EXHIBIT 10.1
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HAWK CORPORATION SEPTEMBER 27, 2002
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HAWK CORPORATION
SENIOR SECURED CREDIT FACILITIES
SUMMARY OF TERMS AND CONDITIONS
SEPTEMBER 27, 2002
BORROWERS: Hawk Corporation ("HAWK") and certain of its domestic
subsidiaries (each a "BORROWER" and collectively, the
"BORROWERS"). Domestic subsidiaries of Hawk which are
Borrowers will be joint and several co-Borrowers.
GUARANTORS: Each of Hawk's existing and future domestic
subsidiaries, and certain of its foreign subsidiaries
(to the extent that such guaranty would not create undue
adverse tax consequences to such party), that are not a
Borrower shall be required to guaranty the obligations
of the Borrowers under the Credit Facility
(collectively, the "GUARANTORS" and together with the
Borrowers, the "CREDIT PARTIES").
ADMINISTRATIVE AGENT JPMorgan Chase Bank ("JPM CHASE") shall act as sole and
AND ADVISOR: exclusive Administrative Agent and Collateral Agent (the
"AGENT"). X. X. Xxxxxx Business Credit Corp. ("JPMBC"
and, together with JPM Chase, "JPM") shall act as
Advisor.
LENDERS: PNC Business Credit Corporation, Fleet Capital
Corporation and JPM (collectively, the "LENDERS").
DESCRIPTION OF THE The credit facility shall consist of (i) a revolving
CREDIT FACILITY: line of credit (the "REVOLVING CREDIT FACILITY") in a
maximum amount (including up to $5,000,000 of Letters of
Credit (the "LC SUBLIMIT")) not to exceed $50,000,000
(the "MAXIMUM REVOLVING COMMITMENT AMOUNT") and (ii) a
capital expenditure facility (the "CAPEX FACILITY") in a
maximum amount not to exceed $3,000,000. The Revolving
Credit Facility and the Capex Facility are collectively
referred to as the "CREDIT FACILITY".
REVOLVING FACILITY: The Revolving Credit Facility shall expire and
terminate, unless extended in accordance with the terms
of the Facility Documents, four years from the Closing
Date (the "FINAL MATURITY DATE"); provided that, subject
to the terms stated herein, the Final Maturity shall in
no event be later than the date which is 120 days prior
to the maturity date of the Exchange Notes referred to
below. The Borrowers shall be
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Page 1 of 16
permitted to borrow, repay and reborrow loans and
advances under the Revolving Credit Facility ("REVOLVING
CREDIT LOANS"), and have Letters of Credit issued for
their accounts (up to the LC Sublimit) until the Final
Maturity Date; provided, however, that the sum of (i)
the aggregate amount of all Revolving Credit Loans
(including all principal, accrued interest, fees and
charges), (ii) the aggregate amount available to be
drawn under all outstanding Letters of Credit, and (iii)
the aggregate exposure under all Hedging Agreements
shall not exceed the lesser of (a) the Maximum Revolving
Commitment Amount or (b) the Borrowing Base (as defined
below). All Letters of Credit issued under the Credit
Facility shall expire within 364 days from the date of
issuance and in any event no later than 30 days prior to
the Final Maturity Date.
CAPEX FACILITY: The Capex Facility shall expire and terminate on the
Final Maturity Date. The Borrowers shall be permitted to
borrow advances under the Capex Facility ("CAPEX LOANS",
and together with the Revolving Credit Loans, the
"LOANS") in a maximum principal amount of up to
$2,000,000 during the calendar year ended 12/31/03, and
up to $1,000,000 in any subsequent calendar year. Draws
may finance up to 80% of the hard cost of equipment
purchased after the Closing Date, supported by invoices,
as reviewed by Agent in its sole discretion. Capex Loans
may be borrowed no more often than once in any fiscal
quarter and must be in minimum principal amounts of
$250,000.
At the end of each calendar year, beginning with the
year ending December 31, 2003, the principal amount of
all Capex Loans borrowed during such calendar year will
begin to amortize on a seven year, straight-line basis.
The remaining outstanding principal amount of all Capex
Loans will be due and payable on the Final Maturity
Date.
COMMITMENT: The Lenders will commit to provide the entire amount of
the Credit Facility.
CLOSING DATE: On or before 11/30/2002, unless otherwise extended by
the Lenders.
BORROWING BASE: The Borrowing Base shall equal the sum of:
A. Up to 85% of Eligible Accounts (as defined below);
plus
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B. Up to the lesser of (I) the sum of (a) 65% of the
cost of Eligible Inventory (as defined below) which
is not work-in-process and (b) 25% of the cost of
Eligible Inventory which is work-in-process, capped
at $4,000,000, (ii) 85% of the appraised net
recovery value of Eligible Inventory based on an
inventory appraisal acceptable to the Agent in its
discretion, (iii) $15,000,000; plus
C. The Fixed Asset Availability (as defined below)
"ELIGIBLE ACCOUNTS" shall mean those domestic accounts
receivable of Hawk and its domestic subsidiaries for
which an invoice has been sent for goods sold or
services rendered by Hawk or such subsidiaries that are
not subject to any offset or deduction, and that meet
customary criteria for eligibility as determined by the
Agent in its discretion. Ineligible receivables may
include, but are not limited to:
(a) receivables that are more than 90 days from invoice
date or more than 60 days from due date (the Lenders
may from time to time, in their reasonable
discretion, elect to treat certain trade receivables
which are the subject of normal seasonal dating
terms programs, assuming they meet all other
criteria for eligibility, as Eligible Accounts);
(b) foreign receivables (other than certain Canadian
receivables) (the Lenders may from time to time, in
their reasonable discretion, elect to treat certain
foreign trade receivables as Eligible Accounts,
assuming they meet all other criteria for
eligibility, if (1) a payment guaranty for such
trade receivable has been submitted from a reputable
U.S. domiciled corporation, which such guaranty is
acceptable in form and substance to the Lenders and
their counsel, or (2) a letter of credit has been
submitted which secures such foreign trade
receivable and is otherwise acceptable to the
Lenders and their counsel);
(c) receivables owing from affiliated companies;
(d) contra accounts (i.e. receivables owing from
entities to whom there also offsetting payables or
other liabilities);
X.X. XXXXXX BUSINESS CREDIT CORP. CONFIDENTIAL
(e) bill and hold accounts;
(f) chargebacks;
(g) receivables evidenced by promissory notes, warrants
or other instruments or chattel paper,
(h) receivables owing from individuals and governmental
authorities;
(i) receivables owing from an account debtor where more
than 50% of the total receivables owing from such
account debtor are deemed ineligible;
(j) the portion, if any, of the aggregate amount of
receivables owing from any single account debtor
that exceeds 20% of the aggregate amount of
receivables owing from all account debtors at such
time;
(k) receivables owing from account debtors with an
unsatisfactory credit standing as determined by the
Agent in its reasonable discretion;
(1) receivables relating to the sale of goods or
rendering of services outside the ordinary course of
business;
(m) receivables which are not subject to a first
priority and perfected security interest in favor of
the Agent; and
(n) other receivables determined by the Agent in its
reasonable discretion not to be usual and customary
for the Credit Parties' type of business or
otherwise ineligible for inclusion in the Borrowing
Base.
"ELIGIBLE INVENTORY" shall be determined by the Agent in
its discretion based on periodic field examinations and
inventory appraisals to be conducted by the Agent from
time to time, in each case, as described in "CONDITIONS
PRECEDENT" below. Eligible Inventory shall generally
include raw material, work in process and finished goods
inventory that is located in the United States on
premises owned or leased by Hawk and its domestic
subsidiaries (provided that all leased facilities shall
be covered by satisfactory landlord waiver
documentation). Ineligible inventory may include, but
not be limited to packaging, slow moving or obsolete
inventory, damaged or
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defective inventory, inventory on consignment, inventory
held for return to vendors, and other inventory which
the Agent deems unacceptable in its good faith
discretion.
The "FIXED ASSET AVAILABILITY" shall initially be equal
to the lesser of:
A. 81% of the sum of (i) the net forced liquidation
value of the machinery and equipment of Hawk and its
domestic subsidiaries, based on an appraisal
acceptable to the Agent in its discretion and (ii)
the net liquidation value of the real property owned
by Hawk and its domestic subsidiaries located in the
United States, based on an appraisal acceptable to
the Agent in its discretion; and
B. $13,000,000.
The "FIXED ASSET ADVANCE" shall mean the principal
amount of Revolving Credit Loans which shall be drawn
fully on the Closing Date pursuant to the Fixed Asset
Availability. On the last day of each calendar month
beginning in March, 2003, the Fixed Asset Advance will
amortize based on a seven year, straight-line
amortization schedule, and the Fixed Asset Availability
will be reduced dollar for dollar with such
amortization.
The advance rates for Eligible Accounts are subject to
the Agent's confirmation of a receivables dilution
percentage of not more than 5%, based on periodic field
examinations to be completed by the Agent. The advance
rate and dollar limit on Eligible Inventory is subject
to the Agent's review and satisfaction with the results
of a field examination and an inventory appraisal. The
Agent shall have the right, upon the completion of field
examinations and inventory and other appraisals
conducted prior to the term of the Credit Facility, and
periodic field examinations and inventory appraisals
conducted from time to time by the Agent during the term
of the Credit Facility, in each case, as described in
"CONDITIONS PRECEDENT" below, to reduce advance rates,
impose further dollar limits on eligible collateral,
establish reserves and impose other criteria for
determining the eligibility of collateral.
COLLATERAL "COLLATERAL AVAILABILITY" will be defined as the amount
AVAILABILITY: by which (a) the Borrowing Base exceeds (b) the sum of
all
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outstanding Revolving Credit Loans, Letters of Credit,
accrued charges, interest and fees, and exposure under
Hedging Agreements.
REVOLVING "REVOLVING AVAILABILITY" will be defined as the amount
AVAILABILITY: by which (a) the lesser of (i) the Borrowing Base and
(ii) the Maximum Revolving Commitment Amount exceeds (b)
the sum of all outstanding Revolving Credit Loans,
Letters of Credit, accrued charges, interest and fees,
and exposure under Hedging Agreements. The Credit
Parties shall have minimum Revolving Availability as of
the Closing Date (after giving effect to the funding of
all Revolving Credit Loans and the issuance of all
Letters of Credit to be funded or issued as of the
Closing Date) of not less than $9,000,000.
PURPOSE: The proceeds of the Credit Facility shall be used
solely: (i) to refinance existing senior secured
indebtedness of the Credit Parties, (ii) to pay fees and
expenses incurred in connection with the closing of the
Credit Facility and the Exchange Notes, (iii) to finance
the ongoing working capital requirements of the Credit
Parties, (iv) for the issuance of letters of credit for
the accounts of the Credit Parties up to the LC
Sublimit, (v) subject to the terms and conditions set
forth below, to redeem certain of the Borrowers 10.25%
senior notes due December 1, 2003 (the "PRE-EXCHANGE
NOTES"), and (vi) for general corporate purposes. The
Credit Parties will not be permitted to utilize proceeds
from the Credit Facility to redeem, repay or prepay, in
whole or in part, the Exchange Notes at any time.
REDEMPTION OF PRE- Beginning on the date on which the Borrowers shall have
EXCHANGE NOTES USING submitted their fiscal year end audit report for the
PROCEED OF THE year ended 12/31/2002, so long as the Borrowers are in
CREDIT FACILITY: compliance with the Credit Facility at such date,
the Borrowers shall be permitted to redeem certain of
their Pre-Exchange Notes then outstanding using proceeds
from Revolving Loans (the "PRE-EXCHANGE NOTE
REDEMPTION"), PROVIDED THAT the Borrowers demonstrate
average excess Collateral Availability, during the 30
calendar day period immediately preceding such proposed
Pre-Exchange Note Redemption (or, in the case that the
amount of Pre-Exchange Notes then outstanding is in
excess of $3,000,000, during the 60 calendar day period
immediately preceding such proposed Pre-Exchange Note
Redemption), of the sum of (a) the face amount of
Pre-Exchange Notes proposed for a Pre-Exchange Note
Redemption, PLUS (b) an amount to be determined, but not
less than $6,000,000.
X.X. XXXXXX BUSINESS CREDIT CORP. CONFIDENTIAL
COLLATERAL: All obligations of the Borrowers under the Credit
Facility (and under all foreign exchange contracts and
interest rate protection agreements between the
Borrowers and the Lenders (collectively, the "HEDGING
AGREEMENTS")) shall be secured by an exclusive first
priority security interest in all tangible and
intangible property and assets of the Credit Parties,
including, without limitation, 100% of the outstanding
capital stock of each direct or indirect domestic
subsidiary of Hawk and 65% of the outstanding capital
stock of each direct or indirect foreign subsidiary of
Hawk (including, in each case, any subsidiaries that may
be formed, created or acquired after the Closing Date),
all cash and cash equivalents, deposit accounts,
accounts receivable, instruments, inventory, fixtures,
machinery, equipment, real property, rights under
contracts and licenses, patents, copyrights and
trademarks, and all products and proceeds of any and all
of the foregoing (collectively, the "COLLATERAL").
INTEREST RATES: See Schedule "A" attached hereto.
DOCUMENTATION: All loan, security and other documents (collectively,
the "FACILITY DOCUMENTS"), shall be prepared by counsel
for the Agent and shall contain, among other things,
customary conditions precedent, representations and
warranties, affirmative covenants (including reporting
requirements), negative covenants, and events of
default. Such covenants shall include, but not be
limited to: delivery of financial statements and
Borrowing Base certificates, access to financial
information, field examination and inspection rights,
compliance with financial covenants, restrictions on
liens, indebtedness, capital and operating leases, the
sale or transfer of assets, mergers and acquisitions,
investments (including officer loans), dividends,
management fees and distributions, restrictions on
voluntary prepayment of other debt, compliance with
laws, maintenance of insurance, compliance with the
Financial Covenants and other covenants to be determined
in the reasonable discretion of the Agent. All Facility
Documents shall be mutually acceptable to the Borrowers,
the Agent, the Lenders, and their respective counsel.
FINANCIAL COVENANTS: The Credit Parties shall be required to maintain or meet
certain mutually agreed upon financial ratios or other
tests including but not limited to:
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(1) EBITDA of not less than 95% of that which was
forecast in the Borrowers' submitted financial
statement projections for the fiscal year ended
12/31/2002.
(2) Maximum Capital Expenditures of not more than
$13,000,000 for the fiscal year ended 12/31/2002.
(3) Fixed Charge Coverage Ratio of not less than: (a)
1.05 to 1.00 for the quarterly LTM periods ending
3/31/2003 through and including 6/30/2004 and (b)
1.10 to 1.00 for the quarterly LTM periods ending
thereafter.
(4) Leverage Ratio (to be measured quarterly) (a) of not
more than 4.85 to 1.00 at the Closing Date and as
measured as of the fiscal quarter ended 12/31/2002,
and (b) of an amount not greater than 4.85 to 1.00,
and declining over time on a schedule to be
determined, for fiscal quarters ended 3/31/2003 and
thereafter.
The "FIXED CHARGE COVERAGE RATIO" shall be defined as
(x) consolidated EBITDA for the period of twelve
consecutive months most recently ended ("LTM"), divided
by (y) the sum of (1) cash interest expense during the
LTM, plus (2) scheduled payments in respect of long term
indebtedness during the LTM (excluding amortization on
the refinanced Key Bank Facilities, but including
pro-forma amortization of the Fixed Asset Advance), plus
(3) cash taxes paid during the LTM, plus (4) cash
dividends and distributions during the LTM, plus (5)
management fees paid in cash during the LTM, plus (6)
capital expenditures during the LTM not financed with
indebtedness for borrowed money. The Fixed Charge
Coverage Ratio shall be tested as of the end of each
fiscal quarter commencing 3/31/2003.
The "LEVERAGE RATIO" shall be defined as (x)
consolidated total funded debt for borrowed money
divided by (y) EBITDA for the LTM.
COVENANT REGARDING If any amount of Pre-Exchange Notes remain outstanding
PRE-EXCHANGE NOTES: following the Closing Date, the Borrowers agree to
submit to the Lenders, upon the request of any one or
more of the Lenders, a written plan describing how they
will refinance such Pre-Exchange Notes which such plan
will include, among other things, the planned execution
timetable for such refinance.
X.X. XXXXXX BUSINESS CREDIT CORP. CONFIDENTIAL
At any time on or after June 1, 2003, the Agent and/or
any of the Lenders, may require that the Borrower fully
repay or refinance all Pre-Exchange Notes then
outstanding, and the Borrower acknowledges its
obligation to comply with any such requirement by not
later than sixty days following the date of such notice.
CONDITIONS Prior to or simultaneously with the Closing Date, each
PRECEDENT: of the following conditions (together with such other
conditions precedent as the Agent or the Lenders shall
reasonably require) shall have been satisfied by the
Credit Parties (as determined by the Agent, in its
discretion):
1. The Credit Parties, the Agent and the Lenders shall
have entered into the Facility Documents containing,
among other things, customary representations and
warranties, conditions precedent, events of default
and affirmative and negative covenants.
2. The Lenders shall have received and be satisfied
with the prior three most recent years' historical
audited financial statements for Hawk, specifically
the fiscal years ended December 31, 1999, 2000, and
2001 and the unaudited financial statements for Hawk
for the fiscal quarters ended March 31, 2002 and
June 30, 2002. Additionally, the Agent shall have
received and be satisfied with all written
materials, reports and/or management letters, if
any, prepared by the Borrowers' current independent
accountants with respect to the Borrowers. All
financial statements shall consist of at least a
balance sheet, income statement and statement of
cash flows in accordance with GAAP.
3. The Lenders shall have received and be satisfied
with pro forma projections of balance sheets, income
and cash flow statements of the Credit Parties for
the fiscal years ended December 31, 2002, 2003 and
2004. The projections shall be prepared in
accordance with GAAP, with sufficient detail to
determine fixed and variable costs, as well as
provide adequate text explaining the significant
assumptions from which they were prepared. For the
fiscal year ended December 31, 2002, such
projections shall be prepared on a monthly basis and
for the fiscal year ended December 31, 2003, such
projections shall be prepared on at least a
quarterly basis (demonstrating projected financial
results for the
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subsequent 12-month period). For the fiscal year
ended December 31, 2004, such projections shall be
prepared on an annual basis.
4. The Lenders shall have received and be satisfied
that August 2002 and September 2002 EBITDA results
are at least 95% of that which was forecast in
Hawk's submitted financial projections.
5. The Agent shall have conducted both initial and
takedown field examinations of the Credit Parties'
assets, liabilities, management information and cash
management systems, books and records, and the
results of such field examination shall be
satisfactory to the Agent in all respects. After the
Closing Date, field examinations will be required at
least semi-annually at the sole cost of the Credit
Parties.
6. The Agent, on behalf of the Lenders, shall have
conducted and be satisfied with reasonable due
diligence checks on the Credit Parties' customers
and suppliers.
7. The Agent shall be satisfied with the Credit Parties
management information systems and cash management
systems.
8. The Credit Parties shall have satisfied the Agent as
to the existence of adequate casualty, all-risk,
liability and other insurance coverage in form and
substance satisfactory to the Agent and shall have
satisfactorily named the Agent as mortgagee, loss
payee and additional insured on all such policies.
9. The Credit Parties shall have demonstrated to the
Agent that they are in compliance with all federal
and state governmental regulations, licensing and
registration requirements applicable to the Credit
Parties' industry, except where the failure to so
comply could not be expected to have a material
adverse effect.
10. The Agent shall have obtained first priority liens
and security interests on all Collateral of the
Credit Parties.
11. The Agent shall have received and be satisfied with
opinions of counsel to the Credit Parties covering
such
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matters as the Agent shall reasonably require.
12. The Agent shall have received, and be satisfied with
an appraisal, to be performed by a third party
appraiser acceptable to the Agent, of the Borrower's
inventory. Thereafter periodic inventory appraisals
will be required at the Agent's discretion and at
the Borrower's expense. Such inventory appraisals
shall generally be conducted on an annual basis,
subject to the Agent's discretion to conduct such
appraisals more or less frequently.
13. The Agent shall have received, reviewed and be
satisfied with an appraisal of the Borrower's
machinery & equipment and real property, all
prepared using valuation methodology acceptable to
the Agent. To the extent existing appraisals are
deemed acceptable in form and content to the Agent,
Borrower will be required to direct such appraisers
to "recertify" such appraisals directly to the
Agent.
14. The Agent shall have received and be satisfied with
landlord's waivers on the Borrowers' leased
facilities. Such landlord's waivers shall be in a
form and substance satisfactory to the Agent.
15. Hawk shall have completed its offer to exchange
Pre-Exchange Notes for new senior notes (the
"EXCHANGE NOTES"), which Exchange Notes shall be in
an amount, and have terms, conditions, covenants and
a maturity date satisfactory to the Lenders in their
sole discretion.
16. The Agent shall be satisfied in its sole discretion
with the environmental reviews performed with
respect to the Credit Parties' owned real property.
CONDITIONS PRECEDENT Prior to or simultaneously with the making of any
TO ALL LOANS: Revolving Credit Loan (including the initial Loans) or
any Capex Loan, each of the following conditions
(together with such other customary conditions precedent
as the Agent or the Lenders shall reasonably require)
shall have been satisfied by the Credit Parties (as
determined by the Agent, in its discretion): (i) all
representations and warranties shall be true and correct
in all respects (or, in the case of any Loan other than
the initial Loans, true and correct in all material
respects) as of the date
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of such Loan and (ii) no event of default or unmatured
event of default under the Credit Facility shall have
occurred and be continuing.
CASH MANAGEMENT: The Credit Parties shall be required to establish and
maintain a cash management system acceptable to the
Agent that provides for the Credit Parties' account
debtors to remit all payments in respect of receivables
and other amounts due to the Credit Parties to lockbox
and blocked accounts maintained by the Credit Parties
with JPM Chase or with such other financial institutions
as shall be acceptable to the Agent. All such financial
institutions at which such lockbox or blocked accounts
are maintained shall be required to enter into account
control agreements in form and substance satisfactory to
the Agent that provide for the daily collection and
remittance to a collection account at JPM Chase of all
proceeds of accounts receivable and other cash received
by the Credit Parties. The outstanding loan balance
under the Credit Facility shall increase with each new
borrowing and decrease upon the receipt and application
by the Agent of cash collections (using a one business
day collection process).
REPORTING: The Credit Parties will provide the Agent with
Collateral reporting as the Agent may request, which may
include, but not by way of limitation, weekly sales and
collection reports, and monthly summary and/or detailed
aging reports for accounts payable and accounts
receivable, monthly inventory declarations and monthly
Borrowing Base Certificates. The Credit Parties shall
also deliver to the Agent: (i) monthly consolidated and
consolidating financial statements (including balance
sheet and income statement) and covenant compliance
certificates prepared and certified by management in
accordance with GAAP (subject to normal year-end
adjustments and the absence of footnotes) not later than
15 business days after the end of each month; (ii)
quarterly consolidated and consolidating financial
statements (including balance sheet, income statement
and cash flow statement) and compliance certificates
prepared and certified by management in accordance with
GAAP (subject to normal year-end adjustments) not later
than 45 days after the end of each fiscal quarter; (iii)
annual audited (with unqualified opinion) financial
statements of the Credit Parties prepared by an
independent certified public accounting firm
satisfactory to the Agent not later than 90 days after
the end of each year; (iv) preliminary annual financial
projections (prepared using projected monthly data) of
the Credit Parties for the
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subsequent year prepared by management in accordance
with GAAP to be submitted as soon as they are prepared,
and in any case not later than 12/31 of the year
preceding the projection year, and (v) finalized annual
financial projections (prepared using projected monthly
data) of the Credit Parties for the subsequent year
prepared by management in accordance with GAAP to be
submitted as soon as they are prepared, but in any case
not later than 1/31 of the projection year.
EXPENSES: The Borrowers shall reimburse JPM for all out-of-pocket
costs and expenses incurred by JPM in connection with
the delivery of JPM's commitment and for all
out-of-pocket costs incurred by the Agent and JPMBC in
connection with the arrangement, establishment,
syndication and administration of the Credit Facility,
including, without limitation, all field examination
fees and expenses, appraisal costs, travel costs,
reasonable fees and expenses of Agent's counsel incurred
in connection with the preparation, execution and
administration of the Facility Documents, filing fees,
search fees, recording fees, accounting and appraisal
fees, and other customary fees and expenses, whether or
not the Credit Facility is established.
INDEMNIFICATION: The Borrowers shall indemnify JPM and the Lenders and
their respective affiliates from and against any and all
losses, claims, damages, liabilities, deficiencies,
judgments or expenses, other than for their own gross
negligence or willful misconduct (as determined by a
final, non-appealable judgment of a court of competent
jurisdiction), incurred by any of them arising out of or
by result of the Credit Facility, the commitments
thereunder, the use of the proceeds of the Credit
Facility thereof or any related transaction or any
litigation, investigation, claim or proceeding, pending
or threatened (whether or not any indemnified person is
a party thereto), which arise out of or are in any way
based upon any of the foregoing, including without
limitation, amounts paid in settlement, court costs and
the fees and disbursements of counsel incurred in
connection with any such litigation, investigation,
claim or proceedings.
REQUIRED LENDERS: The consent of Lenders holding in the aggregate 51% of
the total commitments shall be required for consents,
waivers and other actions, except that (i) certain
customary consents and waivers shall require the
unanimous consent of all affected Lenders, and (ii) if
at any time there are only two Lenders holding interests
in the Credit Facility, the unanimous consent
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of both Lenders shall be required for all consents,
waivers and other actions.
GOVERNING LAW: New York
AGENT'S COUNSEL: Xxxxx, Day, Xxxxxx & Xxxxx
X.X. XXXXXX BUSINESS CREDIT CORP. CONFIDENTIAL
SCHEDULE "A"
TO SUMMARY OF TERMS AND CONDITIONS DATED SEPTEMBER 27, 2002
HAWK CORPORATION
INTEREST RATES & COMMITMENT FEE
INTEREST RATES: With respect to all outstanding Revolving Credit Loans,
other than the Fixed Asset Advance, the initial
applicable interest rate will be (i) LIBOR plus 250
basis points, or (ii) Prime plus 0 basis points. With
respect to outstanding Revolving Credit Loans which are
part of the Fixed Asset Advance and any advances under
the Capex Facility, the initial applicable interest rate
will be (i) LIBOR plus 300 basis points, or (ii) Prime
plus 50 basis points. The initial interest rates will be
in effect until the earlier of (1) receipt of the Credit
Parties' audited financial statements for the fiscal
year ending December 31, 2002, or (2) March 31, 2003,
and thereafter will be subject to the performance
pricing grid set forth below.
As used herein, (a) "LIBOR" means the London Interbank
Offered Rates quoted by recognized financial sources
such as Reuters or Bloomberg, adjusted if necessary for
any statutory reserves, and (b) "PRIME" means the rate
announced by X.X. Xxxxxx Xxxxx & Co. as its prime rate.
LIBOR-based Revolving Credit loans will be available for
interest periods of one, two or three months, and
available in amounts not less than $500,000 each. All
interest rates shall be calculated based on a 360 day
year.
COMMITMENT FEE: The Borrowers shall be required to pay a commitment fee
of 0.375% per annum (subject to the grid set forth
below) on the average daily unused amount of the sum of
Revolving Credit Commitment and the Capex Commitment
during the preceding quarter and calculated on the basis
of a 360 day year, payable quarterly in arrears
commencing on the first day of the calendar quarter
following the Closing Date. The commitment fee will be
subject to the pricing grid set forth below, commencing
on the date on which the pricing grid comes into effect
with respect to interest rates.
PERFORMANCE
PRICING GRID: Initial pricing for Revolving Credit Loans which are not
part of the Fixed Asset Advance will be at Level 3, and
will be in effect until the earlier of (1) receipt of
the Borrowers audited financial statements for the
fiscal year ending December 31, 2002, or (2) March 31,
2003. Thereafter pricing will be subject to the
following pricing grid:
X.X. XXXXXX BUSINESS CREDIT CORP. CONFIDENTIAL
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LIBOR Prime
Level Leverage Ratio Margin Margin Commitment Fee
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1 4.75 or higher 325 bps 50 bps 50 bps
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2 4.00 -- 4.75 275 bps 25 bps 37.5 bps
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3 3.00 -- 3.99 250 BPS 0 BPS 37.5 BPS
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4 Below 3.00 225 bps 0 bps 25 bps
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Revolving Credit Loans which comprise the Fixed Asset
Advance, as well as any advances under the Capex
Facility, shall bear interest at rates which shall be 50
basis points higher than the above applicable LIBOR and
Prime Margins.
DEFAULT RATE: At the discretion of the Agent and the Required Lenders,
all outstanding principal shall bear interest at a rate
equal to 200 basis points in excess of the otherwise
applicable rate upon the occurrence and during the
continuance of an event of default and all overdue
interest, fees and other amounts shall bear interest at
a rate equal to 200 basis points in excess of the rate
applicable to Prime Rate Loans upon the occurrence and
during the continuance of an event of default.
X.X. XXXXXX BUSINESS CREDIT CORP. CONFIDENTIAL
