TABLE OF CONTENTS

 

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SECTION 1.		DEFINITIONS	1
SECTION 2.		CREDIT FACILITIES	33
2.1	Loans		33
2.2	Letter of Credit Accommodations		34
2.3	Equipment Purchase Loans		38
2.4	Commitments		41
SECTION 3.		INTEREST AND FEES	42
3.1	Interest		42
3.2	Fees		43
3.3	Changes in Laws and Increased Costs of Loans		44
SECTION 4.		CONDITIONS PRECEDENT	46
4.1	Conditions Precedent to Amendment and Restatement		46
4.2	Conditions Precedent to All Loans and Letter of Credit Accommodations		47
SECTION 5.		GRANT AND PERFECTION OF SECURITY INTEREST	47
5.1	Grant of Security Interest		47
5.2	Perfection of Security Interests		49
SECTION 6.		COLLECTION AND ADMINISTRATION	54
6.1	Borrowers’ Loan Accounts		54
6.2	Statements		54
6.3	Collection of Accounts		54
6.4	Payments		55
6.5	Taxes		57
6.6	Authorization to Make Loans		60
6.7	Use of Proceeds		60
6.8	Appointment of Administrative Borrower as Agent for Requesting Loans and Receipts of Loans and Statements		61
6.9	Illegality		61
6.10	Pro Rata Treatment		62
6.11	Sharing of Payments, Etc		62
6.12	Settlement Procedures		63

 

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6.13	Obligations Several; Independent Nature of Lenders’ Rights		66
SECTION 7.		COLLATERAL REPORTING AND COVENANTS	66
7.1	Collateral Reporting		66
7.2	Accounts Covenants		67
7.3	Inventory Covenants		68
7.4	Equipment and Real Property Covenants		69
7.5	Power of Attorney		70
7.6	Right to Cure		71
7.7	Access to Premises		71
SECTION 8.		REPRESENTATIONS AND WARRANTIES	72
8.1	Corporate Existence, Power and Authority		72
8.2	Name; State of Organization; Chief Executive Office; Collateral Locations		72
8.3	Financial Statements; No Material Adverse Change		73
8.4	Priority of Liens; Title to Properties		73
8.5	Tax Returns		73
8.6	Litigation		74
8.7	Compliance with Other Agreements and Applicable Laws		74
8.8	Environmental Compliance		74
8.9	Employee Benefits		75
8.10	Bank Accounts		75
8.11	Intellectual Property		76
8.12	Subsidiaries; Affiliates; Capitalization		76
8.13	Labor Disputes		77
8.14	Restrictions on Subsidiaries		77
8.15	Material Contracts		78
8.16	Payable Practices; Retention of Title		78
8.17	Accuracy and Completeness of Information		78
8.18	Survival of Warranties; Cumulative		78
SECTION 9.		AFFIRMATIVE AND NEGATIVE COVENANTS	79
9.1	Maintenance of Existence		79
9.2	New Collateral Locations		79
9.3	Compliance with Laws, Regulations, Etc		80
9.4	Payment of Taxes and Claims		81
9.5	Insurance		81
9.6	Financial Statements and Other Information		81

 

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9.7	Sale of Assets, Consolidation, Merger, Dissolution, Etc		83
9.8	Encumbrances		86
9.9	Indebtedness		88
9.10	Loans, Investments, Etc		90
9.11	Dividends and Redemptions		93
9.12	Transactions with Affiliates		94
9.13	Compliance with ERISA		95
9.14	End of Fiscal Years; Fiscal Quarters		95
9.15	Change in Business		95
9.16	Limitation of Restrictions Affecting Subsidiaries		95
9.17	Intentionally deleted		96
9.18	Fixed Charge Coverage Ratio		96
9.19	After Acquired Real Property		96
9.20	Effect of Indebtedness of Foreign Subsidiaries		97
9.21	Costs and Expenses		97
9.22	Further Assurances		97
SECTION 10.		EVENTS OF DEFAULT AND REMEDIES	98
10.1	Events of Default		98
10.2	Remedies		99
SECTION 11.		JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW	103
11.1	Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver		103
11.2	Waiver of Notices		104
11.3	Amendments and Waivers		104
11.4	Waiver of Counterclaims		106
11.5	Indemnification		106
11.6	Currency Indemnity		107
SECTION 12.		THE AGENT	107
12.1	Appointment, Powers and Immunities		107
12.2	Reliance by Agent		108
12.3	Events of Default		108
12.4	Wachovia in its Individual Capacity		109
12.5	Indemnification		109
12.6	Non-Reliance on Agent and Other Lenders		109
12.7	Failure to Act		110

 

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12.8	Additional Loans				110
12.9	Concerning the Collateral and the Related Financing Agreements				110
12.10			Field Audit, Examination Reports and other Information; Disclaimer by Lenders		110
12.11			Collateral Matters		111
12.12			Agency for Perfection		113
12.13			Successor Agent		113
SECTION 13.				TERM OF AGREEMENT; MISCELLANEOUS	113
13.1	Term				113
13.2	Interpretative Provisions				115
13.3	Notices				117
13.4	Partial Invalidity				117
13.5	Confidentiality				118
13.6	Successors				118
13.7	Assignments; Participations				119
13.8	USA Patriot Act				121
13.9	Entire Agreement				121
13.10		Counterparts, Etc			121
13.11		Code Section 956 Override			121
13.12		Bank Products Override			122
SECTION 14.				ACKNOWLEDGMENT AND RESTATEMENT	122
14.1	Existing Obligations				122
14.2	Acknowledgment of Security Interests				122
14.3	Existing Financing Agreements				122
14.4	Restatement				123

 

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INDEX TO

EXHIBITS AND SCHEDULES

 

Exhibit A	Form of Assignment and Acceptance
Exhibit B	Form of Borrowing Base Certificate
Exhibit C	Information Certificate
Exhibit D	Form of Equipment Purchase Note
Exhibit E	Form of Compliance Certificate
Exhibit F	Revolving Loan Commitment
Schedule 1.64	Existing Financing Agreements
Schedule 1.136	Timet Collateral
Schedule 1.140	Timet Option Note
Schedule 5.1	Commercial Tort Claims
Schedule 6.6(b)	Operating Accounts to Receive Loan Proceeds
Schedule 8.12	Inactive or Dissolved Subsidiaries
Schedule 9.8	Tax Liens and Other Non-Consensual Liens

 

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SECOND AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

 

This Second Amended and Restated Loan and Security Agreement (this “Agreement” as hereinafter further defined), dated November 18, 2008, is entered into by and among Haynes International, Inc., a Delaware corporation (“Haynes Parent”), Haynes Wire Company, a Delaware corporation (“Haynes Wire” and together with Haynes Parent, collectively, “Borrowers”), the parties hereto from time to time as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively, “Lenders” as hereinafter further defined), JPMorgan Chase Bank, NA, a national banking association, in its capacity as documentation agent (in such capacity, “Documentation Agent” as hereinafter further defined), and Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial Corporation (Central), an Illinois corporation, in its capacity as agent for Lenders (in such capacity, “Agent” as hereinafter further defined).

 

W I T N E S S E T H:

 

WHEREAS, Borrowers, Agent and the parties thereto as lenders, are parties to the Amended and Restated Loan and Security Agreement, dated August 31, 2004, as amended (the “Existing Loan Agreement”);

 

WHEREAS, Borrowers have requested that Agent and Lenders amend and restate the Existing Loan Agreement pursuant to and in accordance with the terms and conditions set forth herein; and

 

WHEREAS, each Lender is willing to agree (severally and not jointly) to amend and restate the Existing Loan Agreement and to make such loans and provide such financial accommodations to Borrowers on a pro   rata basis according to its Commitment (as defined below) on the terms and conditions set forth herein and Agent is willing to act as agent for Lenders on the terms and conditions set forth herein and the other Financing Agreements (as hereinafter defined);

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

SECTION 1.    DEFINITIONS

 

For purposes of this Agreement, the following terms shall have the respective meanings given to them below:

 

1.1            “Accounts” shall mean, as to each Borrower, all present and future rights of such Borrower to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card.

 

 

1.2            “Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to the next one thousandth (1/1000) of one (1%) percent) determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage.  For purposes hereof, “Reserve Percentage” shall mean the reserve percentage, expressed as a decimal, prescribed by any United States banking authority for determining the reserve requirement which is or would be applicable to deposits of United States dollars in a non-United States or an international banking office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with the proceeds of such deposit, whether or not the Reference Bank actually holds or has made any such deposits or loans.  The Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage.

 

1.3            “Administrative Borrower” shall mean Haynes International, Inc., a Delaware corporation in its capacity as Administrative Borrower on behalf of itself and Haynes Wire pursuant to Section 6.8 hereof and its successors and assigns in such capacity.

 

1.4            “Affiliate” shall mean, with respect to a specified Person, any other Person which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person, and without limiting the generality of the foregoing, includes (a) any Person which beneficially owns or holds ten (10%) percent or more of any class of Voting Stock of such Person or other equity interests in such Person, (b) any Person of which such Person beneficially owns or holds ten (10%) percent or more of any class of Voting Stock or in which such Person beneficially owns or holds ten (10%) percent or more of the equity interests and (c) any director or executive officer of such Person.  For the purposes of this definition, the term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise.

 

1.5            “Agent” shall mean Wachovia Capital Finance Corporation (Central), in its capacity as agent on behalf of Lenders pursuant to the terms hereof and any replacement or successor agent hereunder.

 

1.6            “Agent Payment Account” shall mean account no. 5000000030266 of Agent at Wachovia Bank, National Association, or such other account of Agent as Agent may from time to time designate to Administrative Borrower as the Agent Payment Account for purposes of this Agreement and the other Financing Agreements.

 

1.7            “Applicable Margin” shall mean, at any time, with respect to Prime Rate Loans and Eurodollar Rate Loans, the applicable percentage (on a per annum basis) set forth below based on the Monthly Average Excess Availability for the immediately preceding month:

 

 

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provided , that , (i) the Applicable Margin shall be calculated and established on the first day of each month and shall remain in effect until adjusted thereafter at the beginning of the next month and (ii) the Applicable Margin from and including the date hereof through November 30, 2008 shall be the amount for Tier 1 set forth above.

 

1.8            “Approved Fund” shall mean with respect to any Lender that is a fund or similar investment vehicle that makes or invests in commercial loans, any other fund or similar investment vehicle that invests in commercial loans which is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

 

1.9            “Arcadia Facility Inventory Availability” shall mean, with respect to Eligible Arcadia Inventory, the lesser of:

 

(a)        the sum of (i) seventy (70%) percent multiplied by the Value of the Eligible Arcadia Inventory consisting of finished goods, plus (ii) thirty (30%) percent multiplied by the Value of the Eligible Arcadia Inventory consisting of work-in-process, plus (iii) sixty (60%) percent multiplied by the Value of the Eligible Arcadia Inventory consisting of raw materials; or

 

(b)       the amount equal to the sum of the following for each category of Eligible Arcadia Inventory (such categories being finished goods, work-in-process and raw materials as described above): (i) eighty-five (85%) percent of the Net Recovery Percentage for each category of such Eligible Arcadia Inventory multiplied by (ii) the Value of such category of Eligible Arcadia Inventory; or

 

(c)        forty-five (45%) percent multiplied by the sum of the Value of all of the above categories of such Eligible Arcadia Inventory.

 

1.10          “Assignment and Acceptance” shall mean an Assignment and Acceptance Agreement substantially in the form of Exhibit A attached hereto (with blanks appropriately completed) delivered to Agent in connection with an assignment of a Lender’s interest hereunder in accordance with the provisions of Section 13.7 hereof.

 

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Eligible Inventory of Haynes Wire or (b) eighty-five (85%) percent of the Net Recovery Percentage of Eligible Inventory of Haynes Wire, or (ii) the Inventory Loan Limit, plus

 

(c)        the Fixed Asset Availability, less

 

(d)       Reserves.

 

For purposes only of applying the Inventory Loan Limit, Agent may treat the then undrawn amounts of outstanding Letter of Credit Accommodations issued for the purpose of purchasing Eligible Inventory as Loans to the extent Agent is in effect basing the issuance of the Letter of Credit Accommodations on the Value of the Eligible Inventory being purchased with such Letter of Credit Accommodations.  In determining the actual amounts of such Letter of Credit Accommodations to be so treated for purposes of the sublimit, the outstanding Loans and Reserves shall be attributed first to any components of the lending formulas set forth above that are not subject to such sublimit, before being attributed to the components of the lending formulas subject to such sublimit.  The amounts of Eligible Inventory of Borrowers shall, at Agent’s option, be determined based on the lesser of the amount of Inventory set forth in the general ledger of Borrowers or the perpetual inventory record maintained by Borrowers.

 

1.19          “Borrowing Base Certificate” shall mean a certificate substantially in the form of Exhibit B hereto, as such form may from time to time be modified by Agent in good faith with the consent of each Borrower (which consent shall not be unreasonably withheld, conditioned or delayed), which is duly completed (including all schedules thereto) and executed by the vice-president-finance, chief financial officer, treasurer, assistant treasurer, controller or other financial or senior officer of Administrative Borrower on behalf of Borrowers acceptable to Agent and delivered to Agent.

 

1.20          “Business Day” shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of Illinois, or the State of North Carolina, and a day on which Agent is open for the transaction of business, except that if a determination of a Business Day shall relate to any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market or other applicable Eurodollar Rate market.

 

1.21          “Capital Expenditures” shall mean, with respect to any Person, all expenditures made and liabilities incurred for the acquisition of assets which are not, in accordance with GAAP, treated as expense items for such Person in the year made or incurred or as a prepaid expense applicable to a future year or years; provided ,  that , Capital Expenditures shall not include expenditures that would otherwise constitute Capital Expenditures to the extent made with proceeds from insurance for an insured loss or proceeds of an award of compensation from a condemnation or eminent domain proceeding to replace or restore the assets that were the subject of the loss giving rise to the payment of such insurance proceeds or the subject of such condemnation or eminent domain proceeding giving rise to the payment of such award.

 

1.22          “Capital Leases” shall mean, as applied to any Person, any lease of (or any agreement conveying the right to use) any property (whether real, personal or mixed) by such

 

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Person as lessee which in accordance with GAAP, is required to be reflected as a liability on the balance sheet of such Person.

 

1.23          “Capital Stock” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock or partnership, limited liability company or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock). !

 

1.24          “Cash Equivalents” shall mean any of the following: (a) any evidence of Indebtedness with a maturity date of ninety (90) days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof or any agency or instrumentality thereof; provided , that , the full faith and credit of the United States of America is pledged in support thereof; (b) certificates of deposit or bankers’ acceptances with a maturity of ninety (90) days or less (after the date of the purchase thereof) of any financial institution that is a member of the Federal Reserve System, in any case having combined capital and surplus and undivided profits of not less than $250,000,000; (c) commercial paper (including variable rate demand notes) with a maturity of ninety (90) days or less (after the date of the purchase thereof) issued or guaranteed by a corporation (except an Affiliate of any Borrower) organized under the laws of any State of the United States of America, the District of Columbia or a bank organized under the laws of any State of the United States of America or constituting a national banking association under the laws of the United States of America, in each case having a rating of at least A 1 by Standard & Poor’s Ratings Service, a division of The McGraw Hill Companies, Inc. or at least P 1 by Moody’s Investors Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days (after the date of the purchase thereof) for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital and surplus and undivided profits of not less than $250,000,000; (e) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit of the United States of America in each case maturing within ninety (90) days or less from the date of acquisition; provided , that , the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; and (f) investments in money market funds and mutual funds which invest substantially all of their assets in securities of the types described in clauses (a) through (e) above.

 

1.25          “Change of Control” shall mean (a) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of any Borrower to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act); (b) the liquidation or dissolution of any Borrower; (c) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act) of beneficial ownership, directly or indirectly, of more than fifty (50%) percent of the voting power of the total outstanding Voting Stock of any Borrower; (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of any Borrower (together with any new directors whose nomination for election by the stockholders of any Borrower was approved by a vote of at least

 

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sixty six and two thirds (66 2/3%) percent of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of any Borrower then still in office.

 

1.26          “Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all governmental rules, regulations and interpretations thereunder or related thereto.

 

1.27          “Collateral” shall have the meaning set forth in Section 5 hereof.

 

1.28          “Collateral Access Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, from any lessor of premises to each Borrower, or any other person to whom any Collateral is consigned or who has custody, control or possession of any Collateral or is otherwise the owner or operator of any premises on which any Collateral is located, in favor of Agent with respect to the Collateral at such premises or otherwise in the custody, control or possession of such lessor, consignee or other person.

 

1.29          “Commitment” shall mean, with respect to each Lender, the principal amount set forth on Exhibit F hereto for such Lender or for any party becoming a Lender after the date hereof the amount of such Lender’s Commitment as set forth on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender may become a Lender hereunder in accordance with the provisions of Section 13.7 of this Agreement; as the same may be adjusted in accordance with the terms hereof; sometimes being collectively referred to as “Commitments”.

 

1.30          “Consolidated Adjusted Net Income” shall mean, with respect to any Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries, on a consolidated basis, for such period (excluding to the extent included therein any extraordinary or non recurring gains and non cash charges, including non-cash pension and other non-cash post-employment benefit charges and non-cash restructuring charges and expenses and in the case of Borrowers and its Subsidiaries, such cash charges and non-cash charges in each case in amounts acceptable to Agent in its determination and arising pursuant to events or circumstances beyond the control of Borrowers), after deducting all charges which should be deducted before arriving at the net income (loss) for such period, and after deducting the Provision for Taxes for such period, all as determined in accordance with GAAP; provided , that , (a) the net income of any Person that is not a wholly owned Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid or payable to such Person or a wholly owned Subsidiary of such Person; (b) except to the extent included pursuant to the foregoing clause, the net income of any Person accrued prior to the date it becomes a wholly owned Subsidiary of such Person or is merged into or consolidated with such Person or any of its wholly owned Subsidiaries or that Person’s assets are acquired by such Person or by any of its wholly owned Subsidiaries shall be excluded; and (c) the effect of any change in accounting principles adopted by such Person or its Subsidiaries after the date hereof shall be excluded.  For the purposes of this definition, net income excludes any gain and non cash loss (but not any cash loss) together with any related Provision for Taxes for such gain and non cash loss (but not any cash loss) realized upon the sale or other disposition of any assets that

 

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are not sold in the ordinary course of business (including, without limitation, dispositions pursuant to sale and leaseback transactions) or of any capital stock of such Person or a Subsidiary of such Person and any net income realized as a result of changes in accounting principles or the application thereof to such Person.

 

1.31          “Credit Facility” shall mean the Loans and Letter of Credit Accommodations provided to or for the benefit of any Borrower pursuant to Sections 2.1 and 2.2 hereof.

 

1.32          “Default” shall mean an act, condition or event which with notice or passage of time or both would constitute an Event of Default.

 

1.33          “Defaulting Lender” shall have the meaning set forth in Section 6.12(e) hereof.

 

1.34          “Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent, the Borrowers with a deposit account at any bank and the bank at which such deposit account is at any time maintained which provides that such bank will comply with instructions originated by Agent directing disposition of the funds in the deposit account without further consent by such Borrower and has such other terms and conditions as Agent may reasonably require.

 

1.35          “Direct Remittance Event” shall have the meaning set forth in Section 6.3(a) hereof.

 

1.36          “Early Termination Fee” shall mean the fee payable by Borrowers pursuant to Section 13.1(b) hereof.

 

1.37          “EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to: (a) the Consolidated Adjusted Net Income of such Person and its Subsidiaries for such period, plus (b) depreciation and amortization and other non-cash charges including imputed interest and deferred compensation for such period (to the extent deducted in the computation of Consolidated Adjusted Net Income of such Person), all in accordance with GAAP, plus (c) Interest Expense for such period (to the extent deducted in the computation of Consolidated Adjusted Net Income of such Person), plus (d) the Provision for Taxes for such period (to the extent deducted in the computation of Consolidated Adjusted Net Income of such Person), plus (e) non-recurring cash charges for such period, including any payments made to unionized employees pursuant to a Collective Bargaining Agreement, to be entered into after the date hereof, between Haynes International, Inc. and United Steelworkers of America, for itself and on behalf of its Local No. 2958 as to all of such non-recurring cash charges to the extent deducted in the computation of Consolidated Adjusted Net Income of such Person), provided , that , in no event shall the amount of non-recurring cash charges added pursuant to this clause (f) exceed $10,000,000 in the aggregate for the fiscal year ending September 30, 2009 and each fiscal year thereafter, plus (f) non-cash charges related to “fresh-start” accounting taken in such period.

 

1.38          “Eligible Accounts” shall mean Accounts created by a Borrower that at the time of determination satisfy the criteria set forth below.  Accounts shall be Eligible Accounts if:

 

(a)        such Accounts arise from the actual and bona fide sale and delivery of goods by such Borrower or rendition of services by such Borrower in the ordinary course of its business

 

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which transactions are completed in accordance with the terms and provisions contained in any documents related thereto;

 

(b)       such Accounts are not unpaid more than sixty (60) days after the original due date thereof or more than one hundred twenty (120) days after the date of the original invoice for them;

 

(c)        such Accounts comply with the terms and conditions contained in Section 7.2(b) of this Agreement;

 

(d)       such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent;

 

(e)        the chief executive office of the account debtor with respect to such Accounts is located in the United States of America or Canada ( provided , that , in order for such Account to continue to be an Eligible Account, at any time promptly upon Agent’s request in good faith, such Borrower shall execute and deliver, or cause to be executed and delivered, such other agreements, documents and instruments as may be required by Agent to perfect the security interests of Agent in those Accounts of an account debtor with its chief executive office or principal place of business in Canada in accordance with the applicable laws of the applicable Province of Canada in which such chief executive office or principal place of business is located and take or cause to be taken such other and further actions as Agent may reasonably request to enable Agent as secured party with respect thereto to collect such Accounts under the applicable Federal or Provincial laws of Canada) or, at Agent’s option, if the chief executive office and principal place of business of the account debtor with respect to such Accounts is located other than in the United States of America or Canada, then if either: (i) the account debtor has delivered to such Borrower an irrevocable letter of credit issued or confirmed by a bank satisfactory to Agent and payable only in the United States of America and in U.S. Dollars, sufficient to cover such Account, in form and substance satisfactory to Agent in good faith and if required by Agent, the original of such letter of credit has been delivered to Agent or Agent’s agent and the issuer thereof, and such Borrower has complied with the terms of Section 5.2(f) hereof with respect to the assignment of the proceeds of such letter of credit to Agent or naming Agent as transferee beneficiary thereunder, as Agent may specify, or (ii) such Account is subject to credit insurance payable to Agent issued by an insurer and on terms and in an amount acceptable to Agent, or (iii) such Account is otherwise acceptable in all respects to Agent (subject to such lending formula with respect thereto as Agent may determine);

 

(f)        such Accounts do not consist of progress billings (such that the obligation of the account debtors with respect to such Accounts is conditioned upon such Borrower’s satisfactory completion of any further performance under the agreement giving rise thereto), bill and hold invoices or retainage invoices, except as to bill and hold invoices, if Agent shall have received an agreement in writing from the account debtor, in form and substance reasonably satisfactory to Agent, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice;

 

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(g)       the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and is not owed or does not claim to be owed any amounts that may give rise to any right of setoff or recoupment against such Accounts (but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by such Borrower to such account debtor or claimed owed by such account debtor that otherwise satisfy the criteria for Eligible Accounts shall be deemed Eligible Accounts);

 

(h)       there are no facts, events or occurrences which would impair the validity, enforceability or collectability of such Accounts or reduce the amount payable (other than to the extent of sales credits in favor of account debtors consistent with the practices of Borrowers with respect thereto as of the date hereof) or delay in any material respect payment thereunder;

 

(i)         except for security interests or liens therein in favor of a person with whom Agent has entered into a satisfactory intercreditor agreement or as Agent may otherwise specifically agree, such Accounts are subject to the first priority, valid and perfected security interest of Agent and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any claims, liens, security interest interests, charges or other encumbrances other than in favor of Agent, or those that have been released and terminated on or before the date hereof, or are otherwise permitted under Section 9.8 hereof, provided , that , any of such claims, liens, security interest interests, charges or other encumbrances with respect to such goods do not extend to such Accounts;

 

(j)         the account debtor is not an Affiliate of any Borrower;

 

(k)        the account debtors with respect to such Accounts are not any foreign government, the United States of America, any State, political subdivision, department, agency or instrumentality thereof, unless, if the account debtor is the United States of America, any State, political subdivision, department, agency or instrumentality thereof, upon Agent’s request, the Federal Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Agent; provided , that , so long as no Default or Event of Default shall exist or have occurred and be continuing, and the aggregate amount of such Accounts is less than $500,000, Agent shall not request that Borrowers comply with such laws;

 

(l)         there are no proceedings or actions which are threatened or pending against the account debtors with respect to such Accounts that Agent determines in good faith could reasonably be expected to result in any material adverse change in any such account debtor’s financial condition (including, without limitation, any bankruptcy, dissolution, liquidation, reorganization or similar proceeding);

 

(m)       the aggregate amount of such Accounts owing by a single account debtor do not constitute more than fifteen (15%) percent of the aggregate amount of all otherwise Eligible Accounts (but the portion of the Accounts not in excess of the applicable percentages may be deemed Eligible Accounts);

 

(n)       such Accounts are not owed by an account debtor who has Accounts unpaid more than sixty (60) days after the original due date for them or one hundred twenty (120) days

 

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after the date of the original invoice for them, in either case which constitute more than fifty (50%) percent of the total Accounts of such account debtor;

 

(o)       the account debtor is not located in a State requiring the filing of a Notice of Business Activities Report or similar report in order to permit such Borrower to seek judicial enforcement in such State of payment of such Account, unless such Borrower has qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for the then current year or such failure to file and inability to seek judicial enforcement is capable of being remedied without any material delay or material cost;

 

(p)       such Accounts are owed by account debtors whose total indebtedness to such Borrower do not exceed the credit limit with respect to such account debtors as determined by such Borrower from time to time, to the extent such credit limit as to any account debtor is established consistent with the current practices of such Borrower as of the date hereof and such credit limit is acceptable to Agent in good faith (but the portion of the Accounts not in excess of such credit limit that otherwise satisfy the criteria for Eligible Accounts shall be deemed Eligible Accounts); and

 

(q)       such Accounts are owed by account debtors deemed creditworthy at all times by Agent in good faith.

 

The criteria for Eligible Accounts set forth above may only be changed and any new criteria for Eligible Accounts may only be established by Agent in good faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from a Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Accounts in the good faith determination of Agent.  Any Accounts that are not Eligible Accounts shall nevertheless be part of the Collateral.

 

1.39          “Eligible Arcadia Inventory” shall mean Eligible Inventory (a) located at Haynes Parent’s Arcadia, Louisiana facility; or (b) located at third-party processors of Haynes Parent’s Inventory used by Haynes Parent in connection with the Arcadia, Louisiana facility and from which processors Agent shall have received a Collateral Access Agreement (except as Agent may otherwise agree); or (c) in transit between Haynes Parent’s Arcadia, Louisiana facility and such processor’s location; or (d) in transit from another of Haynes Parent’s facilities referred to herein to Haynes Parent’s Arcadia, Louisiana facility.

 

1.40          “Eligible Equipment” shall mean all Equipment owned by Borrowers which has been acquired prior to or after the date hereof and which is included in an appraisal of Equipment received by Agent after the date hereof in accordance with Section 7.4(a) hereof and is in good order, repair, running and marketable condition that at all times satisfies the criteria set forth below.  In general, Eligible Equipment shall not include:  (a) Equipment at premises other than those permitted hereunder and which are either (i) owned and operated by Borrowers, or (ii) leased and operated by Borrowers or (iii) owned and operated by a third person, provided , that , except as Agent may otherwise agree, Agent shall have received a Collateral Access Agreement duly executed and delivered by such third person; (b) Equipment subject to a security interest, lien, charge or other encumbrance in favor of any Person other than Agent except those

 

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permitted in this Agreement that are subject to an intercreditor agreement, in form and substance satisfactory to Agent, between the holder of such security interest or lien and Agent or as Agent may otherwise specifically agree; (c) Equipment located outside the continental United States of America; (d) Equipment that is not subject to the first priority, valid and perfected security interests and liens of Agent; (e) worn-out, obsolete, damaged or defective Equipment or Equipment not used or usable in the ordinary course of Borrowers’ business as presently conducted; (f) computer hardware; (g) Equipment that is or becomes a fixture; or (h) Equipment which is Eligible New Equipment.  The criteria for Eligible Equipment set forth above may only be changed and any new criteria for Eligible Equipment may only be established by Agent in good faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from Borrowers prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect such Equipment in the good faith determination of Agent.  Any Equipment that is not Eligible Equipment shall nevertheless be part of the Collateral.

 

1.41          “Eligible Inventory” shall mean, as to each Borrower, Inventory owned by such Borrower consisting of finished goods held for resale in the ordinary course of the business of such Borrower, raw materials for such finished goods and work-in-process and semi-finished Inventory, in each case that at all times satisfies the criteria set forth below.  In general, Eligible Inventory shall not include (a) spare parts for equipment; (b) packaging and shipping materials; (c) supplies used or consumed in such Borrower’s business; (d) Inventory at premises other than those permitted hereunder and which are either  (i) owned and operated by Borrowers or (ii) leased and operated by Borrowers or (iii) owned and operated by a third person, provided , that , except as Agent may otherwise agree, as to locations leased and operated by Borrowers or locations owned and operated by a third person, Agent shall have received a Collateral Access Agreement duly executed and delivered by the lessor and owner of such leased locations or by such third person, as the case may be; (e) Inventory subject to a security interest, lien, charge or other encumbrance in favor of any Person other than Agent except those permitted in this Agreement that are subject to an intercreditor agreement in form and substance satisfactory to Agent between the holder of such security interest or lien and Agent or as Agent may otherwise specifically agree; (f) bill and hold goods; (g) unserviceable, obsolete or slow moving Inventory; (h) Inventory that is not subject to the first priority, valid and perfected security interests and liens of Agent; (i) returned, damaged and/or defective Inventory; (j) Inventory purchased or sold on consignment and (k) Inventory of Borrowers located outside the United States of America.  The criteria for Eligible Inventory set forth above may only be changed and any new criteria for Eligible Inventory may only be established by Agent in good faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from a Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Inventory in the good faith determination of Agent.  Any Inventory that is not Eligible Inventory shall nevertheless be part of the Collateral.

 

1.42          “Eligible Kokomo Inventory” shall mean Eligible Inventory (a) located at Haynes Parent’s Kokomo, Indiana facility; or (b) located at third-party processors of Haynes Parent’s Inventory used by Haynes Parent in connection with the Kokomo, Indiana facility and from which processors Agent shall have received a Collateral Access Agreement (except as Agent

 

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may otherwise agree); or (c) in transit between Haynes Parent’s Kokomo, Indiana facility and such processor’s location; or (d) in transit from another of Haynes Parent’s facilities referred to herein to Haynes Parent’s Kokomo, Indiana facility.

 

1.43          “Eligible New Equipment” shall mean all new Equipment owned by Borrowers which is or has been acquired on or after October 1, 2008 (the value of which has been included in the calculation of the amount of any Equipment Purchase Loan) and which is not included in the most recent appraisal of Equipment received by Agent after the date hereof in accordance with Section 7.4(a) hereof, and is in good order, repair, running and marketable condition that at all times satisfies the criteria set forth below.  In general, Eligible New Equipment shall not include:  (a) Equipment at premises other than those permitted hereunder and which are either (i) owned and operated by Borrowers, or (ii) leased and operated by Borrowers or (iii) owned and operated by a third person, provided , that , except as Agent may otherwise agree, Agent shall have received a Collateral Access Agreement duly executed and delivered by such third person; (b) Equipment subject to a security interest, lien, charge or other encumbrance in favor of any Person other than Agent except those permitted in this Agreement that are subject to an intercreditor agreement, in form and substance satisfactory to Agent, between the holder of such security interest or lien and Agent or as Agent may otherwise specifically agree; (c) Equipment located outside the continental United States of America; (d) Equipment that is not subject to the first priority, valid and perfected security interests and liens of Agent; (e) worn-out, obsolete, damaged or defective Equipment or Equipment not used or usable in the ordinary course of Borrowers’ business as presently conducted; (f) computer hardware; (g) Equipment that is or becomes a fixture; or (h) Equipment which is Eligible Equipment.  The criteria for Eligible New Equipment set forth above may only be changed and any new criteria for Eligible New Equipment may only be established by Agent in good faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from Borrowers prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect such Equipment in the good faith determination of Agent.  Any Equipment that is not Eligible New Equipment shall nevertheless be part of the Collateral.

 

1.44          “Eligible Service Center Inventory” shall mean Eligible Inventory (a) located at Haynes Parent’s existing leased service center locations as of the date hereof in Windsor, Connecticut, Anaheim, California, Houston, Texas and Lebanon, Indiana; or (b) at any new service center location used by Haynes Parent after the date hereof, so long as Agent has received prior written notice of the use of such location, a Collateral Access Agreement from the owner and lessor of such location (except as Agent may otherwise agree) and such new service center is operating with Inventory and in a manner substantially consistent with the existing service center locations of Borrowers as of the date hereof; or (d) in transit from one of Borrowers’ facilities referred to herein to any of such service center locations.

 

1.45          “Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at least fifty (50%) percent owned by such Lender or its parent company; (c) any person (whether a corporation, partnership, trust or otherwise) that is engaged in the business of making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is

 

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administered or managed by a Lender or with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank 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, and in each case is approved by Agent; (d) any other commercial bank approved by Agent; and (e) any other financial institution or “accredited investor” (as defined in Regulation D under the Securities Act of 1933) approved by Agent that makes loans and provides similar extensions of credit in the ordinary course of its business and is capable of funding revolving loans; provided , that , (i) neither any Borrower nor any Affiliate of any Borrower shall qualify as an Eligible Transferee and (ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of any Borrower shall qualify as an Eligible Transferee, except as Agent may otherwise specifically agree.

 

1.46          “Enforcement Action” shall mean the exercise by Agent (or its assignee or designee) in good faith and in a commercially reasonable manner of any of its material enforcement rights and remedies as a secured creditor hereunder or under the other Financing Agreements, applicable law or otherwise, in respect of any of the Collateral, at any time following the occurrence of an Event of Default (including, without limitation, the demand for the immediate payment of all or any portion of the Obligations, the solicitation of bids from third parties to conduct the liquidation of any of the Collateral, the engagement or retention of sales brokers, marketing agents, investment bankers, accountants, appraisers, auctioneers or other third parties for the purposes of valuing, marketing, promoting and selling any of the Collateral, the opposition of the sale of assets constituting Collateral in any bankruptcy or insolvency proceeding, the commencement of any action to foreclose on the security interests or liens of Agent in all or any material portion of the Collateral or commencement of any legal proceedings or actions against any Borrower or with respect to all or any portion of the Collateral).

 

1.47          “Environmental Laws” shall mean all foreign, Federal, State and local laws, legislation, rules, codes, licenses, permits (including any conditions imposed therein), authorizations, judicial or administrative decisions, injunctions or agreements between any Borrower and any Governmental Authority, (a) relating to pollution and the protection, preservation or restoration of the environment (including air, water vapor, surface water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, (b) relating to the exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing, distribution, transportation, handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials, or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials.

 

1.48          “Equipment” shall mean all of each Borrower’s now owned and hereafter acquired equipment, wherever located, including machinery, data processing and computer equipment (whether owned or licensed and including embedded software), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.

 

1.49          “Equipment Purchase Loan Limit” shall mean at any time the lesser of (a) $15,000,000 or (b) the amount equal to: (i) $120,000,000 minus (ii) the sum of (A) the

 

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termination of, or the appointment of a trustee to administer, any Pension Plan or any Borrower receiving a notice of or otherwise obtaining knowledge of any such event or condition as to a Multiemployer Plan; (j) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower or any ERISA Affiliate in excess of $250,000.

 

1.56          “Eurodollar Rate” shall mean, with respect to any Eurodollar Rate Loan for the Interest Period applicable thereto, the rate appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by Agent from time to time for purposes of providing quotations of interest rates applicable to eurodollar deposits in dollars in the London interbank market) (“Page”) at approximately 11:00 A.M. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided , that , if more than one rate is specified on such Page for such comparable period, the applicable rate shall be the arithmetic mean of all such rates.  In the event that such rate is not available at such time for any reason, then the term “Eurodollar Rate” shall mean, with respect to any Eurodollar Rate Loan for the Interest Period applicable thereto, the rate of interest per annum at which dollar deposits of $5,000,000 and for a term comparable to such Interest Period are offered by the principal London office of Reference Bank 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.

 

1.57          “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof (including Eurodollar Rate Fixed Asset Loans and Eurodollar Rate Equipment Purchase Loans).

 

1.58          “Eurodollar Rate Equipment Purchase Loans” shall mean Equipment Purchase Loans outstanding from time to time that are Eurodollar Rate Loans.

 

1.59          “Eurodollar Rate Fixed Asset Loans” shall mean Eurodollar Rate Loans outstanding from time to time based on Fixed Asset Availability.

 

1.60          “Excess Availability” shall mean at any time and without duplication, (a) the lesser of: (i) the Borrowing Base and (ii) the Revolving Loan Limit (in each case under (i) or (ii) after giving effect to any applicable Reserves), minus (b) the sum of: (i) the amount of the then outstanding and unpaid principal amount of the Revolving Loans and the undrawn amount of Letter of Credit Accommodations, plus (ii) the aggregate amount of all payables or other obligations outstanding more than forty-five (45) days after the due date therefor, plus (iii) the amount of checks issued by any Borrower to pay payables and other obligations which are more than such number of days past due, but not yet sent (without duplication of amounts included in clause (b)(ii) herein).

 

1.61          “Exchange Act” shall mean the Securities Exchange Act of 1934, together with all rules, regulations and interpretations thereunder or related thereto.

 

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1.62          “Exchange Rate” shall mean the prevailing spot rate of exchange of such bank as Agent may reasonably select for the purpose of conversion of one currency to another, at or around 11:00 a.m. Chicago time, on the date on which any such conversion of currency is to be made under this Agreement.

 

1.63          “Excluded Taxes” shall have the meaning set forth in Section 6.5 hereof.

 

1.64          “Existing Financing Agreements” shall mean, collectively (each as amended, modified or supplemented prior to the date hereof); (a) the Existing Loan Agreement, and (b) the other agreements listed on Schedule 1.64 hereto.

 

1.65          “Existing Loan Agreement” shall have the meaning set forth in the recitals hereto.

 

1.66          “Fee Letter” shall mean the Amended and Restated Fee Letter, dated of even date herewith, by and among Borrowers and Agent, setting forth certain fees payable by Borrowers to Agent for the benefit of itself and Lenders, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.67          “Financing Agreements” shall mean, collectively, this Agreement, the Existing Financing Agreements (other than the Existing Loan Agreement), and all notes, guarantees, security agreements, Deposit Account Control Agreements, Investment Property Control Agreements, intercreditor agreements and all other agreements, documents and instruments now or at any time hereafter executed and/or delivered by Borrowers in connection with this Agreement.

 

1.68          “Fixed Asset Availability” shall mean, at any time:

 

(a)         prior to the month following the receipt by Agent of updated appraisals of the Equipment and the Real Property in accordance with Section 7.4(a) hereof, the amount of $7,448,766; provided , that , effective on the first day of each month after the date hereof, the Fixed Asset Availability shall be reduced by the amount equal to $228,989 on the first day of each such month; and

 

(b)         effective as of the first day of the first month after the receipt by Agent of updated appraisals of the Equipment in accordance with Section 7.4(a) hereof (the “New Fixed Asset Availability Effective Date”), the amount equal to the lesser of (i) the amount equal to eighty-five (85%) percent of the Net Recovery Percentage of Eligible Equipment or (ii) $15,000,000; provided , that , such amount shall be reduced by 1/60 commencing on the first day of the first month after the New Fixed Asset Availability Effective Date and on the first day of each month thereafter and subject to other reductions based on sales or other dispositions of any assets that were included in the calculation thereof.

 

1.69          “Fixed Charges” shall mean, as to any Person and its Subsidiaries with respect to any period, the sum of, without duplication, (a) all cash Interest Expense (which for purposes of this definition shall not include amortizing payments of deferred financing charges that do not constitute interest), plus (b) net cash costs under any Hedge Agreement (in each case as to such Person and its Subsidiaries for such period and to the extent not included in the calculation of EBITDA of such Person and its Subsidiaries for such period), plus (c) all regularly scheduled (as

 

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determined at the beginning of the respective period) principal payments of Indebtedness for borrowed money and Indebtedness with respect to Capital Leases (and without duplicating in items (a) and (c) of this definition, the interest component with respect to Indebtedness under Capital Leases), plus (d) all Capital Expenditures, plus (e) the cash portion of any Provision for Taxes paid in such period and unpaid amounts of any Provision for Taxes the last date for payment of which before becoming past due occurs during such period, plus (f) all scheduled reductions in the Fixed Asset Availability occurring during such period, plus (g) cash payments in respect of US pension obligations made during such period.

 

1.70          “Fixed Charge Coverage Ratio” shall mean, as to any Person, with respect to any period, the ratio of (a) the amount equal to EBITDA of such Person and its Subsidiaries for such period to (b) the Fixed Charges of such Person and its Subsidiaries for such period.

 

1.71          “Foreign Subsidiaries” shall mean the Subsidiaries of any Borrower organized or incorporated under the laws of a jurisdiction outside of the United States of America or which have substantially all of their respective assets and operations outside the United States of America; sometimes being referred to herein individually as a “Foreign Subsidiary”.

 

1.72          “4-High Facility” shall mean, collectively, the Mill and the Real Estate, in each case, as defined in the Timet Security Agreement as in effect on the Timet Closing Date.

 

1.73          “4-High Intellectual Property” shall mean the Intellectual Property, as defined in the Timet Security Agreement as in effect on the Timet Closing Date.

 

1.74          “GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied; provided , that , for purposes of Sections 9.17 and 9.18 hereof, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered to Agent prior to the date hereof.

 

1.75          “Governmental Authority” shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

1.76          “Hard Costs” shall mean, with respect to the purchase by Borrowers of an item of Eligible New Equipment, the net cash amount actually paid to acquire title to such item, net of all incentives, trade-in allowances, discounts and rebates, and exclusive of freight, delivery charges, installation costs and charges, software costs, charges and fees, warranty costs, taxes, insurance and other incidental costs or expenses and all indirect costs or expenses of any kind.

 

1.77          “Haynes Parent” shall mean Haynes International, Inc., a Delaware corporation, and its successors and assigns.

 

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1.78          “Haynes UK” shall mean Haynes International Ltd., a company organized under the laws of England and Wales, and its successors and assigns.

 

1.79          “Haynes UK Pension Trustees” shall mean, collectively, Haynes UK, John Raymond Woolnough and Jynette Rutherford, and their respective successors and assigns in their respective capacities as trustees for the Haynes Pension Plan established by Haynes UK.

 

1.80          “Haynes Wire” shall mean Haynes Wire Company, a Delaware corporation, and its successors and assigns.

 

1.81          “Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), and including any other substances, materials, or wastes that are classified as hazardous or toxic under any Environmental Law).

 

1.82          “Hedge Agreement” shall mean an agreement that is a rate swap agreement, basis swap, forward rate agreement, commodity swap, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement rate, floor agreement, rate collar agreement, currency swap agreement, cross currency rate swap agreement, currency option, any other similar agreement (including any option to enter into any of the foregoing or a master agreement for any the foregoing together with all supplements thereto) for the purpose of protecting against or managing exposure to fluctuations in interest or exchange rates, currency valuations or commodity prices; sometimes being collectively referred to herein as “Hedge Agreements”.

 

1.83          “Indebtedness” shall mean, with respect to any Person, whether or not contingent, (a) all indebtedness for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) the balance deferred and unpaid of the purchase price of any property or services (except any such balance that constitutes an account payable to a trade creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed by such Person in the ordinary course of business of such Person in connection with obtaining goods, materials or services that is not overdue by more than one hundred twenty (120) days (unless the trade payable is being contested in good faith (or during the course thereof) will be the date for payment of such payables and as to those payables or other obligations that are subject to a dispute or are not otherwise allowed, prior to the establishment of the due date for such payables or other obligations pursuant to the Plan and the claims administration process, such payables and other obligations shall not be deemed overdue by more than one hundred twenty (120) days for purposes of this definition); (c) the principal component of all leases to which it is a lessee which have been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness described in this definition of another Person, including, without limitation, any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any

 

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security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect to redeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account; (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; (h) all obligations, liabilities and indebtedness of such Person arising under any Hedge Agreements; and (i) the principal and interest portions of all rental obligations of such Person under any synthetic lease or similar off balance sheet financing where such transaction is considered to be borrowed money for tax purposes but is classified as an operating lease in accordance with GAAP.

 

1.84          “Information Certificate” shall mean, collectively, the Information Certificate of Haynes Parent and the information certificate of Haynes Wire constituting Exhibit C hereto each containing material information with respect to Borrowers, its business and assets provided by or on behalf of Borrowers to Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.

 

1.85          “Intellectual Property” shall mean as to each Borrower, such Borrower’s now owned and hereafter arising or acquired:  patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright applications, copyright registrations, trademarks, servicemarks, trade names, trade styles, trademark and service mark applications, and licenses and rights to use any of the foregoing and all applications, registrations and recordings relating to the foregoing as may be filed in the United States Copyright Office, the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, any political subdivision thereof or in any other country, together with all rights and privileges arising under applicable law with respect to any Borrower’s use of any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or servicemark or the license of any trademark or servicemark); customer and other lists in whatever form maintained; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registrations; software and contract rights relating to computer software programs, in whatever form created or maintained.

 

1.86          “Interest Expense” shall mean, for any period, as to any Person, as determined in accordance with GAAP, the total interest expense of such Person, whether paid or accrued during such period but without duplication (including the interest component of Capital Leases for such period), including, without limitation, discounts in connection with the sale of any Accounts that are sold for purposes other than collection, but excluding interest paid in property other than cash and any other interest expense not payable in cash.

 

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1.87          “Interest Period” shall mean for any Eurodollar Rate Loan, a period of approximately one (1), two (2), or three (3) months duration as any Borrower (or Administrative Borrower on behalf of such Borrower) may elect, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; provided , that , such Borrower (or Administrative Borrower on behalf of such Borrower) may not elect an Interest Period which will end after the last day of the then current term of this Agreement.

 

1.88          “Interest Rate” shall mean,

 

(a)         Subject to clause (b) and (c) below, (i) as to Prime Rate Loans, a rate equal to the then Applicable Margin for Prime Rate Loans on a per annum basis plus the Prime Rate and (ii) as to Eurodollar Rate Loans, a rate equal to the then Applicable Margin for Eurodollar Rate Loans on a per annum basis plus the Adjusted Eurodollar Rate; in the case of clause (ii) hereof based on the Eurodollar Rate applicable for the Interest Period selected by Borrowers as in effect three (3) Business Days after the date of receipt by Agent of the request of Borrowers for such Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is higher or lower than any rate previously quoted to Borrowers.

 

(b)         Subject to clause (c) of this definition below, effective as of the first day of each month, the Interest Rate payable by Borrowers shall be increased or decreased, as the case may be, (i) as to Prime Rate Loans, to the rate equal to the Applicable Margin on a per annum basis in excess of the Prime Rate, and (ii) as to Eurodollar Rate Loans, to the rate equal to the Applicable Margin on a per annum basis in excess of the Adjusted Eurodollar Rate.

 

(c)         Notwithstanding anything to the contrary contained in clause (a) of this definition, the Applicable Margin otherwise used to calculate the Interest Rate for Prime Rate Loans and Eurodollar Rate Loans, shall be the highest percentage in the definition of Applicable Margin (with respect to Loans of the applicable type) plus (in each case) two (2%) percent per annum (without regard to Monthly Excess Availability), at Agent’s option, without notice, (i) either (A) for the period on and after the date of termination or non-renewal hereof until such time as all Obligations are indefeasibly paid and satisfied in full in immediately available funds (or in the case of contingent Obligations, Agent shall have received cash collateral or a letter of credit, at its option, all in accordance with Section 13.1(c)), or (B) for the period from and after the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing as determined by Agent and (ii) on the Loans to Borrowers at any time outstanding in excess of the Borrowing Base of any Borrower or the Loan Limit of any Borrower (whether or not such excess(es) arise or are made with or without Agent’s or any Lender’s knowledge or consent and whether made before or after an Event of Default).

 

1.89          “Inventory” shall mean, as to each Borrower, all of such Borrower’s now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by such Borrower as lessor; (b) are held by such Borrower for sale or lease or to be furnished under a contract of service; (c) are furnished by such Borrower under a contract of service; or (d) consist of raw materials, work-in-process, finished goods or materials used or consumed in its business.

 

1.90          “Inventory Loan Limit” shall mean, at any time, $90,000,000.

 

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1.91          “Investment Property Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent in good faith, by and among Agent, any Borrower and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of such Borrower acknowledging that will comply with entitlement orders originated by Agent with respect to such investment property, or other instructions of Agent, and has such other terms and conditions as Agent may reasonably require.

 

1.92          “Kokomo Facility Inventory Availability” shall mean, with respect to Eligible Kokomo Inventory, the lesser of:

 

(a)         the sum of (i) seventy (70%) percent multiplied by the Value of the Eligible Kokomo Inventory consisting of finished goods, plus (ii) fifty-five (55%) percent multiplied by the Value of the Eligible Kokomo Inventory consisting of work-in-process, plus (iii) eighty-five (85%) percent multiplied by the Value of the Eligible Kokomo Inventory consisting of raw materials; or

 

(b)         the amount equal to the sum of the following for each category of Eligible Kokomo Inventory (such categories being finished goods, work-in-process and raw materials as described above): (i) eighty-five (85%) percent of the Net Recovery Percentage for each category of such Eligible Kokomo Inventory multiplied by (ii) the Value of such category of Eligible Kokomo Inventory; or

 

(c)         sixty (60%) percent multiplied by the sum of the Value of all of the above categories of such Eligible Kokomo Inventory.

 

1.93          “Lenders” shall mean the financial institutions who are signatories hereto as Lenders and other persons made a party to this Agreement as a Lender in accordance with Section 13.7 hereof, and their respective successors and assigns; each sometimes being referred to herein individually as a “Lender”.

 

1.94          “Letter of Credit Accommodations” shall mean, collectively, the letters of credit, merchandise purchase or other guaranties which are from time to time either (a) issued or opened by Agent or any Lender for the account of any Borrower or (b) with respect to which Agent or Lenders have agreed to indemnify the issuer or guaranteed to the issuer the performance by Borrower of its obligations to such issuer; sometimes being referred to herein individually as “Letter of Credit Accommodation”.

 

1.95          “Letter of Credit Fee” shall have the meaning set forth in Section 2.2(b) hereof.

 

1.96          “License Agreements” shall have the meaning set forth in Section 8.11 hereof.

 

1.97          “Loans” shall mean the Revolving Loans and the Equipment Purchase Loans, being sometimes referred to herein individually as a “Loan”.

 

1.98          “Material Adverse Effect” shall mean a material adverse effect on (a) the financial condition, business, performance or operations of Borrowers and their Subsidiaries (taken as a whole); (b) the legality, validity or enforceability of this Agreement or any of the other Financing

 

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Agreements; (c) the legality, validity, enforceability, perfection or priority of the security interests and liens of Agent upon the Collateral; (d) the Collateral or its value; (e) the ability of any Borrower to repay the Obligations or perform its obligations under this Agreement or any of the other Financing Agreements; or (f) the ability of Agent or any Lender to enforce the Obligations or realize upon the Collateral.

 

1.99          “Material Contract” shall mean (a) any contract or other agreement (other than the Financing Agreements), of any Borrower involving monetary liability of or to any Person in an amount in excess of $5,000,000 in any fiscal year and (b) any other contract or other agreement (other than the Financing Agreements), to which any Borrower is a party, as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect.  For purposes hereof, the breach, non-performance, cancellation or failure to renew by any party will not constitute a Material Adverse Effect if any Borrower is readily able to promptly obtain substitute performance from a third party on terms (taken as a whole) that are not less favorable in any material respect to any Borrower.

 

1.100        “Maturity Date” shall have the meaning set forth in Section 13.1 hereof.

 

1.101        “Maximum Credit” shall mean $120,000,000.

 

1.102        “Monthly Average Excess Availability” shall mean, at any time, the daily average of the aggregate amount of the Excess Availability for the immediately preceding month as calculated by Agent in good faith.

 

1.103        “Mortgages” shall mean, individually and collectively, each of the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (a) the Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated August 31, 2004, by Haynes Parent in favor of Agent with respect to the Real Property and related assets of Haynes Parent located in Kokomo, Indiana, (b) the Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated August 31, 2004, by Haynes Parent in favor of Agent with respect to the Real Property and related assets of Haynes Parent located in Arcadia, Louisiana, and (c) the Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated November 5, 2004, by Haynes Wire in favor of Agent with respect to the Real Property of Haynes Wire located in Mountain Home, North Carolina.

 

1.104        “Multiemployer Plan” shall mean a “multi employer plan” as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by any Borrower or any ERISA Affiliate.

 

1.105        “Net Recovery Percentage” shall mean the fraction, expressed as a percentage, (a) the numerator of which is the amount equal to the amount of the recovery in respect of the Inventory at such time determined on a “net orderly liquidation value” basis pursuant to the most recent acceptable appraisal of Inventory or Equipment received by Agent in accordance with Sections 7.3 or 7.4 (as applicable), net of operating expenses, liquidation expenses and commissions (without duplication) likely to be incurred in connection with the liquidation of such Inventory or Equipment as set forth in such appraisal, and (b) the denominator of which is

 

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the applicable standard cost of the aggregate amount of the Inventory or Equipment subject to such appraisal.

 

1.106        “Non-U.S. Person” means a Person that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code.

 

1.107        “Obligations” shall mean (a) any and all Loans, Letter of Credit Accommodations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by Borrowers to Agent or any Lender and/or any of their Affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, in each case arising under this Agreement or any of the other Financing Agreements, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to Borrowers under the Bankruptcy Code or any similar statute (and including any principal, interest, fees, costs, expenses and other amounts owed to Agent or any Lender which would accrue and become due but for the commencement of such a case, whether or not such amounts are allowed or allowable in whole or in part in such a case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Agent or any Lender and (b) for purposes only of Section 5.1 hereof and subject to the priority in right of payment set forth in Section 6.4 hereof, all obligations of any Borrower arising under or pursuant to a Hedge Agreement with a party acceptable to Agent (it being understood that, so long as JPMorgan Chase Bank, N.A. is a Lender, JPMorgan Chase Bank, N.A. and its Affiliates shall be acceptable to Agent for this purpose); provided ,  that , (i) upon Agent’s request, Agent shall have entered into an agreement, in form and substance satisfactory to Agent, with such Person that is a counterparty to such Hedge Agreement, as acknowledged and agreed to by Borrowers, providing for the delivery to Agent by such counterparty of information with respect to the amount of such obligations and providing for the other rights of Agent and such Lender, Affiliate or other Person, as the case may be, in connection with such arrangements and (ii) in no event shall the party to such Hedge Agreement to whom such obligations are owed be deemed a Lender for purposes hereof to the extent of and as to such obligations other than for purposes of Section 5.1 hereof and other than for purposes of Sections 12.1, 12.2, 12.3(b), 12.6, 12.7, 12.9 and 12.12 hereof.  Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation, all Bank Product Obligations; provided , that , any Bank Product Provider to whom such obligations, liabilities and indebtedness are owing be not deemed a Lender for purposes hereof to the extent of and as to such Bank Product Obligations other than for purposes of Section 5.1 hereof and other than for purposes of Section 12.1, 12.2, 12.3(b), 12.6, 12.7, 12.9 and 12.12 hereof.

 

1.108        “Other Taxes” shall mean any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any of the other Financing Agreements.

 

1.109        “Participant” shall mean any financial institution that acquires and holds a participation in the interest of any Lender in any of the Loans and Letter of Credit

 

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Accommodations in conformity with the provisions of Section 13.7 of this Agreement governing participations.

 

1.110        “Pension Plan” shall mean a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which Borrowers sponsor, maintain, or to which any Borrower or ERISA Affiliate makes, is making, or is obligated to make contributions, other than a Multiemployer Plan.

 

1.111        “Permits” shall have the meaning set forth in Section 8.7 hereof.

 

1.112        “Permitted Acquisitions” shall mean the purchase by a Borrower or Guarantor (or any Subsidiary created for such purpose) after the date hereof of all or substantially all of the assets of any Person or a business or division of such Person (whether pursuant to a merger or other transaction) or of all or a majority of the Capital Stock of any Person (such assets or Person being referred to herein as the “Acquired Business”) and in one or a series of transaction that satisfies each of the following conditions as determined in good faith by Agent:

 

(a)         Agent shall have received not less than ten (10) Business Days’ prior written notice of the proposed acquisition and such information with respect thereto as Agent may request, including (i) the proposed date and amount of the acquisition, (ii) a list and description of the assets or shares to be acquired, (iii) the total purchase price for the assets to be purchased (and the terms of payment of such purchase price), (iv) a summary of the due diligence undertaken by Borrowers in connection with such acquisition, and (v) appropriate financial statements of the Acquired Business,

 

(b)         the Acquired Business shall be an operating company that engages in a line of business substantially similar or complimentary to the business that Borrowers are engaged in on date hereof,

 

(c)         the aggregate amount of all consideration paid for all Permitted Acquisitions shall not exceed (i) $25,000,000 during any fiscal year or (ii) $75,000,000 during the term of this Agreement;

 

(d)         in the event that the consideration paid for or in connection with the assets or shares (or as merger consideration) of the Acquired Business is equal to or greater than $10,000,000, Agent shall have received: (i) the most recent annual and interim financial statements with respect to the Acquired Business and related statements of income and cash flows showing positive cash flows for the immediately preceding fiscal year of such Acquired Business, (ii) detailed forecasts of cash flows for the Acquired Business forecasting positive future cash flows, (iii) detailed projections for Haynes Parent and its Subsidiaries through the Maturity Date giving pro   forma effect to such acquisition, based on assumptions reasonably satisfactory to Agent and demonstrating pro   forma compliance with all financial covenants set forth in this Agreement, prepared in good faith and in a manner and using such methodology as is consistent with the most recent financial statements delivered to Agent pursuant to Section 9.6 hereof and in form and substance reasonably satisfactory to Agent and (iv) current, updated projections of the amount of the Borrowing Base and Excess Availability for the 12 month period after the date of such acquisition, in a form reasonably satisfactory to Agent, representing

 

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Borrowers’ reasonable best estimate of the future Borrowing Base and Excess Availability for the period set forth therein as of the date not more than ten (10) days prior to the date of such acquisition, which projections shall have been prepared on the basis of the assumptions set forth therein which Borrowers believe are fair and reasonable as of the date of preparation in light of current and reasonably foreseeable business conditions and which projections shall show amounts of Excess Availability satisfactory to Agent,

 

(e)         if Administrative Borrower requests that any assets acquired pursuant to such acquisition be included in the Borrowing Base, Agent shall have completed a field examination with respect to the business and assets of the Acquired Business in accordance with Agent’s customary procedures and practices and as otherwise required by the nature and circumstances of the business of the Acquired Business, the scope and results of which shall be satisfactory to Agent and any accounts and inventory of the Acquired Business shall only be Eligible Accounts and Eligible Inventory, respectively, to the extent Agent has completed such field examination with respect thereto and the criteria for Eligible Accounts and Eligible Inventory set forth herein are satisfied with respect thereto in accordance with this Agreement (or such other or additional criteria as Agent may, at its option, establish with respect thereto in accordance with this Agreement and subject to such Reserves as Agent may establish in connection with the Acquired Business, and in the case of Eligible Inventory acquired pursuant to a Permitted Acquisition to the extent that it has been subject to an appraisal that satisfies the requirements of Section 7.3 hereof),

 

(f)          in the case of the acquisition of Capital Stock of any Person or the formation of any Subsidiary in connection with such acquisition, (i) the Borrower or Guarantor forming such Subsidiary shall, except as Agent may otherwise agree, (A) execute and deliver to Agent, a pledge and security agreement, in form and substance satisfactory to Agent, granting to Agent a first pledge of and lien on all of the issued and outstanding shares of Capital Stock of any such Subsidiary, (B) deliver the original stock certificates evidencing such shares of Capital Stock (or such other evidence as may be issued in the case of a limited liability company), together with stock powers with respect thereto duly executed in blank (or the equivalent thereof in the case of a limited liability company in which such interests are certificated, or otherwise take such actions as Agent shall require with respect to Agent’s security interests therein) and (ii) as to any such Subsidiary, except as Agent may otherwise agree, the Borrower or Guarantor forming such Subsidiary shall cause any such Subsidiary to execute and deliver to Agent, the following (each in form and substance satisfactory to Agent), (A) an absolute and unconditional guarantee of payment of the Obligations, (B) a security agreement granting to Agent a first security interest and lien (except as otherwise consented to in writing by Agent) upon all of the assets of any such Subsidiary, and (C) such other agreements, documents and instruments as Agent may require in connection with the documents referred to above in order to make such Subsidiary a party to this Agreement as a “Borrower” or as a “Guarantor” as Agent may determine, including, but not limited to, supplements and amendments hereto, authorization to file UCC financing statements, Collateral Access Agreements and other consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the assets purchased, corporate resolutions and other organization and authorizing documents of such Person, and favorable opinions of counsel to such person,

 

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or not such announced rate is the best rate available at such bank or (b) the Adjusted Eurodollar Rate plus 2.50%.

 

1.115        “Prime Rate Equipment Purchase Loans” shall mean Prime Rate Loans outstanding from time to time that are Equipment Purchase Loans.

 

1.116        “Prime Rate Fixed Asset Loans” shall mean Prime Rate Loans outstanding from time to time based on Fixed Asset Availability.

 

1.117        “Prime Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Prime Rate in accordance with the terms thereof (including Prime Rate Fixed Asset Loans and Prime Rate Equipment Purchase Loans).

 

1.118        “Pro Rata Share” shall mean with respect to a Lender’s obligation to make Revolving Loans and Equipment Purchase Loans and to acquire interests in Letter of Credit Accommodations and receive payments of interest and principal with respect thereto, the fraction (expressed as a percentage) the numerator of which is such Lender’s Commitment and the denominator of which is the aggregate amount of all of the Commitments, as adjusted from time to time in accordance with the provisions of Section 13.7 hereof; provided , that , if the Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Revolving Loans and Equipment Purchase Loans and its interest in the Letter of Credit Accommodations and the denominator shall be the aggregate amount of all unpaid Revolving Loans, Equipment Purchase Loans and Letter of Credit Accommodations;

 

1.119        “Provision for Taxes” shall mean an amount equal to all taxes imposed on or measured by net income, whether Federal, State, county or local, and whether foreign or domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP.

 

1.120        “Real Property” shall mean all now owned and hereafter acquired real property of any Borrower together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located, including the real property and related assets more particularly described in the Mortgages.

 

1.121        “Receivables” shall mean all of the following now owned or hereafter arising or acquired property of each Borrower: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles of such Borrower; (d) letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued payable to any Borrower or otherwise in favor of or delivered to any Borrower in connection with any Account; or (e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to any Borrower, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by any Borrower or to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of any Borrower) or otherwise associated with any Accounts, Inventory or general intangibles of any Borrower (including, without limitation, choses in action, causes of action, tax refunds, tax

 

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refund claims, any funds which may become payable to any Borrower in connection with the termination of any Benefit Plan or other employee benefit plan and any other amounts payable to any Borrower from any Benefit Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which any Borrower is a beneficiary).

 

1.122        “Records” shall mean, as to each Borrower, all of Borrowers’ present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of Borrowers with respect to the foregoing maintained with or by any other person).

 

1.123        “Reference Bank” shall mean Wachovia Bank, National Association, or such other major U.S. Bank as Agent may from time to time designate.  For purposes hereof, a “major U.S. Bank” shall be any commercial bank organized under the laws of the United States, or any State thereof, or the District of Columbia that is a member of the Federal Reserve System and has combined capital and surplus and undivided profits of not less than $500,000,000.

 

1.124        “Required Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate fifty-one (51%) percent or more of the aggregate of the Commitments of all Lenders, or if the Commitments shall have been terminated, Lenders to whom at least fifty-one (51%) percent of the principal amount of the then outstanding Obligations are owing; provided ,  that , in the event that there are only two (2) Lenders, Required Lenders shall mean both such Lenders.

 

1.125        “Reserves” shall mean as of any date of determination, such amounts as Agent may from time to time establish and revise in good faith reducing the amount of Loans and Letter of Credit Accommodations that would otherwise be available to any Borrower under the lending formula(s) provided for herein:  (a) to reflect events, conditions, contingencies or risks which, as determined by Agent in good faith, have adversely affected, or are reasonably likely to adversely affect, either (i) the Collateral, its value or the amount that might be received by Agent from the sale or other disposition thereof, or (ii) the business or operations of any Borrower or (iii) the security interests and other rights of Agent or any Lender in the Collateral (including the enforceability, perfection and priority thereof), including, without limitation, the maximum amount of any indebtedness or claim which may have a lien or administrative claim upon property of the estate of any Borrower superior to or on a parity with the lien and security interest or administrative claim of Agent or any Lender therein or thereon or (b) to reflect Agent’s good faith belief that any collateral report or financial information furnished by or on behalf of any Borrower to Agent is or may have been incomplete, inaccurate or misleading in any material respect or (c) to reflect outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof.  Without limiting the generality of the foregoing, Reserves may, at Agent’s option, be established to reflect: (i) dilution with respect to the Accounts (based on the ratio of the aggregate amount of non-cash reductions in Accounts for any period to the aggregate dollar amount of the sales of such Borrower for such period) as calculated by Agent for any period is or

 

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is reasonably anticipated to be greater than five (5%) percent; or (ii) that the fair market value of Real Property subject to a Mortgage, or the net orderly liquidation value of the Equipment, as set forth in any appraisals received by Agent with respect thereto after the date hereof (in each case net of operating expenses, liquidation expenses and commissions (without duplication) estimated to be incurred in connection with the liquidation thereof, that are acceptable to Agent for such purpose, has declined so that the Fixed Asset Availability is greater than (A) the percentages with respect to the value of Real Property or Equipment used in establishing the original amounts of the Fixed Asset Availability multiplied by (B) the applicable values set forth in such subsequent appraisals; or (iii) the net orderly liquidation value of any Eligible New Equipment as set forth in any appraisals thereof received by Agent with respect thereto after the date hereof (net of operating expenses, liquidation expenses and commissions without duplication estimated to be incurred in connection with the liquidation thereof) that are acceptable to Agent, for such purpose, has declined so that the Equipment Purchase Loan based on such Eligible New Equipment is greater than the then outstanding principal amount of such Equipment Purchase Loan; or (iv) variances between the Inventory records of any Borrower and the results of test counts or physical counts of Inventory with respect thereto; or (v) variances between the stock ledger Inventory report and general ledger; or (vi) returns, discounts, claims, credits and allowances of any nature that are not paid pursuant to the reduction of Accounts; or (vii) amounts due or to become due in respect of sales, excise, use and/or withholding taxes; or (viii) to the extent that a change in the turnover, age or mix of the categories of Inventory adversely affects the aggregate value of all Inventory or to reflect that the commodity prices of raw materials have decreased; or (ix) any rental payments or other amounts due or to become due to owners and lessors of real property or owners and operators of premises to the extent Inventory, Equipment or Records are located in or on such property or premises and Agent has not received a satisfactory Collateral Access Agreement from the owner or lessor of such real property or owner and operator of such property or premises in possession of such assets ( provided ,  that , such Reserves will not exceed the aggregate of the amounts payable to such owners and lessors or owners and operators for the next three (3) months from any such time and including in each case amounts, if any, then outstanding and unpaid owed by any Borrower to such owners and lessors or owners and operators, but such limitations will only apply so long as no Event of Default exists or has occurred and is continuing); or (x) obligations (contingent or otherwise) of any Borrower to any Affiliate of Agent or a Lender arising under or in connection with any Hedge Agreement of any Borrower with such Affiliate or Lender or as such Affiliate or Lender may otherwise require in connection therewith to the extent that such obligations constitute Obligations as such term is defined herein or otherwise receive the benefit of the security interest of Agent in any Collateral; provided , that , the amount of the Reserves in respect of such obligations shall be based on the amount of the liability of any Borrower as reported by such Affiliate or Lender in a form and substance satisfactory to Agent; or (xi) Bank Product Obligations.  To the extent Agent may revise the lending formulas used to determine the Borrowing Base or establish new criteria or revise existing criteria for Eligible Accounts or Eligible Inventory so as to address any circumstances, condition, event or contingency in a manner satisfactory to Agent, Agent shall not establish a Reserve for the same purpose.  The amount of any Reserve established by Agent shall have a reasonable relationship to the event, condition or other matter which is the basis for such reserve as determined by Agent in good faith.   In the event that the event, condition or other matter giving rise to the establishment of any Reserve shall cease to exist for a period of thirty (30) consecutive days (unless there is a

 

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reasonable prospect that such event, condition or other matter will occur again within a reasonable period of time thereafter), the Reserve established pursuant to such event, condition or other matter, shall be discontinued.  The term “Reserves” as used herein shall include in addition, and not in limitation, the Special Availability Reserve.  Without limiting the generality of the foregoing, the Revolving Loans and Letter of Credit Accommodations otherwise available to Borrowers shall, at Agent’s option, be subject to a special reserve, in an amount up to any unpaid interest, fees, costs, expenses or other charges.

 

1.126        “Revolving Loan Limit” shall mean, at any time, the amount equal to: (a) $120,000,000 minus (b) the then outstanding aggregate principal amount of the Equipment Purchase Loans.

 

1.127        “Revolving Loans” shall mean the loans now or thereafter made by or on behalf of any Lender or by Agent for the account of any Lender, on a revolving basis pursuant to the Credit Facility (including advances, repayments and readvances), as set forth in Section 2.1(a) hereof.

 

1.128        “Secured Parties” shall mean, collectively, Agent, Lenders and Bank Product Providers; sometimes being referred to herein individually as a “Secured Party”.

 

1.129        “Service Center Availability” shall mean, with respect to Eligible Service Center Inventory, the lesser of (a) seventy (70%) percent multiplied by the Value of such Eligible Service Center Inventory or (b) eighty-five (85%) percent of the Net Recovery Percentage multiplied by the Value of such Eligible Service Center Inventory.

 

1.130        “Special Agent Advances” shall have the meaning set forth in Section 12.11 hereof.

 

1.131        “Special Availability Reserve” shall mean, at any time, $1,500,000.

 

1.132        “Subsidiary” or “subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which an aggregate of at least a majority of the outstanding Capital Stock or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more subsidiaries of such Person.

 

1.133        “Taxes” shall mean any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto imposed by Governmental Authority.

 

1.134        “Timet” shall mean Titanium Metals Corporation, a Delaware corporation, and its successors and assigns.

 

1.135        “Timet Closing Date” shall mean November 17, 2006.

 

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1.136        “Timet Collateral” shall mean, collectively, the Mill, the Contract Rights, the Equipment, the Intellectual Property for Titanium Conversion Services, or any Proceeds thereof to the extent subject to the security interest and lien of Timet under the Timet Security Agreement as in effect on the Timet Closing Date.  Each of the capitalized terms used in this definition of the term “Timet Collateral” shall have the meanings assigned on Schedule 1.136 hereto in the Timet Security Agreement as in effect on the Timet Closing Date.

 

1.137        “Timet Conversion Agreement” shall mean the Conversion Services Agreement, dated the Timet Closing Date, by and between Haynes Parent and Timet, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.138        “Timet Debt” shall mean, collectively, (a) any outstanding principal balance under the Timet Option Note and any accrued and unpaid interest thereon, if any; (b) the entire unearned portion of the Timet Fee; (c) the amount of any Liquidated Damages (as defined in the Timet Conversion Agreement as in effect on the Timet Closing Date); (d) the amount of any Termination Fee (as defined in the Timet Conversion Agreement as in effect on the Timet Closing Date);(e) the amount of any Non-Compete Amendment Fee (as defined in the Timet Conversion Agreement as in effect on the Timet Closing Date); and (f) any amounts owed by Haynes Parent under Section 5.1 of the Timet Conversion Agreement as in effect on the Timet Closing Date.

 

1.139        “Timet Documents” shall mean, collectively, the Timet Conversion Agreement, the Timet Security Agreement, the Timet Option Note and all agreements, documents or instruments at any time executed and/or delivered by Borrowers or any other Person with, to or in favor of Timet in connection therewith or related thereto, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.140        “Timet Option Note” shall mean the secured promissory note made by Haynes Parent in favor of Timet in an aggregate principal amount of not more than $12,000,000 pursuant to the Timet Documents, substantially in the form attached hereto as Schedule 1.140 and as the same may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.141        “Timet Security Agreement” shall mean the Access and Security Agreement, dated the Timet Closing Date, by and between Haynes Parent and Timet, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.142        “UCC” shall mean the Uniform Commercial Code as in effect in the State of Illinois, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of Illinois on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute).

 

1.143        “US Dollar Equivalent” shall mean at any time (a) as to any amount denominated in US Dollars, the amount thereof at such time, and (b) as to any amount denominated in any other currency, the equivalent amount in US Dollars calculated by Agent at such time using the Exchange Rate in effect on the Business Day of determination.

 

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1.144        “US Dollars”, “US$” and “$” shall each mean lawful currency of the United States of America.

 

1.145        “Value” shall mean the US Dollar Equivalent with respect to Inventory, equal to the lower of (a) cost computed on a first-in-first-out basis in accordance with GAAP using “standard” costs or (b) market value; provided , that , for purposes of the calculation of the Borrowing Base, (i) the Value of the Inventory shall not include: (A) the portion of the value of Inventory equal to the profit earned by any Affiliate on the sale thereof to any Borrower to the extent the same is reflected in the cost of such Inventory or (B) write ups or write downs in value with respect to currency exchange rates and (ii) notwithstanding anything to the contrary contained herein, the cost of the Inventory shall be computed in the same manner and consistent with the most recent appraisal of the Inventory received and accepted by Agent prior to the date hereof, if any.

 

1.146        “Voting Stock” shall mean with respect to any Person, (a) one (1) or more classes of Capital Stock of such Person having general voting powers to elect at least a majority of the board of directors, managers or trustees of such Person, irrespective of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency, and (b) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (a) of this definition.

 

1.147        “Wachovia” shall mean Wachovia Capital Finance Corporation (Central), an Illinois corporation, in its individual capacity, and its successors and assigns.

 

SECTION 2.  CREDIT FACILITIES

 

2.1    Revolving Loans .

 

(a)         Subject to and upon the terms and conditions contained herein, each Lender severally (and not jointly) agrees to make its Pro Rata Share of Revolving Loans to Borrowers from time to time in amounts requested by any Borrower (or Administrative Borrower on behalf of Borrowers) in the aggregate amount for the Loans of all Lenders of up to the lesser of (i) the Borrowing Base at such time or (B) the Revolving Loan Limit at such time.

 

(b)         Except in Agent’s discretion, with the consent of all Lenders, or as otherwise provided herein, (i) the aggregate amount of the Loans and the Letter of Credit Accommodations outstanding at any time shall not exceed the Maximum Credit, (ii) the aggregate principal amount of the Revolving Loans outstanding at any time shall not exceed the lesser of the Borrowing Base or the Revolving Loan Limit, (iii) the aggregate principal amount of the Revolving Loans outstanding at any time based on Eligible Inventory consisting of work-in-process shall not exceed $50,000,000, and (iv) the aggregate principal amount of the Revolving Loans outstanding at any time based on Eligible Inventory shall not exceed the Inventory Loan Limit.

 

(c)         In the event that the aggregate principal amount of the Loans and Letter of Credit Accommodations outstanding at any time exceeds the Maximum Credit, or the aggregate principal amount of the Revolving Loans exceeds the lesser of the Borrowing Base or the

 

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Revolving Loan Limit, or the aggregate amount of the outstanding Letter of Credit Accommodations exceed the sublimit for Letter of Credit Accommodations set forth in Section 2.2(e), or the aggregate principal amount of the Revolving Loans outstanding at any time based on Eligible Inventory consisting of work-in-process exceed $50,000,000, or the aggregate principal amount of the Revolving Loans outstanding at any time based on Eligible Inventory exceed the Inventory Loan Limit, in any case such event shall not limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrowers shall, upon demand by Agent, which may be made at any time or from time to time, immediately repay to Agent the entire amount of any such excess(es) for which payment is demanded.

 

2.2    Letter of Credit Accommodations .

 

(a)         Subject to and upon the terms and conditions contained herein, at the request of a Borrower (or Administrative Borrower on behalf of such Borrower), Agent agrees, for the ratable risk of each Lender according to its Pro Rata Share, to provide or arrange for Letter of Credit Accommodations for the account of such Borrower containing terms and conditions acceptable to Agent and the issuer thereof.  Any payments made by or on behalf of Agent or any Lender to any issuer thereof and/or related parties in connection with the Letter of Credit Accommodations provided to or for the benefit of such Borrower shall constitute additional Revolving Loans to such Borrower pursuant to this Section 2 (or in any event Special Agent Advances as the case may be).

 

(b)         In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations, Borrowers shall pay to Agent, for the benefit of Lenders based on their respective Pro Rata Shares, monthly a letter of credit fee (the “Letter of Credit Fee”) at the applicable rate determined as provided below (on a per annum basis) on the daily outstanding balance of Letter of Credit Accommodations for the immediately preceding month (or part thereof), payable in arrears as of the first day of each succeeding month.  Such percentages shall be increased or decreased, as the case may be, to the applicable percentage (on a per annum basis) set forth below based on the Monthly Average Excess Availability for immediately preceding month.

 

Tier		Monthly Average Excess Availability		LC Fee Rate
1		Greater than $40,000,000		2.50	%
2		Greater than or equal to $20,000,000 and less than or equal to $40,000,000		2.75	%
3		Less than $20,000,000		3.00	%

 

provided ,  that , (i) the applicable percentage shall be calculated and established on the first day of each month and shall remain in effect until adjusted thereafter at the beginning of the next month

 

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and (ii)  the applicable percentage from and including the date hereof through November 30, 2008 shall be the amount for Tier 1 set forth above, and (iii) Agent may, and upon the written direction of Required Lenders shall, require Borrowers to pay to Agent for the benefit of Lenders based on their respective Pro Rata Shares such Letter of Credit Fee, at a rate equal to two (2%) percent greater than the highest rate above on such daily outstanding balance for: (i) the period from and after the date of termination hereof until Agent and Lenders have received full and final payment of all Obligations (notwithstanding entry of a judgment against such Borrower) and (ii) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing.  Such Letter of Credit Fee shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrowers to pay such fee shall survive the termination of this Agreement.

 

(c)         Such Borrower shall give Agent two (2) Business Days’ prior written notice of such Borrower’s request for the issuance of a Letter of Credit Accommodation.  Such notice shall be irrevocable and shall specify the original face amount of the Letter of Credit Accommodation requested, the effective date (which date shall be a Business Day and in no event shall be a date less than ten (10) days prior to the end of the then current term of this Agreement) of issuance of such requested Letter of Credit Accommodation, whether such Letter of Credit Accommodations may be drawn in a single or in partial draws, the date on which such requested Letter of Credit Accommodation is to expire (which date shall be a Business Day), the purpose for which such Letter of Credit Accommodation is to be issued, and the beneficiary of the requested Letter of Credit Accommodation.  Such Borrower shall attach to such notice the proposed terms of the Letter of Credit Accommodation.

 

(d)         In addition to being subject to the satisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of Credit Accommodations shall be available unless each of the following conditions precedent have been satisfied in a manner satisfactory to Agent:  (i) the Borrowers requesting such Letter of Credit (or Administrative Borrower on behalf of such Borrower) shall have delivered to the proposed issuer of such Letter of Credit Accommodation at such times and in such manner as such proposed issuer may require, an application, in form and substance satisfactory to such proposed issuer and Agent, for the issuance of the Letter of Credit Accommodation and such other documents as may be required pursuant to the terms thereof, and the form and terms of the proposed Letter of Credit Accommodation shall be satisfactory to Agent and such proposed issuer, (ii) as of the date of issuance, no order of any court, arbitrator or other Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit Accommodation, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that the proposed issuer of such Letter of Credit Accommodation refrain from, the issuance of letters of credit generally or the issuance of such Letter of Credit Accommodation; and (iii) Excess Availability prior to giving effect to any Reserves with respect to such Letter of Credit Accommodations, on the date of the proposed issuance of any Letter of Credit Accommodations, shall be equal to or greater than: (A) if the proposed Letter of Credit Accommodation is for the purpose of purchasing Eligible Inventory and the documents of title with respect thereto are consigned to the issuer (or subject to such other arrangements as are

 

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acceptable to Agent), the sum of (1) the percentage equal to one hundred (100%) percent minus the then applicable percentage with respect to Eligible Inventory set forth in the definition of the term Borrowing Base multiplied by the Value of such Eligible Inventory, plus (2) freight, taxes, duty and other amounts which Agent estimates must be paid in connection with such Inventory upon arrival and for delivery to one of such Borrower’s locations for Eligible Inventory within the United States of America and (B) if the proposed Letter of Credit Accommodation is for any other purpose or the documents of title are not consigned to the issuer (or subject to such other arrangements as are acceptable to Agent) in connection with a Letter of Credit Accommodation for the purpose of purchasing Inventory, an amount equal to one hundred (100%) percent of the face amount thereof and all other commitments and obligations made or incurred by Agent with respect thereto.  Effective on the issuance of each Letter of Credit Accommodation, a Reserve shall be established in the applicable amount set forth in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).

 

(e)         Except in Agent’s discretion, with the consent of all Lenders, the amount of all outstanding Letter of Credit Accommodations and all other commitments and obligations made or incurred by Agent or any Lender in connection therewith shall not at any time exceed $10,000,000.

 

(f)          Subject to Section 6.5 hereof, Borrowers shall indemnify and hold Agent and Lenders harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Agent or any Lender may suffer or incur in connection with any Letter of Credit Accommodations and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to any action taken by any issuer or correspondent with respect to any Letter of Credit Accommodation, except for such losses, claims, damages, liabilities, costs or expenses that are a direct result of the gross negligence or willful misconduct of Agent or any Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction.  Each Borrower assumes all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of Credit Accommodation and for such purposes the drawer or beneficiary shall be deemed such Borrower’s agent.  Subject to Section 6.5 hereof, each Borrower assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit Accommodations or any documents, drafts or acceptances thereunder.  Each Borrower hereby releases and holds Agent and Lenders harmless from and against any acts, waivers, errors, delays or omissions, whether caused by Borrowers, by any issuer or correspondent or otherwise with respect to or relating to any Letter of Credit Accommodation, except for the gross negligence or willful misconduct of Agent or such Lender, as the case may be, as determined pursuant to a final, non-appealable order of a court of competent jurisdiction.  The provisions of this Section 2.2(f) shall survive the payment of Obligations and the termination of this Agreement.

 

(g)         In connection with Inventory purchased pursuant to Letter of Credit Accommodations, Borrowers shall, at Agent’s request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver them to Agent and/or subject to Agent’s order, and if they shall come into such Borrower’s possession, to deliver them, upon Agent’s request, to Agent in their original form; provided , that , Agent shall not exercise its rights under this clause (g) to have such persons deliver any cash, checks, documents or instruments (so

 

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long as such documents or instruments are held by a customs broker that has executed and delivered a Collateral Access Agreement) or Inventory to Agent unless a Default or Event of Default exists or has occurred and is continuing.  At any time that a Default or Event of Default exists or has occurred and is continuing, Borrowers shall also, at Agent’s request, designate Agent (or the issuer of the Letter of Credit Accommodation with respect thereto as Agent may specify) as the consignee on all bills of lading and other negotiable and non-negotiable documents.

 

(h)         Borrowers hereby irrevocably authorize and direct any issuer of a Letter of Credit Accommodation to name a Borrower as the account party therein and to deliver to Agent all instruments, documents and other writings and property received by issuer pursuant to the Letter of Credit Accommodations and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit Accommodations or the applications therefor ( provided , that , such rights of Agent to provide such instructions and agreements shall be subject to the rights of such Borrower to provide instructions and agreements with respect to certain matters arising in connection therewith as set forth below).  Nothing contained herein shall be deemed or construed to grant such Borrower any right or authority to pledge the credit of Agent or any Lender in any manner.  Agent and Lenders shall have no liability of any kind with respect to any Letter of Credit Accommodation provided by an issuer other than Agent or any Lender unless Agent has duly executed and delivered to such issuer the application or a guarantee or indemnification in writing with respect to such Letter of Credit Accommodation.  Borrowers shall be bound by any reasonable interpretation made in good faith by Agent, or any other issuer or correspondent under or in connection with any Letter of Credit Accommodation or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions of such Borrower.

 

(i)          So long as no Event of Default exists or has occurred and is continuing, Borrowers may (i) approve or resolve any questions of non-compliance of documents, (ii) give any instructions as to acceptance or rejection of any documents or goods, (iii) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, and (iv) with Agent’s consent, grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents, and agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral.

 

(j)     At any time an Event of Default exists or has occurred and is continuing, Agent shall have the right and authority to, and on and after written notice from Agent to each Borrower, Borrowers shall not, without the prior written consent of Agent, (i) approve or resolve any questions of non-compliance of documents, (ii) give any instructions as to acceptance or rejection of any documents or goods, (iii) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, (iv) grant any extensions of the maturity of, time of payments for, or time of presentation of, any drafts, acceptances, or documents, and (v) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or

 

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documents, drafts or acceptances thereunder or any letters of credit included in the Collateral.  Agent may take such actions either in its own name or in such Borrower’s name.

 

(k)         Any rights, remedies, duties or obligations granted or undertaken by any Borrower to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement in favor of any issuer or correspondent relating to any Letter of Credit Accommodation, shall be deemed to have been granted or undertaken by such Borrower to Agent for the ratable benefit of Lenders.  Any duties or obligations undertaken by Agent to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement by Agent in favor of any issuer or correspondent to the extent relating to any Letter of Credit Accommodation, shall be deemed to have been undertaken by such Borrower to Agent for the ratable benefit of Lenders and to apply in all respects to such Borrower.

 

(l)          Immediately upon the issuance or amendment of any Letter of Credit Accommodation, each Lender shall be deemed to have irrevocably and unconditionally purchased and received, without recourse or warranty, an undivided interest and participation to the extent of such Lender’s Pro Rata Share of the liability with respect to such Letter of Credit Accommodation (including, without limitation, all Obligations with respect thereto).

 

(m)        Each Borrower is irrevocably and unconditionally obligated, without presentment, demand or protest, to pay to Agent any amounts paid by an issuer of a Letter of Credit Accommodation with respect to such Letter of Credit Accommodation (whether through the borrowing of Loans in accordance with Section 2.2(a) or otherwise).  In the event that any Borrower fails to pay Agent on the date of any payment under a Letter of Credit Accommodation in an amount equal to the amount of such payment, Agent (to the extent it has actual notice thereof) shall promptly notify each Lender of the unreimbursed amount of such payment and each Lender agrees, upon one (1) Business Day’s notice, to fund to Agent the purchase of its participation in such Letter of Credit Accommodation in an amount equal to its Pro Rata Share of the unpaid amount.  The obligation of each Lender to deliver to Agent an amount equal to its respective participation pursuant to the foregoing sentence is absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuance of any Event of Default, the failure to satisfy any other condition set forth in Section 4 or any other event or circumstance.  If such amount is not made available by a Lender when due, Agent shall be entitled to recover such amount on demand from such Lender with interest thereon, for each day from the date such amount was due until the date such amount is paid to Agent at the interest rate then payable by such Borrower in respect of Loans that are Prime Rate Loans as set forth in Section 3.1(a) hereof.

 

2.3    Equipment Purchase Loans .

 

(a)         Subject to and upon the terms and conditions contained herein, at any time and from to time on or after the date hereof, each Lender severally (and not jointly) shall make its Pro Rata Share of Equipment Purchase Loans to Borrowers, at the request of Borrowers, of seventy five (75%) percent of the Hard Costs of Eligible New Equipment purchased or to be purchased by Borrowers after October 1, 2008 and which is not included in the most recent appraisal of Equipment received by Agent after the date hereof in accordance with Section 7.4(a) 

 

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hereof, or such lesser amount as to any Equipment Purchase Loan as such Borrower may request.  The proceeds of each Equipment Purchase Loan shall be used solely for the payment of the purchase price, or to reimburse such Borrower for the cash previously paid by such Borrower for the purchase price, for the Eligible New Equipment specified in the Equipment Purchase Loan Request applicable to such Equipment Purchase Loan; provided ,  that , (i) as to any Eligible New Equipment purchased after October 1, 2008 and prior to the date hereof, such Equipment Purchase Loan Request shall be received within thirty (30) days after the date hereof, (ii) as to any Equipment Purchase Loans based on Eligible New Equipment purchased after October 1, 2008 and prior to the date hereof, the aggregate amount of all such Equipment Purchase Loans shall not exceed $2,000,000, (iii) to the extent that the proceeds of any Equipment Purchase Loan are used to reimburse such Borrower for the cash paid by such Borrower for the purchase price of any Eligible New Equipment purchased after the date hereof, such Borrower shall have taken possession of such Eligible New Equipment within ninety (90) days prior to the date of the Equipment Purchase Loan, and (iv) no Equipment Purchase Loan Request shall include any Eligible New Equipment that has been included in any other Equipment Purchase Loan Request. Each Equipment Purchase Loan shall be in an amount of not less than $500,000.  A single Equipment Purchase Loan may be used for the purchase price of one or more items constituting Eligible New Equipment specified in the Equipment Purchase Loan Request required to be delivered to Lender pursuant to Section 2.3(d)(i) below and the minimum amount of such Equipment Purchase Loan applies to such Equipment Purchase Loan, not to the purchase price of any individual item of Eligible New Equipment.

 

(b)         The outstanding aggregate principal amount of the Equipment Purchase Loans made by Lenders shall not exceed $15,000,000; provided ,  that , in no event shall the aggregate principal amount of the Equipment Purchase Loans exceed the aggregate amount of seventy-five (75%) percent of the Hard Costs of all Eligible New Equipment purchased by Borrowers pursuant hereto.  If at any time the outstanding aggregate principal amount of all Equipment Purchase Loans exceeds eighty (80%) percent of the net orderly liquidation value of all of the Eligible New Equipment (net of liquidation expenses) as set forth in the most recent acceptable appraisal with respect thereto received by Agent, Agent may, at its option, or shall upon the request of the Required Lenders, establish a Reserve in the amount equal to the entire amount of such excess or Agent may instead, at its option, demand and such Borrower shall, upon demand by Agent, which may be made at any time and from time to time, repay to Agent the entire amount of such excess.

 

(c)         Each Equipment Purchase Loan to such Borrower shall be (i) evidenced by an Equipment Purchase Note executed and delivered by the applicable Borrower to Agent concurrently with each Equipment Purchase Loan, (ii) repaid, together with interest and other amounts payable thereunder, in accordance with the provisions of the applicable Equipment Purchase Note, this Agreement and the other Financing Agreements, and (iii) secured by all of the Collateral.

 

(d)         In addition to the other conditions precedent to any Loan or Letter of Credit Accommodation set forth in this Agreement, the making of each Equipment Purchase Loan shall be subject to the satisfaction of each of the following additional conditions precedent, as determined by Agent:

 

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(i)             Agent shall have received from such Borrower not less than five (5) Business Days and not more than ten (10) Business Days prior written notice of the proposed Equipment Purchase Loan (each such notice being an “Equipment Purchase Loan Request”), which notice shall specify the following: (A) the proposed date and amount of the Equipment Purchase Loan, (B) a list and description of the Eligible New Equipment (by model, make, manufacturer, serial number and/or such other identifying information as may be requested by Agent), (C) whether any of such Eligible New Equipment has been purchased prior to the date of the proposed Equipment Purchase Loan and if so, the date of such purchase and identifying the specific Eligible New Equipment that has been so purchased, (D) the Hard Costs and total purchase price for the Eligible New Equipment to be purchased with the proceeds of such Equipment Purchase Loan (and the terms of payment of such purchase price), or for which such Borrower is being reimbursed, as the case may be and (E) such other information and documents as Agent may from time to time reasonably request with respect thereto;

 

(ii)            Agent shall have a valid and perfected first priority security interest in and lien upon the Eligible New Equipment to be purchased with the proceeds of the Equipment Purchase Loan and the Eligible New Equipment shall be free and clear of all other liens, security interests, claims or other encumbrances (except for those permitted in this Agreement that are subject to an intercreditor agreement, in form and substance satisfactory to Agent, between the holder of such security interest and Agent or as Agent may otherwise specifically agree), and such Borrower shall have delivered to Agent such evidence thereof, as Agent may from time to time require;

 

(iii)           the amount of each Equipment Purchase Loan shall not exceed seventy five (75%) percent of the Hard Costs of the Eligible New Equipment to be purchased by such Borrower with the proceeds of such Equipment Purchase Loan;

 

(iv)           as of the date of such Equipment Purchase Loan, and after giving effect thereto, the aggregate amount of the Loans and the Letter of Credit Accommodations shall not exceed the Maximum Credit minus the sum of (A) the aggregate amount of the Revolving Loans then outstanding, and (B) the aggregate amount of the undrawn Letter of Credit Accommodations then outstanding;

 

(v)            as of the date of such Equipment Purchase Loan, and after giving effect thereto, the aggregate amount of all Equipment Purchase Loans shall not exceed the Equipment Purchase Loan Limit;

 

(vi)           as of the date of such Equipment Purchase Loan, and after giving effect thereto, the aggregate amount of the Revolving Loans and the Letter of Credit Accommodations shall not exceed the amount equal to $120,000,000 minus the sum of (A) the aggregate amount of the Revolving Loans then outstanding, and (B) the aggregate amount of the undrawn Letter of Credit Accommodations then outstanding;

 

(vii)          The applicable Borrower shall duly authorize, execute and deliver to Agent a single original Equipment Purchase Note in the form annexed hereto as Exhibit D, as completed to reflect the date and amount of each such Equipment Purchase Loan and with the number of monthly installments of principal payable thereunder and the amount of each such monthly

 

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installment completed in accordance with Sections 2.3(e) and 2.3(f) below, as the case may be, which note shall evidence a valid and legally enforceable indebtedness of such Borrower unconditionally owing to Lenders, without offset, defense or counterclaim of any kind, nature or description whatsoever; and

 

(viii)         as of the date of such Equipment Purchase Loan and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing.

 

(e)         The principal amount of each Equipment Purchase Loan shall be payable (subject to earlier payment as provided herein or in such Equipment Purchase Note) in sixty (60) equal, consecutive monthly installments of principal, each in an amount calculated below, commencing on the first day of the second month after the date of the making of such Equipment Purchase Loan, together with interest and other amounts as provided herein and in the Equipment Purchase Note with respect to such Equipment Purchase Loan.

 

(f)          The amount of each monthly installment of principal in respect of each Equipment Purchase Loan (other than the last installment which shall be in an amount equal to the entire unpaid balance of the Equipment Purchase Note) shall equal: (i) the original principal amount of the proposed Equipment Purchase Loan divided by (ii) sixty (60).

 

2.4    Joint and Several Liability .  Each Borrower shall be jointly and severally liable for all amounts due to Agent and Lenders under this Agreement and the other Financing Agreements, regardless of which Borrower actually receives the Loans or Letter of Credit Accommodations hereunder or the amount of such Loans received or the manner in which Agent or any Lender accounts for such Loans, Letter of Credit Accommodations or other extensions of credit on its books and records.  All references herein or in any of the other Financing Agreements to any of the obligations of Borrowers to make any payment hereunder or thereunder shall constitute joint and several obligations of Borrowers.  The Obligations with respect to Loans made to a Borrower, and the Obligations arising as a result of the joint and several liability of a Borrower hereunder, with respect to Loans made to the other Borrower, shall be separate and distinct obligations, but all such other Obligations shall be primary obligations of each Borrower.  The Obligations arising as a result of the joint and several liability of a Borrower hereunder with respect to Loans, Letter of Credit Accommodations or other extensions of credit made to the other Borrower shall, to the fullest extent permitted by law, be unconditional irrespective of (a) the validity or enforceability, avoidance or subordination of the Obligations of the other Borrower or of any promissory note or other document evidencing all or any part of the Obligations of the other Borrower, (b) the absence of any attempt to collect the Obligations from the other Borrower or any other security therefor, or the absence of any other action to enforce the same, (c) the waiver, consent, extension, forbearance or granting of any indulgence by Agent or any Lender with respect to any provisions of any instrument evidencing the Obligations of the other Borrower, or any part thereof, or any other agreement now or hereafter executed by the other Borrower and delivered to Agent or any Lender, (d) the failure by Agent or any Lender to take any steps to perfect and maintain its security interest in, or to preserve its rights and maintain its security or collateral for the Obligations of the other Borrower, (e) the election of Agent and Lenders in any proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy Code, (f) the disallowance of all or any portion of the claim(s) of Agent or any Lender for the repayment of the Obligations of the other Borrowers

 

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under Section 502 of the Bankruptcy Code, or (g) any other circumstances which might constitute a legal or equitable discharge or defense of the other Borrower other than to the extent of the gross negligence or willful misconduct of Agent or a Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction.  With respect to the Obligations arising as a result of the joint and several liability of a Borrower hereunder with respect to Loans, Letter of Credit Accommodations or other extensions of credit made to the other Borrower hereunder, each Borrower waives, until the Obligations shall have been paid in full and this Agreement shall have been terminated, any right to enforce any right of subrogation or any remedy which Agent or any Lender now has or may hereafter have against any Borrower and any benefit of, and any right to participate in, any security or collateral given to Agent or any Lender.  Upon any Event of Default, and for so long as such Event of Default is continuing, Agent may proceed directly and at once, without notice, against any Borrower to collect and recover the full amount, or any portion of the Obligations, without first proceeding against the other Borrower or any other Person, or against any security or collateral for the Obligations.  Each Borrower consents and agrees that Agent and Lenders shall be under no obligation to marshall any assets in favor of Borrower(s) or against or in payment of any or all of the Obligations.

 

2.5  Commitments .  The aggregate amount of each Lender’s Pro Rata Share of the Loans and Letter of Credit Accommodations shall not exceed the amount of such Lender’s Commitment, as the same may from time to time be amended in accordance with the provisions hereof.

 

SECTION 3.   INTEREST AND FEES

 

3.1    Interest .

 

(a)         Borrowers shall pay to Agent, for the benefit of Lenders, interest on the outstanding principal amount of the Loans at the Interest Rate.  All interest accruing hereunder on and after the date of any Event of Default or termination hereof shall be payable on demand.

 

(b)         Each Borrower (or Administrative Borrower on behalf of such Borrower) may from time to time request Eurodollar Rate Loans or may request that Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue for an additional Interest Period.  Such request from a Borrower shall specify the amount of the Eurodollar Rate Loans or the amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such Eurodollar Rate Loans.  Subject to the terms and conditions contained herein, three (3) Business Days after receipt by Agent of such a request from a Borrower, such Eurodollar Rate Loans shall be made or Prime Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be; provided ,  that , (i) no Default or Event of Default shall exist or have occurred and be continuing, (ii) such Borrower (or Administrative Borrower on behalf of such Borrower) shall have complied with such customary procedures as are established by Agent and specified by Agent to Administrative Borrower from time to time for requests by Borrowers for Eurodollar Rate Loans, (iii) no more than eight (8) Interest Periods may be in effect at any one time, (iv) the aggregate amount of the Eurodollar Rate Loans must be in an amount not less than $5,000,000 or

 

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any of the Obligations are outstanding, which fee shall be payable on the first day of each month in arrears.

 

(c)                     Borrowers agree to pay to Agent the other fees and amounts set forth in the Fee Letter in the amounts and at the times specified therein.

 

3.3          Changes in Laws and Increased Costs of Loans .

 

(a)                     Subject to Section 6.5 hereof, if after the date hereof, either (i) any change in, or in the interpretation of, any law or regulation is introduced, including, without limitation, with respect to reserve requirements, applicable to any Lender or any banking or financial institution from whom any Lender borrows funds or obtains credit (a “Funding Bank”), which Funding Bank is a commercial bank or other financial institution having combined capital and surplus and undivided profits of not less than $500,000,000 or (ii) a Funding Bank or any Lender complies with any future guideline or request from any central bank or other Governmental Authority or (iii) a Funding Bank or any Lender determines that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof has or would have the effect described below, or a Funding Bank or any Lender complies with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, and in the case of any event set forth in this clause (iii), such adoption, change or compliance has or would have the direct or indirect effect of reducing the rate of return on any Lender’s capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance (taking into consideration the Funding Bank’s or Lender’s policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, and the result of any of the foregoing events described in clauses (i), (ii) or (iii) is or results in an increase in the cost to any Lender of funding or maintaining the Loans, the Letter of Credit Accommodations or its Commitment, then Borrowers shall from time to time upon demand by Agent pay to Agent additional amounts sufficient to indemnify Lenders against such increased cost (after taking into account applicable deductions and credits in respect of the amount indemnified).  A certificate as to the amount of such increased cost setting forth in reasonable detail the basis for such increased cost and calculation of the amount thereof shall be submitted to Administrative Borrower by or on behalf of the Lender seeking indemnification therefor or by Agent on its behalf and shall be conclusive, absent manifest error.

 

(b)                    If prior to the first day of any Interest Period, (i) Agent shall have determined in good faith (which determination shall be conclusive and binding upon Borrowers) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Adjusted Eurodollar Rate for such Interest Period, (ii) Agent has received notice from the Required Lenders that the Adjusted Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to Lenders of making or maintaining Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in the principal amounts of the Eurodollar Rate Loans to which such Interest Period is to be applicable are not generally available in the London interbank market, Agent shall give telecopy or telephonic notice thereof to Administrative Borrower as soon as practicable thereafter, and will

 

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also give prompt written notice to Administrative Borrower when such conditions no longer exist.  If such notice is given (A) any Eurodollar Rate Loans requested to be made on the first day of such Interest Period shall be made as Prime Rate Loans, (B) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans and (C) each outstanding Eurodollar Rate Loan shall be converted, on the last day of the then current Interest Period thereof, to Prime Rate Loans.  Until such notice has been withdrawn by Agent, no further Eurodollar Rate Loans shall be made or continued as such, nor shall any Borrower (or Administrative Borrower on behalf of any Borrower) have the right to convert Prime Rate Loans to Eurodollar Rate Loans.

 

(c)                     Notwithstanding any other provision herein, if the adoption of or any change in any law, treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or other Governmental Authority or in the interpretation or application thereof occurring after the date hereof shall make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly give written notice of such circumstances to Administrative Borrower (which notice shall be withdrawn whenever such circumstances no longer exist), (ii) the commitment of such Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender shall then have a commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (iii) such Lender’s Loans then outstanding as Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law.  If any such conversion of a Eurodollar Rate Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, Borrowers shall pay to such Lender such amounts, if any, as may be required pursuant to Section 3.3(d) below.

 

(d)                    Subject to Section 6.5 hereof, Borrowers shall indemnify Agent and each Lender and hold Agent and each Lender harmless from any loss or expense which Agent or such Lender may sustain or incur as a consequence of (i) default by any Borrower in making a borrowing of, conversion into or extension of Eurodollar Rate Loans after such Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (ii) default by any Borrower in making any prepayment of a Eurodollar Rate Loan after such Borrower has given a notice thereof in accordance with the provisions of this Agreement, and (iii) the making of a prepayment of Eurodollar Rate Loans on a day which is not the last day of an Interest Period with respect thereto.  With respect to Eurodollar Rate Loans, such indemnification may include an amount equal to the excess, if any, of (A) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or extended, for the period from the date of such prepayment or of such failure to borrow, convert or extend to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or extend, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Eurodollar Rate Loans provided for herein over (B) the amount of interest (as determined by such Agent or such Lender) which would have accrued to Agent or such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market as set forth in a certificate from or on behalf of Agent or such

 

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Lender to such Borrower setting forth the calculation of such amounts.  This covenant shall survive the termination or non-renewal of this Agreement and the payment of the Obligations.

 

SECTION 4.   CONDITIONS PRECEDENT

 

4.1          Conditions Precedent to Amendment and Restatement .  Each of the following is a condition precedent to the effectiveness hereof:

 

(a)                     all requisite corporate action and proceedings in connection with this Agreement and the other Financing Agreements shall be reasonably satisfactory in form and substance to Agent, and Agent shall have received all information and copies of all documents, including records of requisite corporate action and proceedings which Agent may have reasonably requested in connection therewith, such documents where requested by Agent or its counsel to be certified by appropriate corporate officers or Governmental Authority (and including a copy of the certificate of incorporation of each Borrower certified by the Secretary of State (or equivalent Governmental Authority) which shall set forth the same complete corporate name of such Borrower as is set forth herein and such document as shall set forth the organizational identification number of each Borrower, if one is issued in its jurisdiction of incorporation;

 

(b)                    no act, condition or event shall have occurred since the date of Agent’s latest field examination that has or is reasonably likely to have Material Adverse Effect;

 

(c)                     Agent shall have received, in form and substance satisfactory to Agent, all consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in good faith in order to permit, protect and perfect its security interests in and liens upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing Agreements, including, without limitation, Collateral Access Agreements; provided ,  that , the failure to deliver Collateral Access Agreements as to specific locations shall not be a condition of closing, so long as all other conditions are met after giving effect to any Reserves established by Agent in respect of amounts due or to become due to the owner, lessor or operator thereof as provided for in the definition of Reserves;

 

(d)                    Agent shall have received, in form and substance satisfactory to Agent, amendments to the Mortgages relating to the Real Property, duly authorized, executed and delivered by the owner of such Real Property;

 

(e)                     Agent shall have received, in form and substance satisfactory to Agent, an endorsement (or a commitment to issue an endorsement) to the existing title insurance policy relating to the Real Property subject to the Mortgages, (i) insuring the priority and amount of each Mortgage (as so amended) relating to such Real Property and (ii) containing any legally available endorsements, assurances or affirmative coverage requested by Agent for the protection of its interest with respect to each Mortgage (as so amended);

 

(f)                       Agent shall have received, in form and substance reasonably satisfactory to Agent, such opinion letters of counsel to Borrowers with respect to the Financing Agreements and such other matters as Agent may reasonably request; and

 

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(g)                    the other Financing Agreements and all instruments and documents required to be delivered hereunder and thereunder prior to the date hereof shall have been duly executed and delivered to Agent, in form and substance reasonably satisfactory to Agent.

 

4.2          Conditions Precedent to All Loans and Letter of Credit Accommodations .  Each of the following is an additional condition precedent to the Loans and/or providing Letter of Credit Accommodations to Borrowers, including the initial Loans and Letter of Credit Accommodations and any future Loans and Letter of Credit Accommodations:

 

(a)                     all representations and warranties contained herein and in the other Financing Agreements that are qualified as to materiality or Material Adverse Effect shall be true and correct and the representations and warranties that are not so qualified shall be true and correct in all material respects, in each case with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Loan or providing each such Letter of Credit Accommodation and after giving effect thereto, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct to the extent required hereunder or under the other Financing Agreements on and as of such earlier date);

 

(b)                    no law, regulation, order, judgment or decree of any Governmental Authority shall exist, and no action, suit, investigation, litigation or proceeding shall be pending or threatened in any court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or otherwise adversely affect (A) the making of the Loans or providing the Letter of Credit Accommodations, or (B) the consummation of the transactions contemplated pursuant to the terms hereof or the other Financing Agreements or (ii) has or has a reasonable likelihood of having a Material Adverse Effect;

 

(c)                     no Default or Event of Default shall exist or have occurred and be continuing on and as of the date of the making of such Loan or providing each such Letter of Credit Accommodation and after giving effect thereto.

 

SECTION 5.   GRANT AND PERFECTION OF SECURITY INTEREST

 

5.1          Grant of Security Interest .

 

(a)                     To secure payment and performance of all Obligations, Borrowers hereby grant to Agent, for the benefit of Secured Parties, a continuing security interest in, a lien upon, and a right of set off against, all personal and real property and fixtures, and interests in property and fixtures, of Borrowers, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Agent or any Secured Party, collectively, the “Collateral”), including:

 

(i)                        all Accounts;

 

(ii)                     all general intangibles, including, without limitation, all Intellectual Property;

 

(iii)                  all goods, including, without limitation, Inventory and Equipment;

 

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(iv)                 all Real Property and fixtures;

 

(v)                    all chattel paper, including, without limitation, all tangible and electronic chattel paper;

 

(vi)                 all instruments, including, without limitation, all promissory notes;

 

(vii)              all documents;

 

(viii)           all deposit accounts;

 

(ix)                   all letters of credit, banker’s acceptances and similar instruments and including all letter of credit rights;

 

(x)                      all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (A) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (B) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (C) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (D) deposits by and property of account debtors or other persons securing the obligations of account debtors;

 

(xi)                   all (A) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts), except as otherwise provided in Section 5.2(e) below and (B) monies, credit balances, deposits and other property of Borrowers now or hereafter held or received by or in transit to Agent or any Lender or its Affiliates or at any other depository or other institution from or for the account of Borrowers, whether for safekeeping, pledge, custody, transmission, collection or otherwise;

 

(xii)                all commercial tort claims listed on Schedule 5.1 hereto;

 

(xiii)             to the extent not otherwise described above, all Receivables;

 

(xiv)            all Records; and

 

(xv)               all products and proceeds of the foregoing, in any form, including insurance proceeds (other than business interruption insurance) and all claims against third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral or damages and payments or claims by Borrowers for past or future infringements of any Intellectual Property.

 

(b)                    Notwithstanding anything to the contrary set forth in Section 5.1(a) above, the types or items of Collateral described in such Section shall not include:

 

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(i)                        any rights or interests in any contract, lease, permit, license, charter or license agreement covering real or personal property, as such, if under the terms of such contract, lease, permit, license, charter or license agreement, or applicable law with respect thereto, the valid grant of a security interest or lien therein to Agent is prohibited and such prohibition has not been or is not waived or the consent of the other party to such contract, lease, permit, license, charter or license agreement has not been or is not otherwise obtained or under applicable law such prohibition cannot be waived; provided,   that, the foregoing exclusion shall in no way be construed (A) to apply if any such prohibition is unenforceable under Sections 9-406, 9-407, 9-408, or 9-409 of the UCC or other applicable law or (B) so as to limit, impair or otherwise affect Agent’s unconditional continuing security interests in and liens upon any rights or interests of Borrowers in or to monies due or to become due under any such contract, lease, permit, license, charter or license agreement (including any Receivables);

 

(ii)                     the Capital Stock in excess of 65% of any Foreign Subsidiary that is (a) organized under the laws of a jurisdiction outside of the United States and (b) directly owned by any Borrower (without regard to any indirect ownership attributed to the Borrowers); and

 

(iii)                  the Timet Collateral.

 

5.2          Perfection of Security Interests .

 

(a)                     Borrowers irrevocably and unconditionally authorize Agent (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Agent as the secured party and such Borrower as debtor, as Agent may require, and including any other information with respect to such Borrower or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine, together with any amendments and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof.  Such financing statements may describe the Collateral in the same manner as described herein or in any security agreement or pledge agreement entered into by the parties in connection herewith or may contain an indication or description of Collateral that describes such property in any other manner as the Agent may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral granted to the Agent in connection herewith or therewith.  Each Borrower hereby ratifies and approves all financing statements naming Agent or its designee as secured party and such Borrower as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Agent prior to the date hereof and ratifies and confirms the authorization of Agent to file such financing statements (and amendments, if any).  Each Borrower hereby authorizes Agent to adopt on behalf of such Borrower any symbol required for authenticating any electronic filing.  In the event that the description of the collateral in any financing statement naming Agent or its designee as the secured party and any Borrower as debtor includes assets and properties of such Borrower that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by such Borrower to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral.  In no event shall any Borrower at any time file, or permit or cause to be filed, any correction statement or termination statement

 

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with respect to any financing statement (or amendment or continuation with respect thereto) naming Agent or its designee as secured party and such Borrower as debtor, without the express prior written consent of Agent.

 

(b)                    Each Borrower does not have any chattel paper (whether tangible or electronic) or instruments as of the date hereof, except as set forth in the Information Certificate and except for checks deposited or to be deposited in the ordinary course of business.  In the event that any Borrower shall receive any chattel paper or instrument in excess of $50,000 after the date hereof (except for checks deposited or to be deposited for collection in the ordinary course of business), Borrowers shall promptly notify Agent thereof in writing.  Promptly upon the receipt thereof by or on behalf of any Borrower, such Borrower shall deliver, or cause to be delivered to Agent, all tangible chattel paper and instruments (except for checks deposited or to be deposited for collection in the ordinary course of business) that Borrowers have or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify, in each case except as Agent may otherwise agree; provided ,  that , so long as no Default or Event of Default shall exist or have occurred and be continuing, Borrowers shall not be required to deliver to Agent any tangible chattel paper or instrument received after the date hereof until the aggregate amount of the monetary obligations evidenced thereby exceed $50,000.  At Agent’s option, each Borrower shall, or Agent may at any time on behalf of any Borrower, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Agent with the following legend referring to chattel paper or instruments as applicable: “This [chattel paper][instrument] is subject to the security interest of Wachovia Capital Finance Corporation (Central), as Agent and any sale, transfer, assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured party.”

 

(c)                     In the event that any Borrower shall at any time hold or acquire an interest in any electronic chattel paper or any “transferable record” (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), such Borrower shall promptly notify Agent thereof in writing.  Promptly upon Agent’s request, such Borrower shall take, or cause to be taken, such actions as Agent may reasonably request to give Agent control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.

 

(d)                    Each Borrower does not have deposit accounts as of the date hereof having or reasonably anticipated to have a balance in excess of $50,000 (or the US Dollar Equivalent thereof), except as set forth in the Information Certificate ( provided ,  that , the aggregate amount of the balances in all of those deposit accounts having a balance of less than $50,000 (or the US Dollar Equivalent thereof) does not, and shall not, exceed $250,000 or the US Dollar Equivalent thereof).  Borrowers shall not, directly or indirectly, after the date hereof open, establish or maintain any deposit account unless each of the following conditions is satisfied:  (i) Agent shall have received not less than five (5) Business Days prior written notice of the intention of any Borrower to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such

 

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bank with whom such Borrower is dealing and the purpose of the account, (ii) the bank where such account is opened or maintained shall be reasonably acceptable to Agent, and (iii) on or before the opening of such deposit account or so long as no Default or Event of Default shall exist or have occurred and be continuing, promptly after the opening of such deposit account, such Borrower shall deliver to Agent a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed and delivered by such Borrower and the bank at which such deposit account is opened and maintained, except, that, such Borrower shall not be required to comply with clauses (i), (ii) or (iii) of this subsection (d) as to any deposit account which at all times has a balance of less than $50,000 so long as the aggregate amount of all deposits in all such accounts is less than $250,000 and no Default of Event of Default shall exist or have occurred and be continuing. In addition, Haynes Parent shall not be required to provide a Deposit Account Control Agreement with respect to the existing deposit account of Haynes Parent maintained at Community First Bank (account number 08001031) so long as such account is used only in connection with the cashing of checks or similar items for employees of Haynes Parent and the aggregate amount of the funds in such account does not exceed $100,000.  If the purpose of such account shall change or the aggregate amount of such funds at any time exceed $100,000 for five (5) consecutive days or shall exceed $100,000 more than two (2) times, promptly upon the request of Agent, Haynes Parent  shall deliver or cause to be delivered to Agent a Deposit Account Control Agreement with respect to such deposit account. The terms of this subsection (d) shall not apply to deposit accounts specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of each Borrower’s employees.

 

(e)                     No Borrower owns or holds, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or has any investment account, securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth in the Information Certificate.

 

(i)                        In the event that any Borrower shall be entitled to or shall at any time after the date hereof hold or acquire any certificated securities, such Borrower shall promptly endorse, assign and deliver the same to Agent, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify; provided ,  that , if such certificated securities constitute shares of Capital Stock of a Foreign Subsidiary constituting a “controlled foreign corporation” (as such term is defined in Section 957(a) of the Code or a successor provision thereof), then such Borrower shall not be required to endorse, assign or deliver to Agent those certificates representing the number of shares of the issuer thereof exceeding sixty-five (65%) percent of the voting power of all classes of Capital Stock of such issuer entitled to vote.  If any securities, now or hereafter acquired by such Borrower are uncertificated and are issued to such Borrower or its nominee directly by the issuer thereof, such Borrower shall immediately notify Agent thereof and shall subject to the proviso contained in the immediately preceding sentence, as Agent may specify, either (A) cause the issuer to agree to comply with instructions from Agent as to such securities, without further consent of such Borrower or such nominee, or (B) arrange for Agent to become the registered owner of the securities.  Nothing contained in this Section 5 shall be construed to require that the Collateral include the portion of the Capital Stock of any Foreign Subsidiary that is a “controlled foreign corporation”, as defined in Section 957 of the Code, in excess of sixty-five (65%) percent of the

 

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issued and outstanding Capital Stock thereof entitled to vote (within the meaning of Treasury Regulation Section 1.956-2).

 

(ii)                     Borrowers shall not, directly or indirectly, after the date hereof open, establish or maintain any investment account, securities account, commodity account or any other similar account (other than a deposit account) with any securities intermediary or commodity intermediary unless each of the following conditions is satisfied: (A) Agent shall have received not less than five (5) Business Days prior written notice of the intention of such Borrower to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the securities intermediary or commodity intermediary at which such account is to be opened or established, the individual at such intermediary with whom such Borrower is dealing and the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shall be reasonably acceptable to Agent, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity intermediary, such Borrower shall as Agent may specify either (1) execute and deliver, and cause to be executed and delivered to Agent, an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by Borrower and such securities intermediary or commodity intermediary or (2) arrange for Agent to become the entitlement holder with respect to such investment property on terms and conditions acceptable to Agent.

 

(f)                       Borrowers are not the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker’s acceptance or similar instrument as of the date hereof, except as set forth in the Information Certificate.  In the event that any Borrower shall receive any right to payment under any letter of credit, banker’s acceptance or any similar instrument having a face amount of excess of $25,000 in any one case or $100,000 in the aggregate (or after notice by Agent to such Borrower, at any time after a Default or Event of Default shall exist or have occurred and for so long as the same is continuing, regardless of the amount thereof), whether as beneficiary thereof or otherwise after the date hereof, such Borrower shall promptly notify Agent thereof in writing.  At any time that Excess Availability is less than $5,000,000, or a Default or an Event of Default exists or has occurred and is continuing, or the aggregate amount of such letters of credit, banker’s acceptance or similar instruments outstanding at any time shall exceed $3,500,000, or as to any such letter of credit, banker’s acceptance or similar instrument outstanding at any time that is more than $1,000,000, such Borrower shall promptly, as Agent may specify and upon Agent’s request, either (i) use all commercially reasonable efforts (including the payment of reasonable attorneys’ fees and expenses of any person in connection therewith) to deliver, or cause to be delivered to Agent, with respect to any such letter of credit, banker’s acceptance or similar instrument, the written agreement of the issuer and any other nominated person obligated to make any payment in respect thereof (including any confirming or negotiating bank), in form and substance reasonably satisfactory to Agent, consenting to the assignment of the proceeds of the letter of credit to Agent by such Borrower and agreeing to make all payments thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent to become, at Borrowers’ expense, the transferee beneficiary of the letter of credit, banker’s acceptance or similar instrument (as the case may be); provided ,  that , upon Agent’s request, Borrowers shall use their commercially reasonable efforts (without having to pay more than the customary fees of the applicable bank but including the payment of reasonable attorneys’ fees

 

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and expenses of any person in connection therewith) to have such letter of credit, banker’s acceptance or similar instrument be transferable.

 

(g)                    Borrowers do not have any commercial tort claims as of the date hereof, except as set forth in the Information Certificate.  In the event that any Borrower shall at any time after the date hereof have any commercial tort claims in excess of $50,000, such Borrower shall promptly notify Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercial tort claim and (ii) include the express grant by such Borrower to Agent of a security interest in such commercial tort claim (and the proceeds thereof).  In the event that such notice does not include such grant of a security interest, the sending thereof by such Borrower to Agent shall be deemed to constitute such grant to Agent. Upon the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein.  Without limiting the authorization of Agent provided in Section 5.2(a) hereof or otherwise arising by the execution by such Borrower of this Agreement or any of the other Financing Agreements, Agent is hereby irrevocably authorized from time to time and at any time to file such financing statements naming Agent or its designee as secured party and such Borrower, as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral. In addition, each Borrower shall promptly upon Agent’s request, execute and deliver, or cause to be executed and delivered, to Agent such other agreements, documents and instruments as Agent may require in order to perfect its security interest in such commercial tort claim.

 

(h)                    Borrowers do not have any goods, documents of title or other Collateral in the custody, control or possession of a third party as of the date hereof, except as set forth in the Information Certificate and except for goods located in the United States in transit to a location of a Borrower permitted herein in the ordinary course of business of such Borrower in the possession of the carrier transporting such goods.  In the event that any goods, documents of title or other Collateral are at any time after the date hereof in the custody, control or possession of any other person not referred to in the Information Certificate or such carriers, Borrowers shall promptly notify Agent thereof in writing.  Promptly upon Agent’s request, Borrowers shall use commercially reasonable efforts to deliver to Agent a Collateral Access Agreement duly authorized, executed and delivered by such person and Borrowers as owner of such Collateral.

 

(i)                        Borrowers shall take any other actions reasonably requested by Agent from time to time to cause the attachment, perfection and (subject to liens permitted hereunder) first priority of, and the ability of Agent to enforce, the security interest of Agent in any and all of the Collateral, including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that any Borrower’s signature thereon is required therefor, (ii) complying with any provision of any statute, regulation or treaty as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iii) using its commercially reasonable efforts (but excluding the payment of reasonable attorneys’ fees and expenses of any person in connection therewith) to obtain the consents and approvals of any Governmental Authority or third party, including, without limitation, any consent of any licensor, lessor or other person obligated on Collateral, and (iv) taking all actions required by any law, as applicable in any relevant jurisdiction.

 

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SECTION 6.   COLLECTION AND ADMINISTRATION

 

6.1          Borrowers’ Loan Accounts .  Agent shall maintain one or more loan account(s) on its books in which shall be recorded (a) all Loans, Letter of Credit Accommodations and other Obligations and the Collateral, (b) all payments made by or on behalf of any Borrower and (c) all other appropriate debits and credits as provided in t