentive marketing programs or similar programs, as determined by the Administrative Agent in its sole discretion from time to time.

 

“ Register ” shall have the meaning set forth in Section 10.3(d) .

 

“ Reorganization Plan ” shall mean a plan of reorganization in any of the Cases.

 

“ Replacement Lender ” shall have the meaning given such term in Section 2.29 .

 

“ Required Lenders ” shall mean, at any time, Lenders holding in excess of 50% of the Total Commitment.

 

“ Restatement Effectiveness Date ” shall have the meaning given such term in Section 10.19 .

 

“ Revolving Loans ” shall have the meaning given such term in Section 2.1 .

 

“ S&P ” shall mean Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc., or any successor to the rating agency business thereof.

 

“ Security and Pledge Agreement ” shall have the meaning given such term in Section 4.1(c) .

 

“ Single Employer Plan ” shall mean a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of a Borrower or an ERISA Affiliate or (ii) was so maintained and in respect of which a Borrower could have liability under Section 4069 of ERISA in the event such Plan has been or were to be terminated.

 

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“ Statutory Reserves ” shall mean on any date the percentage (expressed as a decimal) established by the Board and any other banking authority which is (i) for purposes of the definition of Base CD Rate, the then stated maximum rate of all reserves (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City, for new three month negotiable nonpersonal time deposits in dollars of $100,000 or more or (ii) for purposes of the definition of Adjusted LIBOR Rate, the then stated maximum rate for all reserves (including but not limited to any emergency, supplemental or other marginal reserve requirements) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency Liabilities (or any successor category of liabilities under Regulation D issued by the Board, as in effect from time to time). Such reserve percentages shall include, without limitation, those imposed pursuant to said Regulation. The Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in such percentage.

 

“ Stock Liens ” shall mean the perfected liens on the stock of certain Subsidiaries of the Parent in favor of (x) the trustees for the holders of Indebtedness of the Parent under the Indentures, and (y) the holders of obligations under the Prepetition Credit Agreement and the Surety Bonds.

 

“ Subsidiary ” shall mean, with respect to any Person (herein referred to as the “parent”), any corporation, association or other business entity (whether now existing or hereafter organized) of which at least a majority of the securities or other ownership interests having ordinary voting power for the election of directors is, at the time as of which any determination is being made, owned or controlled by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

 

“ Super-majority Lenders ” shall have the meaning given such term in Section 10.10(b) .

 

“ Superpriority Claim ” shall mean a claim against any Borrower in any of the Cases which is a superpriority administrative expense claim having priority over any or all administrative expenses of the kind specified in Sections 503(b) or 507(b) of the Bankruptcy Code.

 

“ Supplies ” shall mean film, packaging and/or shipping supplies or materials not otherwise directly used in the production of Finished Goods.

 

“ Surety Bonds ” shall mean, collectively, the Contracts of Indemnity, each dated December 29, 2000, entered into by the Parent and certain of its Subsidiaries with (i) Travelers Casualty & Surety Company of America with respect to Performance Bond Number 103529126 and Performance Bond Number 103529229REL, each in the original maximum amount of $50,000,000, (ii) SAFECO Insurance Company of America with respect to Performance Bond Number 6066092 in the original maximum amount of $75,000,000, and (iii) National Fire Insurance Company of Hartford and Continental Casualty Company with respect to Performance Bond Number 929182983 in the original maximum amount of $75,000,000.

 

“ Taxes ” shall have the meaning given such term in Section 2.18 .

 

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“ Termination Date ” shall mean the earliest to occur of (i) the Maturity Date, (ii) the Consummation Date and (iii) the acceleration of the Loans and the termination of the Total Commitment in accordance with the terms hereof.

 

“ Termination Event ” shall mean (i) a “reportable event”, as such term is described in Section 4043 of ERISA and the regulations issued thereunder (other than a “reportable event” not subject to the provision for 30-day notice to the PBGC under Section 4043 of ERISA or such regulations) or an event described in Section 4068 of ERISA excluding events described in Section 4043(c)(9) of ERISA or 29 CFR §§ 2615.21 or 2615.23, or (ii) the withdrawal of any Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a “substantial employer”, as such term is defined in Section 4001(c) of ERISA, or the incurrence of liability by any Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) providing notice of intent to terminate a Plan pursuant to Section 4041(c) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) any other event or condition (other than the commencement of the Cases and the failure to have made any contribution accrued as of the Filing Date but not paid) which would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the imposition of any liability under Title IV of ERISA (other than for the payment of premiums to the PBGC).

 

“ Term Loans ” shall have the meaning given such term in Section 2.1 .

 

“ Third Party Dividend ” shall have the meaning set forth in Section 6.8 .

 

“ Total Commitment ” shall mean, at any time, the sum of the Commitments at such time.

 

“ Total Tranche A Commitment ” shall mean, at any time, the sum of the Tranche A Commitments at such time.

 

“ Total Tranche B Commitment ” shall mean, at any time, the sum of the Tranche B Commitments at such time.

 

“ Total Usage ” shall mean, at any time, the sum of the outstanding aggregate principal amount of the Revolving Loans and the Term Loans plus the aggregate Letter of Credit Outstandings.

 

“ Tranche A Commitment ” shall mean the Commitment of each Tranche A Lender hereunder to make Revolving Loans and to issue and/or participate in Letters of Credit in the amount set forth opposite its name on Annex A-1 hereto or as may subsequently be set forth in the Register from time to time, as the same may be reduced from time to time pursuant to the terms of this Agreement.

 

“ Tranche A Lender ” shall mean each Lender having a Tranche A Commitment.

 

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“ Tranche B Commitment ” shall mean the Commitment of each Tranche B Lender hereunder to make a Term Loan in the amount set forth opposite its name on Annex A-2 hereto or as may subsequently be set forth in the Register from time to time, as the same may be reduced from time to time pursuant to this Agreement.

 

“ Tranche B Lender ” shall mean each Lender having a Tranche B Commitment.

 

“ Transferee ” shall have the meaning given such term in Section 2.18 .

 

“ Type ” when used in respect of any Loan or Borrowing shall refer to the Rate of interest by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, “ Rate ” shall mean the Adjusted LIBOR Rate and the Alternate Base Rate.

 

“ U.K. Subsidiaries ” shall mean those Subsidiaries of the Borrowers which are organized under the laws of any jurisdiction in the United Kingdom and which are the subject of administration petitions under the U.K. Insolvency Act of 1986 (collectively, and including upon the grant of such petitions, the “ U.K. Administration ” ) and are debtors in cases pending under Chapter 11 of the Bankruptcy Code.

 

“ U.K. Subsidiary Proceedings ” shall mean the proceedings of the U.K. Subsidiaries under Chapter 11 of the Bankruptcy Code commenced on the Filing Date.

 

“ Unused Total Commitment ” shall mean, at any time, (i) the Total Commitment less (ii) the sum of (x) the aggregate outstanding principal amount of all Loans and (y) the aggregate Letter of Credit Outstandings.

 

“ Unused Total Tranche A Commitment ” shall mean, at any time, (i) the Total Tranche A Commitment less (ii) the sum of (x) the aggregate outstanding principal amount of all Revolving Loans made under Tranche A and (y) the aggregate Letter of Credit Outstandings under Tranche A.

 

“ Withdrawal Liability ” shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA.

 

“ Work-in-Process ” shall mean goods to be sold by the Borrowers in the ordinary course of business, which are currently in the process of being manufactured.

 

SECTION 1.2 Terms Generally . The definitions in Section 1.1 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references herein to Sections, Exhibits and Schedules shall be deemed references to Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided , however , that for purposes of determining compliance with any covenant set forth in Section 6 , such terms shall be construed in accordance with GAAP as in effect on the date of this Agreement applied on a basis

 

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consistent with the application used in the Borrowers’ audited financial statements referred to in Section 3.4 .

 

SECTION 2. AMOUNT AND TERMS OF CREDIT.

 

SECTION 2.1 Commitment of the Lenders.

 

(a) Each Tranche A Lender severally and not jointly with the other Tranche A Lenders agrees, upon the terms and subject to the conditions herein set forth, to make revolving credit loans (each a “ Revolving Loan ” and collectively, the “ Revolving Loans ” ) to the Borrowers at any time and from time to time during the period commencing on the date hereof and ending on the Termination Date (or the earlier date of termination of the Total Tranche A Commitment) in an aggregate principal amount not to exceed, when added to such Tranche A Lender’s Tranche A Commitment Percentage of the then aggregate Letter of Credit Outstandings, the Tranche A Commitment of such Tranche A Lender, which Revolving Loans may be repaid and reborrowed in accordance with the provisions of this Agreement. At no time shall the sum of the then outstanding aggregate principal amount of the Revolving Loans plus the then aggregate Letter of Credit Outstandings exceed the Total Tranche A Commitment of $350,000,000, as the same may be reduced from time to time pursuant the terms of this Agreement.

 

(b) (i) Each Tranche B Lender severally and not jointly with the other Tranche B Lenders agrees, upon the terms and subject to the conditions herein set forth, to make (or, pursuant to clause (ii) below, elect to convert all or a portion of such Lender’s Existing Term Loans into) term loans (each a “ Term Loan ” and collectively, the “ Term Loans ” ) to the Borrowers on the Restatement Effectiveness Date, in an aggregate principal amount not to exceed the Tranche B Commitment of such Tranche B Lender. At no time shall the sum of the then outstanding aggregate principal amount of the Term Loans exceed the Total Tranche B Commitment of $250,000,000.

 

(ii) In connection with the making of the Term Loans pursuant to clause (i) above, by delivering written notice to the Administrative Agent at least two (2) Business Days prior to the Restatement Effectiveness Date, any Lender of Existing Term Loans may elect to make all or any portion of such Lender’s Tranche B Commitment percentage of the Term Loans requested by the Borrowers to be made on the Restatement Effectiveness Date by converting all or a portion of the outstanding principal amount of the Existing Term Loans held by such Lender into Term Loans in a principal amount equal to the amount of Existing Term Loans so converted (each such Existing Term Loan to the extent it is to be converted a “ Converted Term Loan ” ). On the Restatement Effectiveness Date, the Converted Term Loans shall be converted for all purposes of this Agreement into Term Loans, and the Administrative Agent shall record in the Register the aggregate amounts of Converted Term Loans converted into Term Loans. Any written notice to the Administrative Agent delivered by an applicable Lender pursuant to this Section 2.1(b) shall specify the amount of such Lender’s Tranche B Commitment and the principal amount of Existing Term Loans held by such Lender that are to be converted into Term Loans.

 

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(c) Each Borrowing shall be made by the Lenders pro rata in accordance with their respective Commitments; provided , however , that the failure of any Lender to make any Loan shall not in itself relieve the other Lenders of their obligations to lend.

 

(d) Notwithstanding anything to the contrary herein, the Administrative Agent shall have the right to determine a reallocation of the Commitments in Tranche A and Tranche B (and the sublimits therein), provided that such reallocation by the Administrative Agent shall not increase the amount of the Total Commitment.

 

SECTION 2.2 Borrowing Base . Notwithstanding any other provision of this Agreement to the contrary, the Total Usage shall not at any time exceed the lesser of (i) the Total Commitment and (ii) the Borrowing Base, and no Loan shall be made or Letter of Credit issued in violation of the foregoing.

 

SECTION 2.3 Letters of Credit.

 

(a) Upon the terms and subject to the conditions herein set forth, the Borrowers may request the Fronting Bank, at any time and from time to time after the date hereof and prior to the Termination Date, to issue, and, subject to the terms and conditions contained herein, the Fronting Bank shall issue, for the account of the Borrowers one or more Letters of Credit in support of obligations of the Borrowers or one or more Foreign Subsidiaries that are acceptable to the Administrative Agent, provided that no Letter of Credit shall be issued if after giving effect to such issuance (i) the aggregate Letter of Credit Outstandings would exceed $75,000,000, and (ii) the Total Usage would exceed the lesser of (x) the Total Commitment and (y) the Borrowing Base, and, provided further that no Letter of Credit shall be issued if the Fronting Bank shall have received notice from the Administrative Agent or the Required Lenders that the conditions to such issuance have not been met. On the Restatement Effectiveness Date, all Existing Letters of Credit shall be deemed to have been issued under this Agreement and shall for all purposes constitute “Letters of Credit” hereunder.

 

(b) No Letter of Credit shall expire later than the earlier of (i) one year from the issuance thereof, and (ii) five (5) days before the Maturity Date, provided that if the Termination Date shall occur prior to the expiration of any Letter of Credit, the Borrowers shall, at or prior to the Termination Date, except as the Administrative Agent may otherwise agree in writing, (i) cause all Letters of Credit which expire after the Termination Date to be returned to the Fronting Bank undrawn and marked “canceled” or (ii) if the Borrowers are unable to do so in whole or in part, either (x) provide a “back-to-back” letter of credit to one or more Fronting Banks in a form satisfactory to such Fronting Bank and the Administrative Agent (in their sole discretion), issued by a bank satisfactory to such Fronting Bank and the Administrative Agent (in their sole discretion), in an amount equal to the greater of (A) an amount, as determined by the Fronting Bank and the Administrative Agent, equal to the face amount of all outstanding Letters of Credit plus the sum of all projected contractual obligations to the Administrative Agent, the Fronting Bank and the Lenders of the Borrowers thereunder through the expiration date(s) of such Letters of Credit, and (B) 105% of the then undrawn stated amount of all outstanding Letters of Credit issued by the Fronting Bank and/or (y) deposit cash in the Letter of Credit Account in an amount which, together with any amounts then held in the Letter of Credit Account, is equal to the greater of (A) an amount, as determined by the Fronting Bank and the

 

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Administrative Agent, equal to the face amount of all outstanding Letters of Credit plus the sum of all projected contractual obligations to the Administrative Agent, the Fronting Bank and the Lenders of the Borrowers thereunder and (B) 105% of the then undrawn stated amount of all Letter of Credit Outstandings as collateral security for the Borrowers’ reimbursement obligations in connection therewith, such cash to be remitted to the Borrowers upon the expiration, cancellation or other termination or satisfaction of such reimbursement obligations.

 

(c) The Borrowers shall pay to each Fronting Bank, in addition to such other fees and charges as are specifically provided for in Section 2.21 hereof, such fees and charges in connection with the issuance and processing of the Letters of Credit issued by the Fronting Bank as are customarily imposed by the Fronting Bank from time to time in connection with letter of credit transactions.

 

(d) Drafts drawn under each Letter of Credit shall be reimbursed by the Borrowers in Dollars not later than the first Business Day following the date of draw and shall bear interest from the date of draw until the first Business Day following the date of draw at a rate per annum equal to the Alternate Base Rate plus 2.00% and thereafter until reimbursed in full at a rate per annum equal to the Alternate Base Rate plus 4.00% (computed on the basis of the actual number of days elapsed over a year of 360 days). The Borrowers shall effect such reimbursement (x) if such draw occurs prior to the Termination Date (or the earlier date of termination of the Total Tranche A Commitment), in cash or through a Borrowing of Revolving Loans without the satisfaction of the conditions precedent set forth in Section 4.2 or (y) if such draw occurs on or after the Termination Date (or the earlier date of termination of the Total Tranche A Commitment), in cash. Each Lender agrees to make the Loans described in clause (x) of the preceding sentence notwithstanding a failure to satisfy the applicable lending conditions thereto or the provisions of Sections 2.2 or 2.29 .

 

(e) Immediately upon the issuance of any Letter of Credit by the Fronting Bank, the Fronting Bank shall be deemed to have sold to each Tranche A Lender other than the Fronting Bank and each such other Tranche A Lender shall be deemed unconditionally and irrevocably to have purchased from such Fronting Bank, without recourse or warranty, an undivided interest and participation, to the extent of such Tranche A Lender’s Commitment Percentage, in such Letter of Credit, each drawing thereunder and the obligations of the Borrowers under this Agreement with respect thereto. Upon any change in the Commitments pursuant to Section 10.3 , it is hereby agreed that with respect to all Letter of Credit Outstandings, there shall be an automatic adjustment to the participations hereby created to reflect the new Commitment Percentages of the assigning and assignee Tranche A Lenders. Any action taken or omitted by the Fronting Bank under or in connection with a Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for the Fronting Bank any resulting liability to any other Tranche A Lender.

 

(f) In the event that the Fronting Bank makes any payment under any Letter of Credit and the Borrowers shall not have reimbursed such amount in full to the Fronting Bank pursuant to this Section, the Fronting Bank shall promptly notify the Administrative Agent, which shall promptly notify each Tranche A Lender of such failure, and each Tranche A Lender shall promptly and unconditionally pay to the Administrative Agent for the account of the Fronting Bank the amount of such Tranche A Lender’s Commitment Percentage of such

 

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unreimbursed payment in Dollars and in same day funds. If the Fronting Bank so notifies the Administrative Agent, and the Administrative Agent so notifies the Tranche A Lenders prior to 11:00 a.m. (New York City time) on any Business Day, such Tranche A Lenders shall make available to the Fronting Bank such Tranche A Lender’s Commitment Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Tranche A Lender shall not have so made its Commitment Percentage of the amount of such payment available to the Fronting Bank, such Tranche A Lender agrees to pay to the Fronting Bank, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent for the account of the Fronting Bank at the Federal Funds Effective Rate. The failure of any Tranche A Lender to make available to the Fronting Bank its Commitment Percentage of any payment under any Letter of Credit shall not relieve any other Tranche A Lender of its obligation hereunder to make available to the Fronting Bank its Commitment Percentage of any payment under any Letter of Credit on the date required, as specified above, but no Tranche A Lender shall be responsible for the failure of any other Tranche A Lender to make available to the Fronting Bank such other Tranche A Lender’s Commitment Percentage of any such payment. Whenever the Fronting Bank receives a payment of a reimbursement obligation as to which it has received any payments from the Tranche A Lenders pursuant to this paragraph, the Fronting Bank shall pay to each Tranche A Lender which has paid its Commitment Percentage thereof, in Dollars and in same day funds, an amount equal to such Tranche A Lender’s Commitment Percentage thereof.

 

(g) Letters of Credit may be issued for the account of Non-Debtor Foreign Subsidiaries (subject to availability under Tranche A and the $75,000,000 sub-limit). The face amount of Letters of Credit issued for the account of Non-Debtor Foreign Subsidiaries shall constitute a use of the amount of Intercompany Loans permitted to be made by the Borrowers pursuant to Sections 6.10(iv) and (v) .

 

(h) Letters of Credit may be issued for the account of the U.K. Subsidiaries (subject to availability under Tranche A and the $75,000,000 sub-limit). The face amount of Letters of Credit issued for the account of U.K. Subsidiaries shall constitute a use of the amount of Intercompany Loans permitted to be made by the Borrowers pursuant to Section 6.10(vi) .

 

SECTION 2.4 Issuance . Whenever the Borrowers desire the Fronting Bank to issue a Letter of Credit, they shall give to the Fronting Bank and the Administrative Agent at least two (2) Business Days’ prior written (including telegraphic, telex, facsimile or cable communication) notice (or such shorter period as may be agreed upon by the Administrative Agent, the Borrowers and the Fronting Bank) specifying the date on which the proposed Letter of Credit is to be issued (which shall be a Business Day), the stated amount of the Letter of Credit so requested, the expiration date of such Letter of Credit and the name and address of the beneficiary thereof.

 

SECTION 2.5 Nature of Letter of Credit Obligations Absolute . The obligations of the Borrowers to reimburse the Lenders for drawings made under any Letter of Credit shall be joint and several, unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, setoff, defense or other right which any Borrower may have at any time against a beneficiary of any Letter of Credit or

 

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against any of the Lenders, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by the Fronting Bank of any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit; (v) any other circumstance or happening whatsoever, which is similar to any of the foregoing; or (vi) the fact that any Event of Default shall have occurred and be continuing.

 

SECTION 2.6 Making of Loans.

 

(a) Except as contemplated by Section 2.11 , Loans shall be either ABR Loans or Eurodollar Loans as the Borrowers may request subject to and in accordance with this Section, provided that all Loans made pursuant to the same Borrowing shall, unless otherwise specifically provided herein, be Loans of the same Type. Each Lender may fulfill its Commitment with respect to any Eurodollar Loan or ABR Loan by causing any lending office of such Lender to make such Loan; provided that any such use of a lending office shall not affect the obligation of the Borrowers to repay such Loan in accordance with the terms of this Agreement. Each Lender shall, subject to its overall policy considerations, use reasonable efforts (but shall not be obligated) to select a lending office which will not result in the payment of increased costs by the Borrowers pursuant to Sections 2.15 or 2.18 . Subject to the other provisions of this Section and the provisions of Section 2.12 , Borrowings of Loans of more than one Type may be incurred at the same time, provided that no more than fifteen (15) Borrowings of Eurodollar Loans may be outstanding at any time.

 

(b) The Borrowers shall give the Administrative Agent prior written, telex, facsimile or telephonic (confirmed promptly in writing) notice of each Borrowing of Revolving Loans hereunder of at least three (3) Business Days for Eurodollar Loans and one (1) Business Day for ABR Loans; such notice shall be irrevocable and shall specify the amount of the proposed Borrowing (which shall not be less than $5,000,000 or any integral multiple of $1,000,000 in excess thereof) and the date thereof (which shall be a Business Day) and shall contain disbursement instructions. Such notice, to be effective, must be received by the Administrative Agent not later than 12:00 noon, New York City time, on the third Business Day in the case of Eurodollar Loans and the first Business Day in the case of ABR Loans, preceding the date on which such Borrowing is to be made. Such notice shall specify whether the Borrowing then being requested is to be a Borrowing of ABR Loans or Eurodollar Loans. If no election is made as to the Type of Loan, such notice shall be deemed a request for Borrowing of ABR Loans. The Administrative Agent shall promptly notify each Tranche A Lender of its proportionate share of such Borrowing, the date of such Borrowing, the Type of Borrowing or Loans being requested and the Interest Period or Interest Periods applicable thereto, as appropriate. On the Borrowing date specified in such notice, each Tranche A Lender shall make its share of the Borrowing available at the office of the Administrative Agent at 270 Park Avenue, New York, New York 10017, no later than 12:00 noon, New York City time, in immediately available funds. Upon receipt of the funds made available by the Tranche A Lenders to fund any Borrowing hereunder, the Administrative Agent shall disburse such funds in the manner specified in the notice of Borrowing delivered by the Borrowers.

 

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(c) The Borrowers shall give the Administrative Agent prior notice of the making of the Term Loans of at least three (3) Business Days if the Term Loans or a portion thereof are to be made as Eurodollar Loans and one (1) Business Day if the Term Loans are to be made as ABR Loans; such notice shall be irrevocable and shall specify the amount of the proposed Borrowing that is to be made as a Eurodollar Loan (which shall not be less than $5,000,000 or any integral multiple of $1,000,000 in excess thereof) and the date thereof (which shall be a Business Day) and shall contain disbursement instructions. Such notice, to be effective, must be received by the Administrative Agent not later than 12:00 noon, New York City time, on the third Business Day in the case of Eurodollar Loans and the first Business Day in the case of ABR Loans, preceding the date on which such Borrowing is to be made. Such notice shall specify whether the Borrowing then being requested is to be a Borrowing of ABR Loans or Eurodollar Loans. If no election is made as to the Type of Loan, such notice shall be deemed a request for Borrowing of ABR Loans. The Administrative Agent shall promptly notify each Tranche B Lender of its proportionate share of such Borrowing, the date of such Borrowing, the Type of Borrowing or Loans being requested and the Interest Period or Interest Periods applicable thereto, as appropriate. On the Borrowing date specified in such notice, each Tranche B Lender shall make its share of the Borrowing available at the office of the Administrative Agent at 270 Park Avenue, New York, New York 10017, no later than 12:00 noon, New York City time, in immediately available funds, except to the extent such Lender elects to convert the Existing Term Loans into Term Loans pursuant to Section 2.1(b) . Upon receipt of the funds made available by the Tranche B Lenders to fund any Borrowing hereunder, the Administrative Agent shall disburse such funds in the manner specified in the notice of Borrowing delivered by the Borrowers.

 

SECTION 2.7 Repayment of Loans and Unreimbursed Draws; Evidence of Debt .

 

(a) The Borrowers hereby jointly and severally unconditionally promise to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan and each unreimbursed draw under all Letters of Credit as set forth herein.

 

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrowers to such Lender resulting from each Loan made by such Lender or participation in each Letter of Credit in which such Lender is participating, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

 

(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrowers to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

 

(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain

 

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such accounts or any error therein shall not in any manner affect the obligation of the Borrowers to repay the Loans in accordance with the terms of this Agreement.

 

(e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrowers shall execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) in a form furnished by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.3 ) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

 

SECTION 2.8 Interest on Loans .

 

(a) Subject to the provisions of Section 2.9 , each ABR Loan shall bear interest (computed, for ABR Loans wherein the Alternate Base Rate is determined by reference to the Base CD Rate or the Federal Funds Effective Rate, on the basis of the actual number of days elapsed over a year of 360 days, and otherwise computed on the basis of the actual number of days elapsed over a year of 365 days) at a rate per annum equal to the Alternate Base Rate plus 2.00%.

 

(b) Subject to the provisions of Section 2.9 , each Eurodollar Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal, during each Interest Period applicable thereto, to the Adjusted LIBOR Rate for such Interest Period in effect for such Borrowing plus 3.00%.

 

(c) Accrued interest on all Loans shall be payable in arrears on each Interest Payment Date applicable thereto, at maturity (whether by acceleration or otherwise), after such maturity on demand and (with respect to Eurodollar Loans) upon any repayment or prepayment thereof (on the amount prepaid).

 

SECTION 2.9 Default Interest . If any Borrower shall default in the payment of the principal of or interest on any Loan or in the payment of any other amount becoming due hereunder (including, without limitation, the reimbursement pursuant to Section 2.3(d) of any draft drawn under a Letter of Credit), whether at stated maturity, by acceleration or otherwise, such Borrower shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (after as well as before judgment) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to 2% above the then applicable rate.

 

SECTION 2.10 Optional Termination or Reduction of Commitment . Upon at least two (2) Business Days’ prior written notice to the Administrative Agent, the Borrowers may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Unused Total Tranche A Commitment. Each such reduction or termination, as applicable, of the Unused Total Tranche A Commitment shall be in the principal amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof. Any reduction or termination, as applicable, pursuant to this Section shall be deemed to be a reduction or termination, as applicable, in the

 

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amount of such reduction or termination of the Total Tranche A Commitment and shall be applied pro rata to reduce the applicable Tranche A Commitment of each Tranche A Lender. Simultaneously with each reduction or termination, as applicable, of the Unused Total Tranche A Commitment, the Borrowers shall pay to the Administrative Agent for the account of each Tranche A Lender the Commitment Fee accrued on the amount of the Tranche A Commitment of such Lender so terminated or reduced through the date thereof.

 

SECTION 2.11 Alternate Rate of Interest . In the event, and on each occasion, that on the day two (2) Business Days prior to the commencement of any Interest Period for a Eurodollar Loan, the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrowers absent manifest error) that reasonable means do not exist for ascertaining the applicable Adjusted LIBOR Rate, the Administrative Agent shall, as soon as practicable thereafter, give written or telegraphic notice of such determination to the Borrowers and the Lenders, and any request by the Borrowers for a Borrowing of Eurodollar Loans (including pursuant to a refinancing with Eurodollar Loans) pursuant to Section 2.6 or 2.12 shall be deemed a request for a Borrowing of ABR Loans. After such notice shall have been given and until the circumstances giving rise to such notice no longer exist, each request for a Borrowing of Eurodollar Loans shall be deemed to be a request for a Borrowing of ABR Loans.

 

SECTION 2.12 Refinancing of Loans . The Borrowers shall have the right, at any time, on three (3) Business Days’ prior irrevocable notice to the Administrative Agent (which notice, to be effective, must be received by the Administrative Agent not later than 1:00 p.m., New York City time, on the third Business Day preceding the date of any refinancing), (x) to refinance (without the satisfaction of the conditions set forth in Section 4.2 as a condition to such refinancing) any outstanding Borrowing or Borrowings of Loans of one Type (or a portion thereof) with a Borrowing of Loans of the other Type or (y) to continue an outstanding Borrowing of Eurodollar Loans for an additional Interest Period, subject to the following:

 

(a) as a condition to the refinancing of ABR Loans with Eurodollar Loans and to the continuation of Eurodollar Loans for an additional Interest Period, no Event of Default shall have occurred and be continuing at the time of such refinancing;

 

(b) if less than a full Borrowing of Loans shall be refinanced, such refinancing shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising such Borrowing held by the Lenders immediately prior to such refinancing;

 

(c) the aggregate principal amount of Loans being refinanced shall be at least $5,000,000 or any integral multiple of $1,000,000 in excess thereof, provided that no partial refinancing of a Borrowing of Eurodollar Loans shall result in the Eurodollar Loans remaining outstanding pursuant to such Borrowing being less than $5,000,000 in aggregate principal amount;

 

(d) each Lender shall effect each refinancing by applying the proceeds of its new Eurodollar Loan or ABR Loan, as the case may be, to its Loan being refinanced;

 

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(e) the Interest Period with respect to a Borrowing of Eurodollar Loans effected by a refinancing or in respect to the Borrowing of Eurodollar Loans being continued as Eurodollar Loans shall commence on the date of refinancing or the expiration of the current Interest Period applicable to such continuing Borrowing, as the case may be;

 

(f) a Borrowing of Eurodollar Loans may be refinanced only on the last day of an Interest Period applicable thereto; and

 

(g) each request for a refinancing with a Borrowing of Eurodollar Loans which fails to state an applicable Interest Period shall be deemed to be a request for an Interest Period of one month.

 

In the event that the Borrowers shall not give notice to refinance any Borrowing of Eurodollar Loans, or to continue such Borrowing as Eurodollar Loans, or shall not be entitled to refinance or continue such Borrowing as Eurodollar Loans, in each case as provided above, such Borrowing shall automatically be refinanced with a Borrowing of ABR Loans at the expiration of the then-current Interest Period. The Administrative Agent shall, after it receives notice from the Borrowers, promptly give each Lender notice of any refinancing, in whole or part, of any Loan made by such Lender.

 

SECTION 2.13 Mandatory Prepayment; Commitment Termination.

 

(a) If at any time the aggregate principal amount of the outstanding Loans plus the aggregate Letter of Credit Outstandings exceeds the lesser of (x) the Total Commitment or (y) the Borrowing Base, the Borrowers will within one (1) Business Day (i) prepay the Loans in an amount necessary to cause the aggregate principal amount of the outstanding Loans plus the aggregate Letter of Credit Outstandings, including unreimbursed draws, to be equal to or less than the lesser of (x) the Total Commitment and (y) the Borrowing Base, and (ii) if, after giving effect to the prepayment in full of the Loans, the aggregate Letter of Credit Outstandings in excess of the amount of cash held in the Letter of Credit Account exceeds the lesser of (x) the Total Commitment or (y) the Borrowing Base, deposit into the Letter of Credit Account an amount equal to 105% of the amount by which the aggregate Letter of Credit Outstandings in excess of the amount of cash held in the Letter of Credit Account so exceeds the lesser of (x) the Total Commitment or (y) the Borrowing Base.

 

(b) The Borrowers shall, upon the receipt of the Net Proceeds by any of the Borrowers from any Asset Sales by any Borrower, jointly and severally, apply such Net Proceeds as follows: first , to repay the then outstanding Loans; second , if an Event of Default or an event which upon notice or lapse of time or both would constitute an Event of Default shall have occurred and be continuing or if no Loans are then outstanding, deposit an amount in the Letter of Credit Account up to 105% of the then Letter of Credit Outstandings; and thereafter , such Net Proceeds may be retained by the Borrowers and invested in Permitted Investments or used for expenditures in the ordinary course of business (subject to compliance with the terms and conditions of this Agreement). Prepayments of the Loans pursuant to the foregoing shall be effected as follows: the Tranche A Commitments and Tranche B Commitments shall be reduced on a pro rata basis by an aggregate amount equal to the Net Proceeds of the subject Asset Sale; the Revolving Loans shall be prepaid in a proportionate amount equal to the percentage decrease

 

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in the Total Tranche A Commitments; and the Tranche B Loans shall be prepaid in an amount equal to the decrease in the Total Tranche B Commitments. Net Proceeds from any Asset Sales by a Non-Debtor Foreign Subsidiary, net of the amount of any repayment obligations of such Non-Debtor Foreign Subsidiary with respect to third party financing arrangements, shall (i) reduce, on a dollar for dollar basis, the amount of postpetition Intercompany Loans which may be made to the Non-Debtor Foreign Subsidiaries, provided , however , that in no event shall the permitted amount