Exhibit 10.1

Execution Copy

 

 

AGY HOLDING CORP.,

AGY AIKEN LLC, and

AGY HUNTINGDON LLC,

as Borrowers

 

 

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

Dated as of March 8, 2011

$50,000,000

 

 

CERTAIN FINANCIAL INSTITUTIONS,

as Lenders

and

BANK OF AMERICA, N.A.,

as Administrative Agent

and

UBS SECURITIES LLC,

as Documentation Agent

 

 

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TABLE OF CONTENTS

 

          Page  

Section 1. DEFINITIONS; RULES OF CONSTRUCTION

     1   

1.1.

  

Definitions

     1   

1.2.

  

Accounting Terms

     33   

1.3.

  

Uniform Commercial Code

     33   

1.4.

  

Certain Matters of Construction

     33   

Section 2. CREDIT FACILITIES

     34   

2.1.

  

Revolver Commitment

     34   

2.2.

  

Reserved

     35   

2.3.

  

Letter of Credit Facility

     35   

Section 3. INTEREST, FEES AND CHARGES

     38   

3.1.

  

Interest

     38   

3.2.

  

Fees

     39   

3.3.

  

Computation of Interest, Fees, Yield Protection

     39   

3.4.

  

Reimbursement Obligations

     40   

3.5.

  

Illegality

     40   

3.6.

  

Inability to Determine Rates

     40   

3.7.

  

Increased Costs; Capital Adequacy

     40   

3.8.

  

Mitigation

     41   

3.9.

  

Funding Losses

     41   

3.10.

  

Maximum Interest

     42   

Section 4. LOAN ADMINISTRATION

     42   

4.1.

  

Manner of Borrowing and Funding Revolver Loans

     42   

4.2.

  

Defaulting Lender

     44   

4.3.

  

Number and Amount of LIBOR Loans; Determination of Rate

     44   

4.4.

  

Borrower Agent

     44   

4.5.

  

One Obligation

     45   

4.6.

  

Effect of Termination

     45   

Section 5. PAYMENTS

     45   

5.1.

  

General Payment Provisions

     45   

5.2.

  

Repayment of Revolver Loans

     45   

5.3.

  

Reserved

     45   

5.4.

  

Payment of Other Obligations

     45   

5.5.

  

Marshaling; Payments Set Aside

     45   

5.6.

  

Post-Default Allocation of Payments

     46   

5.7.

  

Application of Payments

     46   

5.8.

  

Loan Account; Account Stated

     47   

5.9.

  

Taxes

     47   

5.10.

  

Lender Tax Information

     47   

5.11.

  

Nature and Extent of Each Borrower’s Liability

     48   

Section 6. CONDITIONS PRECEDENT

     50   

6.1.

  

Conditions Precedent to Initial Loans

     50   

6.2.

  

Conditions Precedent to All Credit Extensions

     51   

Section 7. COLLATERAL

     52   

7.1.

  

Grant of Security Interest

     52   

7.2.

  

Lien on Deposit Accounts; Cash Collateral

     53   

7.3.

  

Real Estate Collateral

     53   

7.4.

  

Other Collateral

     53   

7.5.

  

No Assumption of Liability

     54   

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7.6.

  

Further Assurances

     54   

7.7.

  

Foreign Subsidiary Stock

     54   

Section 8. COLLATERAL ADMINISTRATION

     54   

8.1.

  

Borrowing Base Certificates

     54   

8.2.

  

Administration of Accounts

     54   

8.3.

  

Administration of Inventory

     55   

8.4.

  

Administration of Equipment

     55   

8.5.

  

Administration of Deposit Accounts

     56   

8.6.

  

General Provisions

     56   

8.7.

  

Power of Attorney

     57   

8.8.

  

Existing Letters of Credit

     58   

Section 9. REPRESENTATIONS AND WARRANTIES

     58   

9.1.

  

General Representations and Warranties

     58   

9.2.

  

Complete Disclosure

     63   

Section 10. COVENANTS AND CONTINUING AGREEMENTS

     63   

10.1.

  

Affirmative Covenants

     63   

10.2.

  

Negative Covenants

     66   

10.3.

  

Financial Covenant

     70   

Section 11. EVENTS OF DEFAULT; REMEDIES ON DEFAULT

     70   

11.1.

  

Events of Default

     70   

11.2.

  

Remedies upon Default

     72   

11.3.

  

License

     73   

11.4.

  

Setoff

     73   

11.5.

  

Remedies Cumulative; No Waiver

     73   

Section 12. AGENT

     74   

12.1.

  

Appointment, Authority and Duties of Agent

     74   

12.2.

  

Agreements Regarding Collateral and Field Examination Reports

     75   

12.3.

  

Reliance By Agent

     75   

12.4.

  

Action Upon Default

     75   

12.5.

  

Ratable Sharing

     75   

12.6.

  

Indemnification

     76   

12.7.

  

Limitation on Responsibilities of Agent

     76   

12.8.

  

Successor Agent and Co-Agents

     76   

12.9.

  

Due Diligence and Non-Reliance

     77   

12.10.

  

Remittance of Payments and Collections

     77   

12.11.

  

Agent in its Individual Capacity

     78   

12.12.

  

Agent Titles

     78   

12.13.

  

Bank Product Providers

     78   

12.14.

  

No Third Party Beneficiaries

     78   

Section 13. BENEFIT OF AGREEMENT; ASSIGNMENTS

     78   

13.1.

  

Successors and Assigns

     78   

13.2.

  

Participations

     79   

13.3.

  

Assignments

     79   

13.4.

  

Replacement of Certain Lenders

     80   

Section 14. MISCELLANEOUS

     80   

14.1.

  

Consents, Amendments and Waivers

     80   

14.2.

  

Indemnity

     81   

14.3.

  

Notices and Communications

     81   

14.4.

  

Performance of Borrowers’ Obligations

     82   

14.5.

  

Credit Inquiries

     82   

14.6.

  

Severability

     82   

14.7.

  

Cumulative Effect; Conflict of Terms

     82   

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14.8.

  

Counterparts

     82   

14.9.

  

Entire Agreement

     82   

14.10.

  

Relationship with Lenders

     82   

14.11.

  

No Advisory or Fiduciary Responsibility

     83   

14.12.

  

Confidentiality

     83   

14.13.

  

Certifications and Representations Regarding Indentures

     83   

14.14.

  

GOVERNING LAW

     84   

14.15.

  

Consent to Forum

     84   

14.16.

  

Waivers by Borrowers

     84   

14.17.

  

Patriot Act Notice

     84   

14.18.

  

Amendment and Restatement

     85   

LIST OF EXHIBITS AND SCHEDULES

 

Exhibit A

  

Revolver Note

Exhibit B

  

Assignment and Acceptance

Exhibit C

  

Assignment Notice

Exhibit D

  

Notice of Borrowing

 

Schedule 1.1

  

Commitments of Lenders

Schedule 8.5

  

Deposit Accounts

Schedule 8.6.1

  

Business Locations

Schedule 8.8

  

Existing Letters of Credit

Schedule 9.1.4

  

Names and Capital Structure

Schedule 9.1.11

  

Patents, Trademarks, Copyrights and Licenses

Schedule 9.1.14

  

Environmental Matters

Schedule 9.1.15

  

Restrictive Agreements

Schedule 9.1.16

  

Litigation

Schedule 9.1.18

  

Pension Plans

Schedule 9.1.20

  

Labor Contracts

Schedule 10.2.2

  

Existing Liens

Schedule 10.2.17

  

Existing Affiliate Transactions

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AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is dated as of March 8,
2011, among AGY HOLDING CORP., a Delaware corporation (“AGY Holdings”), AGY
AIKEN LLC, a Delaware limited liability company (“AGY Aiken”), and AGY
HUNTINGDON LLC, a Delaware limited liability company (“AGY Huntingdon”, and
together with AGY Holdings and AGY Aiken, collectively, “Borrowers”), the
financial institutions party to this Agreement from time to time as lenders
(collectively, “Lenders”), and BANK OF AMERICA, N.A., a national banking
association, as administrative agent for the Lenders (in such capacity, “Agent”)
and UBS SECURITIES LLC, as documentation agent for the Lenders (in such
capacity, “Documentation Agent”).

RECITALS:

Borrowers have requested that Lenders provide a credit facility to Borrowers to
finance their mutual and collective business enterprise. Lenders are willing to
provide the credit facility on the terms and conditions set forth in this
Agreement.

NOW, THEREFORE, for valuable consideration hereby acknowledged, the parties
agree as follows:

SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION

1.1. Definitions. As used herein, the following terms have the meanings set
forth below:

Account: as defined in the UCC, including all rights to payment for goods sold
or leased, or for services rendered.

Account Debtor: a Person who is obligated under an Account, Chattel Paper or
General Intangible.

Accounts Formula Amount: 85% of the Value of Eligible Accounts, minus the
Dilution Reserve.

Acquisition Consideration: the purchase consideration for any Permitted
Acquisition and all other payments by KAGY Holdings or any of its Subsidiaries
in exchange for, or as part of, or in connection with, any Permitted
Acquisition, whether paid in cash or by exchange of Equity Interests or of
properties or otherwise and whether payable at or prior to the consummation of
such Permitted Acquisition or deferred for payment at any future time, whether
or not any such future payment is subject to the occurrence of any contingency,
and includes any and all payments representing the purchase price and any
assumptions of Debt, “earn-outs” and other agreements to make any payment the
amount of which is, or the terms of payment of which are, in any respect subject
to or contingent upon the revenues, income, cash flow or profits (or the like)
of any Person; provided that any such future payment that is subject to a
contingency shall be considered Acquisition Consideration only to the extent of
the reserve, if any, required under GAAP at the time of such sale to be
established in respect thereof by KAGY Holdings or any of its Subsidiaries.

Additional Equity Proceeds: the aggregate amount of net cash proceeds received
by AGY Holdings pursuant to an issuance of its common equity (net of all taxes,
fees, commissions, costs and other expenses incurred in connection with such
issuance) conducted during any period commencing on the 60th day preceding the
completion of the Secondary Grace Purchase and ending on the date of such
completion, exclusive of any net proceeds of the Initial Grace Equity
Contribution.

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Affiliate: with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified. “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise. “Controlling” and
“Controlled” have correlative meanings.

Agent Indemnitees: Agent and its officers, directors, employees, Affiliates,
agents and attorneys.

Agent Professionals: attorneys, accountants, appraisers, auditors, business
valuation experts, environmental engineers or consultants, turnaround
consultants, and other professionals and experts retained by Agent.

AGY Aiken: the meaning assigned to such term in the preamble hereto.

AGY Cayman: a company incorporated in the Cayman Islands and a wholly-owned
Subsidiary of AGY Holdings.

AGY Holdings: the meaning assigned to such term in the preamble hereto.

AGY Holdings Guarantees: the (i) Secondary Grace Purchase Guaranty and the
(ii) guaranty by AGY Holdings of certain obligations of AGY Cayman under the
Framework Agreement.

AGY Huntingdon: the meaning assigned to such term in the preamble hereto.

AGY Shanghai: Shanghai Grace Technology Co., Ltd., a wholly-owned foreign
enterprise organized under the laws of the Peoples’ Republic of China.

Allocable Amount: as defined in Section 5.11.3.

Anti-Terrorism Laws: any laws relating to terrorism or money laundering,
including the Patriot Act.

Applicable Law: all laws, rules, regulations and governmental guidelines
applicable to the Person, conduct, transaction, agreement or matter in question,
including all applicable statutory law, common law and equitable principles, and
all provisions of constitutions, treaties, statutes, rules, regulations, orders
and decrees of Governmental Authorities.

Applicable Margin: with respect to any Type of Loan, the margin set forth below,
as determined by the Fixed Charge Coverage Ratio for the last Fiscal Quarter:

 

Level

  

Ratio

   Base Rate Revolver
Loans     LIBOR Revolver
Loans  

I

   < 1.0:1.0      2.00 %      3.00 % 

II

   > 1.0:1.0 < 1.50:1.0      1.75 %      2.75 % 

III

   > 1.50:1.0      1.50 %      2.50 % 

Until June 1, 2011, margins shall be determined as if Level I were applicable.
Thereafter, the margins shall be subject to increase or decrease upon receipt by
Agent pursuant to Section 10.1.2 of the financial statements and corresponding
Compliance Certificate for the last Fiscal Quarter, which change shall be
effective on the first day of the calendar month following receipt. If, by the
first day of a month, any financial statement or Compliance Certificate due in
the preceding month has not been received, then, at the option of Agent or
Required Lenders, the margins shall be determined as if Level I were applicable,
from such day until the first day of the calendar month following actual
receipt.

 

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Approved Fund: any Person (other than a natural person) that is engaged in
making, purchasing, holding or otherwise investing in commercial loans and
similar extensions of credit in its ordinary course of activities, and is
administered or managed by a Lender, an entity that administers or manages a
Lender, or an Affiliate of either.

Asset Disposition: a sale, lease, license, consignment, transfer or other
disposition of Property of an Obligor, including a disposition of Property in
connection with a Sale and Leaseback Transaction or synthetic lease.

Asset Sale: (a) any conveyance, sale, lease, sublease, assignment, transfer or
other disposition (including by way of merger or consolidation and including any
Sale and Leaseback Transaction) of any property, excluding sales of Inventory
and dispositions of cash and cash equivalents, in each case, in the Ordinary
Course of Business, by KAGY Holdings or any of its Subsidiaries and (b) any
issuance or sale of any Equity Interests of any Subsidiary of Holdings, in each
case, to any Person other than (i) Borrowers, (ii) any Subsidiary Guarantor or
(iii) other than for purposes of Section 10.2.6, any other Subsidiary.

Assignment and Acceptance: an assignment agreement between a Lender and Eligible
Assignee, in the form of Exhibit B.

Availability: the lesser of (i) the Borrowing Base, and (ii) the aggregate
amount of the Revolver Commitments.

Availability Block: $7,500,000.

Availability Reserve: the sum (without duplication) of (a) the Inventory
Reserve; (b) the Rent and Charges Reserve; (c) the LC Reserve; (d) the Bank
Product Reserve; (e) all accrued Royalties, whether or not then due and payable
by a Borrower; (f) the aggregate amount of liabilities secured by Liens upon
Collateral that are senior to Agent’s Liens (but imposition of any such reserve
shall not waive an Event of Default arising there from); (g) the Credit
Insurance Deductible Reserve; (h) mark-to-market adjustments concerning
Borrowers’ metal alloys and the Metals Value, as determined from time to time by
Agent in its Credit Judgment, and (i) such additional reserves, in such amounts
and with respect to such matters, as Agent in its Credit Judgment may elect to
impose from time to time.

Average Excess Availability: as of any date of determination, and for any
measurement period, the Excess Availability on the last Business Day of the
fiscal month or months most recently ended during such period.

Bank of America: Bank of America, N.A., a national banking association, and its
successors and assigns.

Bank of America Indemnitees: Bank of America and its officers, directors,
employees, Affiliates, agents and attorneys.

Bank Product: any of the following products, services or facilities extended to
any Borrower or Subsidiary by a Lender or any of its Affiliates: (a) Cash
Management Services; (b) products under Hedging Agreements; (c) commercial
credit card and merchant card services; and (d) leases and other banking
products or services as may be requested by any Borrower or Subsidiary, other
than Letters of Credit.

Bank Product Debt: Debt and other obligations of an Obligor relating to Bank
Products.

Bank Product Reserve: the aggregate amount of reserves established by Agent from
time to time - in its discretion in respect of Secured Bank Product Obligations.

 

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Bankruptcy Code: Title 11 of the United States Code.

Base Rate: for any day, a per annum rate equal to the greater of (a) the Prime
Rate for such day; (b) the Federal Funds Rate for such day, plus 0.50%; or
(c) LIBOR for a 30 day interest period as determined on such day, plus 1.0%.

Base Rate Loan: any Loan that bears interest based on the Base Rate.

Base Rate Revolver Loan: a Revolver Loan that bears interest based on the Base
Rate.

BOA Lease Agreement: Master Lease Agreement No. 18147-90000, dated as of
June 19, 2008, by and between AGY Holdings and Banc of America Leasing &
Capital, LLC, including any schedules, addendums, supplements or sub-leases
thereto, and any amendments, extensions, replacements and refinancing thereof.

Board of Governors: the Board of Governors of the Federal Reserve System.

Borrowed Money: with respect to any Obligor, without duplication, its (a) Debt
that (i) arises from the lending of money by any Person to such Obligor, (ii) is
evidenced by notes, drafts, bonds, debentures, credit documents or similar
instruments, (iii) accrues interest or is a type upon which interest charges are
customarily paid (excluding trade payables owing in the Ordinary Course of
Business), or (iv) was issued or assumed as full or partial payment for
Property; (b) Capital Leases; (c) reimbursement obligations with respect to
letters of credit; and (d) guaranties of any Debt of the foregoing types owing
by another Person.

Borrower Agent: as defined in Section 4.4.

Borrowing: a group of Loans of one Type that are made on the same day or are
converted into Loans of one Type on the same day.

Borrowing Base: on any date of determination, an amount equal to the lesser of
(a) the aggregate amount Revolver Commitments minus the LC Reserve, or (b) the
sum of, without duplication:

(i) the book value of Eligible Accounts of Borrowers multiplied by the Accounts
Formula Amount; plus

(ii) the lesser of (x) the advance rate of 65% of the Cost of Eligible Inventory
of Borrowers, or (y) the advance rate of 85% of the Net Recovery Cost Percentage
multiplied by the Cost of Eligible Inventory of Borrowers, plus

(iii) the Metals Assets Loan Value of Borrowers; provided, that the Metals
Assets Loan Value of Borrowers shall in no event exceed $40,000,000, minus

(iv) the Current Derivative Reserve; minus

(v) the Availability Block; minus

(vi) the Availability Reserve.

Borrowing Base Certificate: a certificate, in form and substance satisfactory to
Agent, by which Borrowers certify calculation of the Borrowing Base.

 

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Business Day: any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the laws of, or are in fact
closed in, North Carolina and Massachusetts, and if such day relates to a LIBOR
Loan, any such day on which dealings in Dollar deposits are conducted between
banks in the London interbank Eurodollar market.

Capital Expenditures: all liabilities incurred or expenditures made by a
Borrower or Subsidiary for the acquisition of fixed assets, or any improvements,
replacements, substitutions or additions thereto with a useful life of more than
one year, in accordance with GAAP.

Capital Lease: any lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.

Cash Collateral: cash, and any interest or other income earned thereon, that is
delivered to Agent to Cash Collateralize any Obligations.

Cash Collateral Account: a demand deposit, money market or other account
established by Agent at such financial institution as Agent may select in its
discretion, which account shall be subject to Agent’s Liens for the benefit of
Secured Parties.

Cash Collateralize: the delivery of cash to Agent, as security for the payment
of Obligations, in an amount equal to (a) with respect to LC Obligations, 105%
of the aggregate LC Obligations, and (b) if an Event of Default exists, with
respect to any inchoate, contingent or other Obligations (including Secured Bank
Product Obligations), Agent’s good faith estimate of the amount due or to become
due, including all fees and other amounts relating to such Obligations. “Cash
Collateralization” has a correlative meaning

Cash Equivalents: shall mean, as to any person, (a) marketable obligations
issued or unconditionally guaranteed by, and backed by the full faith and credit
of, the United States government or any agency or instrumentality thereof,
maturing within 12 months of the date of acquisition; (b) certificates of
deposit, time deposits and bankers’ acceptances maturing within 12 months of the
date of acquisition, and overnight bank deposits, in each case which are issued
by any Lender or a commercial bank organized under the laws of the United States
or any state or district thereof, rated A-1 (or better) by S&P or P-1 (or
better) by Moody’s at the time of acquisition, and (unless issued by a Lender)
not subject to offset rights; (c) repurchase obligations with a term of not more
than 30 days for underlying investments of the types described in clause
(a) above and entered into with any bank described in clause (b) above;
(d) commercial paper issued by any person incorporated in the United States
rated A-1 (or better) by S&P or P-1 (or better) by Moody’s, and maturing within
one year of the date of acquisition; (e) investments in money market funds
substantially all of whose assets are compromised of securities of the types
described in clauses (a) through (d) above, (f) unrestricted demand deposit
accounts maintained in the ordinary course of business; and (g) Dollars.

Cash Management Services: any services provided from time to time by Bank of
America or any of its Affiliates to any Borrower or Subsidiary in connection
with operating, collections, payroll, trust, or other depository or disbursement
accounts, including automated clearinghouse, e-payable, electronic funds
transfer, wire transfer, controlled disbursement, overdraft, depository,
information reporting, lockbox and stop payment services.

CERCLA: the Comprehensive Environmental Response Compensation and Liability Act
(42 U.S.C. § 9601 et seq.) and all implementing regulations.

Change in Law: the occurrence, after the date hereof, of (a) the adoption,
taking effect or phasing in of any law, rule, regulation or treaty; (b) any
change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof; or (c) the making, issuance or
application of any request, guideline, requirement or directive (whether or not
having the force of law) by any Governmental

 

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Authority; provided that the Dodd-Frank Wall Street Refinancing and Consumer
Protection Act and all rules, regulations, orders, requests, guidelines or
directives in connection therewith are deemed to have been adopted and gone into
effect after the date of this Agreement.

Change of Control:

(a) KAGY Holdings at any time ceases to own 100% of the Equity Interests of AGY
Holdings;

(b) at any time a change of control occurs under any Material Debt, the BOA
Lease Agreement or the DB Lease Agreement;

(c) prior to an IPO, (i) the Permitted Holders (collectively) cease to own, or
to have the power to vote or direct the voting of, Voting Stock of KAGY Holdings
representing a majority of the voting power of the total outstanding Voting
Stock of KAGY Holdings or (ii) the Permitted Holders cease to own Equity
Interests representing a majority of the total economic interests of the Equity
Interests of KAGY Holdings;

(d) (i) the Permitted Holders (collectively) shall fail to own, or to have the
power to vote or direct the voting of, Voting Stock of KAGY Holdings
representing more than 50% of the voting power of the total outstanding Voting
Stock of KAGY Holdings, (ii) the Permitted Holders cease to own Equity Interests
representing more than 50% of the total economic interests of the Equity
Interests of KAGY Holdings or (iii) any “person” or “group” (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that for purposes of this clause such
person or group shall be deemed to have “beneficial ownership” of all securities
that such person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of Voting Stock of KAGY Holdings representing more than 50% of the
voting power of the total outstanding Voting Stock of Holdings; or

(e) upon and following an TPO, during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of KAGY Holdings (together with any new directors whose election to
such Board of Directors or whose nomination for election was approved by a vote
of a majority of the members of the Board of Directors of KAGY Holdings, which
members comprising such majority are then still in office and 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 KAGY Holdings.

For purposes of this definition, a Person shall not be deemed to have beneficial
ownership of Equity Interests subject to a stock purchase agreement, merger
agreement or similar agreement until the consummation of the transactions
contemplated by such agreement.

Claims: all claims, liabilities, obligations, losses, damages, penalties,
judgments, proceedings, interest, costs and expenses of any kind (including
remedial response costs, reasonable attorneys’ fees and Extraordinary Expenses)
at any time (including after Full Payment of the Obligations or replacement of
Agent or any Lender) incurred by any Indemnitee or asserted against any
Indemnitee by any Obligor or other Person, in any way relating to (a) any Loans,
Letters of Credit, Loan Documents, or the use thereof or transactions relating
thereto, (b) any action taken or omitted in connection with any Loan Documents,
(c) the existence or perfection of any Liens, or realization upon any
Collateral, (d) exercise of any rights or remedies under any Loan Documents or
Applicable Law, or (e) failure by any Obligor to perform or observe any terms of
any Loan Document, in each case including all costs and expenses relating to any
investigation, litigation, arbitration or other proceeding (including an
Insolvency Proceeding or appellate proceedings), whether or not the applicable
Indemnitee is a party thereto.

 

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Closing Date: as defined in Section 6.1.

CMLTD: for any measurement period, with respect to the Borrowers and their
domestic Subsidiaries, the aggregate amount of long-term debt and Capital
Leases, other than the Revolver Loan, which became due during such period.

Code: the Internal Revenue Code of 1986.

Collateral: all Property described in Section 7.1, all Property described in any
Security Documents as security for any Obligations, and all other Property that
now or hereafter secures (or is intended to secure) any Obligations.

Commitment: for any Lender, the aggregate amount of such Lender’s Revolver
Commitment “Commitments” means the aggregate amount of all Revolver Commitments.

Commitment Termination Date: the earliest to occur of (a) the Revolver
Termination Date; (b) the date on which Borrowers terminate the Revolver
Commitments pursuant to Section 2.1.4; or (c) the date on which the Revolver
Commitments are terminated pursuant to Section 11.2.

Compliance Certificate: a certificate, in form and substance satisfactory to
Agent, by which Borrowers certify compliance with Sections 10.2.3 and 10.3, and
calculate the applicable Level for the Applicable Margin.

Contingent Obligation: any obligation of a Person arising from a guaranty,
indemnity or other assurance of payment or performance of any Debt, lease,
dividend or other obligation (“primary obligations”) of another obligor
(“primary obligor”) in any trimmer, whether directly or indirectly, including
any obligation of such Person under any (a) guaranty, endorsement, co-making or
sale with recourse of an obligation of a primary obligor; (b) obligation to make
take-or-pay or similar payments regardless of nonperformance by any other party
to an agreement; and (c) arrangement (i) to purchase any primary obligation or
security therefore, (ii) to supply funds for the purchase or payment of any
primary obligation, (iii) to maintain or assure working capital, equity capital,
net worth or solvency of the primary obligor, (iv) to purchase Property or
services for the purpose of assuring the ability of the primary obligor to
perform a primary obligation, or (v) otherwise to assure or hold harmless the
holder of any primary obligation against loss in respect thereof; provided,
however, that the time “Contingent Obligation” shall not include endorsements of
instruments for deposit or collection in the Ordinary Course of Business or any
product warranties. The amount of any Contingent Obligation shall be deemed to
be the stated or determinable amount of the primary obligation (or, if less, the
maximum amount for which such Person may be liable under the instrument
evidencing the Contingent Obligation) or, if not stated or determinable, the
maximum reasonably anticipated liability with respect thereto.

Control: the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ownership of Voting Stock, by contract, or otherwise, and the terms
“Controlling” and “Controlled” shall have meanings correlative thereto.

Controlled Investment Affiliate: with respect to any Person, any other Person
which directly or indirectly is in Control of, is Controlled by, or is under
common Control with, such Person and is organized by such Person (or any Person
Controlling such Person) primarily for making equity or debt investments in KAGY
Holdings or other portfolio companies of Sponsor.

Cost: as determined by Agent in good faith, with respect to Inventory, the lower
of (a) landed cost computed on first-in a first-out basis in accordance with
GAAP or (b) market value; provided, that for purposes of the calculation of the
Borrowing Base, (i) the Cost of the Inventory shall not include: (A) the portion
of the cost of Inventory equal to the profit earned by any Affiliate on the sale
thereof to a

 

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Borrower or (B) write-ups or write-downs in cost 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 Inventory Appraisal.

Credit Insurance Deductible Reserve; the aggregate amount, as determined from
time to time by Agent in its discretion, of all deductibles or self-insurance
payable by Borrowers under all policies of credit insurance.

Credit Judgment: Agent’s judgment exercised in good faith, and in the exercise
of reasonable business judgment (from the perspective of a secured, asset-based
lender) based upon its consideration of any factor that it believes (a) could
adversely affect the enforceability or priority of Agent’s Liens, or the amount
that Agent and Lenders could receive in liquidation of any Collateral;
(b) suggests that any collateral report or financial information delivered by
any Obligor is incomplete, inaccurate or misleading in any material respect;
(c) materially increases the likelihood of any Insolvency Proceeding involving
an Obligor; or (d) creates or could result in a Default or Event of Default. In
exercising such judgment, Agent may consider any factors that could increase the
credit risk of lending to Borrowers on the security of the Collateral.

Current Derivative Exposure: as of any date of determination, 100% of the
aggregate mark-to market exposure then owing by each Borrower under Hedging
Agreements, determined by Agent, in good faith and in a commercially reasonable
manner, based on net termination values and calculated as if such Hedging
Agreements were terminated as of such determination date and a payment were due
there under by any Borrower and furnished to the Agent on a bi-monthly basis (or
more frequently, in the commercially reasonable discretion of the Agent).

Current Derivative Reserve: the Reserve established from time to time by the
Agent based on the Current Derivative Exposure and such other factors and
conditions that the Agent in its Credit Judgment deems appropriate.

CWA: the Clean Water Act (33 U.S.C. §§ 1251 et seq.).

DB Acknowledgement Agreement: the Acknowledgement Agreement dated as of March 8,
2011, by and among Agent, DB Energy Trading and Borrowers, and any amendments
thereto.

DB Lease Agreement: the Master Lease Agreement dated as of September 28, 2009,
by and between AGY Holdings and DB Energy Trading, including any schedules,
addendums, supplements or sub-leases thereto, and any amendments, extensions,
replacements and refinancings thereof.

Debt: as applied to any Person, without duplication, (a) all items that would be
included as liabilities on a balance sheet in accordance with GAAP, including
Capital Leases, Purchase Money Debt and synthetic lease obligations, but
excluding trade payables, accrued liabilities, deferred taxes and pension and
post-retirement liabilities incurred and being paid in the Ordinary Course of
Business and not overdue by more than 90 days unless Properly Contested; (b) all
obligations of such Person for Borrowed Money and all obligations of such Person
evidenced by bonds, debentures, notes, loan agreements or other similar
instruments; (c) indebtedness (excluding prepaid interest thereon) secured by a
Lien on property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements and
mortgage, industrial revenue bond, industrial development bond and similar
financings), whether or not such indebtedness shall have been assumed by such
Person or is limited in recourse; (d) all Contingent Obligations; (e) the
maximum amount (after giving effect to any prior drawings or reductions that may
have been reimbursed) of all letters of credit (including standby and
commercial), bankers’ acceptances, bank guaranties, surety bonds, performance
bonds and similar instruments issued or created by or for the account of such
Person; (I) all Hedging Obligations to the extent required to be reflected on
the balance sheet of such Person and (g) in the case of a Borrower, the

 

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Obligations. The Debt of a Person shall include any recourse Debt of any other
entity (including any partnership in which such Person is a general partner) to
the extent such person is liable therefore as a result of such person’s
ownership interest in or other relationship with such entity, except (other than
in the case of general partner liability) to the extent that terms of such Debt
expressly provide that such person is not liable therefore. Notwithstanding the
foregoing, for the purposes hereof, Debt excludes any Properly Contested taxes,
the BOA Lease Agreement and the DB Lease Agreement.

Default: an event or condition that, with the lapse of time or giving of notice,
would constitute an Event of Default.

Default Rate: for any Obligation (including, to the extent permitted by law,
interest not paid when due), 2% plus the interest rate otherwise applicable
thereto.

Defaulting Lender: any Lender that, as determined by Agent, (a) has failed to
perform any funding obligations hereunder, and such failure is not cured within
three Business Days; (b) has notified Agent or any Borrower that such Lender
does not intend to comply with its funding obligations hereunder or has made a
public statement to the effect that it does not intend to comply with its
funding obligations hereunder or under any other credit facility; (c) has
failed, within three Business Days following request by Agent, to confirm in a
manner satisfactory to Agent that such Lender will comply with its funding
obligations hereunder; or (d) has, or has a direct or indirect parent company
that has, become the subject of an Insolvency Proceeding or taken any action in
furtherance thereof; provided, however, that a Lender shall not be a Defaulting
Lender solely by virtue of a Governmental Authority’s ownership of any equity
interest in such Lender or parent company.

Deposit Account Control Agreements: the Deposit Account control agreements to be
executed by each institution maintaining a Deposit Account for a Borrower, in
favor of Agent, for the benefit of Secured Parties, as security for the
Obligations.

Diluted Account: an Account which is the subject of a reduction or cancellation
as a result of any defective, rejected or returned merchandise or services and
all credits, rebates, discounts, disputes, warranty claims, repossessed or
returned goods, chargebacks, allowances, other dilutive factors (including
setoffs and other offsets arising out of either the same transaction, a related
transaction or an unrelated transaction) and any other billing or other
adjustment (whether effected through the granting of credits against the
applicable Accounts or by the issuance of a payment in respect of (and as
payment for) such reduction).

Dilution Ratio: as of any date of determination, the ratio (expressed as a
percentage) of (a) the aggregate amount of Borrowers’ Diluted Accounts to
(b) the gross amount of all Accounts of Borrowers, in each case, calculated as
of the date of the most recent Borrowing Base Certificate for the twelve month
period most recently ended.

Dilution Reserve: the amount, expressed as a percentage, on any date of
determination, equal to (i) the Dilution Ratio, minus (ii) five (5) percentage
points.

Disqualified Capital Stock: any Equity Interest which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (a) matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the first anniversary of the Revolver Termination Date, (b) is
convertible into or exchangeable (unless at the sole option of the issuer
thereof) for (i) debt securities or (ii) any Equity Interests referred to in
(a) above, in each case at any time on or prior to the first anniversary of the
Revolver Termination Date, or (c) contains any repurchase obligation which may
come into effect prior to payment in full of all Obligations; provided, however,
that any Equity Interests

 

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that would not constitute Disqualified Capital Stock but for provisions thereof
giving holders thereof (or the holders of any security into or for which such
Equity Interests is convertible, exchangeable or exercisable) the right to
require the issuer thereof to redeem such Equity Interests upon the occurrence
of a change in control or an asset sale occurring prior to the first anniversary
of the Final Maturity Date shall not constitute Disqualified Capital Stock if
such Equity Interests provide that the issuer thereof will not redeem any such
Equity Interests pursuant to such provisions prior to the repayment in full of
the Obligations.

Distribution: any declaration or payment of a distribution, interest or dividend
on any Equity Interest (other than payment-in-kind); any distribution, advance
or repayment of Debt to a holder of Equity Interests; or any purchase,
redemption, or other acquisition or retirement for value of any Equity Interest.

Dollars: lawful money of the United States.

Dominion Account: a special account established by Borrowers at Bank of America
or another bank acceptable to Agent, over which Agent has exclusive control for
withdrawal purposes.

EBITDA: determined on a consolidated basis for Borrowers and their Subsidiaries
(excluding any of the Grace Companies), net income, calculated before
(i) interest expense, (ii) provision for income taxes, (iii) depreciation,
non-cash impairment and amortization expense, (iv) gains or losses arising from
the sale, disposal or abandonment of capital assets, intangible assets,
long-lived assets and investments in debt and equity securities, (v) non-cash
gains or losses arising from the write-up or write-down of assets,
(vi) management, monitoring, consulting and advisory fees paid to Sponsor (to
the extent permitted under Section 10.2.17), (vii) depletion expense in respect
of metal alloys, net of recovery of precious metals, (viii) non-cash
compensation charges, (ix) restructuring charges or unusual non-recurring
charges in an aggregate amount not to exceed $3,500,000 in any trailing four
Fiscal Quarter period, (x) adjustments with respect to the cumulative effect of
changes in accounting principles; (xi) net gains or losses from disposed or
discontinued operations; and (xii) any extraordinary gains or extraordinary
losses (in each case, to the extent included in determining net income).

Eligible Account: on any date of determination of the Borrowing Base, all of the
Accounts owned by a Borrower and reflected in the most recent Borrowing Base
Certificate delivered by the Borrowers to the Agent shall be “Eligible Accounts”
for the purposes of this Agreement, except any Account to which any of the
exclusionary criteria set forth below applies. Eligible Accounts shall not
include any of the following Accounts:

(i) any Account in which Agent, on behalf of the Secured Parties, does not have
a valid, perfected First Priority Lien on such Account;

(ii) any Account that is not owned by a Borrower;

(iii) any Account due from an Account Debtor that is not domiciled in the United
States or Canada and (if not a natural person) organized under the laws of the
United States or any political subdivision thereof, unless such Account is
fully-secured by a commercial letter of credit in form and substance acceptable
to the Collateral Agent, or covered by credit insurance in form and substance
satisfactory to the Agent;

(iv) any Account that is payable in any currency other than Dollars, Euro, GBP,
and Japanese Yen, provided however, that such Accounts that are not denominated
in Dollars must be translated to Dollars as the date of any Borrowing Base
submission;

 

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(v) any Account that does not arise from the sale of goods or the performance of
services by a Borrower in the ordinary course of its business;

(vi) any Account that does not comply with all applicable legal requirements,
including, without limitation, all laws, rules, regulations and orders of any
Governmental Authority (including any Account due from an Account Debtor located
in a jurisdiction which requires that a Borrower, as applicable, register as a
foreign organization, unless such Borrower (at the time the Account was created
and at all times thereafter) (i) had filed and has maintained effective a
current notice of business activities report with the appropriate office or
agency in any such jurisdiction which requires that such Borrower register as a
foreign organization, or (ii) was and has continued to be exempt from filing
such report and has provided the Lenders with satisfactory evidence thereof);

(vii) any account (a) upon which the right of a Borrower to receive payment is
not absolute or is contingent upon the fulfillment of any condition whatsoever
unless such condition is satisfied or (b) as to which a Borrower is not able to
bring suit or otherwise enforce its remedies against the Account Debtor through
judicial or administrative process or (c) that represents a progress billing
consisting of an invoice for goods sold or used or services rendered pursuant to
a contract under which the Account Debtor’s obligation to pay that invoice is
subject to a Borrower’s completion of further performance under such contract or
is subject to the equitable lien of a surety bond issuer;

(viii) to the extent that any defense, counterclaim, setoff or dispute is
asserted as to such Account, it is being understood that the amount of any such
defense, counterclaim, setoff or dispute shall be disclosed to the Collateral
Agent and that the remaining balance of the Account shall be eligible;

(ix) any Account that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Account for merchandise sold to or
services rendered and accepted by the applicable Account Debtor;

(x) any Account with respect to which an invoice or other electronic
transmission constituting a request for payment, reasonably acceptable to the
Collateral Agent in form and substance, has not been sent on a timely basis to
the applicable Account Debtor according to the normal invoicing and timing
procedures of a Borrower;

(xi) any Account that arises from a sale to any director, officer, other
employee or Affiliate of a Borrower;

(xii) any Account that arises with respect to goods that are delivered on a
bill-and-hold, cash-on-delivery basis or while placed on consignment, guaranteed
sale or other terms by reason of which the payment by the Account Debtor is or
may be conditional;

(xiii) any Account that is in default; provided, that, without limiting the
generality of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:

(i) any Account (A) not paid within one hundred and twenty (120) days following
its original invoice date or (B) that is more than forty five (45) days past due
according to its original terms of sale; or

(ii) the Account Debtor obligated upon such Account suspends business, makes a
general assignment for the benefit of creditors or fails to pay its debts
generally as they come due; or

 

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(iii) a petition is filed by or against any Account Debtor obligated upon such
Account under any bankruptcy law or any other federal, state or foreign
(including any provincial) receivership, insolvency relief or other law or laws
for the relief of debtors, provided that the Collateral Agent, in its sole
discretion, may decide to include any such Account described in this subsection
(iii) as an Eligible Account;

(xiv) any Account that is the obligation of an Account Debtor (other than an
individual) if 50% or more of the Dollar amount of all Accounts owing by that
Account Debtor are ineligible under the other criteria set forth herein;

(xv) any Account as to which any of the representations or warranties in the
Loan Documents are untrue;

(xvi) to the extent such Account is evidenced by a judgment, Instrument or
Chattel Paper;

(xvii) to the extent such Account exceeds any credit limit established by the
Collateral Agent, in its Credit Judgment, following prior notice of such limit
by the Collateral Agent to the Borrower;

(xviii) that portion of any Account (1) in respect of which there has been, or
should have been, established by a Borrower a contra account, whether in respect
of contractual allowances with respect to such Account, audit adjustment,
anticipated discounts or otherwise, or (2) which is due from an Account Debtor
to whom a Borrower owes a trade payable, but only to the extent of such trade
payable or (3) which a borrower knows is subject to the exercise by an Account
Debtor of any right of recession, set-off, recoupment, counterclaim or defense;
or

(xix) any Account on which the Account Debtor is a Governmental Authority,
unless a Borrower has assigned its rights to payment of such Account to Agent
pursuant to the Assignment of Claims Act of 1940, as amended, in the case of a
federal Governmental Authority, and pursuant to applicable law, if any, in the
case of any other Governmental Authority, and such assignment has been accepted
and acknowledged by the appropriate government officers.

Eligible Assignee: a Person that is (a) a Lender, U.S.-based Affiliate of a
Lender or Approved Fund; (b) any other financial institution approved by Agent
and Issuing Bank and Borrower Agent (which approval by Borrower Agent shall not
be unreasonably withheld or delayed, and shall be deemed given if no objection
is made within two Business Days after notice of the proposed assignment), that
is organized under the laws of the United States or any state or district
thereof, has total assets in excess of $5 billion, extends asset-based lending
facilities in its ordinary course of business and whose becoming an assignee
would not constitute a prohibited transaction under Section 4975 of the Code or
any other Applicable Law; and (c) after and during the continuance of any
Trigger Period, any Person acceptable to Agent and Issuing Bank in their
respective discretion.

Eligible Inventory: any finished goods Inventory held for sale in the ordinary
course, work-in process Inventory and raw materials, in each case owned a
Borrower, but shall exclude any Inventory to which any of the exclusionary
criteria set forth below applies. Eligible Inventory shall not include any
Inventory of a Borrower that:

Agent, on behalf of Secured Parties, does not have a valid, perfected First
Priority Lien on such Inventory;

 

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(ii) (1) is stored at a location where the aggregate value of Inventory exceeds
$250,000 unless the Agent has given its prior consent thereto and unless either
(x) a Lien Waiver has been delivered to the Agent, or (y) Rent and Charges
Reserves reasonably satisfactory to the Agent have been established with respect
thereto or (2) is stored with a bailee or warehouseman where the aggregate value
of Inventory exceeds $250,000 unless either (x) an acknowledged bailee waiver
letter which is in form and substance satisfactory to the Agent has been
received by the Agent or (y) Rent and Charges Reserves reasonably satisfactory
to the Agent have been established with respect thereto, or (3) is located at an
owned location subject to a mortgage in favor of a lender other than the Agent
where the aggregate value of Inventory exceeds $250,000 unless either
(x) mortgagee waiver which is in form and substance satisfactory to the Agent
has been delivered to the Collateral Agent or (y) Rent and Charges Reserves
reasonably satisfactory to the Agent have been established with respect thereto;

(iii) is placed on consigmnent, unless a valid consignment agreement which is
reasonably satisfactory to Agent is in place with respect to such Inventory;

(iv) is covered by a negotiable document of title, unless such document has been
delivered to the Agent with all necessary endorsements, free and clear of all
Liens except Permitted Liens and those in favor of the Agent and the Lenders and
landlords, carriers, bailees, and warehousemen if clause (ii) above has been
complied with;

(v) is to be returned to suppliers;

(vi) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale;

(vii) consists of display items, samples or packing or shipping materials,
manufacturing supplies or replacement parts;

(viii) is not of a type held for sale in the ordinary course of such Borrower’s
business;

(ix) breaches any of the representations or warranties pertaining to Inventory
set forth in the Loan Documents;

(x) consists of Hazardous Material or goods that can be transported or sold only
with licenses that are not readily available;

(xi) is not covered by casualty insurance; or

(xii) is subject to any licensing arrangement the effect of which would be to
limit the ability of Agent, or any Person selling the Inventory on behalf of
Agent to sell such Inventory in enforcement of Agent’s Liens, without further
consent or payment to the licensor or other Person.

Eligible Metals: any Metals owned by a Borrower which is acceptable to Agent in
its Credit Judgment for inclusion in the Borrowing Base. Without limiting
Agent’s discretion, Eligible Metals shall not include any Metals of a Borrower
that:

are not located in the United States;

(ii) Agent, on behalf of Secured Parties, does not have a valid, perfected First
Priority Lien on such Metals;

(iii) are not owned by such Borrower free and clear of all liens and rights of
any other Person, except the valid, perfected First Priority Liens in favor of
Agent;

 

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(iv) breaches any of the representations or warranties pertaining to such
property set forth in this Agreement or the other Loan Documents;

(v) are not covered by insurance reasonably acceptable to Agent and Agent has
not received evidence of the property or casualty insurance required by this
Agreement with respect to such Metals;

(vi) such Borrower does not have good, valid, and marketable title thereto;

(vii) are located on real property leased by a Borrower, unless such Metals are
subject to a Landlord Access Agreement executed by the lessor, or other third
party, as the case may be;

(viii) are subject to a lease with any Person (other than a Borrower, provided,
that the Lien on and security interest in the related lease shall be granted to
the Agent and Agent shall have received all control agreements and instruments
and all actions shall be taken as reasonably requested by the Agent to perfect
the Agent’s security interest in and other rights with respect to such lease);
or

(ix) are located at an owned location subject to a mortgage or other financing
arrangement in favor of a lender other than Agent (unless a reasonably Lien
Waiver has been delivered to Agent).

Without limiting the foregoing, Eligible Metals shall be reduced by (A) any
Metals subject to the DB Lease Agreement, and (ii) the amounts, determined by
Agent in its discretion, of the conversion costs of Borrowers’ Metals and the
estimated de-alloy loss in respect of Borrowers’ Metals.

Enforcement Action: any action to enforce any Obligations (other than Secured
Bank Product Obligations) or Loan Documents or to exercise any rights or
remedies relating to any Collateral (whether by judicial action, self-help,
notification of Account Debtors, exercise of setoff or recoupment, exercise of
any right to vote or act in an Obligor’s Insolvency Proceeding, or otherwise).

Environmental Agreement: each agreement of Borrowers with respect to any Real
Estate subject to a Mortgage, pursuant to which Borrowers agree to indemnify and
hold harmless Agent and Lenders from liability under any Environmental Laws.

Environmental Laws: all Applicable Laws (including all programs, permits and
guidance promulgated by regulatory agencies), relating to public health (but
excluding occupational safety and health, to the extent regulated by OSHA) or
the protection or pollution of the environment, including CERCLA, RCRA and CWA.

Environmental Notice: a written notice from any Governmental Authority or other
Person of any possible noncompliance with, investigation of a possible violation
of, litigation relating to, or potential fine or liability under any
Environmental Law, or with respect to any Environmental Release, environmental
pollution or hazardous materials, including any complaint, summons, citation,
order, claim, demand or request for correction, remediation or otherwise.

Environmental Release: a release as defined in CERCLA or under any other
Environmental Law.

Equity Interest: the interest of any (a) shareholder in a corporation;
(b) partner in a partnership (whether general, limited, limited liability or
joint venture); (c) member in a limited liability company; or (d) other Person
having any other form of equity security or ownership interest.

 

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ERISA: the Employee Retirement Income Security Act of 1974.

ERISA Affiliate: any trade or business (whether or not incorporated) under
common control with an Obligor within the meaning of Section 414(b) or (c) of
the Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).

ERISA Event: (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by any Obligor or ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by any Obligor or ERISA Affiliate from a Multiemployer Plan
or notification that a Multiemployer Plan is in reorganization; (d) the filing
of a notice of intent to terminate, the treatment of a Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan;
(e) any Obligor or ERISA Affiliate fails to meet any funding obligations with
respect to any Pension Plan or Multiemployer Plan, or requests a minimum funding
waiver; (f) an event or condition which constitutes grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan or Multiemployer Plan; or (g) the imposition of any liability
under Title IV of ERISA, other than for PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon any Obligor or ERISA Affiliate.

Event of Default: as defined in Section 11.

Excess Availability: at any time, (a) the Availability less (b) all outstanding
Loans and LC Obligations.

Exchange Act: the Securities Exchange Act of 1934, as amended.

Excluded Property: shall mean: (a) any permit or license issued by a Government
Authority to any Obligor or any agreement to which any Obligor is a party, in
each case, only to the extent and for so long as the terms of such permit,
license or agreement or any requirement of law applicable thereto, validly
prohibit the creation by such Obligor of a security interest in such permit,
license or agreement in favor, of the Agent (after giving effect to Sections
9-406, 9-407, 9-408 or 9-409 of the UCC of the applicable jurisdiction (or any
successor provision or provisions) or any other applicable law (including the
Bankruptcy Code) or principles of equity); and (b) any “intent to use” trademark
application for which a statement of use has not been filed and accepted by the
United States Patent and Trademark Office.

Excluded Tax: with respect to Agent, any Lender, Issuing Bank or any other
recipient of a payment to be made by or on account of any Obligation, (a) taxes
imposed on or measured by its overall net income (however denominated), and
franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction
(or any political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable Lending Office is located; (b) any branch
profits taxes imposed by the United States or any similar tax imposed by any
other jurisdiction in which Borrower Agent is located; (c) any backup
withholding tax required by the Code to be withheld from amounts payable to a
Lender that has failed to comply with Section 5.10; (d) in the case of a Foreign
Lender, any United States withholding tax that is (i) required pursuant to laws
in force at the time such Lender becomes a Lender (or designates a new Lending
Office) hereunder, or (ii) attributable to such Lender’s failure or inability
(other than as a result of a Change in Law) to comply with Section 5.10, except
to the extent that such Foreign Lender (or its assignor, if any) was entitled,
at the time of designation of a new Lending Office (or assignment), to receive
additional amounts from Borrowers with respect to such withholding tax; and
(e) taxes imposed on it by reason of Section 1471 or 1472 of the Code.

 

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Existing First Lien Credit Agreement: that certain Credit Agreement dated as of
October 25, 2006 (as amended) among AGY Holdings, AGY Aiken and AGY Huntingdon,
KAGY Holdings and the other guarantors party thereto, the lenders party thereto,
UBS Securities LLC, as lead arranger, as documentation agent and as syndication
agent, UBS Loan Finance LLC, as swingline lender, and UBS AG, Stamford Branch,
as administrative agent, collateral agent and issuing bank.

Extraordinary Expenses: all costs, expenses or advances that Agent may incur
while a Default or Event of Default exists, or during the pendency of an
Insolvency Proceeding of an Obligor, including those relating to (a) any audit,
inspection, repossession, storage, repair, appraisal, insurance, manufacture,
preparation or advertising for sale, sale, collection, or other preservation of
or realization upon any Collateral; (b) any action, arbitration or other
proceeding (whether instituted by or against Agent, any Lender, any Obligor, any
representative of creditors of an Obligor or any other Person) in any way
relating to any Collateral (including the validity, perfection, priority or
avoidability of Agent’s Liens with respect to any Collateral), Loan Documents,
Letters of Credit or Obligations, including any lender liability or other
Claims; (c) the exercise, protection or enforcement of any rights or remedies of
Agent in, or the monitoring of, any Insolvency Proceeding; (d) settlement or
satisfaction of any taxes, charges or Liens with respect to any Collateral;
(e) any Enforcement Action; (f) negotiation and documentation of any
modification, waiver, workout, restructuring or forbearance with respect to any
Loan Documents or Obligations; and (g) Protective Advances. Such costs, expenses
and advances include transfer fees, Other Taxes, storage fees, insurance costs,
permit fees, utility reservation and standby fees, legal fees, appraisal fees,
brokers’ fees and commissions, auctioneers’ fees and commissions, accountants’
fees, environmental study fees, wages and salaries paid to employees of any
Obligor or independent contractors in liquidating any Collateral, and travel
expenses.

Federal Funds Rate: (a) the weighted average of interest rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers on the applicable Business Day (or on the preceding
Business Day, if the applicable day is not a Business Day), as published by the
Federal Reserve Bank of New York on the next Business Day; or (b) if no such
rate is published on the next Business Day, the average rate (rounded up, if
necessary, to the nearest 1/8 of 1%) charged to Bank of America on the
applicable day on such transactions, as determined by Agent.

Fee Letter: the fee letter agreement between Agent and Borrowers.

First Priority: means, with respect to any Lien purported to be created in any
Collateral pursuant to the Security Documents, that such Lien is the most senior
Lien to which such Collateral is subject.

Fiscal Quarter: each period of three months, commencing on the first day of a
Fiscal Year.

Fiscal Year: the fiscal year of Borrowers and Subsidiaries for accounting and
tax purposes, ending on December 31 of each year.

Fixed Charge Coverage Ratio: the ratio, determined on a consolidated basis for
Borrowers and their domestic Subsidiaries for the most recent four Fiscal
Quarters, of (a) EBITDA minus Capital Expenditures (except those financed with
Borrowed Money other than Revolver Loans) and cash taxes paid and Distributions
(provided that, solely for purposes of this calculation, the Secondary Grace
Purchase shall not be considered a Distribution), to (b) Fixed Charges. For the
avoidance of doubt, the results of AGY Cayman and its Subsidiaries shall not be
included in the foregoing calculation.

Fixed Charges: the sum of interest expense (other than payment-in-kind) and
CMLTD.

FLSA: the Fair Labor Standards Act of 1938.

Foreign Lender: any Lender that is organized under the laws of a jurisdiction
other than the laws of the United States, or any state or district thereof.

 

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Foreign Plan: any employee benefit plan or arrangement (a) maintained or
contributed to by any Obligor or Subsidiary that is not subject to the laws of
the United States; or (b) mandated by a government other than the United States
for employees of any Obligor or Subsidiary.

Foreign Subsidiary: a Subsidiary that is organized under the laws of a
jurisdiction other than the United States or any state thereof or the District
of Columbia.

Framework Agreement: Framework Agreement dated March 12, 2009 by and among Grace
Guarantor, Grace, AGY Holdings, AGY Cayman, AGY Hong Kong f/k/a Main Union and
AGY Shanghai.

Fronting Exposure: a Defaulting Lender’s Pro Rata share of LC Obligations or
Swingline Loans, as applicable, except to the extent allocated to other Lenders
under Section 4.2.

Full Payment: with respect to any Obligations, (a) the full and indefeasible
cash payment thereof, including any interest, fees and other charges accruing
during an Insolvency Proceeding (whether or not allowed in the proceeding);
(b) if such Obligations are LC Obligations or inchoate or contingent in nature,
Cash Collateralization thereof (or delivery of a standby letter of credit
acceptable to Agent in its discretion, in the amount of required Cash
Collateral); and (c) a release of any Claims of Obligors against Agent, Lenders
and Issuing Bank arising on or before the payment date. No Loans shall be deemed
to have been paid in full until all Commitments related to such Loans have
expired or been terminated.

GAAP: generally accepted accounting principles in effect in the United States
from time to time.

Governmental Approvals: all authorizations, consents, approvals, licenses and
exemptions of, registrations and filings with, and required reports to, all
Governmental Authorities.

Governmental Authority: any federal, state, local, foreign or other agency,
authority, body, commission, court, instrumentality, political subdivision, or
other entity or officer exercising executive, legislative, judicial, regulatory
or administrative functions for any governmental, judicial, investigative,
regulatory or self-regulatory authority (including any supra-national bodies as
the European Union or the European Central Bank).

Grace: Grace Technology Investment Co., a company incorporated in the British
Virgin Islands.

Grace Companies: AGY Cayman, AGY Shanghai, AGY Hong Kong f/k/a Main Union, Grace
Guarantor and Grace, and each of their Foreign Subsidiaries.

Grace Guarantor: Grace THW Holding Limited, a Hong Kong corporation.

Grace Option Agreement: Option Agreement dated June 8, 2009 by and between Grace
and Main Union.

Grace Transaction: collectively, the Initial Grace Purchase and Secondary Grace
Purchase.

Guarantor Payment: as defined in Section 5.11.3.

Guarantors: KAGY Holdings and each other Person who guarantees payment or
performance of any Obligations.

Guaranty: each guaranty agreement executed by a Guarantor in favor of Agent.

Hazardous Material: hazardous substances; hazardous wastes; polychlorinated
biphenyls (“PCBs”) or any substance or compound containing PCBs; asbestos or any
asbestos-containing materials

 

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in any form or condition; radon or any other radioactive materials including any
source, special nuclear or by-product material; petroleum, crude oil or any
fraction thereof; and any other pollutant or contaminant or chemicals, wastes,
materials, compounds, constituents or substances, subject to regulation or which
can give rise to liability under any Environmental Laws.

Hedging Agreement: an agreement relating to any swap, cap, floor, collar,
option, forward, cross right or obligation, or combination thereof or similar
transaction, with respect to interest rate, foreign exchange, currency,
commodity, credit or equity risk.

Hedging Obligations: obligations under or with respect to Hedging Agreements.

Indemnified Taxes: Taxes other than Excluded Taxes.

Indemnitees: Agent Indemnitees, Lender Indemnitees, Issuing Bank Indemnitees and
Bank of America Indemnitees.

Initial Grace Equity Contribution: the contribution by Kohlberg and its
Affiliates of not less than $20,000,000 to the common equity of AGY Holdings,
for contribution to the equity of AGY Cayman, in connection with the Initial
Grace Purchase.

Initial Grace Purchase: the purchase by AGY Cayman of 70% of the share capital
of Main Union pursuant to the Share Sale Agreement.

Insolvency Proceeding: any case or proceeding commenced by or against a Person
under any state, federal or foreign law for, or any agreement of such Person to,
(a) the entry of an order for relief under the Bankruptcy Code, or any other
insolvency, debtor relief or debt adjustment law; (b) the appointment of a
receiver, trustee, liquidator, administrator, conservator or other custodian for
such Person or any part of its Property; or (c) an assignment or trust mortgage
for the benefit of creditors.

Insurance Assignment: each collateral assignment of insurance pursuant to which
an Obligor assigns to Agent, for the benefit of Secured Parties, such Obligor’s
rights under key-man life, business interruption or other insurance policies as
Agent deems appropriate, as security for the Obligations.

Intellectual Property: all intellectual and similar Property of a Person,
including inventions, designs, patents, copyrights, trademarks, service marks,
trade names, trade secrets, confidential or proprietary information, customer
lists, know-how, software and databases; all embodiments or fixations thereof
and all related documentation, applications, registrations and franchises; all
licenses or other rights to use any of the foregoing; and all books and records
relating to the foregoing.

Intellectual Property Claim: any claim or assertion (whether in writing, by suit
or otherwise) that a Borrower’s or Subsidiary’s ownership, use, marketing, sale
or distribution of any Inventory, Equipment, Intellectual Property or other
Property violates another Person’s Intellectual Property.

Intercreditor Agreement: an Intercreditor Agreement substantially in the form of
Exhibit          by and among AGY Holdings, KAGY Holdings, the Subsidiaries of
AGY Holdings named therein, Agent (as successor in interest), the Senior Second
Lien Notes Collateral Agent and the Senior Second Lien Notes Trustee.

Interest Payment Date: (a) with respect to any Base Rate Loan (including
Swingline Loans), the first Business Day of each month, (b) with respect to any
LIBOR Loan, the last day of the Interest Period applicable to the Borrowing of
which such Loan is a part and, in the case of a LIBOR Loan with an Interest
Period of more than three months’ duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months’ duration after
the first day of such Interest Period, or (c) with respect to any Loan, the
Commitment Termination Date or such earlier date on which the Revolving
Commitments are terminated, as the case may be.

 

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Interest Period: as defined in Section 3.1.3.

Inventory: as defined in the UCC, including all goods intended for sale, lease,
display or demonstration; all work in process; and all raw materials, and other
materials and supplies of any kind that are or could be used in connection with
the manufacture, printing, packing, shipping, advertising, sale, lease or
furnishing of such goods, or otherwise used or consumed in a Borrower’s business
(but excluding Equipment).

Inventory Appraisal: (a) on the Closing Date, the inventory appraisal prepared
by Hilco Appraisal Services, LLC dated November 15, 2010 and (b) thereafter, the
most recent inventory appraisal delivered to the Agent pursuant to
Section 10.1.1 and approved by Agent in its Credit Judgment.

Inventory Reserve: reserves established by Agent to reflect factors that may
negatively impact the Value of Inventory, including change in salability,
obsolescence, seasonality, theft, shrinkage, imbalance, change in composition or
mix, markdowns and vendor chargebacks.

Investment: any acquisition of all or substantially all assets of a Person; any
acquisition of record or beneficial ownership of any Equity Interests of a
Person; or any advance or capital contribution to or other investment in a
Person.

IPO: the first underwritten public offering by Holdings of its Equity Interests
after the Closing Date pursuant to a registration statement filed with the
Securities and Exchange Commission in accordance with the Securities Act.

TRS: the United States Internal Revenue Service.

Issuing Bank: with respect to the existing Letters of Credit listed on Schedule
8.8 only, UBS AG, Stamford Branch, and with respect to all other Letters of
Credit, Bank of America or any of their respective Affiliates, or any
replacement issuer appointed pursuant to Section 2.3.4.

Issuing Bank Indemnitees: any Issuing Bank and its officers, directors,
employees, Affiliates, agents and attorneys.

KAGY Holdings: KAGY Holding Company, Inc., a Delaware corporation.

LC Application: an application by Borrower Agent to Issuing Bank for issuance of
a Letter of Credit, in form and substance satisfactory to Issuing Bank.

LC Conditions: the following conditions necessary for issuance of a Letter of
Credit: (a) each of the conditions set forth in Section 6; (b) after giving
effect to such issuance, total LC Obligations do not exceed the Letter of Credit
Subline, no Overadvance exists and, if no Revolver Loans are outstanding, the LC
Obligations do not exceed the Borrowing Base (without giving effect to the LC
Reserve for purposes of this calculation); (c) the expiration date of such
Letter of Credit is (i) no more than 365 days from issuance, in the case of
standby Letters of Credit, and (ii) no more than 120 days from issuance, in the
case of documentary Letters of Credit and in each instance is no later than 5
Business Days prior to the Revolver Termination Date; (d) the Letter of Credit
and payments thereunder are denominated in Dollars; and (e) the purpose and form
of the proposed Letter of Credit is satisfactory to Agent and Issuing Bank in
their discretion.

LC Documents: all documents, instruments and agreements (including LC Requests
and LC Applications) delivered by Borrowers or any other Person to Issuing Bank
or Agent in connection with any Letter of Credit.

 

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LC Obligations: the sum (without duplication) of (a) all amounts owing by
Borrowers for any drawings under Letters of Credit; and (b) the stated amount of
all outstanding Letters of Credit.

LC Request: a request for issuance of a Letter of Credit, to be provided by
Borrower Agent to Issuing Bank, in form satisfactory to Agent and Issuing Bank.

LC Reserve: the aggregate of all LC Obligations, other than those that have been
Cash Collateralized by Borrowers.

Lender Indemnitees: Lenders and their officers, directors, employees,
Affiliates, agents and attorneys.

Lenders: as defined in the preamble to this Agreement, including Agent in its
capacity as a provider of Swingline Loans and any other Person who hereafter
becomes a “Lender” pursuant to an Assignment and Acceptance.

Lending Office: the office designated as such by the applicable Lender at the
time it becomes party to this Agreement or thereafter by notice to Agent and
Borrower Agent.

Letter of Credit: any standby or documentary letter of credit issued by Issuing
Bank or any other Person for the account of a Borrower, or any indemnity,
guarantee, exposure transmittal memorandum or similar form of credit support
issued by Agent or Issuing Bank for the benefit of a Borrower.

Letter of Credit Subline: $20,000,000.

LIBOR: for any Interest Period with respect to a LIBOR Loan, the per annum rate
of interest (rounded up, if necessary, to the nearest 1/8th of 1%), determined
by Agent at approximately 11:00 a.m. (London time) two Business Days prior to
commencement of such Interest Period, for a term comparable to such Interest
Period, equal to (a) the British Bankers Association LIBOR Rate (“BBA LIBOR”),
as published by Reuters (or other commercially available source designated by
Agent); or (b) if BBA LIBOR is not available for any reason, the interest rate
at which Dollar deposits in the approximate amount of the LIBOR Loan would be
offered by Bank of America’s London branch to major banks in the London
interbank Eurodollar market. If the Board of Governors imposes a Reserve
Percentage with respect to LIBOR deposits, then LIBOR shall be the foregoing
rate, divided by 1 minus the Reserve Percentage.

LIBOR Loan: each set of LIBOR Revolver Loans having a common length and
commencement of Interest Period.

LIBOR Revolver Loan: a Revolver Loan that bears interest based on LIBOR.

License: any license or agreement under which an Obligor is authorized to use
Intellectual Property in connection with any manufacture, marketing,
distribution or disposition of Collateral, any use of Property or any other
conduct of its business.

Licensor: any Person from whom an Obligor obtains the right to use any
Intellectual Property.

Lien: any Person’s interest in Property securing an obligation owed to, or a
claim by, such Person, whether such interest is based on common law, statute or
contract, including liens, security interests, pledges, hypothecations,
statutory trusts, reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, and other title exceptions
and encumbrances affecting Property.

 

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Lien Waiver: an agreement, in form and substance satisfactory to Agent, by which
(a) for any material Collateral located on leased premises, the lessor waives or
subordinates any Lien it may have on the Collateral, and agrees to permit Agent
to enter upon the premises and remove the Collateral or to use the premises to
store or dispose of the Collateral; (b) for any Collateral held by a
warehouseman, processor, shipper, customs broker or freight forwarder, such
Person waives or subordinates any Lien it may have on the Collateral, agrees to
hold any Documents in its possession relating to the Collateral as agent for
Agent, and agrees to deliver the Collateral to Agent upon request; (c) for any
Collateral held by a repairman, mechanic or bailee, such Person acknowledges
Agent’s Lien, waives or subordinates any Lien it may have on the Collateral, and
agrees to deliver the Collateral to Agent upon request; and (d) for any
Collateral subject to a Licensor’s Intellectual Property rights, the Licensor
grants to Agent the right, vis-à-vis such Licensor, to enforce Agents Liens with
respect to the Collateral, including the right to dispose of it with the benefit
of the Intellectual Property, whether or not a default exists under any
applicable License.

Loan: a Revolver Loan or any other loan made hereunder by the Lenders.

Loan Account: the loan account established by each Lender on its books pursuant
to Section 5.8.

Loan Documents: this Agreement, Other Agreements and Security Documents.

Loan Year: each 12 month period commencing on the Closing Date and on each
anniversary of the Closing Date.

Main Union: Main Union Industrial Limited, a Hong Kong corporation.

Margin Stock: as defined in Regulation U of the Board of Governors.

Material Adverse Effect: the effect of any event or circumstance that (a) has or
could be reasonably expected to have a material adverse effect on the business,
operations, Properties, prospects or condition (financial or otherwise) of any
Obligor, on the value of any material Collateral, on the enforceability of any
Loan Documents, or on the validity or priority of Agent’s Liens on any
Collateral;

(b) materially impairs the ability of an Obligor to perform its obligations
under the Loan Documents, including repayment of any Obligations; or
(c) otherwise materially impairs the rights of or benefits or remedies available
to the Agent or Lenders under any Loan Document.

Material Contract: any agreement or arrangement to which a Borrower or
Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a
material contract under any securities law applicable to such Obligor, including
the Securities Act of 1933; (b) for which breach, termination, nonperformance or
failure to renew could reasonably be expected to have a Material Adverse Effect;
or

(c) that relates to Subordinated Debt, Material Debt, the BOA Lease Agreement or
the DB Lease Agreement.

Material Debt: (a) the Senior Second Lien Debt, (b) Debt or Contingent
Obligations under the AGY Holdings Guarantees and (c) any other Debt (other than
the Loans and Letters of Credit) or Bank Product Debt of AGY Holdings or any of
its Subsidiaries in an aggregate outstanding principal amount exceeding
$7,500,000. For purposes of determining Material Debt, the “principal amount” in
respect of any Bank Product Debt of any Obligor at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that such Obligor
would be required to pay if the related Bank Product Debt were terminated at
such time.

Metals: Platinum and Rhodium.

Metals Appraisal; (a) on the Closing Date, the metals appraisal prepared by
Hilco Appraisal - Services, LLC dated December 22, 2010 and (b) thereafter, the
most recent metals appraisal delivered to the Agent pursuant to Section 10.1.1
and approved by Agent in its Credit Judgment.

 

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Metals Assets Loan Value; for each Borrower an amount equal to the lesser of
(x) the advance rate of 75% of the Metals Value of the Eligible Metals of such
Borrower owning such Eligible Metals; or (y) 85% of the Net Orderly Liquidation
Value of Eligible Metals.

Metals Value: as of any date of determination, as determined by the Agent in
good faith, with respect to Platinum or Rhodium, the value of such Platinum or
Rhodium on the basis of the Johnson Matthey Base Price set at 15:00 EST. In the
event the Johnson Matthey Base Price shall discontinue or alter in any material
respect its usual practice of quoting a price for Platinum or Rhodium,
respectively, on any day for which such a price is necessary for the purposes of
this Agreement, the Agent, using its reasonable discretion, shall announce a
substituted, reasonably comparable index, service or mechanism which shall
thereupon become the method of valuation hereunder until the Johnson Matthey
Base Price, as the case may be, shall resume its usual practices of quoting
prices.

Moody’s: Moody’s Investors Service, Inc., and its successors.

Mortgage: each mortgage, deed of trust or deed to secure debt pursuant to which
a Borrower grants a Lien on its Real Estate to Agent, for the benefit of Secured
Parties, as security for the Obligations.

Multiemployer Plan: any employee benefit plan of the type described in
Section 4001(a)(3) of EMSA, to which any Obligor or ERISA Affiliate makes or is
obligated to make contributions, or during the preceding five plan years, has
made or been obligated to make contributions.

Net Orderly Liquidation Value of Eligible Metals: the fraction, expressed as a
percentage, (a) the numerator of which is the amount equal to the recovery of
the aggregate amount of the Eligible Metals owned by Borrowers at such time on a
“net orderly liquidation value”: basis as set forth in the most recent Metals
Appraisal received by Agent, net of operating expenses, liquidation expenses and
commissions reasonably anticipated in the disposition of such assets, and
(b) the denominator of which is the Value of the aggregate amount of the
Eligible Metals subject to such Metals Appraisal.

Net Proceeds: with respect to an Asset Disposition, proceeds (including, when
received, any deferred or escrowed payments) received by a Borrower or
Subsidiary in cash from such disposition, net of (a) reasonable and customary
costs and expenses actually incurred in connection therewith, including
reasonable legal, accounting and other professional and transactional fees, and
reasonable sales and brokers’ fees and commissions, and AGY Holdings’
reasonable, good faith estimate of income taxes paid or payable in connection
with such sale; (b) AGY Holding’s good faith estimate of payments required to be
made with respect to unassumed liabilities relating to the properties sold
within 90 days of such Asset Disposition (provided that, to the extent such cash
proceeds are not used to make payments in respect of such unassumed liabilities
within 90 days of such Asset Disposition, such cash proceeds shall constitute
Net Proceeds); and (c) the principal amount, premium or penalty, if any,
interest and other amounts on any Debt for borrowed money which is secured by a
Lien on the properties sold in such Asset Disposition (so long as such Lien was
permitted to encumber such properties under the Loan Documents at the time of
such sale) and which is repaid with such proceeds (other than any such Debt
assumed by the purchaser of such properties).

Net Recovery Cost Percentage: the fraction, expressed as a percentage, (a) the
numerator of which is the amount equal to the recovery on the aggregate amount
of the Inventory owned by Borrowers at such time on a “net orderly liquidation
value” basis as set forth in the most recent Inventory Appraisal received by
Agent, net of operating expenses, liquidation expenses and commissions
reasonably anticipated in the disposition of such assets, and (b) the
denominator of which is the original Cost of the aggregate amount of the
Inventory subject to such Inventory Appraisal.

 

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Non-Recourse Debt: Debt as to which:

(a) no Obligor or any of their Subsidiaries (other than the Grace Companies)
(i) provides credit support of any kind (including any undertaking, agreement or
instrument that would constitute Debt), (ii) is directly or indirectly liable as
a guarantor or otherwise, or (iii) constitutes the lender, except, in each case,
the AGY Guarantees; and

(b) there is no cross-default that would permit any holder of any Debt (other
than Debt under this Agreement) of any Obligor or any of their Subsidiaries
(other than the Grace Companies) to declare a default on such other Debt or
cause the payment of such other Debt to be accelerated or payable prior to its
stated maturity.

Notes: each Revolver Note or other promissory note executed by a Borrower to
evidence any Obligations.

Notice of Borrowing: a Notice of Borrowing to be provided by Borrower Agent to
request a Borrowing of Revolver Loans, in form attached hereto as Exhibit D.

Notice of Conversion/Continuation: a Notice of Conversion/Continuation to be
provided by Borrower Agent to request a conversion or continuation of any Loans
as LIBOR Loans, in form satisfactory to Agent.

Noticed Hedge: Secured Bank Product Obligations arising under a Hedging
Agreement.

Obligations: all (a) principal of and premium, if any, on the Loans, (b) LC
Obligations and other obligations of Obligors with respect to Letters of Credit,
(c) interest, expenses, fees, indemnification obligations, Extraordinary
Expenses and other amounts payable by Obligors under Loan Documents (including
any of the foregoing that accrue or are incurred after the commencement of an
Insolvency Proceeding, whether or not allowed by the presiding court),
(d) Secured Bank Product Obligations, and (e) other Debts, obligations and
liabilities of any kind owing by Obligors pursuant to the Loan Documents,
whether now existing or hereafter arising, whether evidenced by a note or other
writing, whether allowed in any Insolvency Proceeding, whether arising from an
extension of credit, issuance of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, and whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, or joint or several.

Obligor: each Borrower, Guarantor, or other Person that is liable for payment of
any Obligations or that has granted a Lien in favor of Agent on its assets to
secure any Obligations.

Ordinary Course of Business: the ordinary course of business of any Borrower or
Subsidiary, consistent with past practices and undertaken in good faith.

Organic Documents: with respect to any Person, its charter, certificate or
articles of incorporation, bylaws, articles of organization, limited liability
agreement, operating agreement, members agreement, shareholders agreement,
partnership agreement, certificate of partnership, certificate of formation,
voting trust agreement, or similar agreement or instrument governing the
formation or operation of such Person.

OSHA: the Occupational Safety and Hazard Act of 1970.

Other Agreement: each Note; LC Document; Fee Letter; Lien Waiver; Intercreditor
Agreement; Real Estate Related Document; Borrowing Base Certificate, Compliance
Certificate, financial statement or report delivered hereunder; Post-Closing
Side Letter; or other document, instrument or agreement (other than this
Agreement or a Security Document) now or hereafter delivered by an Obligor or
other Person to Agent or a Lender in connection with any transactions relating
hereto.

 

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Other Taxes: all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment
made under any Loan Document or from the execution, delivery or enforcement of,
or otherwise with respect to, any Loan Document.

Overadvance: as defined in Section 2.1.5.

Overadvance Loan: a Base Rate Revolver Loan made when an Overadvance exists or
is caused by the funding thereof.

Participant: as defined in Section 13.2.

Patent Assignment: each patent collateral assignment agreement pursuant to which
an Obligor assigns its interest in patents to Agent, for the benefit of Secured
Parties, as security for the Obligations.

Patriot Act: the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L.
No. 107-56, 115 Stat. 272 (2001).

Payment Item: each check, draft or other item of payment payable to a Borrower,
including those constituting proceeds of any Collateral.

PBGC: the Pension Benefit Guaranty Corporation.

Pension Plan: any employee pension benefit plan (as such term is defined in
Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to
Title IV of ERISA and is sponsored or maintained by any Obligor or ERISA
Affiliate or to which the Obligor or ERISA Affiliate contributes or has an
obligation to contribute, or in the case of a multiple employer or other plan
described in Section 4064(a) of ERISA, has made contributions at any time during
the preceding five plan years.

Permitted Acquisition: any transaction or series of related transactions for the
direct or indirect (a) acquisition of all or substantially all of the property
of any Person, or of any business or division of any Person; (b) acquisition of
in excess of 50% of the Equity Interests of any Person, and otherwise causing
such Person to become a Subsidiary of such Person; or (c) merger or
consolidation or any other combination with any Person, if each of the following
conditions is met:

(i) no Default or Event of Default then exists or would result there from;

(ii) after giving effect to such transaction on a Pro Forma Basis, (A) unless
expressly approved by Agent, the Person or business to be acquired shall have
generated positive cash flow for the four consecutive fiscal quarters of AGY
Holdings most recently ended prior to the date of consummation of such
acquisition, (B) Average Excess Availability for the three (3) consecutive
fiscal months ending at least five (5) Business Days prior to the consummation
of such acquisition would have exceeded $15,000,000 on a Pro Forma Basis (after
giving effect to such acquisition and the Revolving Loans to be funded in
connection therewith as if made on the first day of such period) and (C) the
projections in connection with the proposed acquisition for the 2 years after
the consummation of such acquisition shall be reasonably acceptable to Agent;

(iii) no Obligor or any of its Subsidiaries shall, in connection with any such
transaction, assume or remain liable with respect to any Indebtedness or other
liability (including any material tax or ERISA liability) of the related seller
or the business, Person or properties acquired, except

 

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(A) to the extent permitted under Section 6.01 and (B) obligations not
constituting Indebtedness incurred in the ordinary course of business and
necessary or desirable to the continued operation of the underlying properties,
and any other such liabilities or obligations not permitted to be assumed or
otherwise supported by any Obligor or any of its Subsidiaries hereunder shall be
paid in full or released as to the business, Persons or properties being so
acquired on or before the consummation of such acquisition;

(iv) the Person or business to be acquired shall be, or shall be engaged in, a
business of the type that AGY Holdings and the Subsidiaries are permitted to be
engaged in under Section 6.14 and the property acquired in connection with any
such transaction shall be made subject to the Lien of the Security Documents and
shall be free and clear of any Liens, other than Permitted Liens;

(v) the board of directors or comparable governing body of the Person to be
acquired shall not have indicated publicly its opposition to the consummation of
such acquisition (which opposition has not been publicly withdrawn);

(vi) all transactions in connection therewith shall be consummated in accordance
with all applicable Requirements of Law;

(vii) with respect to any transaction involving Acquisition Consideration of
more than $10,000,000, unless Agent shall otherwise agree, AGY Holdings shall
have provided Agent and the Lenders with (A) historical financial statements for
the last three fiscal years (or, if less, the number of years since formation)
of the Person or business to be acquired (audited if available without undue
cost or delay) and unaudited financial statements thereof for the most recent
interim period which are available, (B) reasonably detailed projections for the
succeeding five years pertaining to the Person or business to be acquired and
updated projections for AGY Holdings after giving effect to such transaction,
(C) a reasonably detailed description of all material information relating
thereto and copies of all material documentation pertaining to such transaction,
and (D) all such other information and data relating to such transaction or the
Person or business to be acquired as may be reasonably requested by the Agent or
the Required Lenders;

(viii) at least 10 Business Days prior to the proposed date of consummation of
the transaction, AGY Holdings shall have delivered to Agent and the Lenders a
certification by a Senior Officer that (A) such transaction complies with this
definition (which shall have attached thereto reasonably detailed backup data
and calculations showing such compliance), and (B) such transaction could not
reasonably be expected to result in a Material Adverse Effect; and

(ix) leases of personal Property entered into in the Ordinary Course of
Business.

Permitted Asset Disposition: so long as no Default or Event of Default exists,
and all Net Proceeds are paid over to Agent or deposited in a Deposit Account
that is subject to an Account Control Agreement in favor of Agent, an Asset
Disposition that is (a) a sale of Inventory (including metal alloy) in the
Ordinary Course of Business; (b) a disposition of Equipment that, in the
aggregate during any 12 month period, has a fair market or book value (whichever
is more) of $500,000 or less; (c) a disposition of Inventory that is obsolete,
unmerchantable or otherwise unsalable in the Ordinary Course of Business;
(d) termination of a lease of real or personal Property that is not necessary
for the Ordinary Course of Business, could not reasonably be expected to have a
Material Adverse Effect and does not result from an Obligor’s default;
(e) Intellectual Property that is, in the reasonable judgment of AGY Holdings,
no longer reasonably practicable to maintain or useful in the conduct of AGY
Holdings and its Subsidiaries, taken as a whole, (f) an Asset Sale, provided
that the aggregate consideration received in respect of all Asset Sales pursuant
to this clause (f) shall not exceed $10,000,000 during any 12 month period, or
(g) approved in writing by Agent and Required Lenders.

 

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Permitted Contingent Obligations: Contingent Obligations (a) arising from
endorsements of Payment Items for collection or deposit in the Ordinary Course
of Business; (b) arising from Hedging Agreements permitted hereunder;
(c) existing on the Closing Date, and any extension or renewal thereof that does
not increase the amount of such Contingent Obligation when extended or renewed;
(d) incurred in the Ordinary Course of Business with respect to surety, appeal
or performance bonds, or other similar obligations; (e) arising from customary
indemnification obligations in favor of purchasers in connection with
dispositions of Equipment permitted hereunder; (f) arising under the Loan
Documents; (g) the AGY Holdings Guarantees; or (h) in an aggregate amount of
$500,000 or less at any time, but excluding in all circumstances any other
Contingent Obligations related to Debt of the Grace Companies or any other
Foreign Subsidiary.

Permitted Distributions: Distributions constituting: (a) provided that no
Default or Event of Default exists or would be caused thereby, payments to KAGY
Holdings to permit it, and the subsequent use of such payments by KAGY Holdings,
to repurchase or redeem Qualified Capital Stock of KAGY Holdings held by
officers, directors or employees (or their transferees, estates or beneficiaries
under their estates) of any Obligor, upon their death, disability, retirement,
severance or termination of employment or service, provided that the aggregate
cash consideration paid for all such redemptions and payments shall not exceed,
in any Fiscal Year, the sum of (i) $2,000,000 (and up to 50% of such $2,000,000
not used in any Fiscal Year may be carried to the next succeeding (but no other)
Fiscal Year), plus (ii) the amount of any net cash proceeds received by or
contributed to AGY Holdings from the issuance and sale since the issue date of
Qualified Capital Stock of KAGY Holdings to officers, directors or employees of
any Obligor that have not been used to make any repurchases, redemptions or
payments under this clause (a), plus (iii) the net cash proceeds of any
“key-person” life insurance policies of any Obligor that have not been used to
make any repurchases, redemptions or payments under this clause (a); (b) (i) to
the extent actually used by KAGY Holdings to pay such taxes, costs and expenses,
payments by AGY Holdings to KAGY Holdings in an amount sufficient to pay
franchise taxes and other fees required to maintain the legal existence of KAGY
Holdings, and (ii) payments by AGY Holdings to KAGY Holdings in an amount
sufficient to pay out-of-pocket legal, accounting and filing costs and other
expenses in the nature of overhead in the ordinary course of business of KAGY
Holdings, in the case of clauses (b)(i) and (b)(ii) not to exceed $500,000 in
any Fiscal Year; and (c) Permitted Tax Distributions.

Permitted Holders: Sponsor and its Controlled Investment Affiliates.

Permitted Lien: as defined in Section 10.2.2.

Permitted Purchase Money Debt: Purchase Money Debt of Borrowers and Subsidiaries
that is unsecured or secured only by a Purchase Money Lien, as long as the
aggregate amount does not exceed $15,000,000 at any time and its incurrence does
not violate Section 10.2.1 or 10.2.3.

Permitted Tax Distribution: payments, dividends or distributions by AGY Holdings
to KAGY Holdings in order to pay consolidated or combined federal, state or
local taxes not payable directly by AGY Holdings or any of its Subsidiaries
which payments by AGY Holdings are not in excess of the tax liabilities that
would have been payable by AGY Holdings and its Subsidiaries on a stand-alone
basis.

Person: any individual, corporation, limited liability company, partnership,
joint venture, joint stock company, land trust, business trust, unincorporated
organization, Governmental Authority or other entity.

Plan: any employee benefit plan (as such term is defined in Section 3(3) of
ERISA) established by an Obligor or, with respect to any such plan that is
subject to Section 412 of the Code or Title IV of ERISA, an ERISA Affiliate.

Platinum: platinum (loco Zurich) having a minimum degree of fineness of
ninety-nine and 95/100 percent (99.95%), or other platinum in sponge or plate
and having a minimum degree of fairness of ninety-nine and 95/100 percent
(99.95%).

 

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Post Closing Side Letter: that certain letter agreement dated as of the Closing
Date among Borrowers and Agent.

Prime Rate: the rate of interest announced by Bank of America from time to time
as its prime rate. Such rate is set by Bank of America on the basis of various
factors, including its costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans, which
may be priced at, above or below such rate. Any change in such rate announced by
Bank of America shall take effect at the opening of business on the day
specified in the public announcement of such change.

Pro Forma Basis: on a basis in accordance with GAAP and otherwise reasonably
satisfactory to Agent.

Pro Rata: with respect to any Lender, a percentage (rounded to the ninth decimal
place) determined (a) while Revolver Commitments are outstanding, by dividing
the amount of such Lender’s Revolver Commitment by the aggregate amount of all
Revolver Commitments; and (b) at any other time, by dividing the amount of such
Lender’s Loans and LC Obligations by the aggregate amount of all outstanding
Loans and LC Obligations.

Properly Contested: with respect to any obligation of an Obligor, (a) the
obligation is subject to a bona fide dispute regarding amount or the Obligor’s
liability to pay; (b) the obligation is being properly contested in good faith
by appropriate proceedings promptly instituted and diligently pursued;
(c) appropriate reserves have been established in accordance with GAAP;
(d) non-payment could not have a Material Adverse Effect, nor result in
forfeiture or sale of any assets of the Obligor; (e) no Lien, other than
Permitted Liens, is imposed on assets of the Obligor, unless bonded and stayed
to the satisfaction of Agent; and (f) if the obligation results from entry of a
judgment or other order, such judgment or order is stayed pending appeal or
other judicial review.

Property: any interest in any kind of property or asset, whether real, personal
or mixed, or tangible or intangible.

Protective Advances: as defined in Section 2.1.6.

Purchase Money Debt: (a) Debt (other than the Obligations) for payment of any of
the purchase price of fixed assets or the cost of installation, construction or
improvement of any fixed assets; (b) Debt (other than the Obligations) incurred
within 10 days before or after such acquisition, installation, construction or
improvement of any fixed assets, for the purpose of financing any of the
purchase price thereof; and (c) any renewals, extensions or refinancings (but
not increases) thereof.

Purchase Money Lien: a Lien that secures Purchase Money Debt, encumbering only
the fixed assets acquired with such Debt and constituting a Capital Lease or a
purchase money security interest under the UCC.

Qualified Capital Stock: for any Person, Equity Interests of such Person that
are not Disqualified Capital Stock.

RCRA: the Resource Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i).

Real Estate: all right, title and interest (whether as owner, lessor or lessee)
in any real Property or any buildings, structures, parking areas or other
improvements thereon.

 

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Refinancing Conditions: the following conditions for Refinancing Debt: (a) it is
in an aggregate principal amount that does not exceed the principal amount of
the Debt being extended, renewed or refinanced; (b) it has with respect to the
Senior Second Lien Notes a final maturity no earlier than March 8, 2016, and
with respect to other Refinancing Debt, a final maturity no sooner than, a
weighted average life no less than, and an interest rate no greater than, the
Debt being extended, renewed or refinanced; (c) it is subordinated to the
Obligations at least to the same extent as the Debt being extended, renewed or
refinanced; (d) the representations, covenants and defaults applicable to it are
no less favorable to Borrowers than those applicable to the Debt being extended,
renewed or refinanced; (e) no additional Lien is granted to secure it; (f) no
additional Person is obligated on such Debt; and (g) upon giving effect to it,
no Default or Event of Default exists.

Refinancing Debt: Borrowed Money that is the result of an extension, renewal or
refinancing of Debt permitted under Section 10.2.1(b), (d) or (e).

Reimbursement Date: as defined in Section 2.3.2.

Related Real Estate Documents: with respect to any Real Estate subject to a
Mortgage, the following, in form and substance satisfactory to Agent: (a) a
mortgagee title policy (or binder therefore) covering Agent’s interest under the
Mortgage, in a form and amount and by an insurer acceptable to Agent, which must
be fully paid on such effective date; (b) a current, as-built survey of the Real
Estate subject to a Mortgage, containing a metes-and-bounds property description
and certified by a licensed surveyor acceptable to Agent or a survey no-change
affidavit from a Borrower; (c) a life-of-loan flood hazard determination and, if
the Real Estate subject to a Mortgage is located in a flood plain, an
acknowledged notice to borrower and flood insurance in an amount, with
endorsements and by an insurer acceptable to Agent; and (d) a Phase I
environmental assessment, prepared by environmental engineers acceptable to
Agent, which shall all be in form and substance satisfactory to Agent.

Rent and Charges Reserve: the aggregate of (a) all past due rent and other
amounts owing by an Obligor to any landlord, warehouseman, processor, repairman,
mechanic, shipper, freight forwarder, broker or other Person who possesses any
Collateral or could assert a Lien on any Collateral; and (b) a reserve at least
equal to three months rent and other charges that could be payable to any such
Person, unless it has executed a Lien Waiver.

Report: as defined in Section 12.2.3.

Reportable Event: any of the events set forth in Section 4043(c) of ERISA, other
than events for which the 30 day notice period has been waived.

Required Lenders: (i) at any time there are two (2) or fewer Lenders (subject to
Section 4.2), all of the Lenders, (ii) at any time there are three (3) or more
Lenders, two (2) or more Lenders having aggregate Commitments that exceed 50% of
the aggregate Commitments of all Lenders and (iii) if the Commitments have
terminated, at any time there are three(3) or more Lenders, two (2) or more
Lenders having Loans in excess of 50% of all outstanding Loans.

Reserve Percentage: the reserve percentage (expressed as a decimal, rounded up
to the nearest 1/8th of 1%) applicable to member banks under regulations issued
from time to time by the Board of Governors for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred to as
“Eurocurrency liabilities”).

Restricted Investment: any Investment by a Borrower or Subsidiary, other than
(a) Investments in Subsidiaries to the extent existing on the Closing Date,
including the Initial Grace Purchase; (b) Investments by any Obligor in any
Borrower or any Subsidiary Guarantor; (c) Investments by a

 

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Subsidiary that is not a Subsidiary Guarantor in any other Subsidiary that is
not a Subsidiary Guarantor; (d) Cash Equivalents that are subject to Agent’s
Lien and control, pursuant to documentation in form and substance satisfactory
to Agent; (e) loans and advances permitted under Section 10.2.7; (1) Investments
in securities of trade creditors or customers in the ordinary course of business
received upon foreclosure or pursuant to any plan or reorganization or
liquidation or arrangement upon the bankruptcy or insolvency of such trade
creditors or customers; (g) Investments made by an Obligor as a result of
consideration received in connection with a Disposition permitted under
Section 10.2.6; (h) the AGY Holdings Guarantees, (i) other Investments in an
aggregate amount not to exceed $10,000,000 at any time outstanding, provided
that, of such $10,000,000, the aggregate amount of direct and indirect
Investments in AGY Cayman or any of its Subsidiaries does not exceed at any time
outstanding $5,000,000 less the outstanding amount of any loans or advances to
AGY Cayman or its Subsidiaries permitted under Section 10.2.7(e); (j) to the
extent permitted under Section 10.2.20, in an amount not to exceed the sum of
$18,000,000 and the amount of Additional Equity Proceeds, the Secondary Grace
Purchase; and (k) Permitted Acquisitions.

Restrictive Agreement: an agreement (other than a Loan Document) that conditions
or restricts the right of any Borrower, Subsidiary or other Obligor to incur or
repay Borrowed Money, to grant Liens on any assets, to declare or make
Distributions, to modify, extend or renew any agreement evidencing Borrowed
Money, or to repay any intercompany Debt.

Revolver Commitment: for any Lender, its obligation to make Revolver Loans and
to participate in LC Obligations up to the maximum principal amount shown on
Schedule 1.1, as hereafter modified pursuant to an Assignment and Acceptance to
which it is a party. “Revolver Commitments” means the aggregate amount of such
commitments of all Lenders.

Revolver Loan: a loan made pursuant to Section 2.1, and any Swingline Loan,
Overadvance Loan or Protective Advance.

Revolver Note: a promissory note executed by Borrowers in favor of a Lender in
the form of Exhibit A, in the amount of such Lender’s Revolver Commitment.

Revolver Termination Date: the first to occur of (a) March 8, 2015 and (b) the
date that is ninety (90) days prior to the maturity date of the Second Lien
Notes.

Rhodium: rhodium (loco Zurich) having a minimum degree of fairness of
ninety-nine and 90/100 percent (99.9%), or other rhodium in sponge or plate and
having a minimum degree of fineness of ninety-nine and 90/100 percent (99.9%).

Royalties: all royalties, fees, expense reimbursement and other amounts payable
by a Borrower under a License.

Sale and Leaseback Transaction; as defined in Section 10.2.6.

S&P: Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., and its successors.

Secondary Grace Purchase: the purchase, through a single payment or installments
and whether as result of the exercise of the option by AGY Cayman to purchase
from Grace and/or the exercise of the option of Grace to sell to AGY Cayman, in
each instance pursuant to the terms of the Grace Option Agreement, or otherwise,
of the remaining 30% of the share capital of Main Union.

Secondary Grace Purchase Conditions: each of (A) (1) if the Secondary Grace
Purchase is to be made on or before June 30, 2012, for the period of sixty
(60) consecutive days ending on the date on

 

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which the Secondary Grace Purchase is to be completed, and immediately after
giving effect thereto, Excess Availability shall not have been less than the
greater of (i) $10,000,000 and (ii) 20.0% of the Borrowing Base as of the last
day of the immediately prior fiscal month, at the end of any day during such
period, and in either instance the Fixed Charge Ratio, immediately prior to and
immediately after giving effect to the Secondary Grace Purchase, shall not be
less than 0.50 to 1.0, or (2) if the Secondary Grace Purchase is to be made
after June 30, 2012, for the period of sixty (60) consecutive days ending on the
date on which the Secondary Grace Purchase is to be completed, and immediately
after giving effect thereto, Excess Availability shall not have been less than
the greater of (i) $8,750,000 and (ii) 17.5% of the Borrowing Base as of the
last day of the immediately prior fiscal month, at the end of any day during
such period, and in either instance the Fixed Charge Ratio, immediately prior to
and immediately after giving effect to the Secondary Grace Purchase, shall not
be less than 1.0 to 1.0, (B) as a result of each such acquisition, no Obligor or
any Subsidiary (other than a Grace Company) shall assume or become liable with
respect to any Debt or other liability (excluding the AGY Holdings Guarantees,
but including any material tax or pension type liability) of a Grace Company,
(C) no Default or Event of Default shall exist or would result from such
purchase, and (D) AGY Holdings shall have delivered to Agent and the Lenders a
certificate from a Senior Officer, dated as of such acquisition and in form and
substance satisfactory to Agent, certifying that the foregoing conditions have
been satisfied, with such supporting calculations as Agent may reasonably
request.

Secondary Grace Purchase Guaranty: the guaranty by AGY Holdings, pursuant to the
terms of the Grace Option Agreement, of the obligations of AGY Cayman under the
Grace Option Agreement.

Secured Bank Product Obligations: Bank Product Debt owing to a Secured Bank
Product Provider, up to the maximum amount (in the case of any Secured Bank
Product Provider other than Bank of America and its Affiliates) specified by
such provider in writing to Agent, which amount may be established or increased
(by further written notice to Agent from time to time) as long as no Default or
Event of Default exists and no Overadvance would result from establishment of a
Bank Product Reserve for such amount and all other Secured Bank Product
Obligations.

Secured Bank Product Provider: (a) Bank of America or any of its Affiliates; and
(b) any other Lender or Affiliate of a Lender that is providing a Bank Product,
provided such provider delivers written notice to Agent, in form and substance
satisfactory to Agent, by the later of the Closing Date or 10 days following
creation of the Bank Product, (i) describing the Bank Product and setting forth
the maximum amount to be secured by the Collateral and the methodology to be
used in calculating such amount, and (ii) agreeing to be bound by Section 12.13.

Secured Parties: Agent, Issuing Bank, Lenders and Secured Bank Product
Providers.

Security Documents: the Guarantees, Mortgages, Patent Assignments, Trademark
Security Agreements, Insurance Assignments, Deposit Account Control Agreements,
and all other documents, instruments and agreements now or hereafter securing
(or given with the intent to secure) any Obligations.

Senior Officer: the chairman of the board, president, chief executive officer or
chief financial officer and any other officer of similar official thereof, of a
Borrower or, if the context requires, an Obligor.

Senior Second Lien Debt: all Debt of the Loan Parties under the Senior Second
Lien Note Documents.

Senior Second Lien Note Agreement: shall mean the Senior Second Lien Note
Indenture or any other indenture, note purchase agreement or other agreement
pursuant to which the Senior Second Lien Notes are issued, as in effect on the
date hereof and thereafter amended from time to time subject to the requirements
of this Agreement and the Intercreditor Agreement.

 

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Senior Second Lien Note Documents: the Senior Second Lien Notes, the Senior
Second Lien Note Agreement, the Senior Second Lien Note Guarantees, the Senior
Second Lien Note Security Documents and all other documents executed and
delivered with respect to the Senior Second Lien Notes or the Senior Second Lien
Note Agreement.

Senior Second Lien Note Guarantees: shall mean the guarantee of the obligations
under the Senior Second Lien Notes by Holdings and the Subsidiary Guarantors
that are “Guarantors” (as defined in the Senior Second Lien Note Agreement).
“Senior Second Lien Note Secured Parties” shall mean the Senior Second Lien
Notes Collateral Agent, the Senior Second Lien Notes Trustee and the Senior
Second Lien Noteholders.

Senior Second Lien Note Indenture: Indenture, dated as of October 25, 2006,
among AGY Holdings, U.S. Bank National Association as Trustee and the Guarantors
named therein, as the same has been amended, modified or supplemented from time
to time.

Senior Second Lien Noteholders: the holders of the Senior Second Lien Notes.

Senior Second Lien Notes: AGY Holdings’ 11% Senior Second Lien Notes due 2014
issued pursuant to the Senior Second Lien Note Agreement and any registered
notes issued by AGY Holdings in exchange for, and as contemplated by, such notes
with substantially identical terms as such notes.

Senior Second Lien Notes Collateral Agent: the collateral agent under the Senior
Second Lien Note Documents.

Senior Second Lien Notes Trustee: the trustee for the Senior Second Lien
Noteholders under the Senior Second Lien Note Documents.

Senior Second Lien Note Security Documents: the “Noteholder Security Documents”
as defined in the Intercreditor Agreement.

Settlement Report: a report summarizing Revolver Loans and participations in LC
Obligations outstanding as of a given settlement date, allocated to Lenders on a
Pro Rata basis in accordance with their Revolver Commitments.

Share Sale Agreement: Share Sale Agreement dated as of March 12, 2009 by and
among AGY Cayman, Grace and Grace Guarantor.

Solvent: as to any Person, such Person (a) owns Property whose fair salable
value is greater than the amount required to pay all of its debts (including
contingent, subordinated, unmatured and unliquidated liabilities); (b) owns
Property whose present fair salable value (as defined below) is greater than the
probable total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person as they become absolute and matured;
(c) is able to pay all of its debts as they mature; and (d) has capital that is
not unreasonably small for its business and is sufficient to carry on its
business and transactions and all business and transactions in which it is about
to engage. “Fair salable value” means the amount that could be obtained for
assets within a reasonable time, either through collection or through sale under
ordinary selling conditions by a capable and diligent seller to an interested
buyer who is willing (but under no compulsion) to purchase.

Sponsor: Kohlberg & Company, LLC (“Kohlberg”) and any other Person which
directly or indirectly, controls, is controlled by or is under common control
with Kohlberg (including any investment partnership under common control with
Kohlberg) and (ii) any Related Parties with respect to any of the

 

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foregoing Persons; provided, that, for purposes of this definition, “control”
means the power to direct or cause the direction of the management and policies
of the relevant Person, whether by contract or otherwise.

Subordinated Debt: Debt incurred by a Borrower that is expressly subordinate and
junior in right of payment to Full Payment of all Obligations, and is on terms
(including maturity, interest, fees, repayment, covenants and subordination)
satisfactory to Agent.

Subsidiary: any entity at least 50% of whose voting securities or Equity
Interests is owned by a Borrower or any combination of Borrowers (including
indirect ownership by a Borrower through other entities in which the Borrower
directly or indirectly owns 50% of the voting securities or Equity Interests).

Supermajority Lenders: (i) at any time there are two (2) or fewer Lenders
(subject to Section 4.2), all of the Lenders, (ii) at any time there are three
(3) or more Lenders, two (2) or more Lenders having aggregate Commitments that
exceed 66.67% of the aggregate Commitments of all Lenders and (iii) if the
Commitments have terminated, at any time there are three (3) or more Lenders,
two (2) or more Lenders having Loans in excess of 66.67% of all outstanding
Loans.

Swingline Loan: any Borrowing of Base Rate Revolver Loans funded with Agent’s
funds, until such Borrowing is settled among Lenders or repaid by Borrowers.

Taxes: all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.

Trademark Security Agreement: each trademark security agreement pursuant to
which an Obligor grants to Agent, for the benefit of Secured Parties, a Lien on
such Obligor’s interests in trademarks, as security for the Obligations.

Transferee: any actual or potential Eligible Assignee, Participant or other
Person acquiring an interest in any Obligations.

Trigger Period: the period (a) commencing on the day that a Default or an Event
of Default occurs, or (b) Excess Availability is less than the greater of
(i) $6,250,000, or (ii) 12.5% of the Borrowing Base as of the last day of the
most recent fiscal month end, at any time.

Type: any type of a Loan (i.e., Base Rate Loan or LIBOR Loan) that has the same
interest option and, in the case of LIBOR Loans, the same Interest Period.

UCC: the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts or, when the laws of any other jurisdiction govern the perfection
or enforcement of any Lien, the Uniform Commercial Code of such jurisdiction.

Unfunded Pension Liability: the excess of a Pension Plan’s benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Pension
Plan’s assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.

 

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Unused Line Fee Rate: a per annum rate as determined by the Fixed Charge
Coverage Ratio for the last Fiscal Quarter:

 

Level

   Ratio    Unused Line Fee
Rate      < 1.0:1.0      0.50 % 

II> 1.0:1.0

   < 1.50:1.0      0.375 % 

III

   > 1.50:1.0      0.375 % 

Until June 1, 2011, the Unused Line Fee Rate shall be determined as if Level I
were applicable. Thereafter, the margins shall be subject to increase or
decrease upon receipt by Agent pursuant to Section 10.1.2 of the financial
statements and corresponding Compliance Certificate for the last Fiscal Quarter,
which change shall be effective on the first day of the calendar month following
receipt. If, by the first day of a month, any financial statement or Compliance
Certificate due in the preceding month has not been received, then, at the
option of Agent or Required Lenders, the Unused Line Fee Rate shall be
determined as if Level I were applicable, from such day until the first day of
the calendar month following actual receipt.

Upstream Payment: a Distribution by a Subsidiary of a Borrower to such Borrower.

Value: (a) for Inventory, its value determined on the basis of the lower of cost
or market, calculated on a first-in, first-out basis, and excluding any portion
of cost attributable to intercompany profit among Borrowers and their
Affiliates; and (b) for an Account, its face amount, net of Taxes (including
sales, excise or other taxes) that have been or could be claimed by the Account
Debtor or any other Person.

Voting Stock: with respect to any Person, any class or classes of Equity
Interests pursuant to which holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
or comparable governing body, of such Person.

1.2. Accounting Terms. Under the Loan Documents (except as otherwise specified
herein), all accounting terms shall be interpreted, all accounting
determinations shall be made, and all financial statements shall be prepared, in
accordance with GAAP applied on a basis consistent with the most recent audited
financial statements of Borrowers delivered to Agent before the Closing Date and
using the same inventory valuation method as used in such financial statements,
except for any change required or permitted by GAAP if Borrowers’ certified
public accountants concur in such change, the change is disclosed to Agent, and
Section 10.3 is amended in a manner satisfactory to Required Lenders to take
into account the effects of the change.

1.3. Uniform Commercial Code. As used herein, the following terms are defined in
accordance with the UCC in effect in the Commonwealth of Massachusetts from time
to time: “Chattel Paper,” “Commercial Tort Claim,” “Deposit Account,”
“Document,” “Equipment,” “General Intangibles,” “Goods,” “Instrument,”
“Investment Property,” “Letter-of-Credit Right” and “Supporting Obligation.”

1.4. Certain Matters of Construction. The terms “herein,” “hereof,” “hereunder”
and other words of similar import refer to this Agreement as a whole and not to
any particular section, paragraph or subdivision. Any pronoun used shall be
deemed to cover all genders. In the computation of periods of time from a
specified date to a later specified date, “from” means “from and including,” and
“to” and “until” each mean “to but excluding.” The terms “including” and
“include” shall mean “including, without limitation” and, for purposes of each
Loan Document, the parties agree that the rule of ejusdem generis shall not be
applicable to limit any provision. Section titles appear as a matter of
convenience only and shall not affect the interpretation of any Loan Document.
All references to (a) laws or statutes include all related rules, regulations,
interpretations, amendments and successor provisions; (b) any document,
instrument or agreement include any amendments, waivers and other modifications,
extensions

 

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or renewals (to the extent permitted by the Loan Documents); (c) any section
mean, unless the context otherwise requires, a section of this Agreement;
(d) any exhibits or schedules mean, unless the context otherwise requires,
exhibits and schedules attached hereto, which are hereby incorporated by
reference; (e) any Person include successors and assigns; (f) time of day mean
time of day at Agent’s notice address under Section 14.3.1; or (g) discretion of
Agent, Issuing Bank or any Lender mean the sole and absolute discretion of such
Person. All calculations of Value, fundings of Loans, issuances of Letters of
Credit and payments of Obligations shall be in Dollars and, unless the context
otherwise requires, all determinations (including calculations of Borrowing Base
and financial covenants) made from time to time under the Loan Documents shall
be made in light of the circumstances existing at such time. Borrowing Base
calculations shall be consistent with historical methods of valuation and
calculation, and otherwise satisfactory to Agent (and not necessarily calculated
in accordance with GAAP). Borrowers shall have the burden of establishing any
alleged negligence, misconduct or lack of good faith by Agent, Issuing Bank or
any Lender under any Loan Documents. No provision of any Loan Documents shall be
construed against any party by reason of such party having, or being deemed to
have, drafted the provision. Whenever the phrase “to the best of Borrowers’
knowledge” or words of similar import are used in any Loan Documents, it means
actual knowledge of a Senior Officer, or knowledge that a Senior Officer would
have obtained if he or she had engaged in good faith and diligent performance of
his or her duties, including reasonably specific inquiries of employees or
agents and a good faith attempt to ascertain the matter to which such phrase
relates.

SECTION 2. CREDIT FACILITIES

2.1. Revolver Commitment.

2.1.1. Revolver Loans. Each Lender agrees, severally on a Pro Rata basis up to
its Revolver Commitment, on the terms set forth herein, to make Revolver Loans
to Borrowers from time to time through the Commitment Termination Date. The
Revolver Loans may be repaid and reborrowed as provided herein. In no event
shall Lenders have any obligation to honor a request for a Revolver Loan if the
unpaid balance of Revolver Loans outstanding at such time (including the
requested Loan) would exceed the Borrowing Base.

2.1.2. Revolver Notes. The Revolver Loans made by each Lender and interest
accruing thereon shall be evidenced by the records of Agent and such Lender. At
the request of any Lender, Borrowers shall deliver a Revolver Note to such
Lender.

2.1.3. Use of Proceeds. The proceeds of Revolver Loans shall be used by
Borrowers (a) to satisfy existing and future Debt; (b) to pay fees and
transaction expenses associated with the closing of this credit facility; (c) to
pay Obligations in accordance with this Agreement; and (d) for working capital
and other lawful corporate purposes of Borrowers.

2.1.4. Voluntary Reduction or Termination of Revolver Commitments.

(a) The Revolver Commitments shall terminate on the Revolver Termination Date,
unless sooner terminated in accordance with this Agreement. Upon at least 90
days prior written notice to Agent at any time after the first Loan Year,
Borrowers may, at their option, terminate the Revolver Commitments and this
credit facility. Any notice of termination given by Borrowers shall be
irrevocable. On the termination date, Borrowers shall make Full Payment of all
Obligations.

(b) Borrowers may permanently reduce the Revolver Commitments, on a Pro Rata
basis for each Lender, upon at least 90 days prior written notice to Agent
delivered at any time after the First Loan Year, which notice shall specify the
amount of the reduction and shall be irrevocable once given. Each reduction
shall be in a minimum amount of $5,000,000, or an increment of $1,000,000 in
excess thereof.

 

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2.1.5. Overadvances. If the aggregate Revolver Loans exceed the Borrowing Base
(“Overadvance”) at any time, the excess amount shall be payable by Borrowers on
demand by Agent, but all such Revolver Loans shall nevertheless constitute
Obligations secured by the Collateral and entitled to all benefits of the Loan
Documents. Agent may require Lenders to honor requests for Overadvance Loans and
to forbear from requiring Borrowers to cure an Overadvance, (a) when no other
Event of Default is known to Agent, as long as (i) the Overadvance does not
continue for more than 30 consecutive days (and no Overadvance may exist for at
least five consecutive days thereafter before further Overadvance Loans are
required), and (ii) the Overadvance is not known by Agent to exceed $5,000,000;
and (b) regardless of whether an Event of Default exists, if Agent discovers an
Overadvance not previously known by it to exist, as long as from the date of
such discovery the Overadvance (i) is not increased by more than $1,000,000, and
(ii) does not continue for more than 30 consecutive days. In no event shall
Overadvance Loans be required that would cause the outstanding Revolver Loans
and LC Obligations to exceed the aggregate Revolver Commitments. Any funding of
an Overadvance Loan or sufferance of an Overadvance shall not constitute a
waiver by Agent or Lenders of the Event of Default caused thereby. In no event
shall any Borrower or other Obligor be deemed a beneficiary of this Section nor
authorized to enforce any of its terms.

2.1.6. Protective Advances. Agent shall be authorized, in its discretion, at any
time that any conditions in Section 6 are not satisfied, and without regard to
the aggregate Commitments, to make Base Rate Revolver Loans (“Protective
Advances”) (a) up to an aggregate amount of $5,000,000 outstanding at any time,
if Agent deems such Loans necessary or desirable to preserve or protect
Collateral, or to enhance the collectibility or repayment of Obligations; or
(b) to pay any other amounts chargeable to Obligors under any Loan Documents,
including costs, fees and expenses. Each Lender shall participate in each
Protective Advance on a Pro Rata basis, provided that no Lender shall be
required to participate in a Protective Advance that would cause the outstanding
Revolver Loans and LC Obligations to exceed the aggregate Revolver Commitments.
Required Lenders may at any time revoke Agent’s authority to make further
Protective Advances under clause (a) by written notice to Agent. Absent such
revocation, Agent’s determination that funding of a Protective Advance is
appropriate shall be conclusive.

2.1.7. Determination of Borrowing Base: Notwithstanding any of the other
provisions of this Agreement, Agent reserves the right, at any time and from
time to time after the Closing Date, to adjust the criteria set forth herein, to
establish new criteria and to adjust the applicable advance rates, with respect
to Eligible Accounts, Eligible Inventory and Eligible Metals, in its Credit
Judgment, subject to the approval of the Supermajority Lenders in the case of
adjustments, new criteria or changes in the applicable advance rates which, when
compared to such criteria or such advance rates as provided herein on the
Closing Date, have the effect of making more credit available to Borrowers. In
addition, Agent shall have the right to establish, modify or eliminate the
Availability Reserve or any component thereof (including, without limitation,
for estimates, chargeback or other accrued liabilities, or offsets and amounts
to adjust for, material claims, offsets, defenses or counterclaims or other
material disputes concerning Borrowers’ Accounts) from time to time in its
Credit Judgment.

2.2. Reserved.

2.3. Letter of Credit Facility.

2.3.1. Issuance of Letters of Credit. Issuing Bank shall issue Letters of Credit
from time to time until 30 days prior to the Revolver Termination Date (or until
the Commitment Termination Date, if earlier), on the terms set forth herein,
including the following:

(a) Each Borrower acknowledges that Issuing Bank’s issuance of any Letter of
Credit is conditioned upon Issuing Bank’s receipt of a LC Application with
respect to the requested Letter of

 

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Credit, as well as such other instruments and agreements as Issuing Bank may
customarily require for issuance of a letter of credit of similar type and
amount. Issuing Bank shall have no obligation to issue any Letter of Credit
unless (i) Issuing Bank receives a LC Request and LC Application at least three
Business Days prior to the requested date of issuance; (ii) each LC Condition is
satisfied; and (iii) if a Defaulting Lender exists, such Lender or Borrowers
have entered into arrangements satisfactory to Agent and Issuing Bank to
eliminate any Fronting Exposure associated with such Lender. If, in sufficient
time to act, Issuing Bank receives written notice from Required Lenders that a
LC Condition has not been satisfied, Issuing Bank shall not issue the requested
Letter of Credit. Prior to receipt of any such notice, Issuing Bank shall not be
deemed to have knowledge of any failure of LC Conditions.

(b) Letters of Credit may be requested by a Borrower to support obligations
incurred in the Ordinary Course of Business, or as otherwise approved by Agent.
The renewal or extension of any Letter of Credit shall be treated as the
issuance of a new Letter of Credit, except that delivery of a new LC Application
shall be required at the discretion of Issuing Bank.

(c) Borrowers assume all risks of the acts, omissions or misuses of any Letter
of Credit by the beneficiary. In connection with issuance of any Letter of
Credit, none of Agent, Issuing Bank or any Lender shall be responsible for the
existence, character, quality, quantity, condition, packing, value or delivery
of any goods purported to be represented by any Documents; any differences or
variation in the character, quality, quantity, condition, packing, value or
delivery of any goods from that expressed in any Documents; the form, validity,
sufficiency, accuracy, genuineness or legal effect of any Documents or of any
endorsements thereon; the time, place, manner or order in which shipment of
goods is made; partial or incomplete shipment of, or failure to ship, any goods
referred to in a Letter of Credit or Documents; any deviation from instructions,
delay, default or fraud by any shipper or other Person in connection with any
goods, shipment or delivery; any breach of contract between a shipper or vendor
and a Borrower; errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex, telecopy, e-mail,
telephone or otherwise; errors in interpretation of technical terms; the
misapplication by a beneficiary of any Letter of Credit or the proceeds thereof;
or any consequences arising from causes beyond the control of Issuing Bank,
Agent or any Lender, including any act or omission of a Governmental Authority.
The rights and remedies of Issuing Bank under the Loan Documents shall be
cumulative. Issuing Bank shall be fully subrogated to the rights and remedies of
each beneficiary whose claims against Borrowers are discharged with proceeds of
any Letter of Credit.

(d) In connection with its administration of and enforcement of rights or
remedies under any Letters of Credit or LC Documents, Issuing Bank shall be
entitled to act, and shall be fully protected in acting, upon any certification,
documentation or communication in whatever final believed by Issuing Bank, in
good faith, to be genuine and correct and to have been signed, sent or made by a
proper Person. Issuing Bank may consult with and employ legal counsel,
accountants and other experts to advise it concerning its obligations, rights
and remedies, and shall be entitled to act upon, and shall be fully protected in
any action taken in good faith reliance upon, any advice given by such experts.
Issuing Bank may employ agents and attorneys-in-fact in connection with any
matter relating to Letters of Credit or LC Documents, and shall not be liable
for the negligence or misconduct of agents and attorneys-in-fact selected with
reasonable care.

2.3.2. Reimbursement; Participations.

(a) If Issuing Bank honors any request for payment under a Letter of Credit,
Borrowers shall pay to Issuing Bank, on the same day (“Reimbursement Date”), the
amount paid by Issuing Bank under such Letter of Credit, together with interest
at the interest rate for Base Rate Revolver Loans from the Reimbursement Date
until payment by Borrowers. The obligation of Borrowers to reimburse Issuing
Bank for any payment made under a Letter of Credit shall be absolute,
unconditional, irrevocable, and joint and several, and shall be paid without
regard to any lack of validity or enforceability of any Letter of Credit or the
existence of any claim, setoff, defense or other right that

 

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Borrowers may have at any time against the beneficiary. Whether or not Borrower
Agent submits a Notice of Borrowing, Borrowers shall be deemed to have requested
a Borrowing of Base Rate Revolver Loans in an amount necessary to pay all
amounts due Issuing Bank on any Reimbursement Date and each Lender agrees to
fund its Pro Rata share of such Borrowing whether or not the Commitments have
terminated, an Overadvance exists or is created thereby, or the conditions in
Section 6 are satisfied.

(b) Upon issuance of a Letter of Credit, each Lender shall be deemed to have
irrevocably and unconditionally purchased from Issuing Bank, without recourse or
warranty, an undivided Pro Rata interest and participation in all LC Obligations
relating to the Letter of Credit. If Issuing Bank makes any payment under a
Letter of Credit and Borrowers do not reimburse such payment on the
Reimbursement Date, Agent shall promptly notify Lenders and each Lender shall
promptly (within one Business Day) and unconditionally pay to Agent, for the
benefit of Issuing Bank, the Lender’s Pro Rata share of such payment. Upon
request by a Lender, Issuing Bank shall furnish copies of any Letters of Credit
and LC Documents in its possession at such time.

(c) The obligation of each Lender to make payments to Agent for the account of
Issuing Bank in connection with Issuing Bank’s payment under a Letter of Credit
shall be absolute, unconditional and irrevocable, not subject to any
counterclaim, setoff, qualification or exception whatsoever, and shall be made
in accordance with this Agreement under all circumstances, irrespective of any
lack of validity or unenforceability of any Loan Documents; any draft,
certificate or other document presented under a Letter of Credit having been
determined to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect; or the
existence of any setoff or defense that any Obligor may have with respect to any
Obligations. Issuing Bank does not assume any responsibility for any failure or
delay in performance or any breach by any Borrower or other Person of any
obligations under any LC Documents. Issuing Bank does not make to Lenders any
express or implied warranty, representation or guaranty with respect to the
Collateral, LC Documents or any Obligor. Issuing Bank shall not be responsible
to any Lender for any recitals, statements, information, representations or
warranties contained in, or for the execution, validity, genuineness,
effectiveness or enforceability of any LC Documents; the validity, genuineness,
enforceability, collectibility, value or sufficiency of any Collateral or the
perfection of any Lien therein; or the assets, liabilities, financial condition,
results of operations, business, creditworthiness or legal status of any
Obligor.

(d) No Issuing Bank Indemnitee shall be liable to any Lender or other Person for
any action taken or omitted to be taken in connection with any LC Documents
except as a result of its actual gross negligence or willful misconduct. Issuing
Bank shall not have any liability to any Lender if Issuing Bank refrains from
any action under any Letter of Credit or LC Documents until it receives written
instructions from Required Lenders.

2.3.3. Cash Collateral. If any LC Obligations, whether or not then due or
payable, shall for any reason be outstanding at any time (a) that an Event of
Default exists, (b) that Excess Availability is less than zero, (c) after the
Commitment Termination Date, or (d) within 20 Business Days prior to the
Revolver Termination Date, then Borrowers shall, at Issuing Bank’s or Agent’s
request, Cash Collateralize the stated amount of all outstanding Letters of
Credit and pay to Issuing Bank the amount of all other LC Obligations. Borrowers
shall, on demand by Issuing Bank or Agent from time to time, Cash Collateralize
the Fronting Exposure associated with any Defaulting Lender. If Borrowers fail
to provide any Cash Collateral as required hereunder, Lenders may (and shall
upon direction of Agent) advance, as Revolver Loans, the amount of the Cash
Collateral required (whether or not the Commitments have terminated, an
Overadvance exists or the conditions in Section 6 are satisfied).

2.3.4. Resignation of Issuing Bank. Issuing Bank may resign at any time upon
notice to Agent and Borrowers. On the effective date of such resignation,
Issuing Bank shall have no further obligation to issue, amend, renew, extend or
otherwise modify any Letter of Credit, but shall continue to have all rights and
obligations of an Issuing Bank hereunder, including under Sections 2.3,

 

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12.6 and 14.2, relating to any Letter of Credit issued prior to such date. Agent
shall promptly appoint a replacement Issuing Bank, which, as long as no Default
or Event of Default exists, shall be reasonably acceptable to Borrowers.

SECTION 3. INTEREST, FEES AND CHARGES

3.1. Interest.

3.1.1. Rates and Payment of Interest.

(a) The Obligations shall bear interest (i) if a Base Rate Loan, at the Base
Rate in effect from time to time, plus the Applicable Margin; (ii) if a LIBOR
Loan, at LIBOR for the applicable Interest Period, plus the Applicable Margin;
and (iii) if any other Obligation (including, to the extent permitted by law,
interest not paid when due), at the Base Rate in effect from time to time, plus
the Applicable Margin for Base Rate Revolver Loans. Interest shall accrue from
the date the Loan is advanced or the Obligation is incurred or payable, until
paid by Borrowers. If a Loan is repaid on the same day made, one day’s interest
shall accrue.

(b) During an Insolvency Proceeding with respect to any Borrower, or during any
other Event of Default if Agent or Required Lenders in their discretion so
elect, Obligations shall bear interest at the Default Rate (whether before or
after any judgment). Each Borrower acknowledges that the cost and expense to
Agent and Lenders due to an Event of Default are difficult to ascertain and that
the Default Rate is a fair and reasonable estimate to compensate Agent and
Lenders for this.

(c) Interest accrued on the Loans shall be due and payable in arrears, (i) on
each applicable Interest Payment Date; and (ii) on any date of prepayment, with
respect to the principal amount of Loans being prepaid. Interest accrued on any
other Obligations shall be due and payable as provided in the Loan Documents
and, if no payment date is specified, shall be due and payable on demand.
Notwithstanding the foregoing, interest accrued at the Default Rate shall be due
and payable on demand.

3.1.2. Application of LIBOR to Outstanding Loans.

(a) Borrowers may on any Business Day, subject to delivery of a Notice of
Conversion/Continuation, elect to convert any portion of the Base Rate Loans to,
or to continue any LIBOR Loan at the end of its Interest Period as, a LIBOR
Loan. During any Default or Event of Default, Agent may (and shall at the
direction of Required Lenders) declare that no Loan may be made, converted or
continued as a LIBOR Loan.

(b) Whenever Borrowers desire to convert or continue Loans as LIBOR Loans,
Borrower Agent shall give Agent a Notice of Conversion/Continuation, no later
than 11:00 a.m. at least three Business Days before the requested conversion or
continuation date. Promptly after receiving any such notice, Agent shall notify
each Lender thereof. Each Notice of Conversion/Continuation shall be
irrevocable, and shall specify the amount of Loans to be converted or continued,
the conversion or continuation date (which shall be a Business Day), and the
duration of the Interest Period (which shall be deemed to be 30 days if not
specified). If, upon the expiration of any Interest Period in respect of any
LIBOR Loans, Borrowers shall have failed to deliver a Notice of
Conversion/Continuation, they shall be deemed to have elected to convert such
Loans into Base Rate Loans.

3.1.3. Interest Periods. In connection with the making, conversion or
continuation of any LIBOR Loans, Borrowers shall select an interest period
(“Interest Period”) to apply, which interest period shall be one, two, three or
six months (or if Agent so agrees, and such Interest Period is available, nine
or twelve months); provided, however, that:

(a) the Interest Period shall commence on the date the Loan is made or continued
as, or converted into, a LIBOR Loan, and shall expire on the numerically
corresponding day in the calendar month at its end;

 

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(b) if any Interest Period commences on a day for which there is no
corresponding day in the calendar month at its end or if such corresponding day
falls after the last Business Day of such month, then the Interest Period shall
expire on the last Business Day of such month; and if any Interest Period would
expire on a day that is not a Business Day, the period shall expire on the next
Business Day; and

(c) no Interest Period shall extend beyond the Revolver Termination Date.

3.1.4. Interest Rate Not Ascertainable. If Agent shall determine that on any
date for determining LIBOR, due to any circumstance affecting the London
interbank market, adequate and fair means do not exist for ascertaining such
rate on the basis provided herein, then Agent shall immediately notify Borrowers
of such determination. Until Agent notifies Borrowers that such circumstance no
longer exists, the obligation of Lenders to make LIBOR Loans shall be suspended,
and no further Loans may be converted into or continued as LIBOR Loans.

3.2. Fees.

3.2.1. Unused Line Fee. Borrowers shall pay to Agent, for the Pro Rata benefit
of Lenders, a fee equal to the Unused Line Fee Rate times the amount by which
the Revolver Commitments exceed the average daily balance of Revolver Loans and
stated amount of Letters of Credit during any month. Such fee shall be payable
in arrears, on the first day of each month and on the Commitment Termination
Date.

3.2.2. LC Facility Fees. Borrowers shall pay (a) to Agent, for the Pro Rata
benefit of Lenders, a fee equal to the Applicable Margin in effect for LIBOR
Revolver Loans times the average daily stated amount of Letters of Credit, which
fee shall be payable monthly in arrears, on the first day of each month; (b) to
Agent, for its own account, a fronting fee equal to 0.25% per annum on the
stated amount of each Letter of Credit, which fee shall be payable monthly in
arrears, on the first day of each month; and (c) to Issuing Bank, for its own
account, all customary charges associated with the issuance, amending,
negotiating, payment, processing, transfer and administration of Letters of
Credit, which charges shall be paid as and when incurred. During an Event of
Default, the fee payable under clause (a) shall be increased by 2% per annum.

3.2.3. Closing Fee. On the Closing Date, Borrowers shall pay to Agent, for the
Pro Rata benefit of Lenders, a closing fee of $312,500, less any unused deposit.

3.2.4. Agent Fees. Borrowers shall pay to Agent, for its own account, the fees
described in the Fee Letter.

3.3. Computation of Interest, Fees, Yield Protection. All interest, as well as
fees and other charges calculated on a per annum basis, shall be computed for
the actual days elapsed, based on a year of 360 days Each determination by Agent
of any interest, fees or interest rate hereunder shall be final, conclusive and
binding for all purposes, absent manifest error. All fees shall be fully earned
when due and shall not be subject to rebate, refund or proration. All fees
payable under Section 3.2 are compensation for services and are not, and shall
not be deemed to be, interest or any other charge for the use, forbearance or
detention of money. A certificate as to amounts payable by Borrowers under
Section 3.4, 3.6, 3.7, 3.9 or 5.9, submitted to Borrower Agent by Agent or the
affected Lender, as applicable, shall be final, conclusive and binding for all
purposes, absent manifest error, and Borrowers shall pay such amounts to the
appropriate party within 10 days following receipt of the certificate.

 

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3.4. Reimbursement Obligations. Borrowers shall reimburse Agent for all
Extraordinary Expenses. Borrowers shall also reimburse Agent for all legal,
accounting, appraisal, consulting, and other fees, costs and expenses incurred
by it in connection with (a) negotiation and preparation of any Loan Documents,
including any amendment or other modification thereof; (b) administration of and
actions relating to any Collateral, Loan Documents and transactions contemplated
thereby, including any actions taken to perfect or maintain priority of Agent’s
Liens on any Collateral, to maintain any insurance required hereunder or to
verify Collateral; and (c) subject to the limits of Section 10.1.1(b), each
inspection, audit or appraisal with respect to any Obligor or Collateral,
whether prepared by Agent’s personnel or a third party. All legal, accounting
and consulting fees shall be charged to Borrowers by Agent’s professionals at
their full hourly rates, regardless of any reduced or alternative fee billing
arrangements that Agent, any Lender or any of their Affiliates may have with
such professionals with respect to this or any other transaction. If, for any
reason (including inaccurate reporting on financial statements or a Compliance
Certificate), it is determined that a higher Applicable Margin should have
applied to a period than was actually applied, then the proper margin shall be
applied retroactively and Borrowers shall immediately pay to Agent, for the Pro
Rata benefit of Lenders, an amount equal to the difference between the amount of
interest and fees that would have accrued using the proper margin and the amount
actually paid. All amounts payable by Borrowers under this Section shall be due
on demand.

3.5. Illegality. If any Lender determines that any Applicable Law has made it
unlawful, or that any Governmental Authority has asserted that it is unlawful,
for any Lender or its applicable Lending Office to make, maintain or fund LIBOR
Loans, or to determine or charge interest rates based upon LIBOR, or any
Governmental Authority has imposed material restrictions on the authority of
such Lender to purchase or sell, or to take deposits of, Dollars in the London
interbank market, then, on notice thereof by such Lender to Agent, any
obligation of such Lender to make or continue LIBOR Loans or to convert Base
Rate Loans to LIBOR Loans shall be suspended until such Lender notifies Agent
that the circumstances giving rise to such determination no longer exist. Upon
delivery of such notice, Borrowers shall prepay or, if applicable, convert all
LIBOR Loans of such Lender to Base Rate Loans, either on the last day of the
Interest Period therefore, if such Lender may lawfully continue to maintain such
LIBOR Loans to such day, or immediately, if such Lender may not lawfully
continue to maintain such LIBOR Loans. Upon any such prepayment or conversion,
Borrowers shall also pay accrued interest on the amount so prepaid or converted.

3.6. Inability to Determine Rates. If Required Lenders notify Agent for any
reason in connection with a request for a Borrowing of, or conversion to or
continuation of, a LlBOR Loan that (a) Dollar deposits are not being offered to
banks in the London interbank Eurodollar market for the applicable amount and
Interest Period of such Loan, (b) adequate and reasonable means do not exist for
determining LIBOR for the requested Interest Period, or (c) LIBOR for the
requested Interest Period does not adequately and fairly reflect the cost to
such Lenders of funding such Loan, then Agent will promptly so notify Borrower
Agent and each Lender. Thereafter, the obligation of Lenders to make or maintain
LEBOR Loans shall be suspended until Agent (upon instruction by Required
Lenders) revokes such notice. Upon receipt of such notice, Borrower Agent may
revoke any pending request for a Borrowing of, conversion to or continuation of
a LIBOR Loan or, failing that, will be deemed to have submitted a request for a
Base Rate Loan.

3.7. Increased Costs; Capital Adequacy.

3.7.1. Change in Law. If any Change in Law shall:

(a) impose, modify or deem applicable any reserve, special deposit, compulsory
loan, insurance charge or similar requirement against assets of, deposits with
or for the account of, or credit extended or participated in by, any Lender
(except any reserve requirement reflected in LIBOR) or Issuing Bank;

 

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(b) subject any Lender or Issuing Bank to any Tax with respect to any Loan, Loan
Document, Letter of Credit or participation in LC Obligations, or change the
basis of taxation of payments to such Lender or Issuing Bank in respect thereof
(except for Indemnified Taxes or Other Taxes covered by Section 5.9 and the
imposition of, or any change in the rate of, any Excluded Tax payable by such
Lender or Issuing Bank); or

(c) impose on any Lender, Issuing Bank or interbank market any other condition,
cost or expense affecting any Loan, Loan Document, Letter of Credit,
participation in LC Obligations, or Commitment;

and the result thereof shall be to increase the cost to such Lender of making or
maintaining any Loan or Commitment, or to increase the cost to such Lender or
Issuing Bank of participating in, issuing or maintaining any Letter of Credit,
or to reduce the amount of any sum received or receivable by such Lender or
Issuing Bank hereunder (whether of principal, interest or any other amount)
then, upon request of such Lender or Issuing Bank, Borrowers will pay to such
Lender or Issuing Bank, as applicable, such additional amount or amounts as will
compensate such Lender or Issuing Bank, as applicable, for such additional costs
incurred or reduction suffered.

3.7.2. Capital Adequacy. If any Lender or Issuing Bank determines that any
Change in Law affecting such Lender or Issuing Bank or any Lending Office of
such Lender or such Lender’s or Issuing Bank’s holding company, if any,
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender’s, Issuing Bank’s or holding company’s capital as a
consequence of this Agreement, or such Lender’s or Issuing Bank’s Commitments,
Loans, Letters of Credit or participations in LC Obligations, to a level below
that which such Lender, Issuing Bank or holding company could have achieved but
for such Change in Law (taking into consideration such Lender’s, Issuing Bank’s
and holding company’s policies with respect to capital adequacy), then from time
to time Borrowers will pay to such Lender or Issuing Bank, as the case may be,
such additional amount or amounts as will compensate it or its holding company
for any such reduction suffered.

3.7.3. Compensation. Failure or delay on the part of any Lender or Issuing Bank
to demand compensation pursuant to this Section shall not constitute a waiver of
its right to demand such compensation, but Borrowers shall not be required to
compensate a Lender or Issuing Bank for any increased costs incurred or
reductions suffered more than nine months prior to the date that the Lender or
Issuing Bank notifies Borrower Agent of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s or Issuing Bank’s intention
to claim compensation therefore (except that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the nine-month period
referred to above shall be extended to include the period of retroactive effect
thereof).

3.8. Mitigation. If any Lender gives a notice under Section 3.5 or requests
compensation under Section 3.7, or if Borrowers are required to pay additional
amounts with respect to a Lender under Section 5.9, then such Lender shall use
reasonable efforts to designate a different Lending Office or to assign its
rights and obligations hereunder to another of its offices, branches or
Affiliates, if, in the judgment of such Lender, such designation or assignment
(a) would eliminate the need for such notice or reduce amounts payable or to be
withheld in the future, as applicable; and (b) would not subject the Lender to
any unreimbursed cost or expense and would not otherwise be disadvantageous to
it or unlawful. Borrowers shall pay all reasonable costs and expenses incurred
by any Lender in connection with any such designation or assignment.

3.9. Funding Losses. If for any reason (other than default by a Lender) (a) any
Borrowing of, or conversion to or continuation of, a LIBOR Loan does not occur
on the date specified therefore in a Notice of Borrowing or Notice of
Conversion/Continuation (whether or not withdrawn), (b) any repayment or
conversion of a LIBOR Loan occurs on a day other than the end of its Interest
Period, (c) Borrowers fail to repay a LIBOR Loan when required hereunder, or
(d) a Lender (other than a Defaulting

 

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Lender) is required to assign a LIBOR Loan prior to the end of its Interest
Period pursuant to Section 13.4, then, in any such event, Borrowers shall,
jointly and severally, compensate each Lender for the loss, cost and expense
attributable to such event. In the case of a LIBOR Loan, such loss, cost or
expense to any Lender shall be deemed to include an amount determined by such
Lender to be the excess, if any, of (i) the amount of interest which would have
accrued on the principal amount of such Loan had such event not occurred, at
LIBOR that would have been applicable to such Loan, for the period from the date
of such event to the last day of the then current Interest Period therefore (or,
in the case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period for such Loan), over (ii) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement of
such period, for dollar deposits of a comparable amount and period from other
banks in the LIBOR market. A certificate of any Lender setting forth in
reasonable detail any amount or amounts that such Lender is entitled to receive
pursuant to this Section 3.9 shall be delivered to Borrowers (with a copy to
Agent) and shall be conclusive and binding absent manifest error. Borrowers
shall pay, jointly and severally, such Lender the amount shown as due on any
such certificate within 5 days after receipt thereof.

3.10. Maximum Interest. Notwithstanding anything to the contrary contained in
any Loan Document, the interest paid or agreed to be paid under the Loan
Documents shall not exceed the maximum rate of non-usurious interest permitted
by Applicable Law (“maximum rate”). If Agent or any Lender shall receive
interest in an amount that exceeds the maximum rate, the excess interest shall
be applied to the principal of the Obligations or, if it exceeds such unpaid
principal, refunded to Borrowers. In determining whether the interest contracted
for, charged or received by Agent or a Lender exceeds the maximum rate, such
Person may, to the extent permitted by Applicable Law, (a) characterize any
payment that is not principal as an expense, fee or premium rather than
interest; (b) exclude voluntary prepayments and the effects thereof; and
(c) amortize, prorate, allocate and spread in equal or unequal parts the total
amount of interest throughout the contemplated term of the Obligations
hereunder.

SECTION 4. LOAN ADMINISTRATION

4.1. Manner of Borrowing and Funding Revolver Loans.

4.1.1. Notice of Borrowing.

(a) Whenever Borrowers desire funding of a Borrowing of Revolver Loans, Borrower
Agent shall give Agent a Notice of Borrowing. Such notice must be received by
Agent no later than 11:00 a.m (i) on the Business Day of the requested funding
date, in the case of Base Rate Loans (or 2:00 p.m. on the Business Day of the
requested funding date in the case of Swingline Loans), and (ii) at least three
Business Days prior to the requested funding date, in the case of LIBOR Loans.
Notices received after 11:00 a.m. shall be deemed received on the next Business
Day. Each Notice of Borrowing shall be irrevocable and shall specify (A) the
amount of the Borrowing, (B) the requested funding date (which must be a
Business Day), (C) whether the Borrowing is to be made as Base Rate Loans or
LIBOR Loans, and (D) in the case of LIBOR Loans, the duration of the applicable
Interest Period (which shall be deemed to be 30 days if not specified).

(b) Unless payment is otherwise timely made by Borrowers, the becoming due of
any Obligations (whether principal, interest, fees or other charges, including
Extraordinary Expenses, LC Obligations, Cash Collateral and Secured Bank Product
Obligations) shall be deemed to be a request for Base Rate Revolver Loans on the
due date, in the amount of such Obligations. The proceeds of such Revolver Loans
shall be disbursed as direct payment of the relevant Obligation. In addition,
Agent may, at its option, charge such Obligations against any operating,
investment or other account of a Borrower maintained with Agent or any of its
Affiliates.

 

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(c) If Borrowers establish a controlled disbursement account with Agent or any
Affiliate of Agent, then the presentation for payment of any check, ACH or
electronic debit, or other payment item at a time when there are insufficient
funds to cover it shall be deemed to be a request for Base Rate Revolver Loans
on the date of such presentation, in the amount of such payment item. The
proceeds of such Revolver Loans may be disbursed directly to the controlled
disbursement account or other appropriate account.

4.1.2. Fundings by Lenders. Each Lender shall timely honor its Revolver
Commitment by funding its Pro Rata share of each Borrowing of Revolver Loans
that is properly requested hereunder. Except for Borrowings to be made as
Swingline Loans, Agent shall endeavor to notify Lenders of each Notice of
Borrowing (or deemed request for a Borrowing) by 12:00 noon on the proposed
funding date for Base Rate Loans or by 3:00 p.m. at least two Business Days
before any proposed funding of LIBOR Loans. Each Lender shall fund to Agent such
Lender’s Pro Rata share of the Borrowing to the account specified by Agent in
immediately available funds not later than 2.00 p.m. on the requested funding
date, unless Agent’s notice is received after the times provided above, in which
case Lender shall fund its Pro Rata share by 11:00 a.m. on the next Business
Day. Subject to its receipt of such amounts from Lenders, Agent shall disburse
the proceeds of the Revolver Loans as directed by Borrower Agent. Unless Agent
shall have received (in sufficient time to act) written notice from a Lender
that it does not intend to fund its Pro Rata share of a Borrowing, Agent may
assume that such Lender has deposited or promptly will deposit its share with
Agent, and Agent may disburse a corresponding amount to Borrowers. If a Lender’s
share of any Borrowing or of any settlement pursuant to Section 4.1.3(b) is not
received by Agent, then Borrowers agree to repay to Agent on demand the amount
of such share, together with interest thereon from the date disbursed until
repaid, at the rate applicable to the Borrowing.

4.1.3. Swingline Loans; Settlement.

(a) Agent shall advance Swingline Loans to Borrowers, up to an aggregate
outstanding amount of $5,000,000 and in a minimum amount of $250,000 and
increments of $100,000 thereafter, unless the funding is specifically required
to be made by all Lenders hereunder. Each Swingline Loan shall constitute a
Revolver Loan for all purposes, except that payments thereon shall be made to
Agent for its own account. The obligation of Borrowers to repay Swingline Loans
shall be evidenced by the records of Agent and need not be evidenced by any
promissory note.

(b) Settlement among Lenders and Agent with respect to Swingline Loans and other
Revolver Loans shall take place on a date determined from time to time by Agent
(but at least weekly), in accordance with the Settlement Report delivered by
Agent to Lenders. Between settlement dates, Agent may in its discretion apply
payments on Revolver Loans to Swingline Loans, regardless of any designation by
Borrower or any provision herein to the contrary. Each Lender’s obligation to
make settlements with Agent is absolute and unconditional, without offset,
counterclaim or other defense, and whether or not the Commitments have
terminated, an Overadvance exists or the conditions in Section 6 are satisfied.
If, due to an Insolvency Proceeding with respect to a Borrower or otherwise, any
Swingline Loan may not be settled among Lenders hereunder, then each Lender
shall be deemed to have purchased from Agent a Pro Rata participation in each
unpaid Swingline Loan and shall transfer the amount of such participation to
Agent, in immediately available funds, within one Business Day after Agent’s
request therefore.

4.1.4. Notices. Borrowers may request„ convert or continue Loans, select
interest rates, and transfer funds based on telephonic or e-mailed instructions
to Agent. Borrowers shall confirm each such request by prompt delivery to Agent
of a Notice of Borrowing or Notice of Conversion/Continuation, if applicable,
but if it differs in any material respect from the action taken by Agent or
Lenders, the records of Agent and Lenders shall govern. Neither Agent nor any
Lender shall have any liability for any loss suffered by a Borrower as a result
of Agent or any Lender acting upon its understanding of telephonic or e-mailed
instructions from a person believed in good faith by Agent or any Lender to be a
person authorized to give such instructions on a Borrower’s behalf.

 

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4.2. Defaulting Lender.

4.2.1. Reallocation of Pro Rata Share; Amendments. For purposes of determining
Lenders’ obligations to fund or acquire participations in Loans or Letters of
Credit, Agent may exclude the Commitments and Loans of any Defaulting Lender(s)
from the calculation of Pro Rata shares. A Defaulting Lender shall have no right
to vote on any amendment, waiver or other modification of a Loan Document,
except as provided in Section 14.1.1(c).

4.2.2. Payments; Fees. Agent may, in its discretion, receive and retain any
amounts payable to a Defaulting Lender under the Loan Documents, and a
Defaulting Lender shall be deemed to have assigned to Agent such amounts until
all Obligations owing to Agent, non-Defaulting Lenders and other Secured Parties
have been paid in full. Agent may apply such amounts to the Defaulting Lender’s
defaulted obligations, use the funds to Cash Collateralize such Lender’s
Fronting Exposure, or radiance the amounts to Borrowers hereunder. A Lender
shall not be entitled to receive any fees accruing hereunder during the period
in which it is a Defaulting Lender, and the unfunded portion of its Commitment
shall be disregarded for purposes of calculating the unused line fee under
Section 3.2.1. To the extent any LC Obligations owing to a Defaulted Lender are
reallocated to other Lenders, Letter of Credit fees attributable to such LC
Obligations under Section 3.2.2 shall be paid to such other Lenders. Agent shall
be paid all Letter of Credit fees attributable to LC Obligations that are not so
reallocated.

4.2.3. Cure. Borrowers, Agent and Issuing Bank may agree in writing that a
Lender is no longer a Defaulting Lender. At such time, Pro Rata shares shall be
reallocated without exclusion of such Lender’s Commitments and Loans, and all
outstanding Revolver Loans, LC Obligations and other exposures under the
Revolver Commitments shall be reallocated among Lenders and settled by Agent
(with appropriate payments by the reinstated Lender) in accordance with the
readjusted Pro Rata shares. Unless expressly agreed by Borrowers, Agent and
Issuing Bank, no reinstatement of a Defaulting Lender shall constitute a waiver
or release of claims against such Lender. The failure of any Lender to fund a
Loan, to make a payment in respect of LC Obligations or otherwise to perform its
obligations hereunder shall not relieve any other Lender of its obligations, and
no Lender shall be responsible for default by another Lender.

4.3. Number and Amount of LIBOR Loans; Determination of Rate. Each Borrowing of
LIBOR Loans when made shall be in a minimum amount of $1,000,000, plus any
increment of $250,000 in excess thereof. No more than 5 Borrowings of LIBOR
Loans may be outstanding at any time, and all LIBOR Loans having the same length
and beginning date of their Interest Periods shall be aggregated together and
considered one Borrowing for this purpose. Upon determining LIBOR for any
Interest Period requested by Borrowers, Agent shall promptly notify Borrowers
thereof by telephone or electronically and, if requested by Borrowers, shall
confirm any telephonic notice in writing.

4.4. Borrower Agent. Each Borrower hereby designates AGY Holdings (“Borrower
Agent”) as its representative and agent for all purposes under the Loan
Documents, including requests for Loans and Letters of Credit, designation of
interest rates, delivery or receipt of communications, preparation and delivery
of Borrowing Base and financial reports, receipt and payment of Obligations,
requests for waivers, amendments or other accommodations, actions under the Loan
Documents (including in respect of compliance with covenants), and all other
dealings with Agent, Issuing Bank or any Lender. Borrower Agent hereby accepts
such appointment. Agent and Lenders shall be entitled to rely upon, and shall be
fully protected in relying upon, any notice or communication (including any
notice of borrowing) delivered by Borrower Agent on behalf of any Borrower.
Agent and Lenders may give any notice or communication with a Borrower hereunder
to Borrower Agent on behalf of such Borrower. Each of Agent, Issuing Bank and
Lenders shall have the right, in its discretion, to deal exclusively with
Borrower Agent for any or all purposes under the Loan Documents. Each Borrower
agrees that any notice, election, communication, representation, agreement or
undertaking made on its behalf by Borrower Agent shall be binding upon and
enforceable against it.

 

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4.5. One Obligation. The Loans, LC Obligations and other Obligations constitute
one general obligation of Borrowers and are secured by Agent’s Lien on all
Collateral; provided, however, that Agent and each Lender shall be deemed to be
a creditor of, and the holder of a separate claim against, each Borrower to the
extent of any Obligations jointly or severally owed by such Borrower.

4.6. Effect of Termination. On the effective date of any termination of the
Commitments, all Obligations shall be immediately due and payable, and any
Lender may terminate its and its Affiliates’ Bank Products (including, only with
the consent of Agent, any Cash Management Services). All undertakings of
Borrowers contained in the Loan Documents shall survive any termination, and
Agent shall retain its Liens in the Collateral and all of its rights and
remedies under the Loan Documents until Full Payment of the Obligations.
Notwithstanding Full Payment of the Obligations, Agent shall not be required to
terminate its Liens in any Collateral unless, with respect to any damages Agent
may incur as a result of the dishonor or return of Payment Items applied to
Obligations, Agent receives (a) a written agreement satisfactory to Agent,
executed by Borrowers and any Person whose advances are used in whole or in part
to satisfy the Obligations, indemnifying Agent and Lenders from such damages;
and (b) such Cash Collateral as Agent, in its discretion, deems appropriate to
protect against such damages. Sections 2.3, 3.4, 3.6, 3.7, 3.9, 5.5, 5.9, 5.10,
12, 14.2 and this Section, and the obligation of each Obligor and Lender with
respect to each indemnity given by it in any Loan Document, shall survive Full
Payment of the Obligations and any release relating to this credit facility.

SECTION 5. PAYMENTS

5.1. General Payment Provisions. All payments of Obligations shall be made in
Dollars, without offset, counterclaim or defense of any kind, free of (and
without deduction for) any Taxes, and in immediately available funds, not later
than 12:00 noon on the due date. Any payment after such time shall be deemed
made on the next Business Day. Any payment of a LIBOR Loan prior to the end of
its Interest Period shall be accompanied by all amounts due under Section 3.9.
Any prepayment of Loans shall be applied first to Base Rate Loans and then to
LIBOR Loans.

5.2. Repayment of Revolver Loans. Revolver Loans shall be due and payable in
full on the Revolver Termination Date, unless payment is sooner required
hereunder. Revolver Loans may be prepaid from time to time, without penalty or
premium. Notwithstanding anything herein to the contrary, if an Overadvance
exists, Borrowers shall, on the sooner of Agent’s demand or the first Business
Day after any Borrower has knowledge thereof, repay the outstanding Revolver
Loans in an amount sufficient to reduce the principal balance of Revolver Loans
to the Borrowing Base.

5.3. Reserved.

5.4. Payment of Other Obligations. Obligations other than Loans, including LC
Obligations and Extraordinary Expenses, shall be paid by Borrowers as provided
in the Loan Documents or, if no payment date is specified, on demand.

5.5. Marshaling; Payments Set Aside. None of Agent or Lenders shall be under any
obligation to marshal any assets in favor of any Obligor or against any
Obligations. If any payment by or on behalf of Borrowers is made to Agent,
Issuing Bank or any Lender, or Agent, Issuing Bank or any Lender exercises a
right of setoff, and such payment or the proceeds of such setoff or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by
Agent, Issuing Bank or such Lender in its discretion) to be repaid to a trustee,
receiver or any other Person, then to the extent of such recovery, the
Obligation originally intended to be satisfied, and all Liens, rights and
remedies relating thereto, shall be revived and continued in full force and
effect as if such payment had not been made or such setoff had not occurred.

 

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5.6. Post-Default Allocation of Payments.

5.6.1. Allocation. Notwithstanding anything herein to the contrary, during an
Event of Default, monies to be applied to the Obligations, whether arising from
payments by Obligors, realization on Collateral, setoff or otherwise, shall be
allocated as follows:

(a) first, to all costs and expenses, including Extraordinary Expenses, owing to
Agent;

(b) second, to all amounts owing to Agent on Swingline Loans;

(c) third, to all amounts owing to Issuing Bank;

(d) fourth, to all Obligations constituting fees (other than Secured Bank
Product Obligations);

(e) fifth, to all Obligations constituting interest (other than Secured Bank
Product Obligations);

(f) sixth, to Cash Collateralization of LC Obligations;

(g) seventh, to all Loans and Noticed Hedges, including Cash Collateralization
of outstanding Noticed Hedges; and

(h) last, to all other Obligations.

Amounts shall be applied to each category of Obligations set forth above until
Full Payment thereof and then to the next category. If amounts are insufficient
to satisfy a category, they shall be applied on a pro rata basis among the
Obligations in the category. Amounts distributed with respect to any Secured
Bank Product Obligations shall be the lesser of the maximum Secured Bank Product
Obligations last reported to Agent or the actual Secured Bank Product
Obligations as calculated by the methodology reported to Agent for determining
the amount due. Agent shall have no obligation to calculate the amount to be
distributed with respect to any Secured Bank Product Obligations, and may
request a reasonably detailed calculation of such amount from the applicable
Secured Party. If a Secured Party fails to deliver such calculation within five
days following request by Agent, Agent may assume the amount to be distributed
is zero. The allocations set forth in this Section are solely to determine the
rights and priorities of Agent and Secured Parties as among themselves, and may
be changed by agreement among them without the consent of any Obligor. This
Section is not for the benefit of or enforceable by any Borrower.

5.6.2. Erroneous Application. Agent shall not be liable for any application of
amounts made by it in good faith and, if any such application is subsequently
determined to have been made in error, the sole recourse of any Lender or other
Person to which such amount should have been made shall be to recover the amount
from the Person that actually received it (and, if such amount was received by
any Lender, such Lender hereby agrees to return it).

5.7. Application of Payments. The ledger balance in the main Dominion Account as
of the end of a Business Day shall be applied to the Obligations at the
beginning of the next Business Day, during any Trigger Period. If, as a result
of such application, a credit balance exists, the balance shall not accrue
interest in favor of Borrowers and shall be made available to Borrowers as long
as no Default or Event of Default exists. Each Borrower irrevocably waives the
right to direct the application of any payments or Collateral proceeds, and
agrees that Agent shall have the continuing, exclusive right to apply and
reapply same against the Obligations, in such manner as Agent deems advisable.

 

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5.8. Loan Account; Account Stated.

5.8.1. Loan Account. Agent shall maintain in accordance with its usual and
customary practices an account or accounts (“Loan Account”) evidencing the Debt
of Borrowers resulting from each Loan or issuance of a Letter of Credit from
time to time. Any failure of Agent to record anything in the Loan Account, or
any error in doing so, shall not limit or otherwise affect the obligation of
Borrowers to pay any amount owing hereunder. Agent may maintain a single Loan
Account in the name of Borrower Agent, and each Borrower confirms that such
arrangement shall have no effect on the joint and several character of its
liability for the Obligations.

5.8.2. Entries Binding. Entries made in the Loan Account shall constitute
presumptive evidence of the information contained therein. If any information
contained in the Loan Account is provided to or inspected by any Person, then
such information shall be conclusive and binding on such Person for all purposes
absent manifest error, except to the extent such Person notifies Agent in
writing within 30 days after receipt or inspection that specific information is
subject to dispute.

5.9. Taxes.

5.9.1. Payments Free of Taxes. All payments by Obligors of Obligations shall be
free and clear of and without reduction for any Taxes. If Applicable Law
requires any Obligor or Agent to withhold or deduct any Tax (including backup
withholding or withholding Tax), the withholding or deduction shall be based on
information provided pursuant to Section 5.10 and Agent shall pay the amount
withheld or deducted to the relevant Governmental Authority. If the withholding
or deduction is made on account of Indemnified Taxes or Other Taxes, the sum
payable by Borrowers shall be increased so that Agent, Lender or Issuing Bank,
as applicable, receives an amount equal to the sum it would have received if no
such withholding or deduction (including deductions applicable to additional
sums payable under this Section) had been made. Without limiting the foregoing,
Borrowers shall timely pay all Other Taxes to the relevant Governmental
Authorities.

5.9.2. Payment. Borrowers shall indemnify, hold harmless and reimburse (within
10 days after demand therefore) Agent, Lenders and Issuing Bank for any
Indemnified Taxes or Other Taxes (including those attributable to amounts
payable under this Section) withheld or deducted by any Obligor or Agent, or
paid by Agent, any Lender or Issuing Bank, with respect to any Obligations,
Letters of Credit or Loan Documents, whether or not such Taxes were properly
asserted by the relevant Governmental Authority, and including all penalties,
interest and reasonable expenses relating thereto, as well as any amount that a
Lender or Issuing Bank fails to pay indefeasibly to Agent under Section 5.10. A
certificate as to the amount of any such payment or liability delivered to
Borrower Agent by Agent, or by a Lender or Issuing Bank (with a copy to Agent),
shall be conclusive, absent manifest error. As soon as practicable after any
payment of Taxes by a Borrower, Borrower Agent shall deliver to Agent a receipt
from the Governmental Authority or other evidence of payment satisfactory to
Agent.

5.10. Lender Tax Information.

5.10.1. Status of Lenders. Each Lender shall deliver documentation and
information to Agent and Borrower Agent, at the times and in form required by
Applicable Law or reasonably requested by Agent or Borrower Agent, sufficient to
permit Agent or Borrowers to determine (a) whether or not payments made with
respect to Obligations are subject to Taxes, (b) if applicable, the required
rate of withholding or deduction, and (c) such Lender’s entitlement to any
available exemption from, or reduction of, applicable Taxes for such payments or
otherwise to establish such Lender’s status for withholding tax purposes in the
applicable jurisdiction.

5.10.2. Documentation. If a Borrower is resident for tax purposes in the United
States, any Lender that is a “United States person” within the meaning of
section 7701(a)(30) of the Code

 

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shall deliver to Agent and Borrower Agent IRS Form W-9 or such other
documentation or information prescribed by Applicable Law or reasonably
requested by Agent or Borrower Agent to determine whether such Lender is subject
to backup withholding or information reporting requirements. If any Foreign
Lender is entitled to any exemption from or reduction of withholding tax for
payments with respect to the Obligations, it shall deliver to Agent and Borrower
Agent, on or prior to the date on which it becomes a Lender hereunder (and from
time to time thereafter upon request by Agent or Borrower Agent, but only if
such Foreign Lender is legally entitled to do so), (a) IRS Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States is a
party; (b) IRS Form W-8ECI; (c) IRS Form W-8EVIY and all required supporting
documentation; (d) in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under section 881(c) of the Code, IRS Form
W-8BEN and a certificate showing such Foreign Lender is not (i) a “bank” within
the meaning of section 881(c)(3)(A) of the Code, (ii) a “10 percent shareholder”
of any Obligor within the meaning of section 881(c)(3)(B) of the Code, or
(iii) a “controlled foreign corporation” described in section 881(c)(3)(C) of
the Code; or (e) any other form prescribed by Applicable Law as a basis for
claiming exemption from or a reduction in withholding tax, together with such
supplementary documentation necessary to allow Agent and Borrowers to determine
the withholding or deduction required to be made.

5.10.3. Lender Obligations. Each Lender and Issuing Bank shall promptly notify
Borrowers and Agent of any change in circumstances that would change any claimed
Tax exemption or reduction. Each Lender and Issuing Bank shall indemnify, hold
harmless and reimburse (within 10 days after demand therefore) Borrowers and
Agent for any Taxes, losses, claims, liabilities, penalties, interest and
expenses (including reasonable attorneys’ fees) incurred by or asserted against
a Borrower or Agent by any Governmental Authority due to such Lender’s or
Issuing Bank’s failure to deliver, or inaccuracy or deficiency in, any
documentation required to be delivered by it pursuant to this Section. Each
Lender and Issuing Bank authorizes Agent to set off any amounts due to Agent
under this Section against any amounts payable to such Lender or Issuing Bank
under any Loan Document.

5.11. Nature and Extent of Each Borrower’s Liability.

5.11.1. Joint and Several Liability. Each Borrower agrees that it is jointly and
severally liable for, and absolutely and unconditionally guarantees to Agent and
Lenders the prompt payment and performance of, all Obligations and all
agreements under the Loan Documents. Each Borrower agrees that its guaranty
obligations hereunder constitute a continuing guaranty of payment and not of
collection, that such obligations shall not be discharged until Full Payment of
the Obligations, and that such obligations are absolute and unconditional,
irrespective of (a) the genuineness, validity, regularity, enforceability,
subordination or any future modification of, or change in, any Obligations or
Loan Document, or any other document, instrument or agreement to which any
Obligor is or may become a party or be bound; (b) the absence of any action to
enforce this Agreement (including this Section) or any other Loan Document, or
any waiver, consent or indulgence of any kind by Agent or any Lender with
respect thereto; (c) the existence, value or condition of, or failure to perfect
a Lien or to preserve rights against, any security or guaranty for the
Obligations or any action, or the absence of any action, by Agent or any Lender
in respect thereof (including the release of any security or guaranty); (d) the
insolvency of any Obligor; (e) any election by Agent or any Lender in an
Insolvency Proceeding for the application of Section 1111(b)(2) of the
Bankruptcy Code; (f) any borrowing or grant of a Lien by any other Borrower, as
debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise;
(g) the disallowance of any claims of Agent or any Lender against any Obligor
for the repayment of any Obligations under Section 502 of the Bankruptcy Code or
otherwise; or (h) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
except Full Payment of all Obligations.

 

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5.11.2. Waivers.

(a) Each Borrower expressly waives all rights that it may have now or in the
future under any statute, at common law, in equity or otherwise, to compel Agent
or Lenders to marshal assets or to proceed against any Obligor, other Person or
security for the payment or performance of any Obligations before, or as a
condition to, proceeding against such Borrower. Each Borrower waives all
defenses available to a surety, guarantor or accommodation co-obligor other than
Full Payment of all Obligations. It is agreed among each Borrower, Agent and
Lenders that the provisions of this Section 5.11 are of the essence of the
transaction contemplated by the Loan Documents and that, but for such
provisions, Agent and Lenders would decline to make Loans and issue Letters of
Credit. Each Borrower acknowledges that its guaranty pursuant to this Section is
necessary to the conduct and promotion of its business, and can be expected to
benefit such business.

(b) During the continuance of an Event of Default, Agent and Lenders may, in
their discretion, pursue such rights and remedies as they deem appropriate,
including realization upon Collateral or any Real Estate by judicial foreclosure
or non-judicial sale or enforcement, without affecting any rights and remedies
under this Section 5.11. If, in taking any action in connection with the
exercise of any rights or remedies, Agent or any Lender shall forfeit any other
rights or remedies, including the right to enter a deficiency judgment against
any Borrower or other Person, whether because of any Applicable Laws pertaining
to “election of remedies” or otherwise, each Borrower consents to such action
and waives any claim based upon it, even if the action may result in loss of any
rights of subrogation that any Borrower might otherwise have had. Any election
of remedies that results in denial or impairment of the right of Agent or any
Lender to seek a deficiency judgment against any Borrower shall not impair any
other Borrower’s obligation to pay the full amount of the Obligations. Each
Borrower waives all rights and defenses arising out of an election of remedies,
such as no judicial foreclosure with respect to any security for the
Obligations, even though that election of remedies destroys such Borrower’s
rights of subrogation against any other Person. Agent may bid all or a portion
of the Obligations at any foreclosure or trustee’s sale or at any private sale,
and the amount of such bid need not be paid by Agent but shall be credited
against the Obligations. The amount of the successful bid at any such sale,
whether Agent or any other Person is the successful bidder, shall be
conclusively deemed to be the fair market value of the Collateral, and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations guaranteed
under this Section 5.11, notwithstanding that any present or future law or court
decision may have the effect of reducing the amount of any deficiency claim to
which Agent or any Lender might otherwise be entitled but for such bidding at
any such sale.

5.11.3. Extent of Liability; Contribution.

(a) Notwithstanding anything herein to the contrary, each Borrower’s liability
under this Section 5.11 shall be limited to the greater of (i) all amounts for
which such Borrower is primarily liable, as described below, and (ii) such
Borrower’s Allocable Amount.

(b) If any Borrower makes a payment under this Section 5.11 of any Obligations
(other than amounts for which such Borrower is primarily liable) (a “Guarantor
Payment”) that, taking into account all other Guarantor Payments previously or
concurrently made by any other Borrower, exceeds the amount that such Borrower
would otherwise have paid if each Borrower had paid the aggregate Obligations
satisfied by such Guarantor Payments in the same proportion that such Borrower’s
Allocable Amount bore to the total Allocable Amounts of all Borrowers, then such
Borrower shall be entitled to receive contribution and indemnification payments
from, and to be reimbursed by, each other Borrower for the amount of such
excess, pro rata based upon their respective Allocable Amounts in effect
immediately prior to such Guarantor Payment. The “Allocable Amount” for any
Borrower shall be the maximum amount that could then be recovered from such
Borrower under this Section 5.11 without rendering such payment voidable under
Section 548 of the Bankruptcy Code or under any applicable state fraudulent
transfer or conveyance act, or similar statute or common law.

 

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(c) Nothing contained in this Section 5.11 shall limit the liability of any
Borrower to pay Loans made directly or indirectly to that Borrower (including
Loans advanced to any other Borrower and then re-loaned or otherwise transferred
to, or for the benefit of, such Borrower), LC Obligations relating to Letters of
Credit issued to support such Borrower’s business, and all accrued interest,
fees, expenses and other related Obligations with respect thereto, for which
such Borrower shall be primarily liable for all purposes hereunder. Agent and
Lenders shall have the right, at any time in their discretion, to condition
Loans and Letters of Credit upon a separate calculation of borrowing
availability for each Borrower and to restrict the disbursement and use of such
Loans and Letters of Credit to such Borrower.

5.11.4. Joint Enterprise. Each Borrower has requested that Agent and Lenders
make this credit facility available to Borrowers on a combined basis, in order
to finance Borrowers’ business most efficiently and economically. Borrowers’
business is a mutual and collective enterprise, and the successful operation of
each Borrower is dependent upon the successful performance of the integrated
group. Borrowers believe that consolidation of their credit facility will
enhance the borrowing power of each Borrower and ease administration of the
facility, all to their mutual advantage. Borrowers acknowledge that Agent’s and
Lenders’ willingness to extend credit and to administer the Collateral on a
combined basis hereunder is done solely as an accommodation to Borrowers and at
Borrowers’ request.

5.11.5. Subordination. Each Borrower hereby subordinates any claims, including
any rights at law or in equity to payment, subrogation, reimbursement,
exoneration, contribution, indemnification or set off, that it may have at any
time against any other Obligor, howsoever arising, to the Full Payment of all
Obligations.

SECTION 6. CONDITIONS PRECEDENT

6.1. Conditions Precedent to Initial Loans. In addition to the conditions set
forth in Section 6.2, Lenders shall not be required to fund any requested Loan,
issue any Letter of Credit, or otherwise extend credit to Borrowers hereunder,
until the date (“Closing Date”) that each of the following conditions has been
satisfied:

(a) Notes shall have been executed by Borrowers and delivered to each Lender
that requests issuance of a Note. Each other Loan Document shall have been duly
executed and delivered to Agent by each of the signatories thereto, and each
Obligor shall be in compliance with all terms thereof.

(b) Agent shall have received acknowledgments of all filings or recordations
necessary to perfect its Liens in the Collateral, as well as UCC and Lien
searches and other evidence satisfactory to Agent that such Liens are the only
Liens upon the Collateral, except Permitted Liens.

(c) Agent shall have received the Related Real Estate Documents for 2556 Wagener
Road, Aiken, South Carolina and 1200 Susquehanna Avenue, Huntingdon,
Pennsylvania (other than surveys and final mortgagee title insurance policy in
respect of such property, which shall be delivered in accordance with the
Post-Closing Side Letter).

(d) Agent shall have received duly executed agreements establishing each
Dominion Account and related lockbox, in form and substance, and with financial
institutions, reasonably satisfactory to Agent.

(e) Agent shall have received certificates, in form and substance reasonably
satisfactory to it, from a knowledgeable Senior Officer of each Borrower
certifying that, after giving effect to the initial Loans and transactions
hereunder, (i) such Borrower is Solvent; (ii) no Default or Event of Default
exists; (iii) the representations and warranties set forth in Section 9 are true
and correct; and (iv) such Borrower has complied with all agreements and
conditions to be satisfied by it under the Loan Documents.

 

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(I) Agent shall have received a certificate of a duly authorized officer of each
Obligor, certifying (i) that attached copies of such Obligor’s Organic Documents
are true and complete, and in full force and effect, without amendment except as
shown; (ii) that an attached copy of resolutions authorizing execution and
delivery of the Loan Documents is true and complete, and that such resolutions
are in full force and effect, were duly adopted, have not been amended, modified
or revoked, and constitute all resolutions adopted with respect to this credit
facility; and (iii) to the title, name and signature of each Person authorized
to sign the Loan Documents. Agent may conclusively rely on this certificate
until it is otherwise notified by the applicable Obligor in writing.

(g) Agent shall have received written opinions of Ropes & Gray LLP, in form and
substance reasonably satisfactory to Agent.

(h) Agent shall have received copies of the charter documents of each Obligor,
certified by the Secretary of State or other appropriate official of such
Obligor’s jurisdiction of organization. Agent shall have received good standing
certificates as of a recent date, for each Obligor, issued by the Secretary of
State or other appropriate official of such Obligor’s jurisdiction of
organization and with respect to each of the Borrowers, foreign qualification
certificates issued by the Secretaries of State of Pennsylvania and South
Carolina.

(i) Agent shall have received copies of policies or certificates of insurance
for the insurance policies carried by Borrowers, all in compliance with the Loan
Documents.

Agent shall have completed its business, financial and legal due diligence of
Obligors, including a roll-forward of its previous field examination, with
results satisfactory to Agent. No material adverse change in the financial
condition of any Obligor or in the quality, quantity or value of any Collateral
shall have occurred since December 31, 2009.

(k) Borrowers shall have paid all fees and expenses to be paid to Agent and
Lenders on the Closing Date.

(1) Agent shall have received a Borrowing Base Certificate prepared as of
January 31, 2011. Upon giving effect to the initial funding of Loans and
issuance of Letters of Credit, and the payment by Borrowers of all fees and
expenses incurred in connection herewith as well as any payables stretched
beyond their customary payment practices, Excess Availability shall be at least
$15,000,000.

(m) The Intercreditor Agreement and the DB Acknowledgement Agreement shall have
been executed and delivered to Agent.

6.2. Conditions Precedent to All Credit Extensions. Agent, Issuing Bank and
Lenders shall not be required to fund any Loans, arrange for issuance of any
Letters of Credit or grant any other accommodation to or for the benefit of
Borrowers, unless the following conditions are satisfied:

(a) No Default or Event of Default shall exist at the time of, or result from,
such funding, issuance or grant;

(b) The representations and warranties of each Obligor in the Loan Documents
shall be true and correct in all material respects (except that any
representation and warranty that itself is qualified as to “materiality” or
“Material Adverse Effect” shall be true and correct in all respects) on the date
of, and upon giving effect to, such funding, issuance or grant (except for
representations and warranties that expressly relate to an earlier date);

(c) All conditions precedent in any other Loan Document shall be satisfied;

 

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(d) No event shall have occurred or circumstance exist that has or could
reasonably be expected to have a Material Adverse Effect; and

(e) With respect to issuance of a Letter of Credit, the LC Conditions shall be
satisfied.

Each request (or deemed request) by Borrowers for funding of a Loan, issuance of
a Letter of Credit or grant of an accommodation shall constitute a
representation by Borrowers that the foregoing conditions are satisfied on the
date of such request and on the date of such funding, issuance or grant.

SECTION 7. COLLATERAL

7.1. Grant of Security Interest. To secure the prompt payment and performance of
all Obligations, each Borrower hereby grants to Agent, for the benefit of
Secured Parties, a continuing security interest in and Lien upon all Property of
such Borrower, including all of the following Property, whether now owned or
hereafter acquired, and wherever located:

(a) all Accounts;

(b) all Chattel Paper, including electronic chattel paper;

(c) all Commercial Tort Claims, including those shown on Schedule 9.1.16;

(d) all Deposit Accounts;

(e) all Documents;

(0 all General Intangibles, including Intellectual Property;

(g) all Goods, including Inventory, Equipment and fixtures;

(h) all Instruments;

(1) all Investment Property;

(1) all Letter-of-Credit Rights;

(k) all Supporting Obligations;

(1) all monies, whether or not in the possession or under the control of Agent,
a Lender, or a bailee or Affiliate of Agent or a Lender, including any Cash
Collateral;

(m) all accessions to, substitutions for, and all replacements, products, and
cash and non-cash proceeds of the foregoing, including proceeds of and unearned
premiums with respect to insurance policies, and claims against any Person for
loss, damage or destruction of any Collateral; and

(n) all books and records (including customer lists, files, correspondence,
tapes, computer programs, print-outs and computer records) pertaining to the
foregoing.

Notwithstanding anything to the contrary contained in clauses (a) through
(n) above, the security interest created by the Agreement shall not extend to,
and the term “Pledged Collateral” shall not include any Excluded Property.

 

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7.2. Lien on Deposit Accounts; Cash Collateral.

7.2.1. Deposit Accounts. To further secure the prompt payment and performance of
all Obligations, each Borrower hereby grants to Agent, for the benefit of
Secured Parties, a continuing security interest in and Lien upon all amounts
credited to any Deposit Account of such Borrower, including any sums in any
blocked or lockbox accounts or in any accounts into which such sums are swept.
Upon the commencement of any Trigger Period, each Borrower hereby authorizes and
directs each bank or other depository to deliver to Agent, upon request, all
balances in any Deposit Account maintained by such Borrower, without inquiry
into the authority or right of Agent to make such request.

7.2.2. Cash Collateral. Any Cash Collateral may be invested, at Agent’s
discretion (and with the consent of Borrowers, as long as no Event of Default
exists), but Agent shall have no duty to do so, regardless of any agreement or
course of dealing with any Borrower, and shall have no responsibility for any
investment or loss. Each Borrower hereby grants to Agent, for the benefit of
Secured Parties and as security for the Obligations, a security interest in all
Cash Collateral held from time to time and all proceeds thereof, whether held in
a Cash Collateral Account or otherwise. Agent may apply Cash Collateral to the
payment of Obligations as they become due, in such order as Agent may elect.
Each Cash Collateral Account and all Cash Collateral shall be under the sole
dominion and control of Agent, and no Borrower or other Person shall have any
right to any Cash Collateral, until Full Payment of all Obligations.

7.3. Real Estate Collateral.

7.3.1. Lien on Real Estate. The Obligations shall also be secured by Mortgages
upon the Real Estate located at 2556 Wagener Road, Aiken, South Carolina and
1200 Susquehanna Avenue, Huntingdon, Pennsylvania. The Mortgages shall be duly
recorded, at Borrowers’ expense, in each office where such recording is required
to constitute a fully perfected Lien on the Real Estate covered thereby. If any
Borrower acquires Real Estate hereafter with a fair market value in excess of
$1,000,000, or is otherwise of material importance of such Borrower’s business,
as determined in each case by Agent in its Credit Judgment, Borrowers shall,
within 60 days, execute, deliver and record a Mortgage sufficient to create a
First Priority Lien in favor of Agent on such Real Estate, and shall deliver all
Related Real Estate Documents.

7.3.2. Collateral Assignment of Leases. To further secure the prompt payment and
performance of all Obligations, each Borrower hereby transfers and assigns to
Agent, for the benefit of Secured Parties, all of such Borrower’s right, title
and interest in, to and under all now or hereafter existing leases of real
Property to which such Borrower is a party, whether as lessor or lessee, and all
extensions, renewals, modifications and proceeds thereof, provided that the
foregoing assignment shall only apply to leases under which Borrower is a tenant
if and to the extent such assignment is permitted by the terms of such lease.

7.4. Other Collateral.

7.4.1. Commercial Tort Claims. Borrowers shall promptly notify Agent in writing
if any Borrower has a Commercial Tort Claim (other than, as long as no Default
or Event of Default exists, a Commercial Tort Claim for less than $500,000),
shall promptly amend Schedule 9.1.16 to include such claim, and shall take such
actions as Agent deems appropriate to subject such claim to a duly perfected,
First Priority Lien in favor of Agent (for the benefit of Secured Parties).

7.4.2. Certain After-Acquired Collateral. Borrowers shall promptly notify Agent
in writing if, after the Closing Date, any Borrower obtains any interest in any
Collateral consisting of Deposit Accounts, Chattel Paper, Documents,
Instruments, Intellectual Property, Investment Property or Letter-of-Credit
Rights and, upon Agent’s request, shall promptly take such actions as Agent
deems appropriate to effect Agent’s duly perfected, First Priority Lien upon
such Collateral, including obtaining any appropriate possession, control
agreement or Lien Waiver. If any Collateral is in the possession of a third
party, at Agent’s request, Borrowers shall obtain an acknowledgment that such
third party holds the Collateral for the benefit of Agent.

 

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7.5. No Assumption of Liability. The Lien on Collateral granted hereunder is
given as security only and shall not subject Agent or any Lender to, or in any
way modify, any obligation or liability of Borrowers relating to any Collateral.

7.6. Further Assurances. Promptly upon request, Borrowers shall deliver such
instruments, assignments, title certificates, or other documents or agreements,
and shall take such actions, as Agent deems appropriate under Applicable Law to
evidence or perfect its Lien on any Collateral, or otherwise to give effect to
the intent of this Agreement. Each Borrower authorizes Agent to file any
financing statement that indicates the Collateral as “all assets” or “all
personal property” of such Borrower, or words to similar effect, and ratifies
any action taken by Agent before the Closing Date to effect or perfect its Lien
on any Collateral.

7.7. Foreign Subsidiary Stock. Notwithstanding Section 7.1, the Collateral shall
include only 65% of the voting stock of any Foreign Subsidiary.

SECTION 8. COLLATERAL ADMINISTRATION

8.1. Borrowing Base Certificates. By the last Business Day of each month, or on
the first Business Day of each week if Excess Availability is less than
$10,000,000, Borrowers shall deliver to Agent (and Agent shall promptly deliver
same to Lenders) a Borrowing Base Certificate prepared as of the close of
business of the previous month, and at such other times as Agent may request.
All calculations of Availability or Excess Availability in any Borrowing Base
Certificate shall originally be made by Borrowers and certified by a Senior
Officer, provided that Agent may from time to time review and adjust any such
calculation (a) to reflect its reasonable estimate of declines in value of any
Collateral, due to collections received in the Dominion Account or otherwise;
(b) to adjust advance rates to reflect changes in dilution, quality, mix and
other factors affecting Collateral; and (c) to the extent the calculation is not
made in accordance with this Agreement or does not accurately reflect the
Availability Reserve.

8.2. Administration of Accounts.

8.2.1. Records and Schedules of Accounts. Each Borrower shall keep accurate and
complete records of its Accounts, including all payments and collections
thereon, and shall submit to Agent sales, collection, reconciliation and other
reports in form satisfactory to Agent, on such periodic basis as Agent may
request. Each Borrower shall also provide to Agent, on or before the last
Business Day of each month, or on the first Business Day of each week if Excess
Availability is less than $10,000,000, a detailed aged trial balance of all
Accounts as of the end of the preceding month, specifying each Account’s Account
Debtor name, amount, invoice date and due date, showing any discount, allowance,
credit, authorized return or dispute, and including such other information as
Agent may reasonably request. If Accounts in an aggregate face amount of
$100,000 or more cease to be Eligible Accounts, Borrowers shall notify Agent of
such occurrence promptly (and in any event within one Business Day) after any
Borrower has knowledge thereof.

8.2.2. Taxes. If an Account of any Borrower includes a charge for any Taxes,
Agent is authorized, in its discretion, to pay the amount thereof to the proper
taxing authority for the account of such Borrower and to charge Borrowers
therefore; provided, however, that neither Agent nor Lenders shall be liable for
any Taxes that may be due from Borrowers or with respect to any Collateral.

8.2.3. Account Verification. Whether or not a Default or Event of Default
exists, Agent shall have the right at any time, in the name of Agent, any
designee of Agent or any Borrower, to verify the validity, amount or any other
matter relating to any Accounts of Borrowers by mail, telephone or otherwise.
Borrowers shall cooperate fully with Agent in an effort to facilitate and
promptly conclude any such verification process.

 

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8.2.4. Maintenance of Dominion Account. Borrowers shall maintain Dominion
Accounts pursuant to lockbox or other arrangements reasonably acceptable to
Agent. Borrowers shall obtain an agreement (in form and substance reasonably
satisfactory to Agent) from each lockbox servicer and Dominion Account bank,
establishing Agent’s control over and Lien in the lockbox or Dominion Account
which may be exercised by Agent during any Trigger Period, requiring immediate
deposit of all remittances received in the lockbox to a Dominion Account, and
waiving offset rights of such servicer or bank, except for customary
administrative charges. If a Dominion Account is not maintained with Bank of
America, Agent may, during any Trigger Period, require immediate transfer of all
funds in such account to a Dominion Account maintained with Bank of America.
Agent and Lenders assume no responsibility to Borrowers for any lockbox
arrangement or Dominion Account, including any claim of accord and satisfaction
or release with respect to any Payment Items accepted by any bank.

8.2.5. Proceeds of Collateral. Borrowers shall request in writing and otherwise
take all necessary steps to ensure that all payments on Accounts or otherwise
relating to Collateral are made directly to a Dominion Account (or a lockbox
relating to a Dominion Account). If any Borrower or Subsidiary receives cash or
Payment Items with respect to any Collateral, it shall hold same in trust for
Agent and promptly (not later than the next Business Day) deposit same into a
Dominion Account.

8.3. Administration of Inventory.

8.3.1. Records and Reports of Inventory. Each Borrower shall keep accurate and
complete records of its Inventory, including costs and daily withdrawals and
additions, and shall submit to Agent inventory and reconciliation reports in
form reasonably satisfactory to Agent, on such periodic basis as Agent may
reasonably request. Each Borrower shall conduct a physical inventory at least
once per calendar year (and on a more frequent basis if requested by Agent when
an Event of Default exists) and periodic cycle counts consistent with historical
practices, and shall provide to Agent a report based on each such inventory and
count promptly upon completion thereof, together with such supporting
information as Agent may request. Agent may participate in and observe each
physical count.

8.3.2. Returns of Inventory. No Borrower shall return any Inventory to a
supplier, vendor or other Person, whether for cash, credit or otherwise, unless
(a) such return is in the Ordinary Course of Business (including the right of
customers to return inventory which is defective or nonconforming); (b) no
Default, Event of Default or Overadvance exists or would result there from;
(c) Agent is promptly notified if the aggregate Value of all Inventory returned
in any month exceeds $250,000; and (d) any payment received by a Borrower for a
return is promptly remitted to Agent for application to the Obligations.

8.3.3. Acquisition, Sale and Maintenance. No Borrower shall acquire or accept
any Inventory on consignment or approval except in the Ordinary Course of
Business, and shall take all steps to assure that all Inventory is produced in
accordance with Applicable Law, including the FLSA. Borrower shall sell
Inventory only in the Ordinary Course of Business. Borrowers shall use, store
and maintain all Inventory with reasonable care and caution, in accordance with
applicable standards of any insurance and in conformity with all Applicable Law,
and shall make current rent payments (within applicable grace periods provided
for in leases) at all locations where any Collateral is located.

8.4. Administration of Equipment.

8.4.1. Records and Schedules of Equipment. Each Borrower shall keep accurate and
complete records of its Equipment, including kind, quality, quantity, cost,
acquisitions and dispositions thereof, and shall submit to Agent, on such
periodic basis as Agent may request, a current schedule thereof, in form
satisfactory to Agent. Promptly upon reasonable request, Borrowers shall deliver
to Agent evidence of their ownership or interests in any Equipment.

 

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8.4.2. Dispositions of Equipment. No Borrower shall sell, lease or otherwise
dispose of any Equipment, without the prior written consent of Agent, other than
(a) a Permitted Asset Disposition; and (b) replacement of Equipment that is
worn, damaged or obsolete with Equipment of like function and value, if the
replacement Equipment is acquired substantially contemporaneously with such
disposition and is free of Liens other than Permitted Liens.

8.4.3. Condition of Equipment. The Equipment is in good operating condition and
repair, and all necessary replacements and repairs have been made so that the
value and operating efficiency of the Equipment is preserved at all times,
reasonable wear and tear excepted. Each Borrower shall ensure that the Equipment
is mechanically and structurally sound, and capable of performing the functions
for which it was designed, in accordance with manufacturer specifications. No
Borrower shall permit any Equipment with a fair market value greater than
$500,000, as reasonably determined by Agent, to become affixed to real Property
unless any landlord or mortgagee delivers a Lien Waiver.

8.5. Administration of Deposit Accounts. Schedule 8.5 sets forth all Deposit
Accounts maintained by Borrowers, including all Dominion Accounts. Each Borrower
shall take all actions necessary to establish Agent’s control of each such
Deposit Account (other than an account exclusively used for payroll, payroll
taxes or employee benefits, or an account containing not more that $100,000 at
any time, or foreign banks accounts in accordance with past practice containing
not more than $1,500,000 in the aggregate at any time excluding funds in transit
to a Deposit Account maintained in the United States and with respect to which
Agent has control). Each Borrower shall be the sole account holder of each
Deposit Account and shall not allow any other Person (other than Agent) to have
control over a Deposit Account or any Property deposited therein. Each Borrower
shall promptly notify Agent of any opening or closing of a Deposit Account and,
with the consent of Agent, will amend Schedule 8.5 to reflect same.

8.6. General Provisions.

8.6.1. Location of Collateral. All tangible items of Collateral, other than
Inventory in transit, shall at all times be kept by Borrowers at the business
locations set forth in Schedule 8.6.1, except that Borrowers may (a) make sales
or other dispositions of Collateral in accordance with Section 10.2.6; and
(b) move Collateral to another location in the United States, upon 30 Business
Days prior written notice to Agent.

8.6.2. Insurance of Collateral; Condemnation Proceeds.

(a) Each Borrower shall maintain insurance with respect to the Collateral,
covering casualty, hazard, theft, malicious mischief, flood and other risks, in
amounts, with endorsements and with insurers (with a Best’s Financial Strength
Rating of at least A- VII, unless otherwise approved by Agent) satisfactory to
Agent. All proceeds under each policy shall be payable to Agent. From time to
time upon request, Borrowers shall deliver to Agent the originals or certified
copies of its insurance policies and updated flood plain searches. Unless Agent
shall agree otherwise, each policy shall include satisfactory endorsements
(i) showing Agent as loss payee; (ii) requiring 30 days prior written notice to
Agent in the event of cancellation of the policy for any reason whatsoever; and
(iii) specifying that the interest of Agent shall not be impaired or invalidated
by any act or neglect of any Borrower or the owner of the Property, nor by the
occupation of the premises for purposes more hazardous than are permitted by the
policy. If any Borrower fails to provide and pay for any insurance, Agent may,
at its option, but shall not be required to, procure the insurance and charge
Borrowers therefore. Each Borrower agrees to deliver to Agent, promptly as
rendered, copies of all reports made to insurance companies. While no Event of
Default exists, Borrowers may settle, adjust or compromise any insurance claim,
as long as the proceeds

 

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are delivered to Agent. If an Event of Default exists, only Agent shall be
authorized to settle, adjust and compromise such claims. Agent hereby
acknowledges and agrees that the insurance currently maintained by Borrowers, as
evidenced by the certificate or policies provided by Borrowers to Agent,
satisfies the insurance requirement of this Section 8.6.2 as of the Closing
Date.

(b) Any proceeds of insurance (other than proceeds from workers’ compensation or
D&O insurance) and any awards arising from condemnation of any Collateral shall
be paid to Agent. Any such proceeds or awards that relate to Inventory shall be
applied to payment of the Revolver Loans, and then to any other Obligations
outstanding. Subject to clause (c) below, any proceeds or awards that relate to
Equipment or Real Estate shall be applied first to Revolver Loans and then to
other Obligations.

(c) If requested by Borrowers in writing within 15 days after Agent’s receipt of
any insurance proceeds or condemnation awards relating to any loss or
destruction of Equipment or Real Estate, Borrowers may use such proceeds or
awards to repair or replace such Equipment or Real Estate (and until so used,
the proceeds shall be held by Agent as Cash Collateral) as long as (i) no
Default or Event of Default exists; (ii) such repair or replacement is promptly
undertaken and concluded, in accordance with plans satisfactory to Agent;
(iii) replacement buildings are constructed on the sites of the original
casualties and are of comparable size, quality and utility to the destroyed
buildings; (iv) the repaired or replaced Property is free of Liens, other than
Permitted Liens that are not Purchase Money Liens; (v) Borrowers comply with
disbursement procedures for such repair or replacement as Agent may reasonably
require; and (vi) the aggregate amount of such proceeds or awards from any
single casualty or condemnation does not exceed $1,000,000.

8.6.3. Protection of Collateral. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping any Collateral, all
Taxes payable with respect to any Collateral (including any sale thereof), and
all other payments required to be made by Agent to any Person to realize upon
any Collateral, shall be borne and paid by Borrowers. Agent shall not be liable
or responsible in any way for the safekeeping of any Collateral, for any loss or
damage thereto (except for reasonable care in its custody while Collateral is in
Agent’s actual possession), for any diminution in the value thereof, or for any
act or default of any warehouseman, carrier, forwarding agency or other Person
whatsoever, but the same shall be at Borrowers’ sole risk.

8.6.4. Defense of Title to Collateral. Each Borrower shall at all times defend
its title to Collateral and Agent’s Liens therein against all Persons, claims
and demands whatsoever, except Permitted Liens.

8.7. Power of Attorney. Each Borrower hereby irrevocably constitutes and
appoints Agent (and all Persons designated by Agent) as such Borrower’s true and
lawful attorney (and agent-in-fact) for the purposes provided in this Section.
Upon the occurrence and during the continuation of an Event of Default, Agent,
or Agent’s designee, may, without notice and in either its or a Borrower’s name,
but at the cost and expense of Borrowers:

(a) Endorse a Borrower’s name on any Payment Item or other proceeds of
Collateral (including proceeds of insurance) that come into Agent’s possession
or control; and

(b) (i) notify any Account Debtors of the assignment of their Accounts, demand
and enforce payment of Accounts by legal proceedings or otherwise, and generally
exercise any rights and remedies with respect to Accounts; (ii) settle, adjust,
modify, compromise, discharge or release any Accounts or other Collateral, or
any legal proceedings brought to collect Accounts or Collateral; (iii) sell or
assign any Accounts and other Collateral upon such terms, for such amounts and
at such times as Agent deems advisable; (iv) collect, liquidate and receive
balances in Deposit Accounts or investment accounts, and take control, in any
rammer, of proceeds of Collateral; (v) prepare, file and sign a Borrower’s name
to a proof of claim or other document in a bankruptcy of an Account Debtor, or
to any

 

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notice, assignment or satisfaction of Lien or similar document; (vi) receive,
open and dispose of mail addressed to a Borrower, and notify postal authorities
to deliver any such mail to an address designated by Agent; (vii) endorse any
Chattel Paper, Document, Instrument, bill of lading, or other document or
agreement relating to any Accounts, Inventory or other Collateral; (viii) use a
Borrower’s stationery and sign its name to verifications of Accounts and notices
to Account Debtors; (ix) use information contained in any data processing,
electronic or information systems relating to Collateral; (x) make and adjust
claims under insurance policies; (xi) take any action as may be necessary or
appropriate to obtain payment under any letter of credit, banker’s acceptance or
other instrument for which a Borrower is a beneficiary; and (xii) take all other
actions as Agent deems appropriate to fulfill any Borrower’s obligations under
the Loan Documents.

8.8. Existing Letters of Credit. Except as set forth on Schedule 8.8, there are
no outstanding Letters of Credit.

SECTION 9. REPRESENTATIONS AND WARRANTIES

9.1. General Representations and Warranties. To induce Agent and Lenders to
enter into this Agreement and to make available the Commitments, Loans and
Letters of Credit, each Borrower represents and warrants that:

9.1.1. Organization and Qualification. Each Borrower and Subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each Borrower and Subsidiary is duly
qualified, authorized to do business and in good standing as a foreign
corporation in each jurisdiction where failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.

9.1.2. Power and Authority. Each Obligor is duly authorized to execute, deliver
and perform its Loan Documents. The execution, delivery and performance of the
Loan Documents have been duly authorized by all necessary action, and do not
(a) require any consent or approval of any holders of Equity Interests of any
Obligor, other than those already obtained; (b) contravene the Organic Documents
of any Obligor; (c) violate or cause a default under any Applicable Law or
Material Contract; or (d) result in or require the imposition of any Lien (other
than Permitted Liens) on any Property of any Obligor.

9.1.3. Enforceability. Each Loan Document is a legal, valid and binding
obligation of each Obligor party thereto, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors’ rights generally.

9.1.4. Capital Structure. Schedule 9.1.4 shows, for each Borrower and
Subsidiary, its name, its jurisdiction of organization, its authorized and
issued Equity Interests, the holders of its Equity Interests, and all agreements
binding on such holders with respect to their Equ4 Interests. Except as
disclosed on Schedule 9.1.4, in the five years preceding the Closing Date,
(i) no Borrower or Subsidiary has acquired any substantial assets from any other
Person nor been the surviving entity in a merger or combination; (ii) each
Borrower has good title to its Equity Interests in its Subsidiaries, subject
only to Agent’s Lien, and all such Equity Interests are duly issued, fully paid
and non-assessable; and (iii) there are no outstanding purchase options,
warrants, subscription rights, agreements to issue or sell, convertible
interests, phantom rights or powers of attorney relating to Equity Interests of
any Borrower or Subsidiary.

9.1.5. Title to Properties; Priority of Liens. Each Borrower and Subsidiary has
good and insurable title to (or valid leasehold interests in) all of its Real
Estate, and good title to (or valid

 

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leasehold interest in) all of its personal Property, including all Property
reflected in any financial statements delivered to Agent or Lenders, in each
case necessary in the ordinary conduct of their respective businesses and free
of Liens except Permitted Liens. Each Borrower and Subsidiary has paid and
discharged all lawful claims that, if unpaid, could become a Lien on its
Properties, other than Permitted Liens. All Liens of Agent in the Collateral are
duly perfected, First Priority Liens, subject only to Permitted Liens that are
expressly allowed to have priority over Agents Liens and subject to recording
the Mortgages in the appropriate recording offices in the jurisdictions whose
such Real Estate subject to a Mortgage is located.

9.1.6. Accounts. Agent may rely, in determining which Accounts are Eligible
Accounts, on all statements and representations made by Borrowers with respect
thereto. Borrowers warrant, with respect to each Account at the time it is shown
as an Eligible Account in a Borrowing Base Certificate, that:

(a) it is genuine and in all respects what it purports to be, and is not
evidenced by a judgment;

(b) it arises out of a completed, bona fide sale and delivery of goods in the
Ordinary Course of Business, and substantially in accordance with any purchase
order, contract or other document relating thereto;

(c) it is for a sum certain, maturing as stated in the invoice covering such
sale, a copy of which has been furnished or is available to Agent on request;

(d) it is not subject to any offset, Lien (other than Agent’s Lien), deduction,
defense, dispute, counterclaim or other adverse condition except as arising in
the Ordinary Course of Business and disclosed to Agent; and it is absolutely
owing by the Account Debtor, without contingency in any respect;

(e) no purchase order, agreement, document or Applicable Law restricts
assignment of the Account to Agent (regardless of whether, under the UCC, the
restriction is ineffective), and the applicable Borrower is the sole payee or
remittance party shown on the invoice;

(f) no extension, compromise, settlement, modification, credit, deduction or
return has been authorized with respect to the Account, except discounts or
allowances granted in the Ordinary Course of Business that are reflected on the
face of the invoice related thereto or in the reports submitted to Agent
hereunder; and

(g) to the best of Borrowers’ knowledge, (i) there are no facts or circumstances
that are reasonably likely to impair the enforceability or collectibility of
such Account; (ii) the Account Debtor had the capacity to contract when the
Account arose, continues to meet the applicable Borrower’s customary credit
standards, is Solvent, is not contemplating or subject to an Insolvency
Proceeding, and has not failed, or suspended or ceased doing business; and
(iii) there are no proceedings or actions threatened or pending against any
Account Debtor that could reasonably be expected to have a material adverse
effect on the Account Debtor’s financial condition.

9.1.7. Financial Statements. The consolidated and consolidating balance sheets,
and related statements of income, cash flow and shareholder’s equity, of
Borrowers and Subsidiaries that have been and are hereafter delivered to Agent
and Lenders, are prepared in accordance with GAAP, and fairly present the
financial positions and results of operations of Borrowers and Subsidiaries at
the dates and for the periods indicated. All projections delivered from time to
time to Agent and Lenders have been prepared in good faith, based on reasonable
assumptions in light of the circumstances at such time. Since December 31, 2009,
there has been no change in the condition, financial or otherwise, of any
Borrower or Subsidiary that could reasonably be expected to have a Material
Adverse Effect. No

 

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financial statement delivered to Agent or Lenders at any time contains any
untrue statement of a material fact, nor fails to disclose any material fact
necessary to make such statement not materially misleading. Each Borrower and
Subsidiary is Solvent.

9.1.8. Surety Obligations. No Borrower or Subsidiary is obligated as surety or
indemnitor under any bond or other contract that assures payment or performance
of any obligation of any Person, except as permitted hereunder.

9.1.9. Taxes. Each Borrower and Subsidiary has filed all federal, state and
local tax returns and other reports that it is required by law to file, and has
paid, or made provision for the payment of, all Taxes upon it, its income and
its Properties that are due and payable, except to the extent being Properly
Contested. The provision for Taxes on the books of each Borrower and Subsidiary
is adequate for all years not closed by applicable statutes, and for its current
Fiscal Year.

9.1.10. Brokers. There are no brokerage commissions, finder’s fees or investment
banking fees payable in connection with any transactions contemplated by the
Loan Documents.

9.1.11. Intellectual Property. Each Borrower and Subsidiary owns or has the
lawful right to use all Intellectual Property necessary for the conduct of its
business, without conflict with any rights of others. There is no pending or, to
any Borrower’s knowledge, threatened Intellectual Property Claim with respect to
any Borrower, any Subsidiary or any of their Property (including any
Intellectual Property). Except as disclosed on Schedule 9.1.11, no Borrower or
Subsidiary pays or owes any Royalty or other compensation to any Person with
respect to any Intellectual Property. All Intellectual Property owned, used or
licensed by, or otherwise subject to any interests of, any Borrower or
Subsidiary is shown on Schedule 9.1.11.

9.1.12. Governmental Approvals. Each Borrower and Subsidiary has, is in
compliance with, and is in good standing with respect to, all Governmental
Approvals necessary to conduct its business and to own, lease and operate its
Properties except where noncompliance could not reasonably be expected to have a
Material Adverse Effect. All necessary import, export or other licenses, permits
or certificates for the import or handling of any goods or other Collateral have
been procured and are in effect, and Borrowers and Subsidiaries have complied
with all foreign and domestic laws with respect to the shipment and importation
of any goods or Collateral, except where noncompliance could not reasonably be
expected to have a Material Adverse Effect.

9.1.13. Compliance with Laws. Each Borrower and Subsidiary has duly complied,
and its Properties and business operations are in compliance, in all material
respects with all Applicable Law, except where noncompliance could not
reasonably be expected to have a Material Adverse Effect. There have been no
citations, notices or orders of material noncompliance issued to any Borrower or
Subsidiary under any Applicable Law. No Inventory has been produced in violation
of the FLSA.

9.1.14. Compliance with Environmental Laws. Except as disclosed on Schedule
9.1.14 or except as would not have a Material Adverse Effect on the business
operations of the Borrowers, no Borrower’s or Subsidiary’s past or present
operations, Real Estate or other Properties are subject to any federal, state or
local investigation to determine whether any remedial action is needed to
address any environmental pollution, hazardous material or environmental
clean-up. No Borrower or Subsidiary has received any Environmental Notice. To
the knowledge of the Borrowers, no Borrower or Subsidiary has any contingent
liability with respect to any Environmental Release, environmental pollution or
hazardous material on any Real Estate now or previously owned, leased or
operated by it. The representations and warranties contained in the
Environmental Agreement are true and correct on the Closing Date.

 

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9.1.15. Burdensome Contracts. No Borrower or Subsidiary is a party or subject to
any contract, agreement or charter restriction that could reasonably be expected
to have a Material Adverse Effect. No Borrower or Subsidiary is party or subject
to any Restrictive Agreement, except as - shown on Schedule 9.1.15. No such
Restrictive Agreement prohibits the execution, delivery or performance of any
Loan Document by an Obligor.

9.1.16. Litigation. Except as shown on Schedule 9.1.16, there are no proceedings
or investigations pending or, to any Borrower’s knowledge, threatened against
any Borrower or Subsidiary, or any of their businesses, operations, Properties,
prospects or conditions, that (a) relate to any Loan Documents or transactions
contemplated thereby; or (b) could reasonably be expected to have a Material
Adverse Effect if determined adversely to any Borrower or Subsidiary. Except as
shown on such Schedule, no Obligor has a Commercial Tort Claim (other than, as
long as no Default or Event of Default exists, a Commercial Tort Claim for less
than $100,000). No Borrower or Subsidiary is in default with respect to any
order, injunction or judgment of any Governmental Authority.

9.1.17. No Defaults. No event or circumstance has occurred or exists that
constitutes a Default or Event of Default. No Borrower or Subsidiary is in
default, and no event or circumstance has occurred or exists that with the
passage of time or giving of notice would constitute a default, under any
Material Contract or in the payment of any Borrowed Money. There is no basis
upon which any party (other than a Borrower or Subsidiary) could terminate a
Material Contract prior to its scheduled termination date.

9.1.18. ERISA. Except as disclosed on Schedule 9.1.18:

(a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code, and other federal and state laws. Each Plan that
is intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS or an application for such a letter is
currently being processed by the IRS with respect thereto and, to the knowledge
of Borrowers, nothing has occurred which would prevent, or cause the loss of,
such qualification. Each Obligor and ERISA Affiliate has made all required
contributions to each Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.

(b) There are no pending or, to the knowledge of Borrowers, threatened claims,
actions or lawsuits, or action by any Governmental Authority, with respect to
any Plan that could reasonably be expected to have a Material Adverse Effect.
There has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan that has resulted in or could
reasonably be expected to have a Material Adverse Effect.

(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no
Pension Plan has any Unfunded Pension Liability; (iii) no Obligor or ERISA
Affiliate has incurred, or reasonably expects to incur, any liability under
Title IV of ERISA with respect to any Pension Plan (other than premiums due and
not delinquent under Section 4007 of ERISA); (iv) no Obligor or ERISA Affiliate
has incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (v) no Obligor or ER1SA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.

(d) With respect to any Foreign Plan, (i) all employer and employee
contributions required by law or by the terms of the Foreign Plan have been
made, or, if applicable, accrued, in accordance with normal accounting
practices; (ii) the fair market value of the assets of each funded Foreign Plan,
the liability of each insurer for any Foreign Plan funded through insurance, or
the book reserve established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations with respect to all current and former participants in such

 

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Foreign Plan according to the actuarial assumptions and valuations most recently
used to account for such obligations in accordance with applicable generally
accepted accounting principles; and (iii) it has been registered as required and
has been maintained in good standing with applicable regulatory authorities.

9.1.19. Trade Relations. There exists no actual or threatened termination,
limitation or modification of any business relationship between any Borrower or
Subsidiary and any customer or supplier, or any group of customers or suppliers,
who individually or in the aggregate are material to the business of such
Borrower or Subsidiary. There exists no condition or circumstance that could
reasonably be expected to impair the ability of any Borrower or Subsidiary to
conduct its business at any time hereafter in substantially the same manner as
conducted on the Closing Date.

9.1.20. Labor Relations. Except as described on Schedule 9.1.20, no Borrower or
Subsidiary is party to or bound by any collective bargaining agreement,
management agreement or consulting agreement. There are no material grievances,
disputes or controversies with any union or other organization of any Borrower’s
or Subsidiary’s employees, or, to any Borrower’s knowledge, any asserted or
threatened strikes, work stoppages or demands for collective bargaining.

9.1.21. Payable Practices. No Borrower or Subsidiary has made any material
change in its historical accounts payable practices from those in effect on the
Closing Date.

9.1.22. Not a Regulated Entity. No Obligor is (a) an “investment company” or a
“person directly or indirectly controlled by or acting on behalf of an
investment company” within the meaning of the Investment Company Act of 1940; or
(b) subject to regulation under the Federal Power Act, the Interstate Commerce
Act, any public utilities code or any other Applicable Law regarding its
authority to incur Debt.

9.1.23. Margin Stock. No Borrower or Subsidiary is engaged, principally or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock. No Loan proceeds or Letters
of Credit will be used by Borrowers to purchase or carry, or to reduce or
refinance any Debt incurred to purchase or carry, any Margin Stock or for any
related purpose governed by Regulations T, U or X of the Board of Governors.

9.1.24. Common Enterprise. KAGY Holdings is the direct or indirect and
beneficial owner and holder of all of the issued and outstanding Equity
Interests in AGY Holdings and the other Borrowers and Guarantors. Borrowers and
Guarantors make up a related organization of various entities constituting a
single economic and business enterprise so that Borrower and Guarantors share a
substantial identity of interests such that any benefit received by any one of
them benefits the others. Borrowers and certain Guarantors render services to or
for the benefit of the other Borrowers and/or the other Guarantors, as the case
may be, purchase or sell and supply goods to or from or for the benefit of the
others, make loans, advances and provide other financial accommodations to or
for the benefit of Borrowers and Guarantors (including, inter alia, the payment
by Borrowers and Guarantors of creditors of Borrowers or Guarantors and
guarantees by Borrowers and Guarantors of indebtedness of Borrowers and
Guarantors and provide administrative, marketing, payroll and management
services to or for the benefit of Borrowers and Guarantors). Borrowers and
Guarantors have centralized accounting, common officers and directors and are in
certain circumstances, identified to creditors as a single economic and business
enterprise.

9.1.25. Grace Transaction Documents; Main Union Debt. Borrowers have delivered
to Agent true, accurate and complete copies of the Share Sale Agreement, the
Grace Option Agreement and the Framework Agreement. All Debt of AGY Cayman and
the Grace Companies is Non-Recourse Debt. There is no security or collateral for
the liabilities and obligations of AGY Holdings under the AGY Holdings
Guarantees.

 

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9.2. Complete Disclosure. No Loan Document contains any untrue statement of a
material fact, nor fails to disclose any material fact necessary to make the
statements contained therein not materially misleading. There is no fact or
circumstance that any Obligor has failed to disclose to Agent in writing that
could reasonably be expected to have a Material Adverse Effect.

SECTION 10. COVENANTS AND CONTINUING AGREEMENTS

10.1. Affirmative Covenants. As long as any Commitments or Obligations are
outstanding, each Obligor shall:

10.1.1. Inspections; Appraisals.

(a) Permit Agent from time to time, subject (except when a Default or Event of
Default has occurred and is continuing) to reasonable notice and normal business
hours, to visit and inspect the Properties of any Borrower or Subsidiary
(provided that the Borrowers will not be required to permit any sampling or
analysis of any environmental media or of any building materials unless required
by Applicable Law, inspect, audit and make extracts from any Borrower’s or
Subsidiary’s books and records, and discuss with its officers, employees,
agents, advisors and independent accountants such Borrower’s or Subsidiary’s
business, financial condition, assets, prospects and results of operations.
Lenders may participate in any such visit or inspection, at their own expense.
Neither Agent nor any Lender shall have any duty to any Borrower to make any
inspection, nor to share any results of any inspection, appraisal or report with
any Borrower. Borrowers acknowledge that all inspections, appraisals and reports
are prepared by Agent and Lenders for their purposes, and Borrowers shall not be
entitled to rely upon them.

(b) Reimburse Agent for all charges, costs and expenses of Agent in connection
with (i) examinations of any Obligor’s books and records or any other financial
or Collateral matters as Agent deems appropriate, up to three times per Loan
Year; (ii) appraisals of Inventory and Metals up to two times per Loan Year, and
(iii) appraisals of Equipment up to one time per Loan Year, and of Real Estate,
at Agent’s reasonable request; provided, however, that if an examination or
appraisal is initiated during the occurrence and continuance of a Default or
Event of Default, all charges, costs and expenses therefore shall be reimbursed
by Borrowers without regard to such limits. Subject to and without limiting the
foregoing, Borrowers specifically agree to pay Agent’s then standard charges for
examination activities, including the standard charges of Agent’s internal
appraisal group. This Section shall not be construed to limit Agent’s right to
use third parties for such purposes.

10.1.2. Financial and Other Information. Keep adequate records and books of
account with respect to its business activities, in which proper entries are
made in accordance with GAAP reflecting all financial transactions; and furnish
to Agent and Lenders:

(a) as soon as available, and in any event within 120 days after the close of
each Fiscal Year, balance sheets as of the end of such Fiscal Year and the
related statements of income, cash flow and shareholders’ equity for such Fiscal
Year, on consolidated and consolidating bases for Borrowers and Subsidiaries,
which consolidated statements shall be audited and certified (without
qualification) by a firm of independent certified public accountants of
recognized standing selected by Borrowers and acceptable to Agent, and shall set
forth in comparative form corresponding figures for the preceding Fiscal Year
and other information acceptable to Agent;

(b) as soon as available, and in any event within 30 days after the end of each
month, unaudited balance sheets as of the end of such month and the related
statements of income and cash flow for such month and for the portion of the
Fiscal Year then elapsed, on consolidated and consolidating bases for Borrowers
and Subsidiaries (provided that the results of the Grace Companies shall not be
included in such monthly reporting), setting forth in comparative form
corresponding figures for the

 

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preceding Fiscal Year and certified by the chief financial officer of Borrower
Agent as prepared in accordance with GAAP and fairly presenting the financial
position and results of operations for such month and period, subject to nominal
year-end adjustments and the absence of footnotes;

(c) as soon as available, and in any event within 45 days after the end of each
quarter, unaudited balance sheets as of the end of such quarter and the related
statements of income and cash flow for such quarter and for the portion of the
Fiscal Year then elapsed, on consolidated and consolidating bases for Borrowers
and its Subsidiaries, setting forth in comparative form corresponding figures
for the preceding Fiscal Year and certified by the chief financial officer of
Borrower Agent as prepared in accordance with GAAP and fairly presenting the
financial position and results of operations for such month and period, subject
to normal year-end adjustments and the absence of footnotes;

(d) concurrently with delivery of financial statements under clauses (a) and
(b) above, or more frequently if requested by Agent while a Default or Event of
Default exists, a Compliance Certificate executed by the chief financial officer
of Borrower Agent;

(e) concurrently with delivery of financial statements under clause (a) above,
copies of all management letters and other material reports submitted to
Borrowers by their accountants in connection with such financial statements;

(f) by January 31st of each year, projections of Borrowers’ consolidated balance
sheets, results of operations, cash flow and Availability and Excess
Availability for that Fiscal Year on a monthly basis and the following Fiscal
Year on a quarterly basis;

(g) at Agent’s request, a listing of each Borrower’s trade payables, specifying
the trade creditor and balance due, and a detailed trade payable aging, all in
form reasonably satisfactory to Agent;

(h) promptly after the sending or filing thereof, copies of any proxy
statements, financial statements or reports that any Obligor has made generally
available to its shareholders; copies of any regular, periodic and special
reports or registration statements or prospectuses that any Obligor files with
the Securities and Exchange Commission or any other Governmental Authority, or
any securities exchange; and copies of any press releases or other statements
made available by an Obligor to the public concerning material changes to or
developments in the business of such Obligor;

promptly after the sending or filing thereof, copies of any annual report to be
filed in connection with each Plan or Foreign Plan; and

(j) such other reports and information (financial or otherwise) as Agent may
reasonably request from time to time in connection with any Collateral or any
Borrower’s, Subsidiary’s or other Obligor’s financial condition or business
(including, without limitation, the financial condition or business of the Grace
Companies).

Simultaneously with retaining accountants for their annual audit, Borrowers
shall send a letter to the accountants, with a copy to Agent and Lenders,
notifying the accountants that one of the primary purposes for retaining their
services and obtaining audited financial statements is for use by Agent and
Lenders. Agent is authorized to send such notice if Borrowers fail to do so for
any reason.

10.1.3. Notices. Notify Agent and Lenders in writing, promptly after a
Borrower’s obtaining knowledge thereof, of (1) any of the following that affects
an Obligor: (a) the threat or commencement of any proceeding or investigation,
whether or not covered by insurance, if an adverse determination could have a
Material Adverse Effect; (b) any pending or threatened labor dispute, strike or
walkout, or the expiration of any material labor contract that could reasonably
be expected to have a

 

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Material Adverse Effect; (c) any default under or termination of a Material
Contract that could reasonably be expected to have a Material Adverse Effect;
(d) the existence of any Default or Event of Default; (e) any judgment in an
amount exceeding $500,000; (f) the assertion of any Intellectual Property Claim,
if an adverse resolution could have a Material Adverse Effect; (g) any violation
or asserted violation of any Applicable Law (including ERISA, OSHA, FLSA, or any
Environmental Laws), if an adverse resolution could have a Material Adverse
Effect; (h) any Environmental Release by an Obligor or on any Property owned,
leased or occupied by an Obligor; or receipt of any Environmental Notice that,
in each case, could reasonably be expected to have a Material Adverse Effect;
(i) the occurrence of any ERISA Event; (j) the discharge of or any withdrawal or
resignation by Borrowers’ independent accountants; or (k) any opening of a new
office or place of business, at least 30 days prior to such opening; or (2) any
demands or default under the AGY Holdings Guarantees, the Grace Option Agreement
or any Debt of the Grace Companies.

10.1.4. Landlord and Storage Agreements. Upon request, provide Agent with copies
of all existing agreements, and promptly after execution thereof provide Agent
with copies of all future agreements, between an Obligor and any landlord,
warehouseman, processor, shipper, bailee or other Person that owns any premises
at which any Collateral, having a fair market value greater than $500,000, may
be kept or that otherwise may possess or handle any Collateral having a fair
market value greater than $500,000, in each case as such value is reasonably
determined by Agent.

10.1.5. Compliance with Laws. Comply with all Applicable Laws, including ERISA,
Environmental Laws, FLSA, OSHA, Anti-Terrorism Laws, and laws regarding
collection and payment of Taxes, and maintain all Governmental Approvals
necessary to the ownership of its Properties or conduct of its business, unless
failure to comply (other than failure to comply with Anti-Terrorism Laws) or
maintain could not reasonably be expected to have a Material Adverse Effect.
Without limiting the generality of the foregoing, if any Environmental Release
occurs at or on any Properties of any Borrower or Subsidiary, it shall act
promptly and diligently to investigate and report to Agent and all appropriate
Governmental Authorities the extent of, and to make appropriate remedial action
to eliminate, such Environmental Release in accordance with applicable
Environmental Laws.

10.1.6. Taxes. Pay and discharge all Taxes prior to the date on which they
become delinquent or penalties attach, unless such Taxes are being Properly
Contested.

10.1.7. Insurance. In addition to the insurance required hereunder with respect
to Collateral, maintain insurance with financially sound and reputable insurers
reasonably satisfactory to Agent, (a) with respect to the Properties and
business of Borrowers and Guarantors of such type (including product liability,
workers’ compensation, larceny, embezzlement, or other criminal misappropriation
insurance), in such amounts, and with such coverages and deductibles as are
customary for companies engaged in the same or similar business; and
(b) business interruption insurance in an amount acceptable to Agent in its
Credit Judgment, with deductibles and subject to an Insurance Assignment
satisfactory to Agent.

10.1.8. Licenses. Keep each License affecting any Collateral (including the
manufacture, distribution or disposition of Inventory) or any other material
Property of Borrowers and Subsidiaries in full force and effect, except as would
not have a Material Adverse Effect; promptly notify Agent of any material
modification to any such License, or entry into any new License, in each case at
least 30 days prior to its effective date; pay all Royalties when due; and
notify Agent of any default or breach asserted by any Person to have occurred
under any License, except as would not have a Material Adverse Effect.

10.1.9. Future Subsidiaries. Promptly notify Agent upon any Person becoming a
Subsidiary and, if such Person is not a Foreign Subsidiary, cause it to guaranty
the Obligations in a manner satisfactory to Agent, and to execute and deliver
such documents, instruments and agreements and to take such other actions as
Agent shall require to evidence and perfect a Lien in favor of Agent (for the
benefit of Secured Parties) on all assets of such Person, including delivery of
such legal opinions, in form and substance satisfactory to Agent, as it shall
deem appropriate.

 

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10.1.10. Reserved.

10.1.11. Reserved.

10.2. Negative Covenants. As long as any Commitments or Obligations are
outstanding, each Obligor shall not:

10.2.1. Permitted Debt. Create, incur, guarantee or suffer to exist any Debt,
except:

(a) the Obligations;

(b) Subordinated Debt;

(c) Permitted Purchase Money Debt and Debt under Capital Leases and refinancings
or renewals thereof, in an aggregate amount not to exceed $20,000,000 at any one
time outstanding;

(d) Senior Second Lien Debt;

(e) Borrowed Money (other than the Obligations, Subordinated Debt, Senior Second
Lien Debt and Permitted Purchase Money Debt), but only to the extent outstanding
on the Closing Date and not satisfied with proceeds of the initial Loans;

(1) Bank Product Debt;

(g) Debt that is in existence when a Person becomes a Subsidiary or that is
secured by an asset when acquired by a Borrower or Subsidiary, as long as such
Debt was not incurred in contemplation of such Person becoming a Subsidiary or
such acquisition, and does not exceed $5,000,000 in the aggregate at any time;

(h) (i) Debt incurred by Foreign Subsidiaries in an aggregate principal amount
outstanding not to exceed $10,000,000 at any one time outstanding, and
(y) Non-Recourse Debt incurred by the Grace Companies incurred in connection
with the Grace Transaction;

(i) Permitted Contingent Obligations;

(1) Refinancing Debt as long as each Refinancing Condition is satisfied; and

(k) Debt that is not included in any of the preceding clauses of this Section,
is not secured by a Lien and does not exceed $10,000,000 in the aggregate at any
time.

10.2.2. Permitted Liens. Create or suffer to exist any Lien upon any of its
Property, except the following (collectively, “Permitted Liens”):

(a) Liens in favor of Agent including any Lien created under any Loan Document;

(b) Purchase Money Liens securing Permitted Purchase Money Debt and Liens
securing Capital Leases permitted under Section 10.2.1(c);

(c) Liens for Taxes not yet due or being Properly Contested;

(d) statutory Liens (other than Liens for Taxes or imposed under ERISA) arising
in

 

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the Ordinary Course of Business, but only if (i) payment of the obligations
secured thereby is not yet due or is being Properly Contested, and (ii) such
Liens do not materially impair the value or use of the Property or materially
impair operation of the business of any Borrower or Subsidiary;

(e) Liens incurred or deposits made in the Ordinary Course of Business to secure
the performance of tenders, bids, leases, contracts (except those relating to
Borrowed Money), statutory obligations and other similar obligations, or arising
as a result of progress payments under government contracts, as long as such
Liens are at all times junior to Agent’s Liens;

(f) Liens arising in the Ordinary Course of Business that are subject to Lien
Waivers;

(g) Liens arising by virtue of a judgment or judicial order against any Borrower
or Subsidiary, or any Property of a Borrower or Subsidiary, as long as such
Liens are (i) in existence for less than 20 consecutive days or being Properly
Contested, and (ii) at all times junior to Agent’s Liens;

(h) easements, rights-of-way, zoning and other restrictions, covenants or other
agreements of record, encroachments, minor defects and other irregularities in
title, and other similar charges or encumbrances on Real Estate, that do not
interfere with the Ordinary Course of Business;

(i) normal and customary rights of setoff upon deposits in favor of depository
institutions, and Liens of a collecting bank on Payment Items in the course of
collection;

Liens securing the Senior Second Lien Debt, to the extent such Liens are subject
to the Intercreditor Agreement;

(k) Liens securing obligations under the DB Lease Agreement as in effect on the
Closing Date, provided that any such Liens attach only to the property that is
the subject of the DB Lease Agreement, as applicable, and do no encumber any
other property of the Loan Parties;

the filing of UCC financing statements solely as a precautionary measure in
connection with operating leases or consignment of goods;

(m) existing Liens shown on Schedule 10.2.2;

(n) carriers’, warehouseman’s, mechanics’, landlords’, materialman’s repairman’s
or other similar liens arising in the Ordinary Course of Business which are not
delinquent for more than 90 days and remain payable without penalty or which are
being Properly Contested;

(o) any interest or title of a lessor or sublessor under any lease permitted by
this Agreement;

(11) licenses, sublicenses, leases or subleases entered into in the Ordinary
Course of Business and not interfering with the Ordinary Course of Business of
Borrowers or materially impair the use (for its intended purpose) or value of
the property subsequent thereto; and

(q) Liens securing Debt incurred pursuant to Section 10.2.1(h), provided that
(i) such Liens do not extend to, or encumber, property which constitutes
Collateral and (ii) such Liens extend only to the property (or Equity Interests)
of the Foreign Subsidiary incurring such Debt.

10.2.3. Reserved.

10.2.4. Distributions; Upstream Payments. Declare or make any Distributions,
except Upstream Payments and Permitted Distributions; or create or suffer to
exist any encumbrance or restriction on the ability of a Subsidiary to make any
Upstream Payment, except for restrictions under the Loan Documents, under
Applicable Law or in effect on the Closing Date as shown on Schedule 9.1.15.

 

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10.2.5. Restricted Investments. Make any Restricted Investment.

10.2.6. Disposition of Assets; Sale and Leaseback Transactions. (i) Make any
Asset Disposition, except a Permitted Asset Disposition, a disposition of
Equipment under Section 8.4.2, or a transfer of Property by a Subsidiary or
Obligor to a Borrower.

(ii) Enter into any arrangement, directly or indirectly, with any Person whereby
it shall sell or transfer any property, real or personal, used or useful in its
business, whether now owned or hereafter acquired, and thereafter rent or lease
such property or other property which it intends to use for substantially the
same purpose or purposes as the property being sold or transferred (a “Sale and
Leaseback Transaction”) unless (i) the sale of such property is a Permitted
Asset Disposition and (ii) any Liens arising in connection with its use of such
property are permitted by Section 10.2.2, except that the Borrowers may enter
into a single Sale and Leaseback Transaction in an amount not exceeding
$10,000,000 and, in addition, may enter into a Sale and Leaseback Transaction on
up to 50% of alloy assets owned by Borrowers.

10.2.7. Loans. Make any loans or other advances of money to any Person, except
(a) advances to a director, officer or employee (i) for salary, travel expenses,
commissions and similar items in the Ordinary Course of Business and (ii) in an
amount not to exceed $2,000,000 at any time outstanding, to purchase Equity
Interests of AGY Holdings or KAGY Holdings; (b) prepaid expenses and extensions
of trade credit made in the Ordinary Course of Business; (c) deposits with
financial institutions permitted hereunder; (d) as long as no Default or Event
of Default exists, intercompany loans by a Borrower to another Borrower; and
(e) loans or advances to AGY Cayman or its Subsidiaries not to exceed, at any
time outstanding (i) $5,000,000, less (ii) the amount of any direct or indirect
Investments in AGY Cayman or its Subsidiaries permitted under clause (i) of the
definition of Restricted Investments.

10.2.8. Restrictions on Payment of Certain Debt. Make any payments (whether
voluntary or mandatory, or a prepayment, redemption, retirement, defeasance or
acquisition) with respect to any (a) Subordinated Debt or Senior Second Lien
Debt, except regularly scheduled payments of principal, interest and fees, but
only to the extent permitted under the Intercreditor Agreement, or any
intercreditor or subordination agreement relating to such Debt (and a Senior
Officer of Borrower Agent shall certify to Agent, not less than five Business
Days prior to the date of payment, that all conditions under such agreement have
been satisfied); or (b) Borrowed Money (other than the Obligations) prior to its
due date under the agreements evidencing such Debt as in effect on the Closing
Date (or as amended thereafter with the consent of Agent); provided, that,
notwithstanding the foregoing, Borrowers may prepay, redeem or otherwise acquire
the Senior Second Lien Debt if, after giving effect to such prepayment,
redemption or other acquisition, (i) there shall be Excess Availability of at
least $20,000,000 and (ii) Borrowers shall have furnished to Agent, at least
five (5) Business Days prior to making such prepayment, redemption or
acquisition, a certificate executed by a Senior Officer of Borrowers, in form
and substance satisfactory to Agent, and demonstrating that the Borrowers will
have a Fixed Charge Coverage Ratio (calculated as if such prepayment, redemption
or acquisition had been made on the first day of the trailing four Fiscal
Quarters ending immediately prior to the actual occurrence of the prepayment,
redemption or acquisition) of not less than 1.5 to 1.0.

10.2.9. Fundamental Changes. Merge, combine or consolidate with any Person
except in connection with a Permitted Acquisition, or liquidate, wind up its
affairs or dissolve itself, in each case whether in a single transaction or in a
series of related transactions, except for mergers or consolidations of a
wholly-owned Subsidiary with another wholly-owned Subsidiary or into a Borrower;
change its name or conduct business under any fictitious name; change its tax,
charter or other organizational identification number; or change its form or
state of organization.

 

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10.2.10. Subsidiaries; Equity Interests. Form or acquire any Subsidiary after
the Closing Date, except in accordance with Sections 10.1.9 and 10.2.5; or
permit AGY Holdings or any existing Subsidiary to issue any additional Equity
Interests (including by way of sales of treasury stock) except (i) director’s
qualifying shares, (ii) AGY Holdings and any Subsidiary may effect stock splits,
stock dividends and additional issuances of Equity Interests which do not
decrease the percentage ownership of AGY Holdings or any Subsidiaries in any
class of Equity Interest of such Subsidiary, (iii) Subsidiaries formed after the
Closing Date in accordance with Section 10.1.9 may issue Equity Interests to AGY
Holdings or its Subsidiaries, and (iii) AGY Holdings may issue Qualified Capital
Stock to KAGY Holdings. All Equity Interests issued pursuant to this
Section 10.2.10 shall be pledged to Agent as Collateral for the Obligations
(other than Equity Interest that would result in the pledge of more than 65% of
the Voting Stock of a Foreign Subsidiary).

10.2.11. Organic Documents. Amend, modify or otherwise change any of its Organic
Documents as in effect on the Closing Date

10.2.12. Tax Consolidation. File or consent to the filing of any consolidated
income tax return with any Person other than Borrowers and Subsidiaries.

10.2.13. Accounting Changes. Make any material change in accounting treatment or
reporting practices, except as required by GAAP and in accordance with
Section 1.2; or change its Fiscal Year.

10.2.14. Restrictive Agreements. Become a party to any Restrictive Agreement,
except a Restrictive Agreement (a) in effect on the Closing Date; (b) relating
to secured Debt permitted hereunder, as long as the restrictions apply only to
collateral for such Debt; or (c) constituting customary restrictions on
assignment in leases and other contracts.

10.2.15. Hedging Agreements. Enter into any Hedging Agreement, except to hedge
risks arising in the Ordinary Course of Business and not for speculative
purposes.

10.2.16. Conduct of Business. Engage in any business, other than its business as
conducted on the Closing Date (or, in the good faith judgment of the Board of
Directors of AGY Holdings, which are substantially related thereto or are
reasonable extensions thereof) and any activities incidental thereto.

10.2.17. Affiliate Transactions. Enter into or be party to any transaction with
an Affiliate, except (a) transactions contemplated by the Loan Documents;
(b) payment of reasonable compensation (including bonus) and other benefits
(including retirement, health, stock option and other benefit plans) to
directors, officers and employees for services actually rendered, and loans and
advances permitted by Section 10.2.7; (c) payment of customary directors,
officers and employees’ fees and indemnities; (d) transactions solely among
Borrowers; (e) transactions with Affiliates that were consummated prior to the
Closing Date, as shown on Schedule 10.2.17, and transactions with Affiliates
otherwise permitted by the Loan Documents; (f) transactions with Affiliates in
the Ordinary Course of Business, upon fair and reasonable terms fully disclosed
to Agent and no less favorable than would be obtained in a comparable
arm’s-length transaction with a non-Affiliate, (g) Permitted Distributions and
Investments permitted by Section 10.2.5, (h) so long as no Default or Event of
Default exists, the payment of regular management fees to Sponsor in the amounts
and at the times specified in the Management Agreement, dated as of April 7,
2006 among KAGY Holdings, KAGY Acquisition Corp., Parent Borrower and Sponsor,
as in effect on the Closing Date or as thereafter amended or replaced in any
manner that, taken as a whole, is not more adverse to the interests of the
Lenders or Secured Parties in any material respect than such agreement as in
effect on the Closing Date, provided that payments under this clause (h) shall
not exceed $1,000,000 in any Fiscal Year, (i) the existence of, and the
performance by any Obligor of its obligations under the terms of, any limited
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Organic Document or securityholders agreement (including any registration rights
agreement or purchase agreement related thereto) to which it is a party on the
Closing Date and which has been disclosed to Agent, as in effect on the Closing
Date, and similar agreements that it may enter into thereafter in the Ordinary
Course of Business; provided, however, that the existence of, or the performance
by any Obligor of obligations under, any amendment to any such existing
agreement or any such similar agreement entered into after the Closing Date
shall only be permitted by this Section 10.2.17 to the extent not more adverse
to the interest of the Lenders and Secured Parties in any material respect, when
taken as a whole, than any of such documents and agreements as in effect on the
Closing Date, (j) sales of Qualified Capital Stock of Holdings to Affiliates of
AGY Holdings not otherwise prohibited by the Loan Documents and the granting of
registration and other customary rights in connection therewith, (k) any
transaction with an Affiliate where the only consideration paid by any Obligor
is Qualified Capital Stock of Holdings, and (1) as contemplated by the Loan
Documents and the Senior Second Lien Note Documents

10.2.18. Plans Become party to any Multiemployer Plan or Foreign Plan, other
than any in existence on the Closing Date.

10.2.19. Amendments to Senior Second Lien Note Documents. Amend, supplement or
otherwise modify Senior Second Lien Note Indenture or any Senior Second Lien
Note Document, if such modification (a) increases the principal balance of such
Debt, or increases any required payment of principal or interest;
(b) accelerates the date on which any installment of principal or any interest
is due, or adds any additional redemption, put or prepayment provisions;
(c) shortens the final maturity date or otherwise accelerates amortization; or
extends the maturity date to any date earlier than March 8, 2016, (d) increases
the interest rate; (e) increases or adds any fees or charges other than
customary refinancing fees; (f) modifies any covenant in a manner or adds any
representation, covenant or default that is more onerous or restrictive in any
material respect for any Borrower or Subsidiary, or that is otherwise materially
adverse to any Borrower, any Subsidiary or Lenders; or (g) results in the
Obligations not constituting “Permitted Debt” under the Senior Second Lien Note
Indenture, or otherwise not being fully benefited by the subordination
provisions thereof.

10.2.20. Secondary Grace Purchase Make any payment in respect of the Secondary
Grace Purchase, whether such payment is an installment or otherwise, unless the
Secondary Grace Purchase Conditions are satisfied at the time of any such
payment, as determined by Agent in its Credit Judgment.

10.2.21. Amendments to AGY Holdings Guarantees and DB Lease Agreement. Amend,
supplement or otherwise modify the AGY Holdings Guarantees or the DB Lease
Agreement in any manner that is adverse in any material respect to the interest
of the Secured Parties or the Lenders.

10.3. Financial Covenant. If (i) any Commitments or Obligations are outstanding
and (ii) after the occurrence of a Trigger Period, Borrowers shall maintain a
Fixed Charge Coverage Ratio of at least 1.0 to 1.0 for each period of four
Fiscal Quarters ending during, or on the last day of the Fiscal Quarter
immediately before, any Trigger Period.

SECTION 11. EVENTS OF DEFAULT; REMEDIES ON DEFAULT

11.1. Events of Default. Each of the following shall be an “Event of Default”
hereunder, if the same shall occur for any reason whatsoever, whether voluntary
or involuntary, by operation of law or otherwise:

(a) A Borrower fails to pay any Obligations when due (whether at stated
maturity, on demand, upon acceleration or otherwise);

(b) Any information contained in any Borrowing Base Certificate is incorrect or

 

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misleading in any material respect (other than unintentional errors which have
the effect of understating the Borrowing Base) or any representation, warranty
or other written statement of an Obligor made in connection with any other Loan
Documents or transactions contemplated thereby is incorrect or misleading in any
material respect when given;

(c) A Borrower breaches or fail to perform any covenant contained in
Section 7.2, 7.3, 7.4, 7.6, 8.1, 8.2.4, 8.6.2, 10.1.1, 10.1.2, 10.2 or 10.3;

(d) An Obligor breaches or fails to perform any other covenant contained in any
Loan Documents, and such breach or failure is not cured within 15 days after a
Senior Officer of such Obligor has knowledge thereof or receives notice thereof
from Agent, whichever is sooner; provided, however, that such notice and
opportunity to cure shall not apply if the breach or failure to perform is not
capable of being cured within such period or is a willful breach by an Obligor;

(e) A Guarantor repudiates, revokes or attempts to revoke its Guaranty; an
Obligor or third party denies or contests the validity or enforceability of any
Loan Documents or Obligations, or the perfection or priority of any Lien granted
to Agent; or any Loan Document ceases to be in full force or effect for any
reason (other than a waiver or release by Agent and Lenders);

Any breach or default of an Obligor occurs under (i) any Hedging Agreement,
(ii) the BOA Lease Agreement or the DB Lease Agreement, (iii) any Senior Second
Lien Note Document, (iv) the AGY Holdings Guarantees, or (v) any other document,
instrument or agreement to which it is a party or by which it or any of its
Properties is bound, relating to any Debt (other than the Obligations) in excess
of $2,500,000, if the maturity of or any payment with respect to such Debt may
be accelerated or demanded due to such breach;

(g) Any judgment or order for the payment of money is entered against an Obligor
in an amount that exceeds, individually or cumulatively with all unsatisfied
judgments or orders against all Obligors, $2,500,000 (net of any insurance
coverage therefore acknowledged in writing by the insurer), unless (i) a stay of
enforcement of such judgment or order is in effect, by reason of a pending
appeal or otherwise or (ii) Excess Availability continues to exceed, at all
times during which such judgment remains unsatisfied, $8,750,000 after giving
effect to such judgment or order;

(h) A loss, theft, damage or destruction occurs with respect to any Collateral
if the amount not covered by insurance exceeds $2,500,000 unless Excess
Availability continues to exceed $8,750,000 after giving effect to such loss,
theft, damage or destruction;

(i) An Obligor is enjoined, restrained or in any way prevented by any
Governmental Authority from conducting any material part of its business; an
Obligor suffers the loss, revocation or termination of any material license,
permit, lease or agreement necessary to its business; there is a cessation of
any material part of an Obligor’s business for a material period of time; any
material Collateral or Property of an Obligor is taken or impaired through
condemnation; an Obligor agrees to or commences any liquidation, dissolution or
winding up of its affairs; or an Obligor is not Solvent;

(i) An Insolvency Proceeding is commenced by an Obligor; an Obligor makes an
offer of settlement, extension or composition to its unsecured creditors
generally; a trustee is appointed to take possession of any substantial Property
of or to operate any of the business of an Obligor; or an Insolvency Proceeding
is commenced against an Obligor and: the Obligor consents to institution of the
proceeding, the petition commencing the proceeding is not timely contested by
the Obligor, the petition is not dismissed within 30 days after filing, or an
order for relief is entered in the proceeding;

(k) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan
that has resulted or could reasonably be expected to result in liability of an
Obligor to a Pension Plan,

 

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Multiemployer Plan or PBGC, or that constitutes grounds for appointment of a
trustee for or termination by the PBGC of any Pension Plan or Multiemployer
Plan; an Obligor or ERISA Affiliate fails to pay when due any installment
payment with respect to its withdrawal liability under Section 4201 of ERISA
under a Multiemployer Plan; or any event similar to the foregoing occurs or
exists with respect to a Foreign Plan;

(1) An Obligor or any of its Senior Officers is criminally indicted or convicted
for (i) a felony committed in the conduct of the Obligor’s business, or
(ii) violating any state or federal law (including the Controlled Substances
Act, Money Laundering Control Act of 1986 and Illegal Exportation of War
Materials Act) that could lead to forfeiture of any material Property or any
Collateral;

(m) A Change of Control occurs; or any event occurs or condition exists that has
a Material Adverse Effect;

(n) the Intercreditor Agreement shall cease to be in full force and effect, or
in the case of the Intercreditor Agreement shall cease to give Agent, for the
benefit of the Secured Parties, the Lien priority, rights, power and privileges
purported to be created and granted under the Intercreditor Agreement, or any
Person shall seek to establish the invalidity or unenforceability of the
Intercreditor Agreement, the DB Intercreditor Agreement or the Metals
Intercreditor Agreement;

(o) AGY Holdings shall fail to make any payment when due in respect of any of
the AGY Guarantees;

(P) Borrowers shall fail to maintain, at any time during the thirty (30) day
period immediately following completion of the Secondary Grace Purchase, Excess
Availability in an amount not less than the greater of (i) $8,750,000, or
(ii) 17.5% of the Borrowing Base as determined as of the last day of the most
recent fiscal month; or

(c1) On or before June 15, 2012, the maturity date of the DB Lease Agreement
shall not have been extended or such lease facility shall not have been
otherwise refinanced, in each case in a manner reasonably acceptable to Agent.

11.2. Remedies upon Default. If an Event of Default described in Section 11.1(j)
occurs with respect to any Borrower, then to the extent permitted by Applicable
Law, all Obligations (other than Secured Bank Product Obligations) shall become
automatically due and payable and all Commitments shall terminate, without any
action by Agent or notice of any kind. In addition, or if any other Event of
Default exists, Agent may in its discretion (and shall upon written direction of
Required Lenders) do any one or more of the following from time to time:

(a) declare any Obligations (other than Secured Bank Product Obligations)
immediately due and payable, whereupon they shall be due and payable without
diligence, presentment, demand, protest or notice of any kind, all of which are
hereby waived by Borrowers to the fullest extent permitted by law;

(b) terminate, reduce or condition any Commitment, or make any adjustment to the
Borrowing Base;

(c) require Obligors to Cash Collateralize LC Obligations, Secured Bank Product
Obligations and other Obligations that are contingent or not yet due and
payable, and, if Obligors fail promptly to deposit such Cash Collateral, Agent
may (and shall upon the direction of Required Lenders) advance the required Cash
Collateral as Revolver Loans (whether or not an Overadvance exists or is created
thereby, or the conditions in Section 6 are satisfied); and

 

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(d) exercise any other rights or remedies afforded under any agreement, by law,
at equity or otherwise, including the rights and remedies of a secured party
under the UCC. Such rights and remedies include the rights to (i) take
possession of any Collateral; (ii) require Borrowers to assemble Collateral, at
Borrowers’ expense, and make it available to Agent at a place designated by
Agent; (iii) enter any premises where Collateral is located and store Collateral
on such premises until sold (and if the premises are owned or leased by a
Borrower, Borrowers agree not to charge for such storage); and (iv) sell or
otherwise dispose of any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale, with such notice
as may be required by Applicable Law, in lots or in bulk, at such locations, all
as Agent, in its discretion, deems advisable. Each Borrower agrees that 10 days
notice of any proposed sale or other disposition of Collateral by Agent shall be
reasonable. Agent shall have the right to conduct such sales on any Obligor’s
premises, without charge, and such sales may be adjourned from time to time in
accordance with Applicable Law. Agent shall have the right to sell, lease or
otherwise dispose of any Collateral for cash, credit or any combination thereof,
and Agent may purchase any Collateral at public or, if permitted by law, private
sale and, in lieu of actual payment of the purchase price, may credit bid and
set off the amount of such price against the Obligations.

11.3. License. Agent is hereby granted an irrevocable, non-exclusive license or
other right to use, license or sub-license (without payment of royalty or other
compensation to any Person) any or all Intellectual Property of Borrowers,
computer hardware and software, trade secrets, brochures, customer lists,
promotional and advertising materials, labels, packaging materials and other
Property, in advertising for sale, marketing, selling, collecting, completing
manufacture of, or otherwise exercising any rights or remedies with respect to,
any Collateral. Each Borrower’s rights and interests under Intellectual Property
shall inure to Agent’s benefit.

11.4. Setoff. At any time during an Event of Default, Agent, Issuing Bank,
Lenders, and any of their Affiliates are authorized, to the fullest extent
permitted by Applicable Law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final, in whatever currency) at any
time held and other obligations (in whatever currency) at any time owing by
Agent, Issuing Bank, such Lender or such Affiliate to or for the credit or the
account of an Obligor against any Obligations, irrespective of whether or not
Agent, Issuing Bank, such Lender or such Affiliate shall have made any demand
under this Agreement or any other Loan Document and although such Obligations
may be contingent or unmatured or are owed to a branch or office of Agent,
Issuing Bank, such Lender or such Affiliate different from the branch or office
holding such deposit or obligated on such indebtedness. The rights of Agent,
Issuing Bank, each Lender and each such Affiliate under this Section are in
addition to other rights and remedies (including other rights of setoff) that
such Person may have.

11.5. Remedies Cumulative; No Waiver.

11.5.1. Cumulative Rights. All agreements, warranties, guaranties, indemnities
and other undertakings of Borrowers under the Loan Documents are cumulative and
not in derogation of each other. The rights and remedies of Agent and Lenders
are cumulative, may be exercised at any time and from time to time, concurrently
or in any order, and are not exclusive of any other rights or remedies available
by agreement, by law, at equity or otherwise. All such rights and remedies shall
continue in full force and effect until Full Payment of all Obligations.

11.5.2. Waivers. No waiver or course of dealing shall be established by (a) the
failure or delay of Agent or any Lender to require strict performance by
Borrowers with any terms of the Loan Documents, or to exercise any rights or
remedies with respect to Collateral or otherwise; (b) the making of any Loan or
issuance of any Letter of Credit during a Default, Event of Default or other
failure to satisfy any conditions precedent; or (c) acceptance by Agent or any
Lender of any payment or performance by an Obligor under any Loan Documents in a
manner other than that specified therein. It is expressly acknowledged by
Borrowers that any failure to satisfy a financial covenant on a measurement date
shall not be cured or remedied by satisfaction of such covenant on a subsequent
date.

 

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SECTION 12. AGENT

12.1. Appointment, Authority and Duties of Agent.

12.1.1. Appointment and Authority. Each Secured Party appoints and designates
Bank of America as Agent under all Loan Documents. Agent may, and each Secured
Party authorizes Agent to, enter into all Loan Documents to which Agent is
intended to be a party and accept all Security Documents, for the benefit of
Secured Parties. Each Secured Party agrees that any action taken by Agent or
Required Lenders in accordance with the provisions of the Loan Documents, and
the exercise by Agent or Required Lenders of any rights or remedies set forth
therein, together with all other powers reasonably incidental thereto, shall be
authorized by and binding upon all Secured Parties. Without limiting the
generality of the foregoing, Agent shall have the sole and exclusive authority
to (a) act as the disbursing and collecting agent for Lenders with respect to
all payments and collections arising in connection with the Loan Documents;
(b) execute and deliver as Agent each Loan Document, including any intercreditor
or subordination agreement, and accept delivery of each Loan Document from any
Obligor or other Person; (c) act as collateral agent for Secured Parties for
purposes of perfecting and administering Liens under the Loan Documents, and for
all other purposes stated therein; (d) manage, supervise or otherwise deal with
Collateral; and (e) take any Enforcement Action or otherwise exercise any rights
or remedies with respect to any Collateral under the Loan Documents, Applicable
Law or otherwise. The duties of Agent shall be ministerial and administrative in
nature, and Agent shall not have a fiduciary relationship with any Secured
Party, Participant or other Person, by reason of any Loan Document or any
transaction relating thereto. Agent alone shall be authorized to determine
whether any Accounts or Inventory constitute Eligible Accounts or Eligible
Inventory, whether to impose or release any reserve, or whether any conditions
to funding or to issuance of a Letter of Credit have been satisfied, which
determinations and judgments, if exercised in good faith, shall exonerate Agent
from liability to any Lender or other Person for any error in judgment.

12.1.2. Duties. Agent shall not have any duties except those expressly set forth
in the Loan Documents. The conferral upon Agent of any right shall not imply a
duty to exercise such right, unless instructed to do so by Required Lenders in
accordance with this Agreement.

12.1.3. Agent Professionals. Agent may perform its duties through agents and
employees. Agent may consult with and employ Agent Professionals, and shall be
entitled to act upon, and shall be fully protected in any action taken in good
faith reliance upon, any advice given by an Agent Professional. Agent shall not
be responsible for the negligence or misconduct of any agents, employees or
Agent Professionals selected by it with reasonable care.

12.1.4. Instructions of Required Lenders. The rights and remedies conferred upon
Agent under the Loan Documents may be exercised without the necessity of joinder
of any other party, unless required by Applicable Law. Agent may request
instructions from Required Lenders or other Secured Parties with respect to any
act (including the failure to act) in connection with any Loan Documents, and
may seek assurances to its satisfaction from Secured Parties of their
indemnification obligations against all Claims that could be incurred by Agent
in connection with any act. Agent shall be entitled to refrain from any act
until it has received such instructions or assurances, and Agent shall not incur
liability to any Person by reason of so refraining. Instructions of Required
Lenders shall be binding upon all Secured Parties, and no Secured Party shall
have any right of action whatsoever against Agent as a result of Agent acting or
refraining from acting in accordance with the instructions of Required Lenders.
Notwithstanding the foregoing, instructions by and consent of specific Lenders
or Secured Parties shall be required to the extent provided in Section 14.1.1.
In no event shall Agent be required to take any action that, in its opinion, is
contrary to Applicable Law or any Loan Documents or could subject any Agent
Indemnitee to personal liability.

 

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12.2. Agreements Regarding Collateral and Field Examination Reports.

12.2.1. Lien Releases; Care of Collateral. Secured Parties authorize Agent to
release any Lien with respect to any Collateral (a) upon Full Payment of the
Obligations; (b) that is the subject of an Asset Disposition which Borrowers
certify in writing to Agent is a Permitted Asset Disposition or a Lien which
Borrowers certify is a Permitted Lien entitled to priority over Agent’s Liens
(and Agent may rely conclusively on any such certificate without further
inquiry); (c) that does not constitute a material part of the Collateral; or
(d) with the written consent of all Lenders. Secured Parties authorize Agent to
subordinate its Liens to any Purchase Money Lien permitted hereunder. Agent
shall have no obligation to assure that any Collateral exists or is owned by a
Borrower, or is cared for, protected or insured, nor to assure that Agent’s
Liens have been properly created, perfected or enforced, or are entitled to any
particular priority, nor to exercise any duty of care with respect to any
Collateral.

12.2.2. Possession of Collateral. Agent and Secured Parties appoint each Lender
as agent (for the benefit of Secured Parties) for the purpose of perfecting
Liens in any Collateral held or controlled by such Lender, to the extent such
Liens are perfected by possession or control. If any Lender obtains possession
or control of any Collateral, it shall notify Agent thereof and, promptly upon
Agent’s request, deliver such Collateral to Agent or otherwise deal with it in
accordance with Agent’s instructions.

12.2.3. Reports. Agent shall promptly forward to each Lender, when complete,
copies of any field audit, examination or appraisal report prepared by or for
Agent with respect to any Obligor or Collateral (“Report”). Each Lender agrees
(a) that neither Bank of America nor Agent makes any representation or warranty
as to the accuracy or completeness of any Report, and shall not be liable for
any information contained in or omitted from any Report; (b) that the Reports
are not intended to be comprehensive audits or examinations, and that Agent or
any other Person performing any audit or examination will inspect only specific
information regarding Obligations or the Collateral and will rely significantly
upon Borrowers’ books and records as well as upon representations of Borrowers’
officers and employees; and (c) to keep all Reports confidential and strictly
for such Lender’s internal use, and not to distribute any Report (or the
contents thereof) to any Person (except to such Lender’s Participants, attorneys
and accountants) or use any Report in any manner other than administration of
the Loans and other Obligations. Each Lender shall indemnify and hold harmless
Agent and any other Person preparing a Report from any action such Lender may
take as a result of or any conclusion it may draw from any Report, as well as
from any Claims arising as a direct or indirect result of Agent furnishing a
Report to such Lender.

12.3. Reliance By Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any certification, notice or other communication
(including those by telephone, telex, telegram, telecopy or e-mail) believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person, and upon the advice and statements of Agent Professionals. Agent shall
have a reasonable and practicable amount of time to act upon any instruction,
notice or other communication under any Loan Document, and shall not be liable
for any such delay in acting.

12.4. Action Upon Default. Agent shall not be deemed to have knowledge of any
Default or Event of Default, or of any failure to satisfy any conditions in
Section 6, unless it has received written notice from a Borrower or Required
Lenders specifying the occurrence and nature thereof. If any Lender acquires
knowledge of a Default, Event of Default or failure of such conditions, it shall
promptly notify Agent and the other Lenders thereof in writing. Each Secured
Party agrees that, except as otherwise provided in any Loan Documents or with
the written consent of Agent and Required Lenders, it will not take any
Enforcement Action, accelerate Obligations (other than Secured Bank Product
Obligations), or exercise any right that it might otherwise have under
Applicable Law to credit bid at foreclosure sales, UCC sales or other similar
dispositions of Collateral or to assert any rights relating to any Collateral.

12.5. Ratable Sharing. If any Lender shall obtain any payment or reduction of
any Obligation, whether through set-off or otherwise, in excess of its share of
such Obligation, determined on a Pro Rata basis or in accordance with
Section 5.6.1, as applicable, such Lender shall forthwith purchase from Agent,
Issuing Bank and the other Lenders such participations in the affected
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necessary to cause the purchasing Lender to share the excess payment or
reduction on a Pro Rata basis or in accordance with Section 5.6.1, as
applicable. If any of such payment or reduction is thereafter recovered from the
purchasing Lender, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest. Notwithstanding
the foregoing, if a Defaulting Lender obtains a payment or reduction of any
Obligation, it shall immediately turn over the amount thereof to Agent for
application under Section 4.2.2 and it shall provide a written statement to
Agent describing the Obligation affected by such payment or reduction. No Lender
shall set off against any Dominion Account without the prior consent of Agent.

12.6. Indemnification. EACH LENDER SHALL INDEMNIFY AND HOLD HARMLESS AGENT
INDEMNITEES AND ISSUING BANK INDEMNITEES, TO THE EXTENT NOT REIMBURSED BY
OBLIGORS, ON A PRO RATA BASIS, AGAINST ALL CLAIMS THAT MAY BE INCURRED BY OR
ASSERTED AGAINST ANY SUCH INDEMNITEE, PROVIDED THAT ANY CLAIM AGAINST AN AGENT
INDEMNITEE RELATES TO OR ARISES FROM ITS ACTING AS OR FOR AGENT (IN THE CAPACITY
OF AGENT). In Agent’s discretion, it may reserve for any Claims made against an
Agent Indemnitee or Issuing Bank Indemnitee, and may satisfy any judgment, order
or settlement relating thereto, from proceeds of Collateral prior to making any
distribution of Collateral proceeds to Secured Parties. If Agent is sued by any
receiver, bankruptcy trustee, debtor-in-possession or other Person for any
alleged preference or fraudulent transfer, then any monies paid by Agent in
settlement or satisfaction of such proceeding, together with all interest, costs
and expenses (including attorneys’ fees) incurred in the defense of same, shall
be promptly reimbursed to Agent by each Lender to the extent of its Pro Rata
share. In no event shall any Lender have any obligation hereunder to indemnify
or hold harmless an Agent Indemnitee with respect to a Claim that is determined
in a final, non-appealable judgment by a court of competent jurisdiction to
result from the gross negligence or willful misconduct of such Agent Indemnitee.

12.7. Limitation on Responsibilities of Agent. Agent shall not be liable to any
Secured Party for any action taken or omitted to be taken under the Loan
Documents, except for losses directly and solely caused by Agent’s gross
negligence or willful misconduct. Agent does not assume any responsibility for
any failure or delay in performance or any breach by any Obligor, Lender or
other Secured Party of any obligations under the Loan Documents. Agent does not
make any express or implied representation, warranty or guarantee to Secured
Parties with respect to any Obligations, Collateral, Loan Documents or Obligor.
No Agent Indemnitee shall be responsible to Secured Parties for any recitals,
statements, information, representations or warranties contained in any Loan
Documents; the execution, validity, genuineness, effectiveness or enforceability
of any Loan Documents; the genuineness, enforceability, collectibility, value,
sufficiency, location or existence of any Collateral, or the validity, extent,
perfection or priority of any Lien therein; the validity, enforceability or
collectibility of any Obligations; or the assets, liabilities, financial
condition, results of operations, business, creditworthiness or legal status of
any Obligor or Account Debtor. No Agent Indemnitee shall have any obligation to
any Secured Party to ascertain or inquire into the existence of any Default or
Event of Default, the observance by any Obligor of any terms of the Loan
Documents, or the satisfaction of any conditions precedent contained in any Loan
Documents.

12.8. Successor Agent and Co-Agents.

12.8.1. Resignation; Successor Agent. Subject to the appointment and acceptance
of a successor Agent as provided below, Agent may resign at any time by giving
at least 30 days written notice thereof to Lenders and Borrowers. Upon receipt
of such notice, Required Lenders shall have the right to appoint a successor
Agent which shall be (a) a Lender or an Affiliate of a Lender; or (b) a
commercial bank that is organized under the laws of the United States or any
state or district thereof, has a combined capital surplus of at least
$200,000,000 and (provided no Default or Event of Default exists) is reasonably
acceptable to Borrowers. If no successor agent is appointed prior to the
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resignation of Agent, then Agent may appoint a successor agent from among
Lenders or, if no Lender accepts such role, Agent may appoint Required Lenders
as successor Agent. Upon acceptance by a successor Agent of an appointment to
serve as Agent hereunder, or upon appointment of Required Lenders as successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the powers and duties of the retiring Agent without further act, and the
retiring Agent shall be discharged from its duties and obligations hereunder but
shall continue to have the benefits of the indemnification set forth in Sections
12.6 and 14.2. Notwithstanding any Agent’s resignation, the provisions of this
Section 12 shall continue in effect for its benefit with respect to any actions
taken or omitted to be taken by it while Agent. Any successor to Bank of America
by merger or acquisition of stock or this loan shall continue to be Agent
hereunder without further act on the part of the parties hereto, unless such
successor resigns as provided above.

12.8.2. Separate Collateral Agent. It is the intent of the parties that there
shall be no violation of any Applicable Law denying or restricting the right of
financial institutions to transact business in any jurisdiction. If Agent
believes that it may be limited in the exercise of any rights or remedies under
the Loan Documents due to any Applicable Law, Agent may appoint an additional
Person who is not so limited, as a separate collateral agent or co-collateral
agent. If Agent so appoints a collateral agent or co-collateral agent, each
right and remedy intended to be available to Agent under the Loan Documents
shall also be vested in such separate agent. Secured Parties shall execute and
deliver such documents as Agent deems appropriate to vest any rights or remedies
in such agent. If any collateral agent or co-collateral agent shall die or
dissolve, become incapable of acting, resign or be removed, then all the rights
and remedies of such agent, to the extent permitted by Applicable Law, shall
vest in and be exercised by Agent until appointment of a new agent.

12.9. Due Diligence and Non-Reliance. Each Lender acknowledges and agrees that
it has, independently and without reliance upon Agent or any other Lenders, and
based upon such documents, information and analyses as it has deemed
appropriate, made its own credit analysis of each Obligor and its own decision
to enter into this Agreement and to fund Loans and participate in LC Obligations
hereunder. Each Secured Party has made such inquiries as it feels necessary
concerning the Loan Documents, Collateral and Obligors. Each Secured Party
acknowledges and agrees that the other Secured Parties have made no
representations or warranties concerning any Obligor, any Collateral or the
legality, validity, sufficiency or enforceability of any Loan Documents or
Obligations. Each Secured Party will, independently and without reliance upon
any other Secured Party, and based upon such financial statements, documents and
information as it deems appropriate at the time, continue to make and rely upon
its own credit decisions in making Loans and participating in LC Obligations,
and in taking or refraining from any action under any Loan Documents. Except for
notices, reports and other information expressly requested by a Lender, Agent
shall have no duty or responsibility to provide any Secured Party with any
notices, reports or certificates furnished to Agent by any Obligor or any credit
or other information concerning the affairs, financial condition, business or
Properties of any Obligor (or any of its Affiliates) which may come into
possession of Agent or its Affiliates.

12.10. Remittance of Payments and Collections.

12.10.1. Remittances Generally. All payments by any Lender to Agent shall be
made by the time and on the day set forth in this Agreement, in immediately
available funds. If no time for payment is specified or if payment is due on
demand by Agent and request for payment is made by Agent by 11:00 a.m. on a
Business Day, payment shall be made by Lender not later than 2:00 p.m. on such
day, and if request is made after 11:00 a.m., then payment shall be made by
11:00 a.m. on the next Business Day. Payment by Agent to any Secured Party shall
be made by wire transfer, in the type of funds received by Agent. Any such
payment shall be subject to Agent’s right of offset for any amounts due from
such payee under the Loan Documents.

 

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12.10.2. Failure to Pay. If any Secured Party fails to pay any amount when due
by it to Agent pursuant to the terms hereof, such amount shall bear interest
from the due date until paid at the rate determined by Agent as customary in the
banking industry for interbank compensation. In no event shall Borrowers be
entitled to receive credit for any interest paid by a Secured Party to Agent,
nor shall any Defaulting Lender be entitled to interest on any amounts held by
Agent pursuant to Section 4.2.

12.10.3. Recovery of Payments. If Agent pays any amount to a Secured Party in
the expectation that a related payment will be received by Agent from an Obligor
and such related payment is not received, then Agent may recover such amount
from each Secured Party that received it. If Agent determines at any time that
an amount received under any Loan Document must be returned to an Obligor or
paid to any other Person pursuant to Applicable Law or otherwise, then,
notwithstanding any other term of any Loan Document, Agent shall not be required
to distribute such amount to any Lender. If any amounts received and applied by
Agent to any Obligations are later required to be returned by Agent pursuant to
Applicable Law, each Lender shall pay to Agent, on demand, such Lender’s Pro
Rata share of the amounts required to be returned.

12.11. Agent in its Individual Capacity. As a Lender, Bank of America shall have
the same rights and remedies under the other Loan Documents as any other Lender,
and the terms “Lenders,” “Required Lenders” or any similar term shall include
Bank of America in its capacity as a Lender. Bank of America and its Affiliates
may accept deposits from, lend money to, provide Bank Products to, act as
financial or other advisor to, and generally engage in any kind of business
with, Obligors and their Affiliates, as if Bank of America were not Agent
hereunder, without any duty to account therefore to Lenders. In their individual
capacities, Bank of America and its Affiliates may receive information regarding
Obligors, their Affiliates and their Account Debtors (including information
subject to confidentiality obligations), and each Secured Party agrees that Bank
of America and its Affiliates shall be under no obligation to provide such
information to any Secured Party, if acquired in such individual capacity.

12.12. Agent Titles. Each Lender, other than Bank of America, that is designated
(on the cover page of this Agreement or otherwise) by Bank of America as an
“Agent” or “Arranger” of any type shall not have any right, power,
responsibility or duty under any Loan Documents other than those applicable to
all Lenders, and shall in no event be deemed to have any fiduciary relationship
with any other Lender.

12.13. Bank Product Providers. Each Secured Bank Product Provider, by delivery
of a notice to Agent of a Bank Product, agrees to be bound by Section 5.6 and
this Section 12. Each Secured Bank Product Provider shall indemnify and hold
harmless Agent Indemnitees, to the extent not reimbursed by Obligors, against
all Claims that may be incurred by or asserted against any Agent Indemnitee in
connection with such provider’s Secured Bank Product Obligations.

12.14. No Third Party Beneficiaries. This Section 12 is an agreement solely
among Secured Parties and Agent, and shall survive Full Payment of the
Obligations. This Section 12 does not confer any rights or benefits upon
Borrowers or any other Person. As between Borrowers and Agent, any action that
Agent may take under any Loan Documents or with respect to any Obligations shall
be conclusively presumed to have been authorized and directed by Secured
Parties.

SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS

13.1. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of Borrowers, Agent, Lenders, Secured Parties, and their respective
successors and assigns, except that (a) no Borrower shall have the right to
assign its rights or delegate its obligations under any Loan Documents; and
(b) any assignment by a Lender must be made in compliance with Section 13.3.
Agent may treat the Person which made any Loan as the owner thereof for all
purposes until such Person makes an assignment in accordance with Section 13.3.
Any authorization or consent of a Lender shall be conclusive and binding on any
subsequent transferee or assignee of such Lender.

 

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13.2. Participations.

13.2.1. Permitted Participants; Effect. Any Lender may, in the ordinary course
of its business and in accordance with Applicable Law, at any time sell to a
financial institution other than a Defaulting Lender (“Participant”) a
participating interest in the rights and obligations of such Lender under any
Loan Documents. Despite any sale by a Lender of participating interests to a
Participant, such Lender’s obligations under the Loan Documents shall remain
unchanged, such Lender shall remain solely responsible to the other parties
hereto for performance of such obligations, such Lender shall remain the holder
of its Loans and Commitments for all purposes, all amounts payable by Borrowers
shall be determined as if such Lender had not sold such participating interests,
and Borrowers and Agent shall continue to deal solely and directly with such
Lender in connection with the Loan Documents. Each Lender shall be solely
responsible for notifying its Participants of any matters under the Loan
Documents, and Agent and the other Lenders shall not have any obligation or
liability to any such Participant. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 5.9 unless
Borrowers agree otherwise in writing.

13.2.2. Voting Rights. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, waiver or other
modification of any Loan Documents other than that which forgives principal,
interest or fees, reduces the stated interest rate or fees payable with respect
to any Loan or Commitment in which such Participant has an interest, postpones
the Commitment Termination Date or any date fixed for any regularly scheduled
payment of principal, interest or fees on such Loan or Commitment, or releases
any Borrower, Guarantor or substantial portion of the Collateral.

13.2.3. Benefit of Set-Off. Borrowers agree that each Participant shall have a
right of set-off in respect of its participating interest to the same extent as
if such interest were owing directly to a Lender, and each Lender shall also
retain the right of set-off with respect to any participating interests sold by
it. By exercising any right of set-off, a Participant agrees to share with
Lenders all amounts received through its set-off, in accordance with
Section 12.5 as if such Participant were a Lender.

13.3. Assignments.

13.3.1. Permitted Assignments. A Lender may assign to an Eligible Assignee any
of its rights and obligations under the Loan Documents, as long as (a) each
assignment is of a constant, and not a varying, percentage of the transferor
Lender’s rights and obligations under the Loan Documents and, in the case of a
partial assignment, is in a minimum principal amount of $5,000,000 (unless
otherwise agreed by Agent in its discretion) and integral multiples of
$1,000,000 in excess of that amount; (b) except in the case of an assignment in
whole of a Lender’s rights and obligations, the aggregate amount of the
Commitments retained by the transferor Lender is at least $5,000,000 (unless
otherwise agreed by Agent in its discretion); and (c) the parties to each such
assignment shall execute and deliver to Agent, for its acceptance and recording,
an Assignment and Acceptance. Nothing herein shall limit the right of a Lender
to pledge or assign any rights under the Loan Documents to (i) any Federal
Reserve Bank or the United States Treasury as collateral security pursuant to
Regulation A of the Board of Governors and any Operating Circular issued by such
Federal Reserve Bank, or (ii) counterparties to swap agreements relating to any
Loans; provided, however, that any payment by Borrowers to the assigning Lender
in respect of any Obligations assigned as described in this sentence shall
satisfy Borrowers’ obligations hereunder to the extent of such payment, and no
such assignment shall release the assigning Lender from its obligations
hereunder.

13.3.2. Effect; Effective Date. Upon delivery to Agent of an assignment notice
in the form of Exhibit C and a processing fee of $3,500 (unless otherwise agreed
by Agent in its discretion), the assignment shall become effective as specified
in the notice, if it complies with this Section 13.3. From such effective date,
the Eligible Assignee shall for all purposes be a Lender under the Loan

 

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Documents, and shall have all rights and obligations of a Lender thereunder.
Upon consummation of an assignment, the transferor Lender, Agent and Borrowers
shall make appropriate arrangements for issuance of replacement and/or new
Notes, as applicable. The transferee Lender shall comply with Section 5.10 and
deliver, upon request, an administrative questionnaire satisfactory to Agent.

13.3.3. Certain Assignees. No assignment may be made to a Borrower, Affiliate of
a Borrower, Defaulting Lender or natural person. In connection with any
assignment by a Defaulting Lender, such assignment shall only be effective upon
payment by the Eligible Assignee or Defaulting Lender to Agent of an aggregate
amount sufficient, upon distribution (through direct payment, purchases of
participations or subparticipations, or other compensating actions as Agent
deems appropriate), (a) to satisfy all funding and payment liabilities then
owing by the Defaulting Lender hereunder, and (b) to acquire its Pro Rata share
of all Loans and LC Obligations. If an assignment by a Defaulting Lender shall
become effective under Applicable Law for any reason without compliance with the
foregoing sentence, then the assignee shall be deemed a Defaulting Lender for
all purposes until such compliance occurs.

13.4. Replacement of Certain Lenders. If a Lender (a) fails to give its consent
to any amendment, waiver or action for which consent of all Lenders was required
and Required Lenders consented, or (b) is a Defaulting Lender, then, in addition
to any other rights and remedies that any Person may have, Agent or Borrower
Agent may, by notice to such Lender within 120 days after such event, require
such Lender to assign all of its rights and obligations under the Loan Documents
to Eligible Assignee(s), pursuant to appropriate Assignment and Acceptance(s),
within 20 days after the notice. Agent is irrevocably appointed as
attorney-in-fact to execute any such Assignment and Acceptance if the Lender
fails to execute it. Such Lender shall be entitled to receive, in cash,
concurrently with such assignment, all amounts owed to it under the Loan
Documents, including all principal, interest and fees through the date of
assignment (but excluding any prepayment charge).

SECTION 14. MISCELLANEOUS

14.1. Consents, Amendments and Waivers.

14.1.1. Amendment. No modification of any Loan Document, including any extension
or amendment of a Loan Document or any waiver of a Default or Event of Default,
shall be effective without the prior written agreement of Agent (with the
consent of Required Lenders) and each Obligor party to such Loan Document;
provided, however, that

(a) without the prior written consent of Agent, no modification shall be
effective with respect to any provision in a Loan Document that relates to any
rights, duties or discretion of Agent;

(b) without the prior written consent of Issuing Bank, no modification shall be
effective with respect to any LC Obligations, Section 2.3 or any other provision
in a Loan Document that relates to any rights, duties or discretion of Issuing
Bank;

(c) without the prior written consent of each affected Lender, including a
Defaulting Lender, no modification shall be effective that would (i) increase
the Commitment of such Lender; (ii) reduce the amount of, or waive or delay
payment of, any principal, interest or fees payable to such Lender (except as
provided in Section 4.2); (iii) extend the Revolver Termination Date applicable
to such Lender’s Obligations; or (iv) amend this clause (c);

(d) without the prior written consent of all Lenders (except any Defaulting
Lender), no modification shall be effective that would (i) alter Section 5.6, 71
(except to add Collateral) or 14.1.1; (ii) amend the definition of Pro Rata or
Required Lenders; (iii) increase any advance rate or decrease the Availability
Block; (iv) release Collateral with a book value greater than $5,000,000 during
any calendar year, except as currently contemplated by the Loan Documents; or
(v) release any Obligor from liability for any Obligations, if such Obligor is
Solvent at the time of the release; and

 

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(e) without the prior written consent of a Secured Bank Product Provider, no
modification shall be effective that affects its relative payment priority under
Section 5.6.

14.1.2. Limitations. The agreement of Borrowers shall not be necessary to the
effectiveness of any modification of a Loan Document that deals solely with the
rights and duties of Lenders, Agent and/or Issuing Bank as among themselves.
Only the consent of the parties to the Fee Letter or any agreement relating to a
Bank Product shall be required for any modification of such agreement, and any
non-Lender that is party to a Bank Product agreement shall have no right to
participate in any manner in modification of any other Loan Document. Any waiver
or consent granted by Agent or Lenders hereunder shall be effective only if in
writing and only for the matter specified.

14.1.3. Payment for Consents. No Borrower will, directly or indirectly, pay any
remuneration or other thing of value, whether by way of additional interest, fee
or otherwise, to any Lender (in its capacity as a Lender hereunder) as
consideration for agreement by such Lender with any modification of any Loan
Documents, unless such remuneration or value is concurrently paid, on the same
terms, on a Pro Rata basis to all Lenders providing their consent.

14.2. Indemnity. EACH BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES
AGAINST ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE,
INCLUDING CLAIMS ASSERTED BY ANY OBLIGOR OR OTHER PERSON OR ARISING FROM THE
NEGLIGENCE OF AN INDEMNITEE. In no event shall any party to a Loan Document have
any obligation thereunder to indemnify or hold harmless an lndemnitee with
respect to a Claim that is determined in a final, non-appealable judgment by a
court of competent jurisdiction to result from the gross negligence or willful
misconduct of such Indemnitee.

14.3. Notices and Communications.

14.3.1. Notice Address. Subject to Section 4.1.4, all notices and other
communications by or to a party hereto shall be in writing and shall be given to
any Borrower, at Borrower Agent’s address shown on the signature pages hereof,
and to any other Person at its address shown on the signature pages hereof (or,
in the case of a Person who becomes a Lender after the Closing Date, at the
address shown on its Assignment and Acceptance), or at such other address as a
party may hereafter specify by notice in accordance with this Section 14.3. Each
such notice or other communication shall be effective only (a) if given by
facsimile transmission, when transmitted to the applicable facsimile number, if
confirmation of receipt is received; (b) if given by mail, three Business Days
after deposit in the U.S. mail, with first-class postage pre-paid, addressed to
the applicable address; or (c) if given by personal delivery, when duly
delivered to the notice address with receipt acknowledged. Notwithstanding the
foregoing, no notice to Agent pursuant to Section 2.1.4, 2.3, 3.1.2, 4.1.1 or
5.3.3 shall be effective until actually received by the individual to whose
attention at Agent such notice is required to be sent. Any written notice or
other communication that is not sent in conformity with the foregoing provisions
shall nevertheless be effective on the date actually received by the noticed
party. Any notice received by Borrower Agent shall be deemed received by all
Borrowers.

14.3.2. Electronic Communications; Voice Mail. Electronic mail and internet
websites may be used only for routine communications, such as financial
statements, Borrowing Base Certificates and other information required by
Section 10.1.2, administrative matters, distribution of Loan Documents, and
matters permitted under Section 4.1.4. Agent and Lenders make no assurances as
to the privacy and security of electronic communications. Electronic and voice
mail may not be used as effective notice under the Loan Documents.

 

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14.3.3. Non-Conforming Communications. Agent and Lenders may rely upon any
notices purportedly given by or on behalf of any Borrower even if such notices
were not made in a manner specified herein, were incomplete or were not
confirmed, or if the terms thereof, as understood by the recipient, varied from
a later confirmation. Each Borrower shall indemnify and hold harmless each
Indemnitee from any liabilities, losses, costs and expenses arising from any
telephonic communication purportedly given by or on behalf of a Borrower.

14.4. Performance of Borrowers’ Obligations. Agent may, in its discretion at any
time and from time to time, at Borrowers’ expense, pay any amount or do any act
required of a Borrower under any Loan Documents or otherwise lawfully requested
by Agent to (a) enforce any Loan Documents or collect any Obligations;
(b) protect, insure, maintain or realize upon any Collateral; or (c) defend or
maintain the validity or priority of Agent’s Liens in any Collateral, including
any payment of a judgment, insurance premium, warehouse charge, finishing or
processing charge, or landlord claim, or any discharge of a Lien. All payments,
costs and expenses (including Extraordinary Expenses) of Agent under this
Section shall be reimbursed to Agent by Borrowers, on demand, with interest from
the date incurred to the date of payment thereof at the Default Rate applicable
to Base Rate Revolver Loans. Any payment made or action taken by Agent under
this Section shall be without prejudice to any right to assert an Event of
Default or to exercise any other rights or remedies under the Loan Documents.

14.5. Credit Inquiries. Each Borrower hereby authorizes Agent and Lenders (but
they shall have no obligation) to respond to usual and customary credit
inquiries from third parties concerning any Borrower or Subsidiary.

14.6. Severability. Wherever possible, each provision of the Loan Documents
shall be interpreted in such manner as to be valid under Applicable Law. If any
provision is found to be invalid under Applicable Law, it shall be ineffective
only to the extent of such invalidity and the remaining provisions of the Loan
Documents shall remain in full force and effect.

14.7. Cumulative Effect; Conflict of Terms. The provisions of the Loan Documents
are cumulative. The parties acknowledge that the Loan Documents may use several
limitations, tests or measurements to regulate similar matters, and they agree
that these are cumulative and that each must be performed as provided. Except as
otherwise provided in another Loan Document (by specific reference to the
applicable provision of this Agreement), if any provision contained herein is in
direct conflict with any provision in another Loan Document, the provision
herein shall govern and control.

14.8. Counterparts. Any Loan Document may be executed in any number of
counterparts and by different parties in separate counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Agreement shall become effective when Agent
has received counterparts bearing the signatures of all parties hereto. Delivery
of a signature page of any Loan Document by telecopy, facsimile or other
electronic transmission (including PDF) shall be effective as delivery of a
manually executed counterpart of such agreement.

14.9. Entire Agreement. Time is of the essence of the Loan Documents. The Loan
Documents constitute the entire contract among the parties relating to the
subject matter hereof, and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.

14.10. Relationship with Lenders. The obligations of each Lender hereunder are
several, and no Lender shall be responsible for the obligations or Commitments
of any other Lender. Amounts payable hereunder to each Lender shall be a
separate and independent debt. It shall not be necessary for Agent or any other
Lender to be joined as an additional party in any proceeding for such purposes.
Nothing in this Agreement and no action of Agent, Lenders or any other Secured
Party pursuant to the Loan Documents or otherwise shall be deemed to constitute
Agent and any Secured Party to be a partnership, association, joint venture or
any other kind of entity, nor to constitute control of any Borrower.

 

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14.11. No Advisory or Fiduciary Responsibility. In connection with all aspects
of each transaction contemplated by any Loan Document, Borrowers acknowledge and
agree that (a)(i) this credit facility and any related arranging or other
services by Agent, any Lender, any of their Affiliates or any arranger are
arm’s-length commercial transactions between Borrowers and such Person;
(ii) Borrowers have consulted their own legal, accounting, regulatory and tax
advisors to the extent they have deemed appropriate; and (iii) Borrowers are
capable of evaluating, and understand and accept, the terms, risks and
conditions of the transactions contemplated by the Loan Documents; (b) each of
Agent, Lenders, their Affiliates and any arranger is and has been acting solely
as a principal and, except as expressly agreed in writing by the relevant
parties, has not been, is not, and will not be acting as an advisor, agent or
fiduciary for Borrowers, any of their Affiliates or any other Person, and has no
obligation with respect to the transactions contemplated by the Loan Documents
except as expressly set forth therein; and (c) Agent, Lenders, their Affiliates
and any arranger may be engaged in a broad range of transactions that involve
interests that differ from those of Borrowers and their Affiliates, and have no
obligation to disclose any of such interests to Borrowers or their Affiliates.
To the fullest extent permitted by Applicable Law, each Borrower hereby waives
and releases any claims that it may have against Agent, Lenders, their
Affiliates and any arranger with respect to any breach of agency or fiduciary
duty in connection with any transaction contemplated by a Loan Document.

14.12. Confidentiality. Each of Agent, Lenders and Issuing Bank shall maintain
the confidentiality of all Information (as defined below), except that
Information may be disclosed (a) to its Affiliates, and to its and their
partners, directors, officers, employees, agents, advisors and representatives
(provided such Persons are informed of the confidential nature of the
Information and instructed to keep it confidential); (b) to the extent requested
by any governmental, regulatory or self-regulatory authority purporting to have
jurisdiction over it or its Affiliates; (c) to the extent required by Applicable
Law or by any subpoena or other legal process; (d) to any other party hereto;
(e) in connection with any action or proceeding, or other exercise of rights or
remedies, relating to any Loan Documents or Obligations; (f) subject to an
agreement containing provisions substantially the same as this Section, to any
Transferee or any actual or prospective party (or its advisors) to any Bank
Product; (g) with the consent of Borrower Agent; or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) is available to Agent, any Lender, Issuing Bank or any of
their Affiliates on a nonconfidential basis from a source other than Borrowers.
Notwithstanding the foregoing, Agent and Lenders may publish or disseminate
general information describing this credit facility, including the names and
addresses of Borrowers and a general description of Borrowers’ businesses, and
may use Borrowers’ logos, trademarks or product photographs in advertising
materials. As used herein, “Information” means all information received from an
Obligor or Subsidiary relating to it or its business that is identified as
confidential when delivered. Any Person required to maintain the confidentiality
of Information pursuant to this Section shall be deemed to have complied if it
exercises the same degree of care that it accords its own confidential
information. Each of Agent, Lenders and Issuing Bank acknowledges that
(i) Information may include material non-public information concerning an
Obligor or Subsidiary; (ii) it has developed compliance procedures regarding the
use of material non-public information; and (iii) it will handle such material
non-public information in accordance with Applicable Law, including federal and
state securities laws.

14.13. Certifications and Representations Regarding Indentures. Borrowers
certify and represent to Agent and Lenders that neither the execution or
performance of the Loan Documents nor the incurrence of any Obligations by
Borrowers violates the Senior Second Lien Note Indenture, including Section 4.9
thereof, or any other Senior Second Lien Note Document. Borrowers further
certify and represent that the Commitments and Obligations constitute and at all
times while outstanding will remain “Permitted Debt” under the Senior Second
Lien Note Indenture and that Borrowers have not taken any action that would
cause their incurrence of the Obligations to violate the Senior Second Lien Note

 

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indenture. Agent may condition Borrowings, Letters of Credit and other credit
accommodations under the Loan Documents from time to time upon Agent’s receipt
of evidence that the Commitments and Obligations continue to constitute
“Permitted Debt” at such time.

14.14. GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, UNLESS
OTHERWISE SPECIFIED, SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES (BUT
GIVING EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).

14.15. Consent to Forum.

14.15.1. Forum. EACH BORROWER HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION
OF ANY FEDERAL OR STATE COURT SITTING LN OR WITH JURISDICTION OVER SUFFOLK
COUNTY, MASSACHUSETTS, IN ANY PROCEEDING OR DISPUTE RELATING IN ANY WAY TO ANY
LOAN DOCUMENTS, AND AGREES THAT ANY SUCH PROCEEDING SHALL BE BROUGHT BY IT
SOLELY IN ANY SUCH COURT. EACH BORROWER IRREVOCABLY WAIVES ALL CLAIMS,
OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING SUCH COURT’S PERSONAL OR
SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM. EACH PARTY HERETO
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN TFIE MANNER PROVIDED FOR NOTICES
IN SECTION 14.3.1. Nothing herein shall limit the right of Agent or any Lender
to bring proceedings against any Obligor in any other court, nor limit the right
of any party to serve process in any other manner permitted by Applicable Law.
Nothing in this Agreement shall be deemed to preclude enforcement by Agent of
any judgment or order obtained in any forum or jurisdiction.

14.16. Waivers by Borrowers. To the fullest extent permitted by Applicable Law,
each Borrower waives (a) the right to trial by jury (which Agent and each Lender
hereby also waives) in any proceeding or dispute of any kind relating in any way
to any Loan Documents, Obligations or Collateral; (b) presentment, demand,
protest, notice of presentment, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of any commercial paper, accounts,
documents, instruments, chattel paper and guaranties at any time held by Agent
on which a Borrower may in any way be liable, and hereby ratifies anything Agent
may do in this regard; (c) notice prior to taking possession or control of any
Collateral; (d) any bond or security that might be required by a court prior to
allowing Agent to exercise any rights or remedies; (e) the benefit of all
valuation, appraisement and exemption laws; (f) any claim against Agent, Issuing
Bank or any Lender, on any theory of liability, for special, indirect,
consequential, exemplary or punitive damages (as opposed to direct or actual
damages) in any way relating to any Enforcement Action, Obligations, Loan
Documents or transactions relating thereto; and (g) notice of acceptance hereof.
Each Borrower acknowledges that the foregoing waivers are a material inducement
to Agent, Issuing Bank and Lenders entering into this Agreement and that they
are relying upon the foregoing in their dealings with Borrowers. Each Borrower
has reviewed the foregoing waivers with its legal counsel and has knowingly and
voluntarily waived its jury trial and other rights following consultation with
legal counsel. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.

14.17. Patriot Act Notice. Agent and Lenders hereby notify Borrowers that
pursuant to the requirements of the Patriot Act, Agent and Lenders are required
to obtain, verify and record information that identifies each Borrower,
including its legal name, address, tax BD number and other information that will
allow Agent and Lenders to identify it in accordance with the Patriot Act. Agent
and Lenders will also require information regarding each personal guarantor, if
any, and may require information regarding Borrowers’ management and owners,
such as legal name, address, social security number and date of birth.

 

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14.18. Amendment and Restatement. Effective immediately upon the Closing Date,
the terms and conditions of the Existing Credit Agreement shall be amended and
restated as set forth herein and the Existing Credit Agreement shall be
superseded by this Credit Agreement. On the Closing Date, the rights and
obligations of the parties evidenced by the Existing Credit Agreement shall be
evidenced by this Credit Agreement and the other Loan Documents and the grant of
security interests and Liens in the Collateral by the Borrowers and the
Guarantors under the Existing Credit Agreement and the other “Loan Documents”
(as defined in the Existing Credit Agreement) shall continue under this
Agreement and the other Loan Documents, and shall not in any event be
terminated, extinguished or annulled but shall hereafter continue to be in full
force and effect and be governed by this Credit Agreement and the other Loan
Documents. All Obligations (as defined in the Existing Credit Agreement) under
the Existing Credit Agreement and the other “Loan Documents” (as defined in the
Existing Credit Agreement) shall continue to be outstanding except as expressly
modified by this Agreement and shall be governed in all respects by this Credit
Agreement and the other Loan Documents, it being agreed and understood that this
Agreement does not constitute a novation, satisfaction, payment or reborrowing
of any Obligation (as defined in the Existing Credit Agreement) under the
Existing Credit Agreement or any other “Loan Document” (as defined in the
Existing Credit Agreement), nor does it operate as a waiver of any right, power
or remedy of the Agent or any Lender under any “Loan Document” (as defined in
the Existing Credit Agreement). All references to the Existing Credit Agreement
in any Loan Document or other document or instrument delivered in connection
therewith shall be deemed to refer to this Credit Agreement and the provisions
hereof.

[Remainder of page intentionally left blank; signatures begin on following page]

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IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the
date set forth above:

 

BORROWERS: AGY HOLDING CORP.

/s/ Douglas J. Mattscheck

By: Douglas J. Mattscheck Title: President & Chief Executive Officer Address:

2556 Wagener Road

Aiken, South Carolina

29801 Attn: Douglas J.

Mattscheck

Telecopy: (803) 643-1180

AGY AIKEN LLC

/s/ Douglas J. Mattscheck

By: Douglas J. Mattscheck

Title: President & Chief Executive Officer Address:

2556 Wagoner Road

Aiken, South Carolina

29801 Attn: Douglas J.

Mattscheck

Telecopy: (803) 643-1180

AGY HUNTINGDON LLC

/s/ Douglas J. Mattscheck

By: Douglas J. Mattscheck Title: President & Chief Executive Officer Address:

2556 Wagoner Road

Aiken, South Carolina

29801 Attn: Douglas I

Mattschock

Telecopy: (803) 643-1180

[Signature Page to Loan Agreement]

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AGENT AND LENDERS:

BANK OF AMERICA, N.A.,

as Agent and Lender

/s/ Matthew T. O’Keefe

By: Matthew T. O’Keefe Title: Senior Vice President Address:

225 Franklin Street, MA1-225-02-05

Boston, Massachusetts 02110

Attn: Matthew T. O’Keefe

Telecopy: (312)-453-4415

[Signature Page to Loan Agreement]

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UBS SECURITIES LLC,

as Documentation Agent

By:  

/s/ Authorized Signatory

Title: Attorney-in-Fact

Address:

677 Washington Blvd.

Stamford, CT 06901

 

 

Attn: Daniel Goldenberg

Telecopy: 203-719-3 90

By:  

/s/ Authorized Signatory

Title: Associate Director Address:   67 Washington Blvd.   Stamford, CT 06901  

 

 

Attn: Daniel Goldenberg

Telecopy: 203-719-3390

UBS LOAN FINANCE LLC,

as a Lender

By:  

/s/ Authorized Signatory

Title: Associate Director Address:   677 Washington Blvd.   Stamford, CT 06901  

 

 

Attn: Daniel Goldenberg

Telecopy: 203-719-3390

By:  

/s/ Authorized Signatory

Title: Associate Director Address:   67 Washington Blvd.   Stamford, CT 06901  

 

 

Attn: Daniel Goldenberg

Telecopy: 203-719-3390

[Signature Page to Loan Agreement]

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EXHIBIT A

to

Loan and Security Agreement

REVOLVER NOTE

 

[Date]  

 

   [City, State of Governing Law]

AGY HOLDINGS, a                              , AGY AIKEN, a
                                         , and AGY HUNTINGDON, a
                             (collectively, “Borrowers”), for value received,
hereby unconditionally promise to pay, on a joint and several basis, to the
order of                                          
                                        (“Lender”), the principal sum of
                                         
                                                                                
DOLLARS ($ ), or such lesser amount as may be advanced by Lender as Revolver
Loans and owing as LC Obligations from time to time under the Loan Agreement
described below, together with all accrued and unpaid interest thereon. Terms
are used herein as defined in the Loan and Security Agreement dated as of , 20,
among Borrowers, Bank of America, N.A., as Agent, Lender, and certain other
financial institutions, as such agreement may be amended, modified, renewed or
extended from time to time (“Loan Agreement”).

Principal of and interest on this Note from time to time outstanding shall be
due and payable as provided in the Loan Agreement. This Note is issued pursuant
to and evidences Revolver Loans and LC Obligations under the Loan Agreement, to
which reference is made for a statement of the rights and obligations of Lender
and the duties and obligations of Borrowers. The Loan Agreement contains
provisions for acceleration of the maturity of this Note upon the happening of
certain stated events, and for the borrowing, prepayment and reborrowing of
amounts upon specified terms and conditions.

The holder of this Note is hereby authorized by Borrowers to record on a
schedule annexed to this Note (or on a supplemental schedule) the amounts owing
with respect to Revolver Loans and LC Obligations, and the payment thereof.
Failure to make any notation, however, shall not affect the rights of the holder
of this Note or any obligations of Borrowers hereunder or under any other Loan
Documents.

Time is of the essence of this Note. Each Borrower and all endorsers, sureties
and guarantors of this Note hereby severally waive demand, presentment for
payment, protest, notice of protest, notice of intention to accelerate the
maturity of this Note, diligence in collecting, the bringing of any suit against
any party, and any notice of or defense on account of any extensions, renewals,
partial payments, or changes in any manner of or in this Note or in any of its
terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity. Borrowers jointly and severally agree
to pay, and to save the holder of this Note harmless against, any liability for
the payment of all costs and expenses (including without limitation reasonable
attorneys’ fees) if this Note is collected by or through an attorney-at-law.

In no contingency or event whatsoever shall the amount paid or agreed to be paid
to the holder of this Note for the use, forbearance or detention of money
advanced hereunder exceed the highest lawful rate permitted under Applicable
Law. If any such excess amount is inadvertently paid by Borrowers or
inadvertently received by the holder of this Note, such excess shall be returned
to Borrowers or credited as a payment of principal, in accordance with the Loan
Agreement. It is the intent hereof that Borrowers not pay or contract to pay,
and that holder of this Note not receive or contract to receive, directly or
indirectly in any manner whatsoever, interest in excess of that which may be
paid by Borrowers under Applicable Law.

This Note shall be governed by the laws of the State of
                                        , without giving effect to any conflict
of law principles (but giving effect to federal laws relating to national
banks).

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IN WITNESS WHEREOF, this Revolver Note is executed as of the date set forth
above.

 

Attest:      

 

 

      Secretary       By  

 

[Seal]           Title: Attest:              

 

      By  

 

          Title: Secretary         [Seal]  

 

   

 

Attest:       By  

 

          Title: Secretary         [Seal]          

 

     

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EXHIBIT B

to

Loan and Security Agreement

ASSIGNMENT AND ACCEPTANCE

Reference is made to the Loan and Security Agreement dated as of
                     , 20 , as amended (“Loan Agreement”), among AGY HOLDINGS,
AGY AIKEN and AGY HUNTINGDON (collectively, “Borrowers”), BANK OF AMERICA, N.A.,
as agent (“Agent”) for the financial institutions from time to time party to the
Loan Agreement (“Lenders”), and such Lenders. Terms are used herein as defined
in the Loan Agreement.

                                          (“Assignor”) and
                                         (“Assignee”) agree as follows:

1. Assignor hereby assigns to Assignee and Assignee hereby purchases and assumes
from Assignor (a) a principal amount of $                      of Assignor’s
outstanding Revolver Loans and of Assignor’s participations in LC Obligations,
and (b) the amount of $                      of Assignor’s Revolver Commitment
(which represents % of the total Revolver Commitments), (the foregoing items
being, collectively, the “Assigned Interest”), together with an interest in the
Loan Documents corresponding to the Assigned Interest. This Agreement shall be
effective as of the date (“Effective Date”) indicated in the corresponding
Assignment Notice delivered to Agent, provided such Assignment Notice is
executed by Assignor, Assignee, Agent and Borrower Agent, if applicable. From
and after the Effective Date, Assignee hereby expressly assumes, and undertakes
to perform, all of Assignor’s obligations in respect of the Assigned Interest,
and all principal, interest, fees and other amounts which would otherwise be
payable to or for Assignor’s account in respect of the Assigned Interest shall
be payable to or for Assignee’s account, to the extent such amounts accrue on or
after the Effective Date.

2. Assignor (a) represents that as of the date hereof, prior to giving effect to
this assignment, its Revolver Commitment is $                     , the
outstanding balance of its Revolver Loans and participations in LC Obligations
is $                     ; (b) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Agreement or any other instrument or document furnished pursuant thereto, other
than that Assignor is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim; and (c) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of Borrowers or the performance by
Borrowers of their obligations under the Loan Documents. [Assignor is attaching
the Note[s] held by it and requests that Agent exchange such Note[s] for new
Notes payable to Assignee [and Assignor]]

3. Assignee (a) represents and warrants that it is legally authorized to enter
into this Assignment and Acceptance; (b) confirms that it has received copies of
the Loan Agreement and such other Loan Documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (c) agrees that it shall, independently and
without reliance upon Assignor and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents; (d) confirms that it is an
Eligible Assignee; (e) appoints and authorizes Agent to take such action as
agent on its behalf and to exercise such powers under the Loan Agreement as are
delegated to Agent by the terms thereof, together with such powers as are
incidental thereto; (f) agrees that it will observe and perform all obligations
that are required to be performed by it as a “Lender” under the Loan Documents;
and (g) represents and warrants that the assignment evidenced hereby will not
result in a non-exempt “prohibited transaction” under Section 406 of ERNA.

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4. This Agreement shall be governed by the laws of the State of . If any
provision is found to be invalid under Applicable Law, it shall be ineffective
only to the extent of such invalidity and the remaining provisions of this
Agreement shall remain in full force and effect.

5. Each notice or other communication hereunder shall be in writing, shall be
sent by messenger, by telecopy or facsimile or other electronic transmission
(including PDF), or by first-class mail, shall be deemed given when sent and
shall be sent as follows:

 

  (a) If to Assignee, to the following address (or to such other address as
Assignee may designate from time to time):

 

 

 

 

 

 

 

  (b) If to Assignor, to the following address or to such other address as
Assignor may designate from time to time):

 

 

 

 

 

 

 

 

Payments hereunder shall be made by wire transfer of immediately available
Dollars as follows:

If to Assignee, to the following account (or to such other account as Assignee
may designate from time to time):

 

 

ABA No.                                       

Account No.                                  

Reference:                                     

If to Assignor, to the following account (or to such other account as Assignor
may designate from time to time):

 

 

ABA No.                                       

Account No.                                  

Reference:                                     

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IN WITNESS WHEREOF, this Assignment and Acceptance is executed as of
                    

 

 

(“Assignee”) By  

 

  Title:

 

(“Assignor”) By  

 

  Title:

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EXHIBIT C

to

Loan and Security Agreement

ASSIGNMENT NOTICE

Reference is made to (1) the Loan and Security Agreement dated as of
                     , 20    , as amended (“Loan Agreement”), among AGY
HOLDINGS, AGY AIKEN and AGY HUNTINGDON (collectively, “Borrowers”), BANK OF
A.MERICA, N.A., as agent (“Agent”) for the financial institutions from time to
time party to the Loan Agreement (“Lenders”), and such Lenders; and (2) the
Assignment and Acceptance dated as of , 20 (“Assignment Agreement”), between
                                         (“Assignor”)
                                         and
                                         (“Assignee”). Terms are used herein as
defined in the Loan Agreement.

Assignor hereby notifies Borrowers and Agent of Assignor’s intent to assign to
Assignee pursuant to the Assignment Agreement (a) a principal amount of
$                     of Assignor’s outstanding Revolver Loans and $
                     of Assignor’s participations in LC Obligations, and (b) the
amount of of Assignor’s Revolver Commitment (which represents % of the total
Revolver Commitments) (the foregoing items being, collectively, the “Assigned
Interest”), together with an interest in the Loan Documents corresponding to the
Assigned Interest. This Agreement shall be effective as of the date (“Effective
Date”) indicated below, provided this Assignment Notice is executed by Assignor,
Assignee, Agent and Borrower Agent, if applicable. Pursuant to the Assignment
Agreement, Assignee has expressly assumed all of Assignor’s obligations under
the Loan Agreement to the extent of the Assigned Interest, as of the Effective
Date.

For purposes of the Loan Agreement, Agent shall deem Assignor’s Revolver
Commitment to be reduced by $                     , and Assignee’s Revolver
Commitment to be increased by $                    

The address of Assignee to which notices and information are to be sent under
the terms of the Loan Agreement is:

 

 

 

 

 

 

 

 

The address of Assignee to which payments are to be sent under the terms of the
Loan Agreement is shown in the Assignment and Acceptance.

This Notice is being delivered to Borrowers and Agent pursuant to Section 13.3
of the Loan Agreement. Please acknowledge your acceptance of this Notice by
executing and returning to Assignee and Assignor a copy of this Notice.

IN WITNESS WHEREOF, this Assignment Notice is executed as of
                    

 

 

(“Assignee”) By  

 

  Title:

--------------------------------------------------------------------------------

 

(“Assignor”) By  

 

  Title:

ACKNOWLEDGED AND AGREED,

AS OF THE DATE SET FORTH ABOVE:

 

BORROWER AGENT:*

 

By  

 

  Title:

 

* No signature required if Assignee is a Lender, U.S.-based Affiliate of a
Lender or Approved Fund, or if an Event of Default exists.

 

BANK OF AMERICA, N.A., as Agent By  

 

  Title:

--------------------------------------------------------------------------------

EXHIBIT D

to

Loan and Security Agreement

NOTICE OF BORROWING

                    , 20

Bank of America, N.A.,

  as Agent

225 Franklin Street

MA1-225-02-05

Boston, Massachusetts 02110

Ladies and Gentlemen:

Reference is made to the Amended and Restated Loan and Security Agreement dated
as of March     , 2011 (as amended, supplemented or otherwise modified from time
to time, the “Loan Agreement”), among AGY Holding Corp., a Delaware corporation
(“AGY Holdings”), AGY Aiken LLC, a Delaware limited liability company (“Aiken”),
AGY Huntingdon LLC, a Delaware limited liability company (“Huntingdon” and,
together with AGY Holdings and Aiken, the “Borrowers”), the financial
institutions from time to time party thereto as lenders (the “Lenders”), Bank of
America, NA., a national banking association, as administrative agent for such
Lenders (the “Agent”), and UBS Securities LLC, as documentation agent for such
Lenders. Capitalized terms used herein but not otherwise defined herein shall
have the meanings assigned to them in the Loan Agreement. This notice is subject
to the terms of the Loan Agreement.

Pursuant to Section 4.1.1 of the Loan Agreement, the Borrower Agent hereby gives
you notice, irrevocably, and hereby requests that Revolver Loans, as specified
below, under the Loan Agreement be made, and in connection therewith set forth
below is the information related to the proposed Borrowing (the “Proposed
Borrowing”) as required by Section 4.1.1 of the Loan Agreement:

1. The principal amount of the Proposed Borrowing under the Loan Agreement shall
be $1                     1.

2. The requested funding date of the Proposed Borrowing is
[                    1 [which shall be a Business Day].

3. The Proposed Borrowing shall consist of $1-                     1 Base Rate
Loans and $[   LIBOR Loans.

4. The Interest Period to be applied to such LIBOR Loans shall be 11 months.

The Borrower Agent hereby certifies that both as of the date hereof and as of
the date of the Proposed Borrowing (both before and after giving effect to such
Proposed Borrowing):

(a) no Default or Event of Default has occurred and is continuing;

(b) the representations and warranties of each Obligor in the Loan Documents are
true and correct in all material respects (except that any representation and
warranty that itself is

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qualified as to “materiality” or “Material Adverse Effect” is true and correct
in all respects) on the date of, and upon giving effect to, such Proposed
Borrowing (except for representations and warranties that expressly relate to an
earlier date);

(c) all conditions precedent in the Loan Documents to the making of the
requested Revolver Loans have been satisfied;

(d) no event has occurred or circumstance exists that has or could reasonably be
expected to have a Material Adverse Effect; and

(e) pursuant to sections 409(b)(1) and 409(b)(17) of the Senior Second Lien Note
Indenture, the Borrowers are permitted to incur Indebtedness (as such term is
defined in the Senior Second Lien Note Indenture) under a Credit Facility (as
such term is defined in the Senior Second Lien Note Indenture) in an aggregate
principal amount at any one time outstanding of not less than
$                    

[Signature page follows]

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IN WITNESS WHEREOF, the undersigned has executed this notice as of this         
day of                      , 20     .

 

AGY HOLDING CORP.,

as Borrower Agent

By:  

 

  Name:   Title: