Exhibit 10.1

 

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THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

Between

 

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.,

as the Borrower

 

and

 

PNC BANK, NATIONAL ASSOCIATION,

as the Bank

 

Dated as of June 24, 2005

 

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TABLE OF CONTENTS

 

                 Page

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LIST OF EXHIBITS

   iv

LIST OF SCHEDULES

   v

ARTICLE 1 . DEFINITIONS

   2      1.1        Defined Terms    2      1.2        Other Definitional
Provisions    27

ARTICLE 2. THE LOANS

   27      2.1        Revolving Credit Commitment    27      2.2        Term
Loan Facility    30      2.3        Interest    32      2.4        Yield
Protection; Indemnity    36      2.5        Capital Adequacy    36      2.6  
     Payments    37      2.7        Loan Account    38      2.8        Fees   
38      2.9        Payment From Accounts Maintained by Borrower    38      2.10
     Late Payment    38      2.11      Letter of Credit Subfacility    39

ARTICLE 3. SET-OFF AND SECURITY INTERESTS

   44      3.1        Set-Off    45      3.2        Form of Security Documents
   45      3.3        Valid Encumbrance    46      3.4        Registration    46
     3.5        After Acquired Property and Further Assurances    46      3.6  
     Form, Substance and Registration of Collateral    46      3.7        Fee
Mortgages.    46      3.8        Benefit of Collateral    47

ARTICLE 4. REPRESENTATIONS AND WARRANTIES

   47      4.1        Existence    47      4.2        Capitalization; Ownership;
Title to Shares    47      4.3        Subsidiaries and Other Investments    47  
   4.4        Power and Authority    47      4.5        Validity and Binding
Effect    48      4.6        No Conflict    48      4.7        Financial Matters
   48      4.8        Material Adverse Change    49      4.9        Solvency   
49      4.10      Litigation    49      4.11      Compliance with Laws    49

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     4.12      Labor Matters    49      4.13      Title to Properties    49     
4.14      Tax Returns and Payments    52      4.15      Intellectual Property   
52      4.16      Insurance    52      4.17      Consents and Approvals    53  
   4.18      No Defaults    53      4.19      Plans and Benefit Arrangements   
53      4.20      Environmental Matters    55      4.21      Margin Stock    56
     4.22      Business of Subsidiaries    56      4.23      Violations of
Anti-Terrorism Laws    56      4.24      Blocked Persons    57      4.25     
Full Disclosure    58

ARTICLE 5. AFFIRMATIVE COVENANTS

   58      5.1        Use of Proceeds    58      5.2        Delivery of
Financial Statements and Other Information    58      5.3        Preservation of
Existence; Qualification    62      5.4        Compliance with Laws and
Contracts    62      5.5        Accounting System; Books and Records    63     
5.6        Payment of Taxes and Other Liabilities    63      5.7       
Insurance    63      5.8        Maintenance of Properties    64      5.9       
Maintenance of Leases    64      5.10      Maintenance of Patents, Trademarks,
Permits, Etc.    64      5.11      Bank Accounts    64      5.12      Plans and
Benefit Arrangements    64      5.13      Environmental Matters and
Indemnification    64      5.14      Key Management    65      5.15      Further
Assurances; Power of Attorney    66

ARTICLE 6. NEGATIVE COVENANTS

   66      6.1        Indebtedness    66      6.2        Guarantees    67     
6.3        Encumbrances    67      6.4        Financial Covenants    68     
6.5        [RESERVED]    68      6.6        Limitation on Dividends    68     
6.7        Liquidations, Mergers, Consolidations, Acquisitions, Etc.    68     
6.8        Dispositions of Assets    69      6.9        Loans and Other Advances
   70      6.10      Investments    70      6.11      Affiliate Transactions   
71      6.12      Use of Proceeds    71      6.13      Change of Business    71
     6.14      Change of Fiscal Year    71

 

- ii -

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     6.15      ERISA    71      6.16      Amendments to Certain Documents    72

ARTICLE 7. CONDITIONS TO MAKING EXTENSIONS OF CREDIT

   72      7.1        All Loans    72      7.2        Initial Extension of
Credit    73

ARTICLE 8. EVENTS OF DEFAULT; REMEDIES

   76      8.1        Events of Default    76      8.2        Remedies    79

ARTICLE 9. GENERAL PROVISIONS

   80      9.1        Amendments and Waivers    80      9.2        Taxes    80  
   9.3        Expenses    80      9.4        Notices    81      9.5       
Participations    82      9.6        Successors and Assigns    83      9.7  
     Confidentiality    83      9.8        Severability    83      9.9       
Interest Limitation    83      9.10      Survival    84      9.11      GOVERNING
LAW    84      9.12      FORUM    84      9.13      Non-Business Days    85     
9.14      Integration    85      9.15      Headings    85      9.16     
Counterparts; Effectiveness    85      9.17      WAIVER OF JURY TRIAL    85     
9.18      General Indemnity    86      9.19      Timing    87      9.20     
Bank Not Liable    87

 

- iii -

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LIST OF EXHIBITS

NOTE : THE EXHIBITS REFERENCED HEREIN ARE NOT INCLUDED WITH THE

FILED VERSION OF THE 10-Q.HOWEVER THEY ARE AVAILABLE UPON

REQUEST.

 

Exhibit
Designation

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Exhibit

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   Principal
Section
Reference

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A   

   Revolving Credit Note    2.1e

B   

   Lockbox Agreement    2.1f

C   

   Term Note    2.2c

D   

   Security Agreement    3.2 E       [RESERVED]     

F-1

   Mortgage    3.2

F-2

   First Amendment to Mortgage    3.2

F-3

   Second Amendment to Mortgage    3.2

F-4

   Third Amendment to Mortgage    3.2

G    

   Landlord’s Consent    3.2

H    

   Compliance Certificate    5.2c

I    

   Subordination Agreement    7.2j

J    

   Borrowing Base Certificate    2.1b(i)

K    

   Guaranty Agreement    3.2

 

- iv -

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LIST OF SCHEDULES

NOTE : THE SCHEDULES REFERENCED HEREIN ARE NOT INCLUDED WITH

THE FILED VERSION OF THE 10-Q.HOWEVER THEY ARE AVAILABLE UPON

REQUEST.

 

Schedule Designation
and

Principal Section
Reference

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Schedule

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   Page

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1.1a    Leased Properties    14 1.1b    Owned Properties    11 1.1c   
Bridgeville Property    5 4.2    Options, Warrants, Etc.    46 4.10   
Litigation    54 4.12    Labor Matters    48 4.13a    Real Estate Matters -
Borrower    55 4.13b    Real Estate Matters - Subsidiaries    56 4.15   
Intellectual Property    58 4.16    Insurance    58 4.19    Plans and Benefit
Arrangements    58 4.20    Environmental Matters    60 4.26    Material
Contracts; Burdensome Restrictions    56 4.31    Jurisdictions    56 4.32   
Bank Accounts    56 5.2k    Major Account Debtors    61 6.1    Permitted
Indebtedness    72 6.3    Permitted Encumbrances    24

 

- v -

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THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 24, 2005 (as
more fully defined below the “Agreement”), entered into by and between UNIVERSAL
STAINLESS & ALLOY PRODUCTS, INC., a Delaware corporation (as more fully defined
below the “Borrower”), and PNC BANK, NATIONAL ASSOCIATION, a national banking
association (as more fully defined below the “Bank”).

 

RECITALS:

 

WHEREAS, the Borrower entered into that certain Second Amended and Restated
Credit Agreement with the Bank dated as of January 30, 1998, as amended by the
First Amendment to Second Amended and Restated Credit Agreement dated as of
December 31, 1998 (the “First Amendment”), as further amended by the Second
Amendment to Second Amended and Restated Credit Agreement dated as of May 25,
2000 (the “Second Amendment”), as further amended by the Third Amendment to
Second Amended and Restated Credit Agreement dated as of June 1, 2001 (the
“Third Amendment”), as further amended by the Fourth Amendment to Second Amended
and Restated Credit Agreement dated as of May 31, 2002 (the “Fourth Amendment”),
as further amended by the Fifth Amendment to Second Amended and Restated Credit
Agreement dated as of February 18, 2003 (the “Fifth Amendment”), as further
amended by the Sixth Amendment to Second Amended and Restated Credit Agreement
dated as of June 30, 2003 (the “Sixth Amendment”), as further amended by the
Seventh Amendment to Second Amended and Restated Credit Agreement dated as of
October 20, 2003 (the “Seventh Amendment”), and as further amended by the Eighth
Amendment to Second Amended and Restated Credit Agreement dated as of September
28, 2004 (the “Eighth Amendment”) (the Second Amended and Restated Credit
Agreement as amended by the First Amendment, Second Amendment, Third Amendment,
Fourth Amendment, Fifth Amendment, Sixth Amendment, Seventh Amendment and Eighth
Amendment together with all exhibits and schedules thereto, the “Original
Agreement”).

 

WHEREAS, the Borrower and the Bank have agreed on additional modifications to
the Original Agreement.

 

WHEREAS, the Borrower and the Bank have agreed to amend and restate the Original
Agreement in its entirety.

 

WHEREAS, the Borrower desires to borrow, and the Bank desires to make available
to the Borrower from time to time the loans and other extensions of credit
hereinafter set forth, under and subject to the terms and conditions of this
Agreement.

 

NOW, THEREFORE, in consideration of the premises (each of which is incorporated
herein by reference) and the mutual promises contained herein and other valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and
with the intent

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to be legally bound hereby, the parties hereto (i) agree to amend and restate
the Original Agreement under and pursuant to the terms hereof and (ii) otherwise
agree as follows:

 

ARTICLE 1. DEFINITIONS

 

1.1 Defined Terms. As used in this Agreement, including the preamble and
recitals hereto, the following terms shall have the respective meanings set
forth below or in the Section of this Agreement referred to, unless the context
otherwise requires:

 

Account: As used (i) in each Loan Document, except as used in the Working Cash
Sweep Agreement and the Trust Agreement, an account, as that term is defined in
the Uniform Commercial Code, of any Person, whether now in existence or
hereafter created or acquired, and (ii) in the Working Cash Sweep Agreement and
the Trust Agreement, the account defined in this Agreement as the Parent
Account.

 

Account Debtor: Any Person who is or may become obligated under or with respect
to an Account, Chattel Paper or a General Intangible.

 

Additional Equity Infusion: Receipt by the Borrower on and after May 31, 2005 of
the Net Proceeds of a public offering or private placement of Borrower’s equity
securities.

 

Affiliate: As to any Person, any other Person (i) which directly or indirectly
through one or more intermediaries controls, is controlled by, or is under
common control with, such Person, or (ii) which beneficially owns or holds 25
percent or more of any class of the voting securities of the Borrower or 25
percent or more of the voting stock (or in the case of a Person which is not a
corporation, 25 percent or more of the equity interest) of which is beneficially
owned or held, directly or indirectly, by the Borrower or a Subsidiary. For
purposes of this definition, “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 ownership of voting securities, by
contract or otherwise, including the power to elect a majority of the directors
of a corporation or trustees of a trust, as the case may be.

 

Agreement: On and after the Closing Date, as used in each Loan Document except
the Working Cash Sweep Agreement and the Trust Agreement, this Third Amended and
Restated Credit Agreement, all exhibits and schedules hereto and all extensions,
renewals, amendments, substitutions and replacements hereof and hereto; and on
and after the Closing Date when this Agreement is referred to in the Working
Cash Sweep Agreement and the Trust Agreement it shall be referred to as the
“Line of Credit Agreement”.

 

Anti-Terrorism Laws: Any laws relating to terrorism or money laundering,
including Executive Order No. 13224, the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, Public Law 107-56, the laws comprising or implementing the Bank Secrecy
Act, and the laws administered by the United States Treasury Department’s Office
of Foreign Asset Control (as any of the foregoing laws may from time to time be
amended, renewed, extended, or replaced).

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Applicable Commitment Fee: The percentage (expressed in basis points) determined
from time to time based upon the ratio of the Borrower’s Consolidated Total
Indebtedness to the Borrower’s Consolidated EBITDA which corresponds to the
range of ratios in which the Borrower’s Consolidated Total Indebtedness to
Consolidated EBITDA Ratio, as at the end of the preceding fiscal quarter, falls:

 

Consolidated Total Indebtedness

to Consolidated EBITDA Ratio

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   Applicable
Commitment Fee

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Less than 1.5 to 1.0

   0.25 %

Greater than or equal to 1.5 to 1.0 but less than or equal to 3.0 to 1.0

   0.375 %

Greater than 3.0 to 1.0

   0.50 %

 

All such adjustments shall be determined as of the date that the Borrower’s
quarterly financial statements and Compliance Certificate are delivered to the
Bank pursuant to Sections 5.2a, 5.2b and 5.2c.

 

Applicable Margin: The percentage (expressed in basis points) determined from
time to time based upon the ratio of the Borrower’s Consolidated Total
Indebtedness to the Borrower’s Consolidated EBITDA, as at the end of the
preceding fiscal quarter, set forth under the relevant column heading below.

 

    

Ratio of Consolidated Total

Indebtedness to Consolidated EBITDA

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   Revolving Credit
Loans

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   Term Loan

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        Euro-
Rate

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   Base
Rate

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   Euro-
Rate

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   Base
Rate

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LEVEL I

   Less than 1.0 to 1.0    100    0    125    0

LEVEL II

   Equal to or greater than 1.0 to 1.0 but less than 1.5 to 1.0    100    0   
150    0

LEVEL III

   Equal to or greater than 1.5 to 1.0 but less than or equal to 2.5 to 1.0   
125    0    175    0

LEVEL IV

   Greater than 2.5 to 1.0 but less than or equal to 3.0 to 1.0    150    0   
200    0

LEVEL V

   Greater than 3.0 to 1.0    200    0    225    0

 

All such adjustments shall be determined as of the date that the Borrower’s
annual and quarterly financial statements, and Compliance Certificate are
delivered to the Bank pursuant to Sections 5.2a, 5.2b and 5.2c.

 

As-extracted Collateral: All as-extracted collateral, as that term is defined in
the Uniform Commercial Code, of any Person, whether now owned or hereafter
created or acquired.

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Authorized Officer: The Chairman of the Board, the President, the Chief
Executive Officer, the Chief Operating Officer, the Chief Financial Officer, any
Vice President or the Treasurer of the Borrower. The Bank shall be entitled to
rely on the incumbency certificate delivered pursuant to Section 7.2 for the
initial designation of each Authorized Officer. Additions or deletions to the
list of Authorized Officers may be made by the Borrower at any time by
delivering to the Bank a revised, fully-executed incumbency certificate.

 

Bank: PNC Bank, National Association, a national banking association, and its
successors and assigns.

 

Base Rate: A fluctuating rate of interest per annum equal to the greater of (i)
the Prime Rate or (ii) the sum of (A) the Federal Funds Effective Rate plus (B)
1/2 of one percent.

 

Base Rate Option: The ability of the Borrower to elect to have all or any
portion of the Loans bear interest at the Interest Rate Option set forth in
Subsection 2.3a(i).

 

Benefit Arrangement: An “employee benefit plan”, within the meaning of Section
3(3) of ERISA, which is not a Plan or a Multiemployer Plan and which is
maintained or otherwise contributed to by the Borrower or any ERISA Affiliate
for the benefit of employees of the Borrower or any ERISA Affiliate.

 

BIDP: The Business Infrastructure Development Program established by the
Commonwealth of Pennsylvania.

 

BIDP Loan: A term loan from the BIDP or the County of Allegheny through BIDP
which shall have a final maturity not exceeding 15 years after the date on which
such loan is advanced.

 

Blocked Person: A person that is listed in the annex to, or is otherwise subject
to the provisions of, Executive Order No,. 13224; (2) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order No.
13224; (3) a Person with which any financial institution is prohibited from
dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (4)
a Person that commits, threatens or conspires to commit or supports “terrorism”
as defined in Executive Order No. 13224; (5) a Person that is named as a
“specially designated national” on the most current list published by the U.S.
Treasury Department Office of Foreign Asset Control at its official website or
any replacement website or other replacement official publication of such list,
or (6) a Person who is affiliated or associated with any of the foregoing.

 

Borrower: Universal Stainless & Alloy Products, Inc., a Delaware corporation,
and its successors and permitted assigns.

 

Borrowing Base: The sum of (i) 80% of the book value of the Qualified Accounts
of the Borrower and Dunkirk, plus (ii) 50% of Value of the Qualified Inventory
of the Borrower and Dunkirk. The advance percentages shown above may be modified
by the Bank from time to time in its sole discretion, as a result of the audit
and appraisal described in Section 2.1a or otherwise.

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Borrowing Base Certificate: A borrowing base certificate substantially in the
form of Exhibit “J” hereto which has been executed by an Authorized Officer and
delivered to the Bank.

 

Borrowing Tranche: Each portion of the Loans bearing interest at a discrete
Euro-Rate Option, that portion of the Revolving Credit Loans bearing interest at
the Base Rate Option and that portion of the Term Loan bearing interest at the
Base Rate Option.

 

Bridgeville Property: Those certain parcels of ground located in the Borough of
Bridgeville, Upper St. Clair Township, Collier Township and Scott Township,
Allegheny County, Pennsylvania and more fully described on Schedule 1.1c
attached hereto together with improvements thereto and all appurtenances
thereto.

 

Business Day: A day other than a Saturday or a Sunday on which the Bank and the
Trustee are open for business.

 

Capital Adequacy Event: This term shall have the meaning given it in Section
2.5.

 

Capital Compensation Amount: This term shall have the meaning given it in
Section 2.5.

 

Capital Expenditure: Any expenditure which would be classified as a capital
expenditure in accordance with GAAP.

 

Capitalized Lease: Any lease of property by a Person, or any Consolidated
Subsidiary of such a Person, as lessee, which would be capitalized on the
Consolidated balance sheet of such a Person prepared in accordance with GAAP.

 

Capitalized Lease Obligations: The amount of the Consolidated obligations of a
Person under Capitalized Leases which would be shown as a liability on a balance
sheet of such a Person prepared in accordance with GAAP.

 

Chattel Paper: Any chattel paper, as that term is defined in the Uniform
Commercial Code, of any Person, whether now owned or hereafter created or
acquired.

 

Closing Date: June 24, 2005, or such other date as is mutually agreeable to the
parties hereto.

 

Closing Fee: A closing fee equal to $25,000.

 

Collateral: Collectively, all of the property (whether real, personal or mixed,
and whether tangible or intangible), rights, titles and interests subject to any
Encumbrance in favor of

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the Bank pursuant to this Agreement or any other Loan Document, including but
not limited to the cash and other assets held by the Bank in the Lockbox
Account, each DDA, the Parent Account and each other bank account maintained by
the Bank in order to implement the Working Cash Agreements.

 

Commercial Tort Claim(s): All commercial tort claims, as that term is defined in
the Uniform Commercial Code, of any Person, whether now owned or hereafter
created or acquired.

 

Commitment Fee: The fee described in Section 2.8a.

 

Commodity Account(s): All commodity accounts, as that term is defined in the
Uniform Commercial Code, of any Person, whether now owned or hereafter created
or acquired.

 

Commodity Contract(s): All commodity contracts, as that term is defined in the
Uniform Commercial Code, of any Person, whether now owned or hereafter created
or acquired.

 

Compliance Certificate: A certificate substantially in the form of Exhibit “H”
which has been executed by an Authorized Officer and delivered to the Bank.

 

Consolidated: The consolidation in accordance with GAAP of the items as to which
such term applies.

 

Consolidated Debt Service: The Consolidated scheduled payments of principal and
interest on Indebtedness of the Borrower and its Subsidiaries during the
relevant fiscal period.

 

Consolidated Excess Cash Flow: The amount by which, as the end of the relevant
fiscal period, the Borrower’s EBITDA for such period exceeds the Borrower’s
Consolidated Fixed Charges for such period.

 

Consolidated Fixed Charges: Without duplication, the sum of the Borrower’s and
its Subsidiaries’ Consolidated interest expense, Consolidated tax expense less
any deferred portion of such tax expense, scheduled payments of principal of
Consolidated Total Indebtedness, payments due under Capitalized Leases and
Capital Expenditures which are not Funded Capital Expenditures during the
relevant fiscal period.

 

Consolidated Net Income: The Consolidated net income of the Borrower and its
Subsidiaries for the period in question, after deducting all Consolidated
operating expenses, provisions for all taxes and all other proper deductions,
all determined in accordance with GAAP.

 

Consolidated Tangible Net Worth: The Borrower’s Consolidated stockholders’
equity, after subtracting all items properly classified as intangible, as
determined in accordance with GAAP consistently applied.

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Consolidated Total Indebtedness: The Indebtedness of the Borrower and its
Subsidiaries on a Consolidated basis, net of excess cash balances, all as
determined in accordance with GAAP consistently applied.

 

Contamination: The presence of any Hazardous Substance at any real property
owned or leased by the Borrower which requires investigation, clean-up or
remediation under any Environmental Law.

 

Credit: A “Credit” as defined in the Working Cash Sweep Agreement.

 

Customer: The Borrower in its capacity as the customer under the Working Cash
Sweep Agreement.

 

Customer’s Trust: The trust created pursuant to the Working Cash Sweep
Agreement.

 

DDA: Each checking account now or hereafter identified on the Schedule to the
Working Cash Sweep Agreement.

 

Debit: A “Debit” as defined in the Working Cash Sweep Agreement.

 

Default: Any condition, event, omission or act which, with the giving of notice,
the passage of time or both, would constitute an Event of Default.

 

Default Rate: The rate of interest charged pursuant to Section 2.3b(iv) hereof.

 

Deposit Account(s): All deposit accounts, as that term is defined in the Uniform
Commercial Code, of any Person, whether now owned or hereafter created or
acquired.

 

Document: Any document, as that term is defined in the Uniform Commercial Code,
of any Person, whether now owned or in existence or hereafter created or
acquired.

 

Dollars or $: The legal tender of the United States of America.

 

Dunkirk: Dunkirk Specialty Steel, LLC, a Delaware limited liability company, and
a Subsidiary of Borrower and a guarantor of the Indebtedness issued hereunder.

 

Dunkirk Acquisition: The purchase by Dunkirk from the New York Job Development
Authority of certain assets formerly owned by Empire Specialty Steel, Inc., on
or about February 14, 2002.

 

EBITDA: For the period in question (tested on a rolling four-quarters basis as
of the end of the Fiscal Quarter in question): the sum of (i) Consolidated Net
Income, plus (ii) Consolidated income tax expense, plus (iii) Consolidated
interest expense, plus (iv) Consolidated depreciation expense, plus (v)
Consolidated amortization expense, each determined in accordance with GAAP,
excluding (A) any Consolidated non-recurring or extraordinary income

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or losses for such period in question determined in accordance with GAAP and (B)
the Net Income of any other Person acquired by the Borrower in a transaction
accounted for as a pooling of interests for any period prior to the date of such
acquisition.

 

EDF: The Allegheny County Department of Development, Economic Development Fund
Business Loan Program.

 

EDF Loan: Any term loan from EDF which shall have a term of at least fifteen
years.

 

EDS: The Economic Development Set Aside Program established by the Commonwealth
of Pennsylvania.

 

EDS Loan: Any grant from EDS the proceeds of which will be lent to the Borrower
as a term loan by the County of Allegheny, which loan shall have a final
maturity of 15 years after the date on which the loan is issued.

 

Electronic Chattel Paper: Any electronic chattel paper, as that term is defined
in the Uniform Commercial Code of any person, whether now owned or hereafter
created or acquired.

 

Encumbrance: Any security interest, mortgage, charge, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any Capitalized Lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code) in, upon, or
against any asset of the Borrower or any Subsidiary, whether or not voluntarily
given.

 

Environmental Claim: Any written claim, suit notice or order made by a Person
(including without limitation a Governmental Authority) or any written demand
made by a Governmental Authority with respect to the Borrower or Dunkirk or any
of their respective properties, whether owned or leased, that: (i) asserts a
violation of an Environmental Law; (ii) asserts a liability under an
Environmental Law; (iii) orders investigations, corrective action, remediation
or other response under an Environmental Law; (iv) demands information under an
Environmental Law; (v) alleges personal injury or property damage resulting from
Hazardous Substances; or (vi) alleges that there is or may be Contamination.

 

Environmental Law: Any Governmental Rule concerning protection or regulation of
the discharge of substances into the environment, including but not limited to
those concerning air emissions, water discharges and treatment, storage tanks,
and the handling, generation, treatment, storage and disposal of waste
materials, chemical substances, pollutants, contaminants, toxic substances,
pathogens, radioactive materials or hazardous substances of any kind, whether
solid, liquid or gaseous.

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Environmental Indemnity Agreement: An environmental indemnity agreement executed
by a Loan Party in favor of the Bank concerning either Owned Properties or
Leased Properties the subject of a mortgage in favor of the Bank in form and
substance satisfactory to the Bank, together with all extensions, renewals,
amendments, substitutions and replacements thereto and thereof.

 

Equipment: Any equipment, as that term is defined in the Uniform Commercial
Code, of any Person, whether now owned or hereafter created or acquired and
wherever located.

 

ERISA: The Employee Retirement Income Security Act of 1974 or any successor
legislation thereto, and the rules and regulations promulgated thereunder,
including any amendments to any of the foregoing.

 

ERISA Affiliate: Any member of a controlled group of corporations under Section
414(b) of the Internal Revenue Code of which the Borrower is a member, and any
trade or business (whether or not incorporated) under common control with the
Borrower under Section 414(c) of the Internal Revenue Code, and all other
entities which, together with the Borrower, are or were treated as a single
employer under Sections 414(m) or 414(o) of the Internal Revenue Code.

 

Euro-Rate: With respect to Borrowing Tranches to which the Euro-Rate Option
applies for any Euro-Rate Interest Period, the interest rate per annum
determined by the Bank by dividing (the resulting quotient rounded upward to the
nearest 1/100th of 1% per annum) (i) the rate of interest determined by the Bank
in accordance with its usual procedures (which determination shall be
conclusive, absent manifest error) to be equal to the average of the London
interbank offered rates of interest per annum for U.S. Dollars quoted by the
British Bankers’ Association as set forth on Moneyline Telerate Service
(formerly Telerate) (or appropriate successor, or, if the British Bankers’
Association or its successor ceases to provide such quotes, a comparable
replacement determined by the Bank) display page 3750 (or such other display
page on the Moneyline Telerate Service as may replace display page 3750), two
(2) Business Days prior to the first day of such Euro-Rate Interest Period for
an amount comparable to such Borrowing Tranche and having a borrowing date and a
maturity comparable to such Euro-Rate Interest Period by (ii) a number equal to
1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed
by the following formula:

 

Euro-Rate =   

Average of London interbank offered rates quoted by

British Bankers’ Association or appropriate successor

as shown on Moneyline Telerate Service

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

     1:00 Euro-Rate Reserve Percentage

 

Euro-Rate Interest Period: Any individual period of one, two, three months or
such longer period of time agreed to by the Bank from time to time commencing on
the date a Euro-Rate Option is exercised; provided, however, that (i) any
Euro-Rate Interest Period which would otherwise end on a day which is not a
Business Day shall be extended to the next Business Day unless such Business Day
falls in the succeeding calendar month, in which case such Euro-Rate Interest
Period shall end on the next preceding Business Day, (ii) any Euro-Rate Interest

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

Period which begins on the last day of a calendar month or on a day for which
there is no numerically corresponding day in the subsequent calendar month
during which such Euro-Rate Interest Period is to end shall end on the last
Business Day of such subsequent month, (iii) no Euro-Rate Interest Period for
the Revolving Credit Loans may end after the Revolving Credit Termination Date,
and (iii) no Euro-Rate Interest Period for the Term Loan may end after the Term
Loan Maturity Date.

 

Euro-Rate Loan: All or any portion of the Revolving Credit Loans or Term Loan,
as the case may be, bearing interest under the Euro-Rate Option, as set forth in
Subsection 2.3a (ii).

 

Euro-Rate Option: The ability of the Borrower to elect Euro-Rate Loans, as set
forth in Subsection 2.3a(ii).

 

Euro-Rate Reserve Percentage: The maximum percentage (expressed as a decimal
rounded upward to the nearest 1/100th of 1%), as determined by the Bank which is
in effect during any relevant period, as prescribed by the Board of Governors of
the Federal Reserve System (or any successor) for determining the maximum
reserve requirements (including supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
“Eurocurrency Liabilities”) of a member bank in such System.

 

Excluded Taxes: Any Tax imposed on the Bank’s net income or capital by any
Governmental Authority as a result of the Bank (a) carrying on a trade or
business or having a permanent establishment in such jurisdiction, (b) being
organized under the laws of such jurisdiction, or (c) being or being deemed to
be resident in such jurisdiction.

 

Event of Default: Any of the events specified in Section 8.1.

 

FDIC: The Federal Deposit Insurance Corporation or any entity succeeding to its
functions.

 

Federal Funds Effective Rate: For any day shall mean the rate per annum (based
on a year of 360 days and actual days elapsed and rounded upward to the nearest
1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the “Federal Funds
Effective Rate” as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
“Federal Funds Effective Rate” for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.

 

Fee: Any of the fees payable or to be payable by the Borrower to the Bank or the
Trustee pursuant to any of the Loan Documents including but not limited to the
Commitment Fee, any Letter of Credit Fee and the Closing Fee.

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Fiscal Quarter: Each three-month fiscal period of the Borrower beginning
respectively on each successive January 1, April 1, July 1 and October 1 during
the term hereof and ending on the immediately succeeding March 31, June 30,
September 30 and December 31.

 

Fiscal Year: Each 12-month fiscal period of the Borrower, currently January 1 to
December 31.

 

Fixture: Any fixture, as that term is defined in the Uniform Commercial Code, of
any Person, whether now owned or hereafter created or acquired and wherever
located.

 

Funded Acquisition: The purchase, lease or other acquisition of all or
substantially all of the assets of any Person or the purchase or other
acquisition of all or substantially all of the capital stock or other equity
interests of any Person, any of which is funded entirely by (A) Indebtedness
permitted by item (vi) of Section 6.1, (B) an Additional Equity Infusion or (C)
a combination thereof.

 

Funded Capital Expenditure: That portion of any Capital Expenditure which is
funded by (w) a Government Loan, (x) an Additional Equity Infusion, (y) the Term
Loan or (z) Indebtedness permitted by item (iv) of Section 6.1 hereof.

 

GAAP: Generally accepted accounting principles which are consistent with the
principles promulgated or adopted by the Financial Accounting Standards Board,
its predecessors and its successors, including any official interpretations
thereof.

 

General Intangible(s): All general intangibles, as that term is defined in the
Uniform Commercial Code, of any Person, whether now owned or hereafter created
or acquired, together with any intangible personal property of the Person of
every kind and nature (other than accounts receivable, Chattel Paper, Documents
and Instruments) including, without limitation, choses in action, causes in
action, corporate or other business records, inventions, designs, patent
applications, trademarks, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, tax refund claims, computer programs,
insurance payments and any guarantee claims.

 

Goods: All goods, as that term is defined in the Uniform Commercial Code, of any
Person, whether now owned or hereafter created or acquired and wherever located.

 

Governmental Authority: Any (i) nation, state, government, jurisdiction or
jurisdictional authority (domestic, foreign or international), any political
subdivision thereof, and any governmental, quasi-governmental, judicial, public,
statutory, administrative or regulatory body, agency, department, bureau,
authority, court, commission, board, office, instrumentality, administrative
tribunal or other entity of any of the foregoing and any official thereof and
(ii) any arbitrator, arbitration tribunal or other non-governmental entity which
has jurisdiction over the Borrower or a Subsidiary as a result of (A) the
written consent of the Borrower or (B) being vested with such jurisdiction by
any Governmental Authority.

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

Government Loan: Any BIDP Loan, EDF Loan, EDS Loan, Redevelopment Authority
Loan, any loan from the New York Job Development Authority in connection with
the Dunkirk Acquisition or the Community Development Block Grant in the
principal amount of $200,000 from the Dunkirk Local Development Corporation to
Dunkirk in connection with the acquisition by Dunkirk of a multiple bar
shotblaster for the steel factory of Dunkirk located at 830 Brigham Road in
Dunkirk, New York 14048.

 

Governmental Rule: Any constitutional provision, law, statute, code, act, rule,
regulation, permit, license, treaty, ordinance, order, writ, injunction, decree,
judgment, award, standard, directive, decision, determination or holding of any
Governmental Authority, whether in existence on the Closing Date or whether
issued, enacted or adopted after the Closing Date, and any change therein or in
the interpretation or application thereof following the Closing Date.

 

Grantor: The Borrower in its capacity as Grantor under the Trust Agreement.

 

Guarantors: Dunkirk, Holdings and each other Subsidiary of the Borrower that
executes a Guaranty of the Obligations in favor of the Bank; and the term
“Guarantor” refers to any of the Guarantors.

 

Guaranty: As to any Person, any obligation, direct or indirect, by which such
Person undertakes to guaranty, assume or remain liable for the payment of a
second Person’s obligations, including but not limited to (i) endorsements of
negotiable instruments, (ii) discounts with recourse, (iii) agreements to pay or
perform upon a second Person’s failure to pay or perform, (iv) agreements to
remain liable on obligations assumed by a second Person (other than pursuant to
Letters of Credit permitted hereunder), (v) agreements to maintain the capital,
working capital, solvency or general financial condition of a second Person and
(vi) agreements for the purchase or other acquisition of products, materials,
supplies or services, if in any case payment therefor is to be made regardless
of the nondelivery of such products, materials or supplies or the nonfurnishing
of such services.

 

Guaranty Agreement: A guaranty agreement executed by a Guarantor substantially
in the form of Exhibit “K” attached hereto, together in each case with all
extensions, renewals, amendments, substitutions and replacements thereto and
thereof.

 

Hazardous Substance: Any (i) substance which is defined as such or regulated in
any manner by any Environmental Law and (ii) petroleum products, including crude
oil.

 

Hedge Obligations: The obligations of a Person under an Interest Hedge
Agreement.

 

Holdings: USAP Holdings, Inc., a Delaware corporation, 100% of the outstanding
capital stock of which is owned legally and beneficially by the Borrower.

 

Holdings Credit Agreement: The credit agreement between the Borrower, as
borrower, and Holdings, as lender, dated as of November 1, 1995, as the same may
be amended from time to time with the Bank’s prior written consent.

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

Indebtedness: All of a Person’s (i) obligations and indebtedness for borrowed
money, (ii) obligations evidenced by bonds, debentures, notes or similar
instruments, (iii) obligations under conditional sale or other title retention
agreements relating to property purchased, (iv) obligations issued or assumed as
the deferred purchase price of property or services, (v) Capitalized Lease
Obligations, (vi) Hedge Obligations, (vii) obligations (contingent or matured)
with respect to letters of credit, including but not limited to letters of
credit whether matured or contingent, (viii) obligations of others secured by
any Encumbrance on property or assets owned or acquired by a Person, whether or
not the obligations secured thereby have been assumed, and (ix) Guarantees and
all other contingent liabilities; provided, however, that Indebtedness shall not
include the Borrower’s or any Subsidiary’s accounts payable and accrued
liabilities incurred in the ordinary course of business if those accounts
payable and accrued liabilities do not constitute obligations to repay borrowed
money or deferred purchase price.

 

Ineligible Securities: Any security which may not be underwritten or dealt in by
member banks of the Federal Reserve System under Section 16 of the Bank Act of
1933 (12 U.S.C. Section 24, Seventh), as amended.

 

Instrument: Any instrument, as that term is defined in the Uniform Commercial
Code, owned or held by any Person, whether now owned or in existence or
hereafter created or acquired.

 

Intercreditor Agreement: The Intercreditor Agreement dated as of October 3,
1995, as amended to the date hereof by and among the Bank, Machinery and
Equipment Loan Fund of the Commonwealth of Pennsylvania, BIDP, the County of
Allegheny acting by and through the EDF and the Redevelopment Authority and
consented to by the Borrower as the same may hereafter be amended, restated or
replaced.

 

Interest Hedge Agreement: Any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate insurance or any other
agreement or arrangement designed to provide protection against fluctuations in
interest rates, together with all extensions, renewals, amendments,
substitutions and replacements to and of any of the foregoing.

 

Interest Rate Option: Either the Base Rate Option or the Euro Rate Option as it
applies to the Loans.

 

Internal Revenue Code: The Internal Revenue Code of 1986, or any successor
legislation thereto, and the rules and regulations issued or promulgated
thereunder, including any amendments to any of the foregoing.

 

Inventory: All inventory, as that term is defined in the Uniform Commercial
Code, of any Person, including but not limited to any and all new or used goods,
merchandise and other personal property, including but not limited to goods in
transit, of the Borrower, Dunkirk or Holdings, and which is or may at any time
be held as finished goods, raw materials, work-in-process, supplies or materials
used or consumed in the business of the Borrower,

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

Dunkirk or Holdings, or held for sale or lease or furnished under a contract of
service in the ordinary course of the business of the Borrower, Dunkirk or
Holdings, including but not limited to ingot molds, universal rolling mill
rolls, all returned and repossessed goods and all supplementary items, packing
and shipping supplies and advertising materials, all of the foregoing whether
now owned or hereafter created or acquired and wherever located.

 

Investment Property: All investment property, as that term is defined in the
Uniform Commercial Code, of any Person, whether now owned or hereafter created
or acquired.

 

Landlord’s Consents: Collectively, in such form and substance reasonably
satisfactory to the Bank of consents landlords of material Leased Properties to
permit an Encumbrance in favor of the Bank against property of the Borrower
located at such premises and to waive any landlord’s lien or right of distraint
against any property of the Borrower located at such premises, all in a form
reasonably acceptable to the Bank.

 

Leased Properties: All lands and premises described in Schedule 1.1a which are
leased by a Loan Party and any other lands and premises which are leased by the
Borrower or a Subsidiary of the Borrower as the lessee.

 

Letter of Credit: Any letter of credit issued by the Bank pursuant to this
Agreement.

 

Letter of Credit Fee: The fee described and defined in Section 2.11b.

 

Letter of Credit Rights: Any letter of credit rights, as that term is defined in
the Uniform Commercial Code, of any Person, whether nor owned or hereafter
created or acquired.

 

Loan: A Revolving Credit Loan or the Term Loan; and the term “Loans” means
collectively the Revolving Credit Loans and the Term Loan.

 

Loan Account: The loan account referred to in Section 2.7.

 

Loan Document: Any of this Agreement, any Note, any Security Document, any
Letter of Credit, any application for Letter of Credit, any Reimbursement
Agreement, any Lockbox Agreement, the Working Cash Sweep Agreement, the Trust
Agreement, the Intercreditor Agreement, any other cash management agreement, any
Interest Hedge Agreement to which the Borrower is a party thereto and the Bank
or an Affiliate of the Bank is the counterparty, any Subordination Agreement to
which the Borrower is a party as a borrower and the Bank is party as a lender
and all other documents and instruments executed and delivered from time to time
to govern, evidence or secure the Obligations, and the exhibits, schedules,
statements, reports, certificates and other documents required by, or related
to, any of the foregoing, and all extensions, renewals, amendments,
substitutions and replacements thereto and thereof.

 

Loan Party: Any of the Borrower or any Guarantor; and the term “Loan Parties”
means collectively, the Borrower and Guarantors.

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

Lockbox Account: A U.S. Postal Service lockbox in the name of the Borrower or
Dunkirk, over which, pursuant to the Lockbox Agreement, the Bank has dominion
and control to the exclusion of the Borrower or Dunkirk, as the case may be, or
other Persons acting by or through the Borrower or Dunkirk, as the case may be,
and the related account into which the proceeds of the items received in the
Lockbox Account are processed, which may be a DDA.

 

Lockbox Agreement: That lockbox agreement executed by the Borrower or Dunkirk,
substantially in the form of Exhibit “B” hereto, in favor of the Bank together
with all extensions, renewals, amendments, substitutions and replacements
thereto and thereof.

 

Material Adverse Change: Any circumstance or event which (i) has or could
reasonably be expected to have a material adverse effect upon the validity or
enforceability of this Agreement or any of the other Loan Documents, (ii) is
material and adverse to the business, properties, assets, financial condition,
results of operations or prospects of the Borrower and its Consolidated
Subsidiaries, taken as a whole, (iii) impairs materially the ability of the
Borrower and the Guarantors to duly and punctually pay or perform the
Obligations, or (iv) impairs materially the ability of the Bank, to the extent
permitted, to enforce the Bank’s legal remedies pursuant to this Agreement and
the other Loan Documents.

 

Money: Any money, as that term is defined in the Uniform Commercial Code, of any
Person, whether now owned or hereafter acquired.

 

Money Purchase Plan: Any Benefit Arrangement subject to the minimum funding
standards under Section 302 of ERISA and Section 412 of the Internal Revenue
Code.

 

Mortgage: Any mortgage and security agreement substantially in the form of
Exhibit “F-1”, together with all extensions, renewals, amendments, substitutions
and replacements thereto and thereof including without limitation Exhibit “F-2”,
Exhibit “F-3” and Exhibit “F-4.; or any mortgage and security agreement by a
Loan Party concerning its fee interest in Owned Properties, which mortgage and
security agreement is in form and substance satisfactory to the Bank, together
with all extensions, renewals, amendments, substitutions and replacements
thereto and thereof.

 

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

 

Net Cash Proceeds: The cash proceeds to the Borrower of any disposition of
assets permitted by items (ii) and (iii) of Section 6.8, less the sum of (i)
reasonable costs associated with such disposition of assets, (ii) all Federal,
state and local taxes assessed against or paid by the Borrower in connection
therewith and (iii) the principal amount of any Indebtedness which is secured by
any asset disposed of and which is required to be repaid in connection
therewith.

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

Net Credit: As defined in the Working Cash Sweep Agreement.

 

Net Debit: As defined in the Working Cash Sweep Agreement.

 

Note: The Revolving Credit Note or the Term Note; and the term “Notes” means
collectively, the Revolving Credit Note and the Term Note.

 

Obligations: Collectively, (i) all unpaid principal and accrued and unpaid
interest under the Loans, (ii) all accrued and unpaid Fees hereunder or under
any of the other Loan Documents, (iii) all obligations (contingent or matured)
due the Bank pursuant to draws on Letters of Credit, (iv) all Hedge Obligations
of a Loan Party to the Bank, (v) any other amounts due hereunder or under any of
the other Loan Documents, including all reimbursements, indemnities, Fees,
costs, expenses, prepayment premiums, and other obligations of the Borrower or
any Subsidiary to the Bank or any indemnified party hereunder and thereunder,
(vi) all other existing and future Indebtedness of the Borrower or any
Subsidiary to the Bank under any other agreement or instrument between the
Borrower or any Subsidiary and the Bank or among the Borrower or any Subsidiary,
the Bank and any other Person, including without limitation any Interest Hedge
Agreement and the P Card Agreement, and (vii) all reasonable out-of-pocket costs
and reasonable expenses incurred by the Bank in connection with this Agreement
and the other Loan Documents, including but not limited to the reasonable fees
and expenses of the Bank’s counsel.

 

Original Agreement: The Second Amended and Restated Credit Agreement dated as of
January 30, 1998, as amended, as more fully defined in the recitals hereto.

 

Outstanding Revolving Credit Amount: The sum of the aggregate principal amount
of outstanding Revolving Credit Loans, plus the aggregate Stated Amounts of all
outstanding Letters of Credit, including any unreimbursed draws on Letters of
Credit which have not yet been converted to Revolving Credit Loans.

 

Owned Property: The lands and premises of a Loan Party owned in fee and
described in Schedule 1.1b and all plant, buildings, structures, erections,
improvements, appurtenances and fixtures (including fixed machinery and fixed
equipment) situated on these lands.

 

P Card Agreement: That certain VISA Purchasing Card Agreement by and between the
Borrower and the Bank executed as of November 1, 2000 by the Borrower and
executed as of November 28, 2000 by the Bank, as the same may be amended,
modified or supplemented from time to time.

 

Parent Account: The parent account as so designated in the Working Cash Sweep
Agreement and referred to in the Working Cash Sweep Agreement and Trust
Agreement as the Account.

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

Participant: Any bank or financial institution which acquires from the Bank an
undivided interest in the Bank’s Revolving Credit Commitment, in the Loans or in
the Letters of Credit, pursuant to Section 9.5.

 

Participation: The sale, made in accordance with the provisions of Section 9.5,
by the Bank to any Participant of an undivided interest in the Bank’s Revolving
Credit Commitment, in the Loans or in the Letters of Credit.

 

Payment Intangible(s): All payment intangibles, as that term is defined in the
Uniform Commercial Code, of any Person, whether now owned or hereafter created
or acquired.

 

PBGC: The Pension Benefit Guaranty Corporation established pursuant to ERISA, or
any entity succeeding to any or all of its functions under ERISA.

 

Permitted Encumbrance: Any of the following:

 

(i) The Encumbrances in the Collateral granted to the Bank;

 

(ii) Encumbrances for taxes, assessments, governmental charges or levies on any
of a Loan Party’s properties if such taxes, assessments, governmental charges or
levies (A) are not at the time due and payable or if they can thereafter be paid
without penalty or are being contested in good faith by appropriate proceedings
diligently conducted and with respect to which the applicable Loan Party has
created adequate reserves, and (B) are not pursuant to any Environmental Law;

 

(iii) Pledges or deposits to secure payment of workers’ compensation
obligations, unemployment insurance, deposits or indemnities to secure public or
statutory obligations or for similar purposes; provided, however, no such
Encumbrance may attach to the Bridgeville Property;

 

(iv) Encumbrances arising out of judgments or awards against a Loan Party with
respect to which enforcement has been stayed and such Person at the time shall
currently be prosecuting an appeal or proceeding for review in good faith by
appropriate proceedings diligently conducted and with respect to which the
applicable Loan Party has created adequate reserves or has adequate insurance
protection; provided, however, that at no time may the aggregate Dollar amount
of such liens exceed $100,000, and no such Encumbrance may attach to the
Bridgeville Property;

 

(v) Mechanics’, carriers’, workmen’s, repairmen’s and other similar statutory
liens incurred in the ordinary course of a Loan Party’s business, so long as the
obligation secured is not overdue or, if overdue, is being contested in good
faith by appropriate actions or proceedings diligently conducted; provided,
however, no such Encumbrance may attach to the Bridgeville Property;

 

(vi) Security interests in favor of lessors of personal property, which property
is the subject of a true lease between such lessor and a Loan Party;

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

(vii) Encumbrances existing on the Closing Date and listed on Schedule 6.3;
provided, however, that the Dollar amount of the obligation secured by any such
Encumbrance shall not exceed the amount shown opposite such Encumbrance on
Schedule 6.3;

 

(viii) Security interests in favor of lenders whose loans to a Loan Party are
permitted pursuant to Subsections 6.1(iii); provided, however, no such
Encumbrance may attach to the Bridgeville Property; and

 

(ix) Security interest in favor of the Dunkirk Local Development Corporation to
secure the repayment of the deferred loan of $200,000 by the Dunkirk Local
Development Corporation to Dunkirk incurred by Dunkirk to finance the
acquisition of a multiple bar shotblaster for the steel factory of Dunkirk
located at 830 Brigham Road in Dunkirk, New York 14048; provided, that, such
lien is limited to such multiple bar shotblaster.

 

(x) Mortgage interest created by Mortgage dated February 14, 2002 in favor of
the New York Job Development Authority, d/b/a Empire State Development
Corporation, to secure repayment of the principal sum of $1,100,000.00 by
Dunkirk Acquisition, LLC (now known as Dunkirk Specialty Steel, LLC), incurred
by Dunkirk to finance the purchase of the 79.01 acre tract with the steel plant
erected thereon.

 

(xi) Security interest created by Security Agreement dated February 13, 2002 in
favor of the New York Job Development Authority, d/b/a Empire State Development
Corporation, to secure the repayment of the loan of the sum of $1.9 million by
Dunkirk Acquisition, LLC (now known as Dunkirk Specialty Steel, LLC) incurred by
Dunkirk to finance the purchase of the personal property at the Dunkirk plant.

 

Person: Any individual, partnership, corporation, association, trust, business
trust, joint venture, joint stock company, limited liability company,
unincorporated organization or enterprise or Governmental Authority.

 

Plan: Any employee pension benefit plan other than a Multiemployer Plan which is
covered by Title IV of ERISA and which either (i) is maintained by the Borrower
and/or any ERISA Affiliate of the Borrower for employees of the Borrower and/or
any ERISA Affiliate or (ii) has at any time within the preceding five years been
maintained by the Borrower and/or any entity which was an ERISA Affiliate at
such time for their respective employees.

 

Prime Rate: For any day, a fluctuating interest rate per annum equal to the rate
of interest which the Bank announces from time to time as its prime lending
rate, which rate may not be the lowest rate then being charged by the Bank to
certain commercial borrowers.

 

Prohibited Transaction: A “prohibited transaction” as defined under Section 406
of ERISA or Section 4975 of the Internal Revenue Code.

 

Promissory Note(s): All promissory notes, as that term is defined in the Uniform
Commercial Code, of any Person, whether now owned or hereafter created or
acquired.

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Qualified Account: Any Account of the Borrower or Dunkirk which the Bank, in its
sole discretion exercised in good faith, determines to have met all of the
following requirements, which requirements may be revised by the Bank in its
sole discretion exercised in good faith from time to time after giving prior
notice to the Borrower:

 

(i) The Account represents a complete bona fide transaction for goods sold or
services rendered (including conversion services rendered but excluding any
amounts in the nature of a service charge added to the amount due on an invoice
because the invoice has not been paid when due) which requires no further act
under any circumstances on the part of the Borrower or Dunkirk to make such
Account payable by the Account Debtor;

 

(ii) The Account arises from an arm’s-length transaction in the ordinary course
of the Borrower’s or Dunkirk’s business between the Borrower or Dunkirk, as the
case may be, and an Account Debtor which is not (A) an Affiliate or Subsidiary
of the Borrower or Dunkirk, (B) a Person controlled by a Subsidiary or Affiliate
of the Borrower or Dunkirk, (C) an officer, director, stockholder or employee of
the Borrower or Dunkirk or (D) a member of the family of an officer, director,
stockholder or employee of the Borrower or Dunkirk;

 

(iii) The Account shall not (A) be or have been unpaid more than 120 days from
the original invoice date, or (B) be payable by an Account Debtor (1) more than
50% of whose Accounts (in Dollar value) are not deemed Qualified Accounts or (2)
whose Accounts constitute 15% or more of the aggregate amount of all outstanding
Accounts unless such Account Debtor is specifically identified on Schedule 5.2
hereto. Such Schedule 5.2 may be revised from time to time in accordance with
Section 5.2i hereof. In no event shall Accounts of any Account Debtor listed on
Schedule 5.2 exceed 40% or more of the aggregate amount of all outstanding
Accounts. When applying the tests set forth in clause (2) immediately above and
the immediately preceding sentence, only those Accounts which exceed by Dollar
value the respective percentage thresholds shall not be Qualified Accounts;

 

(iv) The goods, the sale of which gave rise to the Account (A) were shipped or
delivered or provided to the Account Debtor on an absolute sale basis and not on
a consignment sale basis, a guaranteed sale basis, a sale-or-return basis or on
the basis of any other similar understanding or (B) were provided to the Account
Debtor on a bill and hold basis; provided that the aggregate of all such bill
and hold Accounts which shall be Qualified Accounts shall not at any time exceed
$1,000,000, and no part of such goods has been returned or rejected;

 

(v) The Account is not evidenced by Chattel Paper or an Instrument of any kind
and has not been reduced to judgment;

 

(vi) The Account Debtor with respect to the Account (A) is Solvent, (B) is not
the subject of any bankruptcy or insolvency proceedings of any kind or of any
other proceeding or action, threatened or pending, which might have a materially
adverse effect on his or its business, operations or properties, (C) has not
made an assignment for the benefit of his or its creditors, (D) has not
suspended business, dissolved or consented to or suffered the appointment of a
receiver, trustee, liquidator or custodian for him

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

or it or for all or a significant portion of his or its assets or affairs and
(E) is not, in the sole discretion of the Bank exercised in good faith, deemed
ineligible for credit for other reasons (including, without limitation,
unsatisfactory past experience of the Borrower or Dunkirk or the Bank with such
Account Debtor or the unsatisfactory reputation of such Account Debtor);

 

(vii) The Account Debtor is not located outside of the continental United States
of America, unless the Borrower or Dunkirk has delivered to the Bank any or all
letters of credit and/or cash against documents relating to such Account or
evidence of insurance, as requested by the Bank and deemed adequate and
acceptable by the Bank;

 

(viii) The Account Debtor is not the government of the United States of America,
or any Governmental Authority thereof, unless the Assignment of Claims Act of
1940 (31 U.S.C. §3727 et seq.), as amended from time to time, or applicable
similar or successor legislation, has been fully complied with to the Bank’s
satisfaction so that the Bank has a valid, perfection first priority lien and
security interest in such Account;

 

(ix) The Account is a valid, legally enforceable obligation of the Account
Debtor with respect thereto and is not subject to any dispute, condition,
contingency, offset, recoupment, reduction, claim for credit, allowance,
adjustment, counterclaim or defense on the part of such Account Debtor, and the
Account is not otherwise subject to any right of setoff to the extent of any of
the foregoing, and no facts or circumstances exist which may provide a basis for
any of the foregoing; provided, however, to the extent that such Account is
subject to an allowance adjustment or reduction in an amount that does not
exceed 35% of such Account, such Account shall be a Qualified Account in an
amount equal to such Account, less such allowance, adjustment or reduction;

 

(x) The Account is subject to a valid, perfected first priority lien and
security interest in favor of the Bank and is not subject to any other
Encumbrance whatsoever;

 

(xi) The Account is evidenced by an invoice or other documentation in form
acceptable to the Bank and arises from a contract which is in form and substance
satisfactory to the Bank;

 

(xii) The Borrower or Dunkirk, as the case may be, has observed and complied
with all Governmental Rules of the state in which the Account Debtor is located
or the Account is payable, which laws, if not observed and complied with, would
deny to the Borrower or Dunkirk, as the case may be, access to the courts of
such state;

 

(xiii) The Account is not subject to any provision prohibiting its assignment or
requiring notice of or consent to such assignment;

 

(xiv) The goods or services giving rise to the Account were not, at the time of
sale thereof, subject to any Encumbrance except a first priority lien and
security interest in favor of the Bank;

 

(xv) The Account is payable in freely transferable Dollars;

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(xvi) The Borrower or Dunkirk, as the case may be, has not made any agreement
with the Account Debtor for any deduction therefrom, except agreements relating
to (A) discounts or allowances which are made in the ordinary course of business
for prompt payment and which discounts or allowances are reflected in the
calculation of the face value of each invoice related to such Account and (B)
discounts or allowances permitted by item (ix) of this definition;

 

(xvii) The Borrower or Dunkirk, as the case may be, has not made any agreement
with the Account Debtor to extend the time of payment of such Account;

 

(xviii) The Account does not arise from a retail sale of goods to a Person who
is purchasing the same primarily for personal, family or household purposes;

 

(xix) No material covenant, representation or warranty contained in this
Agreement or any of the other Loan Documents with respect to such Account has
been breached; and

 

(xx) The Account would not be disqualified for any other reason generally
accepted in the commercial finance business.

 

In addition to the foregoing requirements, Accounts of any Account Debtor which
are otherwise Qualified Accounts shall be reduced to the extent of any accounts
payable (including, without limitation, the Bank’s good faith estimate of any
contingent liabilities) owing by the Borrower or Dunkirk, as the case may be, to
such Account Debtor, which accounts payable are known as “contras”.

 

Qualified Bank: A bank or trust company organized under the laws of the United
States of America or any state thereof, having either (i) capital, surplus and
undivided profits aggregating at least $250,000,000 or (ii) total assets in
excess of $1,000,000,000 and whose long-term certificates of deposit are rated
“AA” or better by Standard and Poor’s Rating Group, a division of McGraw Hill,
Inc. or “Aa” or better by Moody’s Investors Service, Inc.

 

Qualified Inventory: Any Inventory of the Borrower or Dunkirk which the Bank, in
its sole discretion exercised in good faith, determines to have met all of the
following requirements, which requirements may be revised by the Bank in its
sole discretion exercised in good faith from time to time after giving prior
notice to the Borrower:

 

(i) The Inventory is either (A) finished goods, (B) work-in-process, or (C) raw
materials, including but not limited to scrap metals and alloys; but excluding
in all cases Inventory which (1) consists of steel rolls or ingot molds used in
the processing of steel; or (2) has been shipped, delivered, provided to,
purchased or sold by the Borrower or Dunkirk on a bill-and-hold basis, a
consignment sale basis, a guaranteed sale basis, a sale-or-return basis, or any
other similar basis or understanding other than an absolute sale;

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(ii) The Inventory (A) is located in the continental United States at the
premises listed on Schedule 1 to the Security Agreement and, for each of such
premises which are leased by the Borrower or Dunkirk as tenant, a duly executed
Landlord’s Consent satisfactory to the Bank has been executed by the landlord,
delivered to the Bank and (B) is not in transit or, if the Inventory is in
transit, the Bank has determined in its sole discretion that the Bank has a
valid, perfected first priority lien and security interest in such Inventory;
provided, however, that in no event will the Bank advance in excess of
$1,000,000 at any one time outstanding on Inventory in transit;

 

(iii) Except as set forth in Schedule 1 to the Security Agreement, the Inventory
is not stored with a third party processor, bailee, warehouseman, consignee or
similar party;

 

(iv) The Inventory is not packaging material or supplies, unless such materials
or supplies have already been incorporated into the finished goods;

 

(v) The Inventory is subject to a valid, perfected first priority lien and
security interest in favor of the Bank and is not subject to any other
Encumbrance whatsoever;

 

(vi) The Inventory meets all applicable standards imposed by any Governmental
Authority;

 

(vii) None of the Inventory, the manufacturing of which is subject to such laws,
has been manufactured in violation of any Federal minimum wage or overtime laws,
including without limitation the Fair Labor Standards Act, 29 U.S.C. §215(a)(1)
or any similar or successor legislation;

 

(viii) No material covenant, representation or warranty contained in this
Agreement or any of the other Loan Documents with respect to such Inventory has
been breached; and

 

(ix) The Inventory is not, and should not be, disqualified for any other reason
generally accepted in the commercial finance business.

 

Redevelopment Authority: The Redevelopment Authority of Allegheny County.

 

Redevelopment Authority Loan: A term loan issued by the Redevelopment Authority.

 

Regulation T, U and X: Regulation T, Regulation U and Regulation X promulgated
by the Board of Governors of the Federal Reserve System (12 C.F.R. Part 220 et
seq., Part 221 et seq., and Part 224 et seq., respectively), as such regulations
are now in effect and as may hereafter be amended.

 

Reimbursement Agreement: Any Reimbursement Agreement relating to a Letter of
Credit issued by the Bank for the account of the Borrower or an Affiliate
pursuant to which the Borrower agrees to reimburse the Bank for any draw against
such Letter of Credit.

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Reportable Event: A “reportable event” described in Section 4043(b) of ERISA and
in 29 C.F.R. Part 2615.

 

Revolving Credit Commitment: The obligation of the Bank to make available to the
Borrower an amount which, when added to the aggregate Stated Amounts of all
Letters of Credit, plus any Unreimbursed L/C Draws on Letters of Credit which
have not yet been converted to Revolving Credit Loans, does not exceed the
lesser of (i) $15,000,000.00 or (ii) the Borrowing Base.

 

Revolving Credit Loan: An individual borrowing under the Revolving Credit
Commitment; and the term “Revolving Credit Loans” refers to all such borrowings
under the Revolving Credit Commitment.

 

Revolving Credit Note: The Revolving Credit Note, in substantially the form of
Exhibit “A” duly executed by the Borrower and delivered to the Bank, together
with all extensions, renewals, amendments, substitutions and replacements
thereto and thereof.

 

Revolving Credit Termination Date: June 30, 2009, as such date may be extended
upon written consent of the Bank which consent is within the sole discretion of
the Bank.

 

SEC: The Securities and Exchange Commission and any entity succeeding to its
functions.

 

Section 20 Subsidiary: The Subsidiary of the bank holding company controlling
the Bank, which Subsidiary has been granted authority by the Federal Reserve
Board to underwrite and deal in certain Ineligible Securities.

 

Securities Account(s): All securities accounts, as that term is defined in the
Uniform Commercial Code, of any Person, whether now owned or hereafter created
or acquired.

 

Security Agreement: The security agreement and collateral assignment executed by
the Borrower, Dunkirk or Holdings, substantially in the form of Exhibit “D”,
together with all extensions, renewals, amendments, substitutions and
replacements thereto and thereof.

 

Security Document: Any (i) Security Agreement, (ii) Mortgage, (iii) Lockbox
Agreement, (iv) Guaranty Agreement, (v) Landlord’s Consent, (vi) additional
documents and instruments entered into from time to time for the purpose of
securing the Obligations, (vii) ancillary documents and instruments relating to
any of the foregoing, such as Uniform Commercial Code financing statements and
stock powers and (viii) extensions, renewals, amendments, substitutions and
replacements to and of any of the foregoing.

 

Security Entitlement(s): All security entitlements, as such term is defined in
the Uniform Commercial Code, of any Person, whether now owned or hereafter
created or acquired.

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Shared Collateral: Shall have the meaning ascribed to it in an Intercreditor
Agreement.

 

Software: All software, as that term is defined in the Uniform Commercial Code,
of any Person, whether now owned or hereafter created or acquired.

 

Solvent: As to any Person, the condition which exists when such Person (i) owns
assets whose value (both at fair market value and present fair saleable value)
is, on the date of determination, greater than the amount of such Person’s
liabilities (including without limitation contingent and unliquidated
liabilities), (ii) is able to pay all of its Indebtedness as such Indebtedness
matures and (iii) has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to engage.

 

Stated Amount: As to any Letter of Credit, the lower of (i) the face amount
thereof or (ii) the remaining available undrawn amount thereof (regardless of
whether any conditions for drawing could then be met).

 

Subordination Agreement: A Subordination Agreement substantially in the form of
Exhibit “I” together with all extensions, renewals, amendments, substitutions
and replacements thereto and thereof.

 

Subordinated Indebtedness: Indebtedness subordinated to the Obligations in a
manner satisfactory to the Bank, including without limitation as set forth in
any Subordination Agreement.

 

Subsidiary: (i) Any corporation or trust of which 50% or more (by number of
shares or number of votes) of the outstanding capital stock or shares of
beneficial interest normally entitled to vote for the election of one or more
directors or trustees (regardless of any contingency which does or may suspend
or dilute the voting rights) is at such time owned directly or indirectly by
another Person or one or more of such other Person’s subsidiaries, (ii) any
partnership of which such other Person is a general partner or of which 50% or
more of the partnership interests is at the time directly or indirectly owned by
such other Person or one or more of such other Person’s Subsidiaries, (iii) any
limited liability company of which such Person is a member or of which 50% or
more of the limited liability company interests is at the time directly or
indirectly owned by such other Person or one or more of such other Person’s
Subsidiaries or (iv) any corporation, trust, partnership, limited liability
company or other entity which is controlled or capable of being controlled by
such other Person or one or more of such other Person’s Subsidiaries.

 

Supporting Obligations: All supporting obligations as that term is defined in
the Uniform Commercial Code, of any Person, whether nor owned or hereafter
created or acquired.

 

Tangible Chattel Paper: All tangible chattel paper, as that term is defined in
the Uniform Commercial Code, of any Person, whether now owned or hereafter
created or acquired.

 

Target Balance: As defined in the Working Cash Sweep Agreement.

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Tax or Taxes: All taxes, charges, fees, levies, imposts and other assessments,
including all income, sales, use, goods and services, value added, capital,
capital gains, alternative, net worth, transfer, profits, withholding, payroll,
employer health, excise, franchise, real property and personal property taxes,
and any other taxes, customs duties, fees, assessments, royalties, duties,
deductions, compulsory loans or similar charges in the nature of a tax,
including PBGC, any state or provincial pension plan contributions, employment
insurance payments and workers compensation premiums, together with any
installments, and any interest, fines and penalties, imposed by any Governmental
Authority, whether disputed or not.

 

Termination Event: (i) A Reportable Event with respect to a Plan or an event
described in Section 4062(e) of ERISA with respect to a Plan, (ii) the
withdrawal of the Borrower or any ERISA Affiliate from a Plan during a Plan year
in which the Borrower or such ERISA Affiliate was a “substantial employer”, as
such term is defined in Section 4001(a)(2) of ERISA, (iii) the incurrence of
liability by the Borrower or such ERISA Affiliate under Section 4064 of ERISA
upon the termination of a Plan, (iv) the distribution of a notice of intent to
terminate a Plan pursuant to Section 4041(c) of ERISA or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA, (v) the institution of
proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (vi)
any other event or condition which might reasonably constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.

 

Term Loan: The Term Loan described in Section 2.2 hereof.

 

Term Loan Commitment: The obligation of the Bank to make available to the
Borrower, pursuant to the terms hereof, the Term Loan.

 

Term Loan Maturity Date: June 30, 2011.

 

Term Note: The Term Note in substantially the form of Exhibit “C” duly executed
by the Borrower and delivered to the Bank, together with all extensions,
renewals, amendments, substitutions and replacements thereto and thereof.

 

Transfer Difference: As defined in the Working Cash Sweep Agreement.

 

Trust Agreement: The Working Cash® Trust Agreement dated as of May 1, 1997, by
and between the Grantor and the Trustee and all extensions, renewals,
amendments, substitutions and replacements thereto and thereof.

 

Trustee: PNC Bank, National Association in its capacity as trustee under the
Trust Agreement.

 

UCC Collateral: Collectively (a) all personal property of a Loan Party,
including without limitation the following, all whether now owned or hereafter
acquired or arising and wherever located: (i) Accounts (including credit card
receivables); (ii) Securities Entitlements, Securities Accounts, Commodity
Accounts, Commodity Contracts and Investment Property; (iii)

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Deposit Accounts; (iv) Instruments (including Promissory Notes); (v) Documents
(including warehouse receipts); (vi) Chattel Paper (including Electronic Chattel
Paper and Tangible Chattel Paper); (vii) Inventory, including raw materials,
work in process, or materials used or consumed in a Loan Party’s business, items
held for sale or lease or furnished or to be furnished under contracts of
service, sale or lease, goods that are returned, reclaimed or repossessed;
(viii) Goods of every nature, including stock-in-trade, goods on consignment,
standing timber that is to be cut and removed under a conveyance or contract for
sale, computer programs embedded in such Goods and farm products; (ix)
Equipment, including machinery, vehicles and furniture; (x) Fixtures; (xi)
As-extracted Collateral; (xii) Commercial Tort Claims, if any, described from
time to time on a schedule or supplement to the Security Agreement; (xiii)
Letter of Credit Rights; (xiv) General Intangibles, of every kind and
description, including Payment Intangibles, Software, computer information,
source codes, object codes, records and data, all existing and future customer
lists, choses in action, claims (including claims for indemnification or breach
of warranty), books, records, patents and patent applications, copyrights,
trademarks, tradenames, tradestyles, trademark applications, goodwill,
blueprints, drawings, designs and plans, trade secrets, contracts, licenses,
license agreements, formulae, tax and any other types of refunds, returned and
unearned insurance premiums, rights and claims under insurance policies; (xv)
all Supporting Obligations of all of the foregoing property; (xvi) all property
of a Loan Party now or hereafter in the Bank possession or in transit to or
from, or under the custody or control of, the Bank or any affiliate thereof;
(xviii) all cash and cash equivalents thereof; and (xviii) all cash and noncash
Proceeds (including insurance proceeds) of all of the foregoing property, all
products thereof and all additions and accessions thereto, substitutions
therefor and replacements thereof; and

 

(b) all books, records, documents, ledger receipts and other information of a
Loan Party pertaining to any of the foregoing, including, without limitation,
all customer lists, credit files, computer records, computer programs, storage
media and computer software used or required in connection with the
establishment, generation, processing, maintenance or storage of such books,
records or documents or otherwise used or acquired in connection with
documenting information pertaining to any of the aforesaid collateral.

 

Unfunded Benefit Liabilities: With respect to any Plan, the amounts described in
Section 4001(a)(18) of ERISA.

 

Uniform Commercial Code: The Uniform Commercial Code as enacted in the
Commonwealth of Pennsylvania or any other jurisdiction which controls the
perfection of a security interest in any of the Collateral in favor of the Bank,
in effect on the Closing Date and as amended from time to time.

 

Unreimbursed L/C Draw: Such sum defined in Section 2.11e hereof.

 

USWA Agreement: Each of the several Collective Bargaining Agreements between the
Borrower and the United Steelworkers of America and all appendices in effect as
of the Closing Date.

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Value: When used in the context of the Borrower’s and Dunkirk’s Qualified
Inventory, shall mean the lower of cost (determined on a first-in-first-out
basis) or market.

 

Withdrawal Liability: “Withdrawal liability” as defined by the provisions of
Part 1 of Subtitle E to Title IV of ERISA.

 

Working Cash Agreements: This Agreement, the Working Cash Sweep Agreement and
the Trust Agreement.

 

Working Cash Sweep Agreement: The Working Cash®, Line of Credit, Investment
Sweep Rider dated as of June 24, 2005, by and between the Borrower as the
Customer and the Bank and all extensions, renewals, amendments, substitutions
and replacements thereto and thereof.

 

1.2 Other Definitional Provisions. (i) Except as otherwise specified herein, all
references in any Loan Document (A) to any Person shall be deemed to include
such Person’s successors and assigns, (B) to any applicable law or Governmental
Rule defined or referred to herein shall be deemed references to such applicable
law or Governmental Rule as the same may have been or may be amended,
supplemented or replaced from time to time and (C) to any Loan Document defined
or referred to herein shall be deemed references to such Loan Document (and, in
the case of the Note or other instrument, any instrument issued in substitution
therefor) as the terms thereof may have been or may be amended, supplemented,
waived or otherwise modified from time to time.

 

(ii) When used in any Loan Document, the words “herein”, “hereof” and
“hereunder” and words of similar import shall refer to such Loan Document as a
whole and not to any particular provision of such Loan Document, and the words
“Article”, “Section”, “Subsection”, “Schedule”, “Exhibit” and “Annex” shall
refer to Articles, Sections and Subsections of, and Schedules, Exhibits and
Annexes to, such Loan Document unless otherwise specified.

 

(iii) Whenever the context so requires, in all Loan Documents the use of or
reference to any gender includes the masculine, feminine, and neuter genders,
and all terms used in the singular shall have comparable meanings when used in
the plural and vice versa.

 

(iv) All accounting terms used in any Loan Document which are not specifically
defined therein shall be construed in accordance with GAAP consistently applied,
except as otherwise expressly stated therein.

 

ARTICLE 2. THE LOANS

 

2.1 Revolving Credit Commitment.

 

2.1a Revolving Credit Loans. The Bank agrees, subject to the terms and
conditions hereof and relying upon the representations and warranties herein set
forth, that the Borrower

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shall have the right to borrow, repay and reborrow, from the date hereof until
the Revolving Credit Termination Date, an aggregate principal amount which,
together with the aggregate Stated Amounts of all outstanding Letters of Credit,
plus any Unreimbursed L/C Draws thereunder which have not been converted to
Revolving Credit Loans, shall not exceed the lesser of $15,000,000, or the
Borrowing Base in the aggregate at any one time outstanding. In the event of any
advance under the Revolving Credit Commitment, the Bank may, at its option,
conduct an audit and appraisal of the Accounts and Inventory of the Borrower and
Dunkirk (at the sole cost of the Borrower) to evidence compliance with the
Borrowing Base and modify, in the Bank’s sole discretion, the advance rates for
borrowing against Qualified Accounts, Qualified Inventory, or both. The parties
hereto acknowledge and agree that after the conversion of certain outstanding
revolving credit loans to a portion of the Term Loan hereunder, the aggregate
principal amount of remaining revolving credit loans outstanding under the
Original Agreement on the Closing Date is $12,940,540.69; and that such
outstanding revolving credit loans are hereby acknowledged to be outstanding
hereunder as Revolving Credit Loans.

 

2.1b Mandatory and Voluntary Reductions of Revolving Credit Commitment.

 

(i) Borrowing Base. In the event that at any time any of the Bank’s Loan
Account, the Borrowing Base Certificate (in the form of Exhibit “J” hereto) most
recently delivered by the Borrower to the Bank or the Borrower’s calculation of
the Borrowing Base shows that the Outstanding Revolving Credit Amount exceeds
the Borrowing Base, the Borrower shall repay, simultaneously with the delivery
of any such Borrowing Base Certificate to the Bank, with any recalculation of
the Borrowing Base or upon demand by the Bank, whichever is earliest, an amount
which is sufficient to reduce the aggregate outstanding principal amount of
Revolving Credit Loans so that, after such payment, the Outstanding Revolving
Credit Amount does not exceed the Borrowing Base.

 

(ii) Voluntary Reductions. Upon at least ten Business Days’ prior written notice
to the Bank, the Borrower may from time to time permanently reduce the Revolving
Credit Commitment, and, to the extent of such reduction, the portion of the
Revolving Credit Commitment shall no longer be available for borrowing.
Simultaneously with any such voluntary permanent reduction, the Borrower shall
make a payment of the outstanding Revolving Credit Loans equal to the excess, if
any, of (A) the Outstanding Revolving Credit Amount over (B) the lesser of (i)
the Revolving Credit Commitment, as so reduced, and (ii) the Borrowing Base.
Each such reduction shall be in a minimum principal amount of $500,000 or, if in
excess of $500,000, in integral multiples of $250,000. Notice of a reduction,
once given, shall be irrevocable.

 

(iii) Application of Payments. Any and all Revolving Credit Commitment
reductions or mandatory or voluntary prepayments made pursuant to any particular
item of this Section 2.1b shall be made in addition to, and not in lieu of, any
and all Revolving Credit Commitment reductions and mandatory and voluntary
prepayments required to be made pursuant to any other item of this Section 2.1b.
All such mandatory and voluntary prepayments shall be accompanied by all accrued
and unpaid interest thereon, and all amounts due pursuant to Section 2.4, if
any.

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2.1c Advance Procedures. In the event that the assets transferred into the
Parent Account from the Customer’s Trust under the Working Cash Sweep Agreement
are insufficient to cover the Net Debit, the Bank shall on behalf of the
Borrower advance an amount equal to the lesser of (i) the remaining amount of
the Net Debit or (ii) the Revolving Credit Commitment.

 

2.1d Payment Terms. Any Credit in the Parent Account shall, to the extent
available at the end of any Business Day, be automatically applied to the
repayment of the outstanding balance of the Revolving Credit Loans. In addition,
the outstanding principal balance of the Revolving Credit Loans and any accrued
and unpaid interest thereon shall be due and payable on the Revolving Credit
Termination Date. If any payment hereunder shall become due on a day which is
not a Business Day, such payment shall be made on the next succeeding Business
Day and such extension of time shall be included in computing interest with such
payment. Borrower hereby authorizes the Bank to charge the Parent Account or any
deposit account maintained by the Borrower, individually or jointly with others
with the Bank for any payment when due hereunder. Payments received will be
applied to charges, fees, expenses, accrued interest and principal in any order
the Bank may choose in its sole discretion.

 

2.1e Revolving Credit Note. The obligation of the Borrower to repay on or before
the Revolving Credit Termination Date the aggregate unpaid principal amount of
all Revolving Credit Loans shall be evidenced by the Revolving Credit Note
substantially in the form of Exhibit “A” attached hereto, executed by the
Borrower and delivered to the Bank.

 

2.1f Lockbox.

 

(i) Lockbox Account. On or prior to the Closing Date, each of the Borrower and
Dunkirk shall enter into a Lockbox Agreement with the Bank in the form of
Exhibit “B” hereto. The Borrower shall notify, and shall cause Dunkirk to
notify, all Account Debtors to make payment directly to the Lockbox Account. All
notifications to Account Debtors shall contain such instructions regarding the
address and account number of the Lockbox Account as may be specified by the
Bank to the Borrower and Dunkirk, as the case may be, from time to time, and
shall otherwise be satisfactory to the Bank. The Bank may also instruct Account
Debtors to make payment to the Lockbox Account at any time. The Bank, pursuant
to the term of the Lockbox Agreement, shall process all items received in the
lockbox and deposit the proceeds of the Lockbox Account into a DDA.

 

(ii) Other Bank Accounts. The Borrower agrees that it shall not maintain, and
shall cause Dunkirk not to maintain, any other depository accounts in which cash
or proceeds of Collateral could be deposited, except for those accounts meeting
the requirements of this item (ii). Pursuant to an agreement satisfactory in
form and substance to the Bank, each bank or other financial institution at
which such an account is maintained by the Borrower shall acknowledge that the
Bank has a security interest in and to such account maintained with it, and
shall agree that, either on a daily basis or upon receipt of instructions from
the Bank, it will cause all collected funds in such account (except for any
required minimum balances) to be deposited in a DDA by wire transfer.

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2.1g Termination of Working Cash Sweep Agreement. The Working Cash Sweep
Agreement may be terminated by the Borrower or the Bank on thirty (30) day’s
prior written notice from the Person terminating the Working Cash Sweep
Agreement to the other party thereto. During such thirty (30) day period the
Bank and the Borrower shall attempt to agree on an alternative mechanism for
funding Revolving Credit Loans under this Agreement. Failure of the Borrower and
the Bank to agree on an alternative funding mechanism shall constitute an Event
of Default hereunder at the end of such thirty (30) day period.

 

2.2 Term Loan Facility.

 

2.2a Term Loan Commitment. On the date hereof, the Bank extends to the Borrower
a term loan facility of $10,000,000. The Borrower and the Bank hereto
acknowledge and agree that the aggregate principal amount of term loan
outstanding under the Original Agreement on the Closing Date is $1,950,000; and
subject to the terms and conditions hereof, the Borrower hereby requests that
such outstanding term loan be hereby amended and extended hereby to be
outstanding hereunder as a portion of the Term Loan. Subject to the terms and
conditions hereof, the Borrower hereby requests that on the Closing Date
revolving credit loans outstanding under the Original Agreement in the principal
amount of $8,050,000 be converted into a portion of the outstanding Term Loan.
The Bank agrees, subject to the terms hereof and relying on the representations
and warranties herein set forth, that the Borrower shall have the right to amend
and extend term loans outstanding under the Original Agreement in the principal
amount of $1,950,000 and to convert outstanding revolving credit loans in the
principal amount of $8,050,000 into the Term Loan hereunder. Such amended,
extended and converted loans shall constitute the entire amount of the Term Loan
hereunder. There are no other funds disbursed hereunder to complete the Term
Loan the subject of this Agreement.

 

2.2b Request for Borrowing Tranches Applicable to the Term Loan. Each request
for a Borrowing Tranche applicable to the amendment, restatement and conversion
of the Term Loan on the Closing Date or a conversion of an existing Interest
Rate Option applicable to the Term Loan shall be made to the Bank orally or in
writing, by an Authorized Officer, (i) by 10:00 A.M. (Pittsburgh, Pennsylvania
time) on the Closing Date or on the Business Day of the proposed conversion to
bear interest at the Base Rate Option and (ii) by 12:00 noon (Pittsburgh,
Pennsylvania time) at least two Business Days prior to the Closing Date or the
date of the conversion of any portion of the Term Loan to bear interest at the
Euro-Rate Option. Each request shall specify the Closing Date or the date on
which such conversion of an existing Interest Rate Option is to be made, the
amount thereof and, if applicable, the Euro-Rate Interest Period therefor. Any
oral request for a conversion of an existing Interest Rate Option shall be
followed immediately by the Borrower’s written request therefore. A request from
the Borrower pursuant to this Section 2.2b, with respect to the Term Loan or any
portion thereof which is to bear interest at the Euro-Rate Option, shall
irrevocably commit the Borrower to accept such Euro-Rate Loan on the date
specified in such request.

 

2.2c Term Note. The obligation of the Borrower to repay on or before the Term
Loan Maturity Date, the aggregate unpaid principal amount of the Term Loan shall
be evidenced by the Term Note substantially in the form of Exhibit “C” hereto,
which shall be executed and delivered to the Bank on the Closing Date. Subject
to the terms of Section 7.2 hereof, the Bank

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shall disburse the Term Loan to the Borrower in accordance with the closing
instructions executed by the Borrower and the Bank. Each selection or conversion
of an Interest Rate Option applicable to the Term Loan shall be in the minimum
principal amount of $1,000,000 or if in excess of $1,000,000 in integral
multiples of $500,000.

 

2.2d Principal Payments on the Term Loan.

 

(i) Scheduled Principal Payments. Principal of the Term Loan shall be repaid in
twenty (20) consecutive quarterly installments beginning June 30, 2006 and
continuing thereafter on the last day of each December, March, June and
September to and including the Term Loan Maturity Date. Each of the first
nineteen quarterly principal installments will be in an amount equal to
$500,000. The final quarterly principal installment due on March 31, 2011, shall
be in an amount equal to the unpaid principal balance of the Term Loan plus all
accrued and unpaid interest thereon.

 

(ii) Voluntary Prepayments. The Borrower, subject to the terms hereof, shall
have the right, at its option, to prepay the Term Loan in whole at any time or
in part from time to time. Each partial voluntary prepayment of the Term Loan
shall be in the minimum amount of $1,000,000 or, if in excess of $1,000,000, in
integral multiples of $500,000. The Borrower shall give the Bank not less than
two (2) Business Days’ prior written notice of each prepayment specifying the
aggregate principal amount to be prepaid and the date of prepayment. Notice of
prepayment having been given as aforesaid, the principal amount specified in
such notice shall be due and payable on the prepayment date.

 

(iii) Mandatory Principal Prepayments. In addition to the payments required
pursuant to Subsection 2.2d(i) above, the Borrower shall make the following
prepayments:

 

(A) Asset Sales. The Borrower shall pay to the Bank, as a mandatory prepayment
of principal on the Term Loan, the Net Cash Proceeds of any disposition of
assets permitted by items (ii) and (iii) of Section 6.8; provided, however no
such mandatory prepayment of such Net Cash Proceeds need be made if (I) the Net
Cash Proceeds do not exceed in the aggregate $5,000,000 during the term hereof
and (II) such Net Cash Proceeds aggregating not more than $10,000,000 are used
within one hundred and eighty days of receipt to acquire other Equipment in
which the Bank is granted a first and prior Encumbrance.

 

(B) Casualty. The Borrower shall pay to the Bank, as a mandatory prepayment of
principal on the Term Loan, the Net Cash Proceeds of any casualty payment
received from an insurance company or eminent domain proceeding; provided,
however no such mandatory prepayment of such Net Cash Proceeds need be made if
(I) the Net Cash Proceeds do not exceed in the aggregate $5,000,000 during the
term hereof and (II) such Net Cash Proceeds aggregating not more than $5,000,000
are used within one hundred and eighty days of receipt to acquire other
Equipment or real property for a plant site in which the Bank is granted a first
and prior Encumbrance.

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(iv) Application of Payment. Each prepayment of principal of the Term Loan,
whether voluntary or mandatory shall be applied against the unpaid principal
installments of the Term Loan in the inverse order of their normal maturity.

 

2.3 Interest.

 

2.3a Interest Rate. During the term hereof, the Borrower, in accordance with the
provisions of this Section 2.3, shall have the option of electing from time to
time one or more Interest Rate Options set forth below to be applied by the Bank
to all or a portion of the Revolving Credit Loans and the Term Loan, as the case
may be.

 

(i) Base Rate Option. Under the Base Rate Option, the Borrowing Tranche of the
Revolving Credit Loans or the Term Loan bearing interest as such Option shall
bear interest at the Base Rate plus the Applicable Margin for the applicable
Loan.

 

(ii) Euro-Rate Option. Under the Euro-Rate Option, the Borrowing Tranches of the
Revolving Credit Loans or the Term Loan bearing interest at such Option shall
bear interest at a rate per annum equal to the sum of the Euro Rate plus the
Applicable Margin for the applicable Loan.

 

2.3b Adjustments to Interest Rates.

 

(i) Changes in Applicable Margin. The Applicable Margin shall be adjusted as of
the day that the Borrower’s annual and quarterly financial statements, and
Compliance Certificate are delivered to the Bank pursuant to Sections 5.2a, 5.2b
and 5.2c hereof.

 

(ii) Changes in Prime Rate or Federal Funds Effective Rate. The Base Rate shall
be adjusted from time to time, without notice to the Borrower, as necessary to
reflect any changes in the Prime Rate or in the Federal Effective Funds Rate, as
applicable, which adjustments shall be automatically effective on the day of any
such change.

 

(iii) Changes in Euro-Rate Reserve Percentage. The Euro-Rate Option shall be
adjusted from time to time, without notice to the Borrower, as necessary to
reflect any changes in the Euro-Rate Reserve Percentage, which adjustments shall
be automatically effective on the day of such change.

 

(iv) Event of Default. Upon the occurrence of and during the continuance of an
Event of Default, the outstanding principal amount of the Loans shall bear
interest from the date of such occurrence at a rate per annum which is equal to
2% (200 basis points) in excess of the rate or rates which would then otherwise
in effect pursuant to this Section 2.3 with respect to such Loans.

 

2.3c Interest Payment Dates.

 

(i) Revolving Credit Interest Payment Dates. Interest on the outstanding
Revolving Credit Loans bearing interest under the Base Rate Option will be due
and payable on

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or about the last date of each month for the period just ended, with the first
such payment due on June 30, 2005. Interest on the outstanding Revolving Credit
Loans bearing interest under the Euro-Rate Option shall be payable on the last
day of the relevant Euro-Rate Interest Period; provided that for Euro-Rate
Interest Periods in excess of three months, interest shall also be payable on
the 90th day of such Euro-Rate Interest Period, on any 180th or 270th day of
such Euro-Rate Interest Period and on the last day of such Euro-Rate Interest
Period. All interest will be charged to the Parent Account or another account
created by the Bank to implement the Working Cash Agreements. In the event that
there is insufficient Credit in the Parent Account or such other account to pay
interest, the Bank will advance funds on behalf of the Borrower as provided by
Subsection 2.1c hereof to the extent the Borrower has availability under the
Revolving Credit Commitment. If not paid by one of the two foregoing
alternatives, then interest will be immediately due and payable by the Borrower.
In the event that the sum, of Federal Funds Effective Rate plus fifty (50) basis
points is, for any period during any month, greater than the Prime Rate a
separate billing for additional interest due shall be sent to the Borrower. Such
additional interest shall be due and payable within ten (10) days. All accrued
and unpaid interest on the Revolving Credit Loan shall be due and payable on the
Revolving Credit Termination Date.

 

(ii) Term Loan Interest Payment Dates. Interest due on the outstanding Term Loan
bearing interest under the Base Rate Option shall be payable monthly in arrears
on the last day of each month for the period just ended, with the first such
payment due on June 30, 2005. Interest due on each outstanding Borrowing Tranche
of the Term Loan bearing interest under the Euro-Rate Option shall be payable on
the last day of the relevant Euro-Rate Interest Period; provided that for
Euro-Rate Interest Periods in excess of three months, interest shall also be
payable on the 90th day of such Euro-Rate Interest Period, on any 180th or 270th
day of such Euro-Rate Interest Period and on the last day of such Euro-Rate
Interest Period. All accrued and unpaid interest on the Term Loan shall be due
and payable on the Term Loan Maturity Date.

 

(iii) Existing Interest. All accrued and unpaid interest outstanding under a
Borrowing Tranche bearing interest at the Base Rate Option under the Original
Agreement shall continue to be due and payable hereunder and under the Notes and
all such interest shall be due and payable on June 30, 2005; and all accrued and
unpaid interest outstanding under a Borrowing Tranche bearing interest at the
Euro-Rate Option for any Euro-Rate Interest Period existing under the Original
Agreement shall continue to be due and payable hereunder and under the Notes and
all such interest shall be due and payable at the end of the applicable
Euro-Rate Interest Period existing under the Original Agreement.

 

(iv) Payments After Maturity. After any maturity of any Note or the Obligations,
whether on a scheduled maturity date, by acceleration or otherwise, all accrued
and unpaid interest shall be due and payable on demand until all amounts due
hereunder are paid in full.

 

2.3d Method of Calculation. The interest rate shall be calculated on the basis
of the actual number of days elapsed, using a year of 360 days. Interest for any
period shall be calculated from and including the first day thereof to but not
including the last day thereof.

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2.3e Interest Rate Option Elections, Renewals and Conversions. Subject to the
remaining provisions of this Agreement, the Borrower shall have the option to
elect to have all or any Borrowing Tranches bear interest at either of the
Interest Rate Options and shall have the right to renew elections of Interest
Rate Options and convert Borrowing Tranches to the other Interest Rate Option.
Notice of the Borrower’s election shall be made in accordance with Section 2.2b.
Elections of, conversions to or renewals of the Base Rate Option shall continue
in effect until converted to the Euro-Rate Option. Elections of, conversions to
or renewals of the Euro-Rate Option shall expire as to each such Euro-Rate
Option at the expiration of the applicable Euro-Rate Interest Period. Any
Borrowing Tranches outstanding for which no elections have been made shall bear
interest under the Base Rate Option.

 

2.3f Limitation on Election of Euro-Rate Options. Each election of the Euro-Rate
Option or the prepayment of all or any Euro-Rate Loans shall be in the minimum
principal amount of $1,000,000 or, if in excess of $1,000,000, in integral
multiples of $500,000. At no time during the term hereof may there be more than
a total of six (6) separate Borrowing Tranches in effect, no more than four (4)
of which may bear interest at the Euro-Rate Option. Upon the occurrence and
during the continuance of an Event of Default, the Borrower’s right to elect,
renew or convert to Euro-Rate Loans shall be suspended.

 

2.3g Special Provisions Relating to Euro-Rate Option.

 

(i) Euro-Rate Unascertainable. In the event that on any date on which a
Euro-Rate would otherwise be set the Bank shall have determined in good faith
(which determination shall be final and conclusive) that, by reason of
circumstances affecting the London interbank market, adequate and reasonable
means do not exist for ascertaining the Euro-Rate, the Bank shall give prompt
notice of such determination to the Borrower, and until the Bank notifies the
Borrower that the circumstances giving rise to such determination no longer
exist, the right of the Borrower to borrow under, renew or convert to the
Euro-Rate Option shall be treated as a request to borrow under, renew or convert
to the Base Rate Option.

 

(ii) Illegality of Offering Euro-Rate. If the Bank shall determine in good
faith, which determination shall be final and conclusive, that compliance by the
Bank with any applicable Governmental Rule (whether or not having the force of
law), or the interpretation or application thereof by any Governmental Authority
has made it unlawful for the Bank to make or maintain Euro-Rate Loans, the Bank
shall give notice of such determination to the Borrower. Notwithstanding any
provision of this Agreement to the contrary, unless and until the Bank shall
give notice to the Borrower that the circumstances giving rise to such
determination no longer apply:

 

(A) with respect to any Euro-Rate Interest Periods thereafter commencing,
interest on the corresponding Euro-Rate Loans shall be computed and payable
under the Base Rate Option; and

 

(B) on such date, if any, as shall be required by law, any Euro-Rate Loans then
outstanding shall be automatically renewed at the Base Rate Option; and the
Borrower shall pay to the Bank the accrued and unpaid interest on such Euro-Rate
Loans to (but not including) such renewal date.

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The Borrower shall pay the Bank any additional amounts reasonably necessary to
compensate the Bank for any out-of-pocket costs incurred by the Bank as a result
of any renewal pursuant to item (B) above on a day other than the last day of
the relevant Euro-Rate Interest Period, including, but not limited to, any
interest or fees payable by the Bank to lenders of funds obtained by it to loan
or maintain the Loans so converted. The Bank shall furnish to the Borrower a
certificate showing the calculation of the amount necessary to compensate the
Bank for such costs (which certificate, in the absence of manifest error, shall
be conclusive), and the Borrower shall pay such amount to the Bank, as
additional consideration hereunder, within ten (10) days of the Borrower’s
receipt of such certificate.

 

(iii) Inability to Offer Euro-Rate. In the event that the Bank shall determine,
in its sole discretion, that it is unable to obtain deposits in the London
interbank market in sufficient amounts and with maturities related to the
Euro-Rate Loans which would enable the Bank to fund such Euro-Rate Loans, then
the Bank shall immediately notify the Borrower that the right of the Borrower to
borrow under, convert to or renew the Euro-Rate Option shall be suspended.
Following notification of the suspension of the Euro-Rate Option, the Borrower
agrees to negotiate with the Bank for a modified Euro-Rate which will allow the
Bank to realize its anticipated and bargained-for yield. In the event that the
Borrower and the Bank cannot agree on a modified Euro-Rate, any notice of
borrowing under, conversion to or renewal of the Euro-Rate Option which was to
become effective during the period of suspension shall be treated as a request
to borrow under, convert to or renew the Base Rate Option with respect to the
principal amount specified therein.

 

(iv) Indemnity. In addition to the other provisions of this Section 2.3g, the
Borrower hereby agrees to indemnify the Bank against any loss or expense which
the Bank may sustain or incur as a consequence of any default by the Borrower in
failing to make any borrowing, conversion or renewal hereunder to bear interest
at the Euro-Rate Option on the scheduled date, in failing to make when due
(whether by declaration, acceleration or otherwise) any payment of any Euro-Rate
Loan or in making any payment or prepayment of any Euro-Rate Loan or any part
thereof on any day other than the last day of the relevant Euro-Rate Interest
Period, including but not limited to any loss of profit, premium or penalty
incurred by the Bank in respect of funds borrowed by it for the purpose of
making or maintaining any Euro-Rate Loan as determined in good faith by the Bank
in the exercise of its sole but reasonable discretion. The Bank shall furnish to
the Borrower a certificate showing the calculation of the amount of any such
loss or expense (which certificate, absent manifest error, shall be conclusive),
and the Borrower shall pay such amount to the affected Bank within ten days of
the Borrower’s receipt of such certificate.

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2.4 Yield Protection; Indemnity.

 

2.4a Yield Protection. If any Governmental Rule or the interpretation or
application thereof by any court or any Governmental Authority charged with the
administration thereof, or the compliance with any guideline or request from any
central bank or other Governmental Authority, whether or not having the force of
law:

 

(i) subjects the Bank to any tax, levy, impost, charge, fee, duty, deduction or
withholding of any kind hereunder (other than any tax imposed or based upon the
income of the Bank and payable to any Governmental Authority or taxing authority
of the United States of America or any state thereof) or changes the basis of
taxation of the Bank with respect to payments by the Borrower of principal,
interest or other amounts due from the Borrower hereunder (other than any change
which affects, and to the extent that it affects, the taxation by the United
States of America or any state thereof of the total net income of the Bank), or

 

(ii) imposes, modifies or deems applicable any reserve, special deposit, special
assessment or similar requirements against assets held by, deposits with or for
the account of or credit extended by the Bank, or

 

(iii) imposes upon the Bank any other condition with respect to this Agreement,
and the result of any of the foregoing is to increase the cost to the Bank,
reduce the income receivable by the Bank, reduce the rate of return on the
Bank’s capital or impose any expense upon the Bank by an amount which the Bank
in its sole but reasonable discretion deems to be material, the Bank shall from
time to time notify the Borrower of the amount determined by the Bank (which
determination, absent manifest error, shall be conclusive) to be reasonably
necessary to compensate the Bank (on an after-tax basis) for such increase in
cost, reduction in income, reduction in rate of return or additional expense,
setting forth the calculations therefor, and the Borrower shall pay such amount
to the Bank, as additional consideration hereunder, within 10 days of the
Borrower’s receipt of such notice.

 

2.4b Method of Calculation. In determining the amount due the Bank hereunder by
reason of the application of this Section 2.4, the Bank may use any reasonable
averaging or attribution method; provided, however, that the Bank must use
reasonable efforts to minimize such losses and costs.

 

2.5 Capital Adequacy. If (i) any adoption of, change in or interpretation of any
Governmental Rule, or (ii) compliance with any guideline, request or directive
of any central bank or other Governmental Authority or quasi-Governmental
Authority exercising control over banks or financial institutions generally,
including but not limited to regulations set forth at 12 C.F.R. Part 3 (Appendix
A), 12 C.F.R. Part 208 (Appendix A), 12 C.F.R. Part 225 (Appendix A) and 12
C.F.R. Part 325 (Appendix A) or any court requires that the commitments of the
Bank hereunder be treated as an asset or otherwise be included for purposes of
calculating the appropriate amount of capital to be maintained by the Bank or
any corporation controlling the Bank (a “Capital Adequacy Event”), the result of
which is to reduce the rate of return on the

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Bank’s capital as a consequence of such commitments to a level below that which
the Bank could have achieved but for such Capital Adequacy Event, taking into
consideration the Bank’s policies with respect to capital adequacy, by an amount
which the Bank reasonably deems to be material, the Bank shall promptly deliver
to the Borrower a statement of the amount necessary to compensate the Bank for
the reduction in the rate of return on its capital attributable to such
commitments (the “Capital Compensation Amount”). The Bank shall determine the
Capital Compensation Amount in good faith, using reasonable attribution and
averaging methods. The Bank shall from time to time notify the Borrower of the
amount so determined setting forth the calculations therefor (which
determination, absent manifest error, shall be conclusive). Such amount shall be
due and payable by the Borrower to the Bank 10 Business Days after such notice
is given.

 

2.6 Payments.

 

2.6a Place and Manner of Payments. All payments of principal, interest, fees,
costs and other amounts due hereunder and under the other Loan Documents not
credited to the Bank directly pursuant to the terms hereof or of the Working
Cash Sweep Agreement shall be made by the Borrower to the Bank at the Bank’s
principal office at One PNC Plaza, Fifth Avenue and Wood Street, Pittsburgh,
Pennsylvania 15222, Attention: Corporate Finance Group, not later than 12:00
noon (Eastern time) on the due date. All such payments with respect to the Loans
shall be immediately good funds when delivered by the Borrower to the Bank.

 

2.6b No Set-Off or Deductions. Subject to the terms of Section 9.5c hereof any
and all payments made by the Borrower hereunder shall be made to the Bank in
full, without set-off or counterclaim and free and clear of and without
deduction or withholding for, or on account of, any and all present and future
Taxes other than Excluded Taxes. If the Borrower is required by law to deduct or
withhold any Taxes from or in respect of any sum payable hereunder, (i) the sum
payable shall be increased, as may be necessary, so that after making all
required deductions and withholdings (including deductions and withholdings
applicable to additional sums payable under this Section) the Bank receives an
amount equal to the sum that it would have received had no deductions or
withholdings been made, (ii) the Borrower shall make the required deductions or
withholdings, and (iii) the Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority in accordance with any applicable
Governmental Rule. The Bank agrees either to repay or credit at Bank’s
discretion to the Borrower any refund or tax credit actually received by, or for
the benefit of, the Bank for tax amounts paid by the Borrower pursuant to this
Section.

 

2.6c Tax Indemnity. The Borrower shall indemnify the Bank for the full amount of
any Taxes (other than Excluded Taxes) imposed by any jurisdiction on amounts
payable by the Borrower under this Section paid or payable by the Bank and for
any liability (including penalties, interest and reasonable expenses) arising
therefrom or with respect thereto, whether or not such Taxes were correctly or
legally asserted, and for any Taxes (other than Excluded Taxes) levied or
imposed with respect to any indemnity payment made under this Section. This
indemnification shall be made within 30 days after the date the Bank makes
written demand therefor. If such Taxes are not correctly or legally asserted,
the Bank will reasonably cooperate with the Borrower at the Borrower’s expense
in contesting such assessment.

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2.6d Evidence of Payment. Within 30 days after the date of any payment of Taxes
withheld by the Borrower in respect of any payment by the Borrower to the Bank,
the Borrower shall furnish to the Bank the original or a certified copy of a
receipt issued by the relevant taxing authority evidencing payment by the
Borrower to the taxing authority of any Taxes (other than Excluded Taxes) with
respect to any payment payable to the Bank.

 

2.6e Survival. The obligations of the Borrower under this Section shall survive
the termination of this Agreement and the payment of all amounts payable under
this Agreement.

 

2.7 Loan Account. The Bank shall open and maintain on its books a Loan Account
in the Borrower’s name with respect to Loans made, repayments, prepayments, the
computation and payment of interest and other amounts due and sums paid to the
Bank hereunder and under the other Loan Documents. Such Loan Account shall be
conclusive and binding on the Borrower as to the amount at any time due to the
Bank from the Borrower except in the case of manifest error in computation.

 

2.8 Fees.

 

2.8a Commitment Fee. The Borrower shall pay to the Bank, on the last day of each
March, June, September and December during the term of the Revolving Credit
Commitment and on the Revolving Credit Termination Date, a Commitment Fee
calculated on the basis of the actual number of days elapsed, using a year of
360 days, at the rate of 1/2 of 1% per annum on the average daily (computed at
the opening of business) unused amount of the Revolving Credit Commitment (i.e.,
the Revolving Credit Commitment less the Outstanding Revolving Credit Amount)
for the Fiscal Quarter then ended. The first payment of the Commitment Fee under
this Agreement shall be due on June 30, 2005, shall be for the period beginning
on the Closing Date; and any accrued and unpaid commitment fee due and unpaid
under the Original Agreement shall continue to be evidenced by and due and
payable hereunder and shall be due and payable on June 30, 2005. The Commitment
Fee shall no longer accrue with respect to portions of the Revolving Credit
Commitment which became permanently unavailable to the Borrower as a result of
permanent reductions to the Revolving Credit Commitment made pursuant to Section
2.1b.

 

2.8b Closing Fee. The Borrower shall pay the Closing Fee on the Closing Date.

 

2.9 Payment From Accounts Maintained by Borrower. In the event that any payment
of principal, interest, Commitment Fee, Letter of Credit Fee, the Closing Fee,
other Fee or expense or any other amount due the Bank under any of the Loan
Documents is not paid when due, the Bank is hereby authorized to effect such
payment by debiting the Parent Account or any deposit account of the Borrower
now or in the future maintained with the Bank by the Borrower either
individually or with another Person. This right of debiting accounts of the
Borrower is in addition to any right of setoff accorded the Bank hereunder or by
operation of law.

 

2.10 Late Payment. If any payment required to be made by the Borrower hereunder
is not made on the due date thereof, the Borrower shall pay interest on the
amount of such required payment at the Default Rate for any Borrowing Tranche
bearing interest at the Base Rate Option (whether or not a Borrowing Tranche
bearing interest).

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2.11 Letter of Credit Subfacility.

 

2.11a Letter of Credit Commitment. At the request of the Borrower, the Bank will
issue for the account of the Borrower, on the terms and conditions hereinafter
set forth (including without limitation Article 7 hereof), one or more Letters
of Credit; provided, however, no Letter of Credit shall have an expiry date
later than fifteen (15) days prior to the Revolving Credit Termination Date; and
provided, further, however, that in no event shall (i) the Stated Amount of the
Letters of Credit issued pursuant to this Section 2.11 exceed, at any one time,
$2,000,000, or (ii) the sum of aggregate outstanding principal balance of the
Revolving Credit Loans, the aggregate unpaid balance of outstanding Revolving
Credit Loans, the aggregate unpaid balance of any Unreimbursed L/C Draws and the
aggregate Stated Amount of the Letters of Credit issued by the Bank under this
Section 2.11 exceed, at any one time, the aggregate Revolving Credit Commitment
or the Borrowing Base, whichever is less.

 

2.11b Letter of Credit Charges.

 

(i) The Borrower shall pay to the Bank a fee (the “Letter of Credit Fee”) equal
to a per annum rate of interest equal to the Applicable Margin for Revolving
Credit Loans bearing interest at the Euro-Rate Option, on the aggregate daily
(computed at the opening of business and on the basis of a year of 360 days and
actual days elapsed) Stated Amount of the outstanding Letters of Credit for the
period in question. The Letter of Credit Fee shall be payable (A) quarterly in
arrears on the last Business Day of each Fiscal Quarter occurring during the
term of this Agreement, (B) on the Revolving Credit Termination Date or (C) upon
acceleration of the Revolving Credit Note. Any issuance of an amendment to
extend the stated expiration date of a Letter of Credit or an amendment to
increase the Stated Amount of a Letter of Credit shall be treated as an issuance
of a new Letter of Credit for purposes of calculation of the Letter of Credit
Fee due and payable hereunder. After the occurrence of an Event of Default and
during the continuation thereof, the rate at which the Letter of Credit Fee is
calculated shall be increased by two hundred (200) basis points (2%) above the
pre-default rate.

 

(ii) The Borrower shall also pay to the Bank for the Bank’s own account the
Bank’s customary documentation fees payable with respect to the Letters of
Credit as the Bank may generally charge from time to time. Without limitation,
the foregoing shall include all charges and expenses paid or incurred by the
Bank in connection with any Letter of Credit, including without limitation: (A)
correspondents’ charges, if any, (B) any and all reasonable out-of-pocket
expenses and charges of the Bank in connection with the performance,
administration, interpretation, collection and enforcement of this Agreement and
any Letter of Credit, including all reasonable legal fees and expenses, and (C)
any and all applicable reserve or similar requirements and any and all premiums,
assessments, or levies imposed upon the Bank by any Governmental Authority.

 

(iii) If by reason of (A) any change in any Law or any change in the
interpretation or application by any judicial or regulatory authority of any Law
or (ii) compliance by the Bank with any direction, request or requirement
(whether or not having the force of law) of any Governmental Authority:

 

(A) the Bank shall be subject to any tax, levy, charge or withholding of any
nature or to any variation thereof or to any penalty with respect to the
maintenance or fulfillment of its obligations under this Section 2.11, whether
directly or by such being imposed on or suffered by the Bank;

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(B) any reserve, deposit or similar requirement is or shall be applicable,
imposed or modified in respect of the Letters of Credit; or

 

(C) there shall be imposed on the Bank any other condition regarding this
Section 2.11 or the Letters of Credit;

 

and if the result of any of the foregoing is to directly or indirectly increase
the cost to the Bank of issuing or maintaining any Letter of Credit, or to
reduce the amount receivable in respect thereof by, the Bank, then and in any
such case the Bank may, at any time after the additional cost is incurred or the
amount receivable is reduced, notify the Borrower, and the Borrower shall pay on
demand such amounts as the Bank may specify to be necessary to compensate the
Bank for such additional cost or reduced receipt, together with interest on such
amount from the date of the notice of such event which results in such increased
cost or reduction in amount receivable until payment in full thereof at a rate
equal at all times to the Base Rate. The determination by the Bank of any amount
due pursuant to this Section 2.11b as set forth in a certificate setting forth
the calculation thereof, shall, in the absence of manifest error, be final and
conclusive and binding on all of the parties hereto.

 

2.11c Change in Law. In the event any restrictions are imposed upon the Bank by
any Law of any Governmental Authority having jurisdiction over the banking
activities of the Bank which would prevent the Bank from issuing the Letters of
Credit or amending the Letters of Credit, the commitment of the Bank to issue
the Letters of Credit or enter into any amendment with respect thereto shall be
immediately suspended. The Bank shall promptly notify the Borrower of the
existence and nature of any restriction which would cause the suspension of the
commitment of the Bank to issue the Letters of Credit or to enter into
amendments with respect thereto. The Borrower will thereupon undertake
reasonable efforts to obtain the cancellation of all outstanding Letters of
Credit; provided, however, that the refusal of any beneficiary of a Letter of
Credit to surrender such Letter of Credit will not be an Event of Default
hereunder, provided that the Borrower shall undertake good faith efforts to
obtain substitute letters of credit for the then existing and outstanding
Letters of Credit. Nothing contained in this Section 2.11 shall be deemed a
termination of the Revolving Credit Commitment and, in the event of a suspension
of the commitment of the Bank to issue Letters of Credit as set forth above, the
Borrower may continue to borrow under the Revolving Credit Commitment provided
the requirements of Sections 7.1 and 7.2 are complied with.

 

2.11d Procedures for Issuance of Letters of Credit. When the Borrower desires
the issuance of a Letter of Credit, the Borrower shall deliver a duly completed
application and agreement for Letter of Credit to the Bank no later than 10:00
A.M. (Pittsburgh, Pennsylvania

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time) at least three (3) Business Days, or such shorter period as may be agreed
to by the Bank, in advance of the proposed date of issuance. Upon satisfaction
of the conditions set forth in Section 7.1 and, if applicable, Section 7.2, the
Bank shall be obligated to issue the Letter of Credit. In determining whether to
pay under a Letter of Credit, the Bank shall be responsible only to determine
that the documents and certificates required to be delivered under the Letter of
Credit have been delivered and that they comply on their face with the
requirements of the Letter of Credit.

 

2.11e Reimbursement of Draws. In the event of any request for drawing under a
Letter of Credit by the beneficiary thereof, the Bank shall immediately notify
the Borrower, and the Borrower shall reimburse, or cause the reimbursement of,
the Bank on demand as set forth in the applicable application and agreement for
Letter of Credit in an amount in same day funds equal to the amount of such
drawing; provided, however, that anything contained in this Agreement to the
contrary notwithstanding, unless the Borrower shall have notified the Bank prior
to such time that the Borrower intends to reimburse the Bank for all or a
portion of the amount of such drawing with funds other than the proceeds of
Revolving Credit Loans, the Borrower shall be deemed to have given a loan
request to the Bank requesting the Bank to make Revolving Credit Loans on the
first Business Day immediately following the date on which such drawing is
honored in an aggregate amount equal to the excess of the amount of such drawing
over the amount received by the Bank from such other funds in reimbursement
thereof (the “Unreimbursed L/C Draw”), plus accrued interest on such amount at
the rate set forth in Section 2.3a(i). Any such Revolving Credit Loan shall be
deemed advanced to the Borrower. The proceeds of any such Revolving Credit Loans
shall be applied directly by the Bank to reimburse the Bank for the Unreimbursed
L/C Draw plus accrued interest on such amount. The foregoing shall not limit or
impair the obligation of the Borrower to reimburse the Bank on demand.

 

2.11f Reimbursement Obligations Absolute. The obligations of the Borrower under
this Agreement to reimburse the Bank for all drawings upon the Letters of Credit
shall be absolute, unconditional and irrevocable, and shall not be subject to
any right of set-off or counterclaim and shall be paid or performed strictly in
accordance with the terms of this Agreement, under all circumstances whatsoever,
including the following circumstances:

 

(i) any lack of validity or enforceability of this Agreement, any Letter of
Credit or any of the Loan Documents;

 

(ii) any amendment or waiver of any provision of all or any of the Loan
Documents;

 

(iii) the existence of any claim, set-off, defense or other rights which the
Borrower may have at any time against any beneficiary or any transferee of any
Letter of Credit (or any Persons for whom any such beneficiary or any such
transferee may be acting), the Bank (other than the defense of payment to the
Bank in accordance with the terms of this Agreement) or any other Person,
whether in connection with this Agreement, the Loan Documents or any transaction
contemplated hereby or thereby or any unrelated transaction;

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(iv) any draft, demand, certificate, statement or document presented under any
Letter of Credit, appearing on its face to be valid and sufficient, but proving
to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect whatsoever;

 

(v) payment by the Bank under any Letter of Credit against presentation of any
document which does not comply with the terms of the Letter of Credit, provided
that such payment shall not have constituted gross negligence or willful
misconduct of the Bank;

 

(vi) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, not resulting from gross negligence or willful misconduct
of the Bank; and

 

(vii) the fact that a Default or Event of Default shall have occurred and be
continuing.

 

2.11g Construed with Applications. This Agreement is intended to supplement each
application and agreement for Letter of Credit executed by the Borrower and
delivered to the Bank. Whenever possible this Agreement is to be construed as
consistent with each application and agreement for Letter of Credit but, to the
extent that the provisions of this Agreement and each application and agreement
for Letter of Credit conflict, the terms of this Agreement shall control.

 

2.11h Letter of Credit Indemnity. In addition to amounts payable as elsewhere
provided in this Section 2.11, the Borrower hereby agrees to protect, indemnify,
pay and save the Bank harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys’ fees) which the Bank may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of the Letters of Credit or any
amendment thereto, other than as a result of the gross negligence or willful
misconduct of the Bank as determined by a court of competent jurisdiction, (ii)
the failure of the Bank to honor a draw under any Letter of Credit if the Bank
in good faith and upon advice of counsel believes that it is prohibited from
making such payment as a result of any requirement of Law or of any Governmental
Authority, or (iii) any material breach by the Borrower of any representation,
warranty, covenant, term or condition in, or the occurrence of any default
under, any document related to the issuance or any amendment of the Letters of
Credit. If any proceeding shall be brought or threatened against the Bank by
reason of or in connection with any event described in clauses (i) through (iii)
above, the Bank shall promptly notify the Borrower in writing, and the Borrower
shall assume the defense thereof, including the employment of counsel and
payment of all costs of litigation. Notwithstanding the preceding sentence, the
Bank shall have the right to employ their own counsel and to determine its own
defense of such action in any such case, but the fees and expenses of such
counsel shall be at the expense of the Bank unless (x) the employment of such
counsel shall have been authorized in writing by the Borrower, (y) the Borrower,
after the aforementioned notice of the action, shall not have employed counsel
to have charge of such defense or (z) if the position of the Borrower is adverse
or contrary to the position advocated by the Bank, as the case may be. In each
case described in clauses (x), (y) and (z) immediately above the reasonable fees
and expenses of counsel for the Bank, as the case may be shall be borne by the
Borrower. The Borrower shall not be liable for any settlement of any such action
affected without its consent.

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2.11i Payments without Inquiry. The Bank is hereby expressly authorized and
directed to honor any request for payment which is made under and in compliance
with the terms of any Letter of Credit without regard to, and without any duty
on the Bank’s part to inquire into, the existence of any disputes or
controversies between the Borrower, the beneficiary of any Letter of Credit or
any other Person, or the respective rights, duties or liabilities of any of them
or whether any facts or occurrences represented in any of the documents
presented under any Letter of Credit are true or correct. Furthermore, the
Borrower fully understands and agrees that the Bank’s sole obligation to the
Borrower shall be limited to honoring requests for payment made under and in
compliance with the terms of any Letter of Credit, the application and agreement
for Letter of Credit therefor and this Agreement and the Bank’s obligation
remains so limited even if the Bank may have assisted the Borrower in the
preparation of the wording of any Letter of Credit or any documents required to
be presented thereunder or that the Bank may otherwise be aware of the
underlying transaction giving rise to any Letter of Credit and this Agreement.

 

2.11j Limitations on Liability of Bank. As between the Borrower and the Bank,
the Borrower assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit by, the beneficiaries of the Letters of Credit. In furtherance
and not in limitation of the foregoing, the Bank shall not be responsible: (i)
for the form, validity, sufficiency, accuracy, genuineness or legal effect of
any document submitted by any party in connection with the application for or
the issuance or amendment of the Letters of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (ii) for the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign the Letters of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) for failure of a
beneficiary of a Letter of Credit to comply fully with conditions required in
order to draw upon such Letter of Credit; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telecopy, telex or otherwise, whether or not they be in
cipher; (v) for errors in interpretation of technical terms; (vi) for any loss
or delay in the transmission or otherwise of any document required in order to
make a draw under the Letters of Credit or of the proceeds thereof; (vii) for
the misapplication by a beneficiary of any Letter of Credit of the proceeds of
any drawing under such Letter of Credit; (viii) for any consequences arising
from causes beyond the control of the Bank, including, without limitation, any
Law; and (ix) for any other circumstances whatsoever in making or failing to
make payment under a Letter of Credit; except that the Borrower shall have a
claim against the Bank, and the Bank shall be liable to the Borrower, to the
extent, but only to the extent, of any direct, as opposed to consequential,
damages suffered by the Borrower by a court of competent jurisdiction to be the
result of (i) the Bank’s willful misconduct or gross negligence in determining
whether documents presented under a Letter of Credit comply with the terms of
the Letter of Credit, (ii) the Bank’s willful misconduct or gross negligence in
paying a draw under a Letter of Credit to any Person other than the beneficiary
of such Letter of Credit or its lawful successor, representative or assign (or
as otherwise directed in writing by the beneficiary of such Letter of Credit) or
(iii) the Bank’s willful failure to pay under a Letter of Credit after the
presentation to it by the beneficiary of

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such Letter of Credit or its lawful successor, representative or assign of a
sight draft and certificate or other documents strictly complying with the terms
and conditions of such Letter of Credit, unless the Bank in good faith and upon
advice of counsel believes that it is prohibited by law or other legal authority
from making such payment. None of the above shall affect, impair, or prevent the
vesting of any of the Bank’s rights or powers hereunder.

 

2.11k Reduction in Credit Rating of Bank. Except for the Bank’s obligations to
issue Letters of Credit hereunder and its obligations under such Letters of
Credit, the Bank shall have no liability to the Borrower from a reduction of the
Bank’s credit rating or any deterioration in its financial condition.

 

2.11l Expenses. The Borrower shall bear and pay all reasonable expenses of every
kind (including all reasonable attorneys’ fees) of the enforcement of any of the
Bank’s rights under this Agreement or the Letters of Credit, or of any claim or
demand by the Bank against the Borrower, or of any actual or attempted sale,
exchange, enforcement, collection, maintenance, retention, insurance,
compromise, settlement, release, delivery on trust receipt, or other security
agreement, or delivery of any such security, and of the receipt of proceeds
thereof, and will repay to the Bank any such expenses incurred by the Bank.

 

2.11m Good Faith Actions. In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or omitted by
the Bank under or in connection with the Letters of Credit or the related sight
drafts or certificates or documents, if taken or omitted in good faith, shall
not put the Bank under any resulting liability to the Borrower.

 

2.11n Subrogation Rights of Bank. Whenever appropriate to prevent unjust
enrichment and to the end that the Borrower shall bear substantially all of the
risks relative to any Letter of Credit and the underlying transactions, the Bank
shall be subrogated (for purposes of defending against the Borrower’s claims and
proceeding against others to the extent of the Bank’s liability to the Borrower)
to the Borrower’s rights against any Person who may be liable to the Borrower on
any underlying transaction, to the rights of any holder in due course or Person
with similar status against the Borrower, and to the rights of the beneficiary
or its assignee or person with similar status against the Borrower.

 

2.11o Governing Law. Except and to the extent inconsistent with the specific
provisions hereof, this Agreement, each Letter of Credit hereunder and all
transactions in connection therewith shall be interpreted, construed and
enforced according to: (i) the “Uniform Customs and Practice for Documentary
Credits” (1993 Revision), International Chamber of Commerce Publication No. 500
and subsequent revisions thereof which shall supersede inconsistent provisions
of applicable law to the extent not prohibited by applicable law and (ii) the
laws of the Commonwealth of Pennsylvania, including, without limitation, the
Uniform Commercial Code, and excluding conflict of laws rules.

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ARTICLE 3. SET-OFF AND SECURITY INTERESTS

 

3.1 Set-Off. To secure the repayment and performance of the Obligations, the
Borrower hereby gives to the Bank and any Participant a lien and security
interest upon and in any of the Borrower’s property, credits, securities or
Money which may at any time be delivered to, or be in the possession of, or owed
by the Bank and any Participant in any capacity whatever, including the balance
of any deposit account, maintained by the Borrower with the Bank or the
Participant, as the case may be. The Borrower hereby authorizes the Bank and any
Participant, at any time and from time to time upon the occurrence and during
the continuance of an Event of Default, at the Bank’s or the Participant’s
option, to apply, at the discretion of the Bank or the Participant, to the
payment of the Obligations, any and all such property, credits, securities or
Money now or hereafter in the hands of the Bank or the Participant or belonging
or owed to the Borrower.

 

3.2 Form of Security Documents. As general and continuing collateral security
for the payment and performance of all Obligations of the Borrower at any time
owing to the Bank, the Borrower shall grant, and shall cause Dunkirk and
Holdings to grant, a lien and security interest in all real and personal
property of the Borrower, Dunkirk or Holdings, as the case may be, whether now
owned or hereafter acquired, and on the Closing Date (or in the case of a
Mortgage for the Bridgeville Property and the Borrower’s fee interest in its
Titusville facility, within sixty (60) days of the Closing Date) the Borrower
and the Guarantors shall execute and deliver to the Bank, the following security
documents in each case in form and substance reasonably satisfactory to the
Bank:

 

(i) a Security Agreement from each of the Borrower, Dunkirk and Holdings
together with all necessary consents (including Landlord’s Consents) and
applicable financing statements;

 

(ii) a Mortgage with assignment of leases and rents, security agreement and
fixture filing encumbering the Owned Properties of the Borrower as a first
ranking fixed charge, (subject to Permitted Liens), in favor of the Bank;

 

(iii) a Leasehold Mortgage (or amendment to existing leasehold mortgage) with
assignment of subleases and rents, security agreement and fixture filing
encumbering each of the Leased Properties of the Borrower;

 

(iv) an Environmental Indemnity Agreement with respect to any Owned Properties
or Leased Properties the subject of a Mortgage in favor of the Bank.

 

(v) a Guaranty Agreement from each of Dunkirk and Holdings;

 

(vi) a Landlord’s Consent from the landlord of each Leased Property where
Collateral in an amount equal to or in excess of $500,000 is located or stored;

 

(vii) an assignment in favor of the Bank by the Borrower, Dunkirk and Holdings
of all insurance, including business interruption, liability and property
insurance, maintained by the Borrower as required hereunder, and the delivery of
an endorsement to the Bank for such insurance in accordance with Accord 27.

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3.3 Valid Encumbrance. All Collateral granted by the Borrower, Dunkirk and
Holdings to the Bank shall rank prior and senior to all other Encumbrances on
such assets and undertaking of the Borrower, Dunkirk and Holdings except for
priority liens permitted in writing by the Bank, and as otherwise expressly
agreed by the Bank in writing.

 

3.4 Registration. The Borrower shall, at its expense, register, file or record
the Security Documents in all offices where such registration, filing or
recording is necessary to the creation, perfection and preserving of the
security applicable to the Borrower, Dunkirk or Holdings including, without
limitation, any land registry offices.

 

3.5 After Acquired Property and Further Assurances. The Borrower, Dunkirk and
Holdings shall from time to time to, upon the reasonable request of the Bank,
provide the Bank with such further security instruments as may be required in
connection with any assets, shares or other equity interests acquired by the
Borrower, Dunkirk and Holdings after the date hereof. In addition, the Borrower
shall cause each newly-created or acquired Subsidiary to execute and deliver a
Guaranty Agreement, a Security Agreement and any applicable mortgage to the
Bank.

 

3.6 Form, Substance and Registration of Collateral. The Security Documents and
all acknowledgements referred to in this Article shall be in form and substance
reasonably satisfactory to the Bank, and the Security Documents shall be
registered in those jurisdictions that the Bank may from time to time reasonably
require.

 

3.7 Fee Mortgages. Within sixty (60) days of the Closing Date, as additional
collateral to the Bank, the Borrower shall execute and deliver, or cause the
delivery of, the following items concerning the mortgage of the fee interest of
the Borrower in the Bridgeville Property and the Borrower’s Titusville plant:

 

(i) a true and accurate legal description of each such property,

 

(ii) a title report for each such property which shall confirm for the Bank a
first lien position with respect to each such property and which shall contain
only such Encumbrances and easements as the Bank in its sole discretion shall
accept,

 

(iii) a duly executed and acknowledged Mortgage for each such property in form
and substance satisfactory to the Bank,

 

(iv) an Environmental Indemnity Agreement, or a supplement to an existing
Environmental Indemnity Agreement, concerning each such property,

 

(v) property and casualty insurance concerning each such property that names the
Bank as additional insured and mortgagee and loss payee, and

 

(vi) any applicable flood insurance policy for such property.

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3.8 Benefit of Collateral. The Collateral shall inure to the benefit of the Bank
until this Agreement and the Revolving Credit Commitment is terminated and all
indebtedness and liability of the Borrower to the Bank under this Agreement and
the other Loan Documents shall have been paid. None of the Loan Documents
constituting the Security Documents shall be amended, released or discharged, in
whole or in part, without the prior written consent of the Bank except to the
extent such documents are defeased in accordance with the terms thereof. The
Collateral shall continue to be effective or be reinstated, as the case may be,
if at any time any amount received by the Bank in respect of the credit facility
herein provided or any Loan Document is rescinded or must otherwise be restored
or returned upon the occurrence of a bankruptcy event with respect to the
Borrower or any substantial part of the Borrower’s properties, or otherwise, all
as though that amount had not been received.

 

ARTICLE 4. REPRESENTATIONS AND WARRANTIES

 

To induce the Bank to enter into this Agreement, to amend and restate the
Original Agreement hereunder, and to make the Loans and the other extensions of
credit herein provided for, the Borrower makes the following representations and
warranties to the Bank:

 

4.1 Existence. The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and the Borrower is
duly qualified or licensed and in good standing as a foreign corporation
authorized to do business in each jurisdiction where the nature of its
activities or the ownership of its properties makes such qualification or
licensing necessary. Each Subsidiary of the Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of their respective incorporation or organization and each
Subsidiary of the Borrower is duly qualified or licensed and in good standing as
a foreign corporation authorized to do business in each jurisdiction where the
nature of its activities or the ownership of its properties makes such
qualification or licensing necessary.

 

4.2 Capitalization; Ownership; Title to Shares. The authorized capital stock of
the Borrower consists of 10,000,000 shares of common stock and 2,000,000 shares
of preferred stock, of which, as of December 31, 2004, 6,601,112 shares of
common stock were issued and outstanding and no shares of preferred stock were
issued and outstanding. All of the issued and outstanding shares of capital
stock of the Borrower are fully paid and nonassessable. There are no options,
warrants or other rights outstanding to purchase any shares of the Borrower, nor
are any securities of the Borrower convertible into or exchangeable for its
capital stock, except as shown on Schedule 4.2.

 

4.3 Subsidiaries and Other Investments. The Borrower has no Subsidiaries except
Holdings and Dunkirk, and it has no other ownership interests in any other
Person.

 

4.4 Power and Authority. The Borrower and each Subsidiary of the Borrower, has
the lawful power to own or lease its properties and to engage in the business it
now conducts or proposes to conduct. The Borrower is duly authorized to enter
into, execute, deliver and perform all of the terms and provisions of this
Agreement, the Notes and the other Loan Documents to

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which it is a party, to incur the Obligations and to perform its obligations
under the Loan Documents to which it is a party. All necessary corporate action
required to authorize the execution, delivery and performance of this Agreement,
the Notes and the other Loan Documents has been properly taken by the Borrower.

 

4.5 Validity and Binding Effect. This Agreement has been, and each other Loan
Document will be, duly executed and delivered by the Borrower. This Agreement
and the other Loan Documents, when delivered by the Borrower pursuant to the
provisions hereof, will constitute legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors’ rights generally and except as such enforceability may
be limited by the availability of equitable remedies.

 

4.6 No Conflict. The execution and delivery of this Agreement and the other Loan
Documents by the Borrower and the consummation of the transactions herein or
therein contemplated or compliance with the terms and provisions hereof or
thereof by it will not conflict with, constitute a default under or result in
any breach of (i) the terms and conditions of the Borrower’s certificate of
incorporation, by-laws, or other organizational documents, (ii) any Governmental
Rule or (iii) any material agreement, instrument, order, writ, judgment,
injunction or decree to which the Borrower is a party or by which it is bound or
to which it is subject, or will result in the creation or enforcement of any
Encumbrance whatsoever upon any property, whether now owned or hereafter
acquired, of the Borrower, except for Permitted Encumbrances.

 

4.7 Financial Matters.

 

4.7a Historical Financial Statements. The Borrower has delivered to the Bank its
audited financial statements for the Fiscal Year ended December 31, 2004 and its
unaudited financial statements for the three-month period ended March 31, 2005.
Such financial statements are complete and correct in all material respects,
subject to ordinary and usual year-end adjustments, and fairly present the
Consolidated financial condition of the Borrower in all material respects and
the results of its operations as of the dates and for the periods referred to,
and have been prepared in accordance with GAAP consistently applied throughout
the periods involved. The Borrower and its consolidated Subsidiaries have no
material liabilities, whether direct or indirect, fixed or contingent, and no
liability for taxes, long-term leases or unusual forward or long-term
commitments as of the date of such financial statements which are not reflected
in such financial statements or in the notes thereto.

 

4.7b Financial Projections. The Borrower has delivered to the Bank financial
projections of the Borrower and its Subsidiaries for the Fiscal Year ending
December 31, 2005. Such projections set forth a reasonable range of possible
results in light of the history of the business of the Borrower and its
Subsidiaries, present and foreseeable conditions and the intentions of the
Borrower’s management. Such projections accurately reflect the liabilities of
the Borrower upon consummation of the transactions contemplated hereby as of the
Closing Date. No material events have occurred since the preparation of the
projections which would cause the projections taken as a whole, not to be
reasonably attainable.

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4.8 Material Adverse Change. Since March 31, 2005, no Material Adverse Change
has occurred.

 

4.9 Solvency. The Borrower is, and after giving effect to the transactions
contemplated pursuant to this Agreement and the other Loan Documents will be,
Solvent.

 

4.10 Litigation. There are no actions, suits, proceedings or investigations
pending or, to the Borrower’s knowledge, threatened against the business,
operations, properties, prospects, profits or condition (financial or otherwise)
of the Borrower or any Subsidiary of the Borrower at law or in equity, before
any Governmental Authority, court or arbitrator which, individually or in the
aggregate, if adversely determined, could reasonably be expected to be material
or which purport to affect the rights and remedies of the Bank pursuant to this
Agreement and the other Loan Documents or which purport to restrain or enjoin
(either temporarily, preliminarily or permanently) the performance by either the
Borrower or any Subsidiary of the Borrower of any action contemplated by any of
the Loan Documents. All pending and, to the Borrower’s knowledge, threatened
actions, suits, proceedings and investigations affecting the Borrower and any
Subsidiary of the Borrower are set forth on Schedule 4.10.

 

4.11 Compliance with Laws. Each of the Borrower and each Subsidiary of the
Borrower has duly complied in all material respects with, and all of their
respective properties, business operations and leaseholds are in compliance in
all material respects with, the provisions of all Governmental Rules applicable
to either Borrower or any Subsidiary of the Borrower, their respective
properties and the conduct of their respective businesses. Neither the Borrower
nor any Subsidiary of the Borrower is in material violation of any Governmental
Rule.

 

4.12 Labor Matters. Except as described in Schedule 4.12, the Borrower is not a
party to, and no Subsidiary of the Borrower a party to, any labor contract or
collective bargaining agreement, and there are no strikes, work stoppages,
material grievances, disputes or controversies with any union or any other
organization of the employees of the Borrower, or any Subsidiary of the
Borrower, or threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization. Each collective
bargaining agreement and labor contract listed on Schedule 4.12 is in full force
and effect as of the date hereof. Neither the Borrower, nor any Subsidiary of
the Borrower, has, within the two-year period preceding the date hereof, taken
any action which would have constituted or resulted in a “plant closing” or
“mass layoff” within the meaning of the Federal Worker Adjustment and Retraining
Notification Act of 1988 or any similar applicable Federal, state or local law.
The procedures by which the Borrower and each Subsidiary of the Borrower have
hired or will hire their respective employees have complied and will comply in
all respects with each collective bargaining agreement to which the Borrower or
any Subsidiary of the Borrower is a party and all applicable Governmental Rules.

 

4.13 Title to Properties.

 

4.13a Titles to Properties - Borrower. (i) The Borrower has good and
indefeasible title to, or valid leasehold interests in, all properties and
assets purported to be owned or leased

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by the Borrower, and none of such properties and assets, including, without
limitation any such property and assets in which the Bank has been granted a
lien and security interest pursuant to the Loan Documents, is subject to any
Encumbrance, except for Permitted Encumbrances in existence on the Closing Date.
All real property of the Borrower owned in fee as of the Closing Date is set
forth on Schedule 1.1b attached hereto. Schedule 1.1c is a true and accurate
description of the Bridgeville Property. Except as set forth on Schedule 4.13a,
the Borrower has received all deeds, assignments, waivers, consents,
non-disturbance and recognition or similar agreements, bills of sale and other
documents and instruments, and has duly effected all recordings, filings and
other actions necessary to establish, protect and perfect the Borrower’s right,
title and interest in and to all such property.

 

(ii) All real property leased as of the Closing Date by the Borrower (as lessee
or lessor) is listed in Schedule 1.1a, which sets forth information regarding
the commencement date, termination date, renewal options (if any) and annual
base rents for the years 2005, 2006 and 2007. Each of such leases is valid and
enforceable in accordance with its terms and is in full force and effect. The
Borrower has delivered to the Bank true and complete copies of each of such
leases shown on Schedule 1.1a and all documents affecting the rights or
obligations of the Borrower, including, without limitation, any non-disturbance
and recognition agreements, subordination agreements, attornment agreements and
agreements regarding the term or rental of any of the leases. The Borrower is
not, and to the best of the Borrower’s knowledge no other party is in default of
its obligations thereunder or has delivered or received any notice of default
under any such lease, nor has any event occurred which, with the giving of
notice, the passage of time or both, would cause a default under any such lease,
except for defaults which individually or in the aggregate are not material.

 

(iii) The Borrower does not own or hold, and is not obligated under or a party
to, any option, right of first refusal or other contractual right to purchase,
acquire, sell, assign or dispose of any real estate owned or leased by the
Borrower, except as set forth on Schedule 4.13a.

 

(iv) All permits, licenses and authorizations required to have been issued or
appropriate to enable all real property owned or leased by the Borrower to be
lawfully occupied and used for all of the purposes for which they are currently
occupied and used have been lawfully issued and are in full force and effect,
other than those which in the aggregate are not material.

 

(v) The Borrower has not received any notice, or has any knowledge, of any
pending, threatened or contemplated condemnation proceeding affecting any real
property owned or leased by the Borrower or any part thereof except those which,
in the aggregate, are not material.

 

(vi) No portion of any real property owned or leased by the Borrower has
suffered any material damage by fire or other casualty loss which has not
heretofore been completely repaired and restored to its original condition.

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(vii) The exercise by the Bank of its remedies under any of the Security
Documents will not result in a default under any of the leases for real property
on which any Inventory of the Borrower is located.

 

4.13b Titles To Properties - Subsidiaries. (i) Each Subsidiary of the Borrower
has good and indefeasible title to, or valid leasehold interests in, all
properties and assets purported to be owned or leased by such Subsidiary, and
none of such properties and assets, including, without limitation any such
property and assets in which the Bank has been granted a lien and security
interest pursuant to the Loan Documents, is subject to any Encumbrance, except
for Permitted Encumbrances in existence on the Closing Date. All real property
of the Subsidiaries of the Borrower owned in fee as of the Closing Date is set
forth on Schedule 1.1b attached hereto. Except as set forth on Schedule 4.13b,
each Subsidiary of the Borrower has received all deeds, assignments, waivers,
consents, non-disturbance and recognition or similar agreements, bills of sale
and other documents and instruments, and has duly effected all recordings,
filings and other actions necessary to establish, protect and perfect such
Subsidiary’s right, title and interest in and to all such property.

 

(ii) All real property leased as of the Closing Date by a Subsidiary of the
Borrower (as lessee or lessor) is listed in Schedule 1.1a, which sets forth
information regarding the commencement date, termination date, renewal options
(if any) and annual base rents for the years 2005, 2006 and 2007. Each of such
leases is valid and enforceable in accordance with its terms and is in full
force and effect. Each Subsidiary of the Borrower has delivered to the Bank true
and complete copies of each of such leases shown on Schedule 1.1a and all
documents affecting the rights or obligations of such a Subsidiary, including,
without limitation, any non-disturbance and recognition agreements,
subordination agreements, attornment agreements and agreements regarding the
term or rental of any of the leases. No Subsidiary of the Borrower and, to the
best of the Borrower’s knowledge, no other party is in default of its
obligations thereunder or has delivered or received any notice of default under
any such lease, nor has any event occurred which, with the giving of notice, the
passage of time or both, would cause a default under any such lease, except for
defaults which individually or in the aggregate are not material.

 

(iii) No Subsidiary of the Borrower owns or holds, and no Subsidiary of the
Borrower is obligated under or a party to, any option, right of first refusal or
other contractual right to purchase, acquire, sell, assign or dispose of any
real estate owned or leased by a Subsidiary of the Borrower, except as set forth
on Schedule 4.13b.

 

(iv) All permits, licenses and authorizations required to have been issued or
appropriate to enable all real property owned or leased by a Subsidiary of the
Borrower to be lawfully occupied and used for all of the purposes for which they
are currently occupied and used have been lawfully issued and are in full force
and effect, other than those which in the aggregate are not material.

 

(v) No Subsidiary of the Borrower has received any notice, or has any knowledge,
of any pending, threatened or contemplated condemnation proceeding affecting any
real property owned or leased by a Subsidiary of the Borrower or any part
thereof except those which, in the aggregate, are not material.

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(vi) No portion of any real property owned or leased by a Subsidiary of the
Borrower has suffered any material damage by fire or other casualty loss which
has not heretofore been completely repaired and restored to its original
condition.

 

(vii) The exercise by the Bank of its remedies under any of the Security
Documents will not result in a default under any of the leases for real property
on which any Inventory of a Subsidiary of the Borrower is located.

 

4.14 Tax Returns and Payments. Each of the Borrower and each Subsidiary of the
Borrower has filed all Federal, state, local and other tax returns required by
law to be filed. Each of the Borrower and each Subsidiary of the Borrower has
paid all taxes, assessments and other governmental charges levied upon the
Borrower or any Subsidiary of the Borrower or any of their respective
properties, assets, income or franchises which are due and payable, other than
(i) those presently payable without penalty or interest, (ii) those which are
being contested in good faith by appropriate proceedings which are being
diligently conducted and (iii) those which, if not paid, would not, in the
aggregate, result in a Material Adverse Change and as to each of items (i), (ii)
and (iii) the Borrower or the applicable Subsidiary has set aside on its books
reserves for such taxes, assessments or other governmental charges as are
determined to be adequate by application of GAAP consistently applied. The
charges, accruals, and reserves on the books of the Borrower and its
Subsidiaries in respect of Federal, state and local taxes for all fiscal periods
to date are adequate, and the Borrower knows of no unpaid assessments for
additional Federal, state, local or other taxes which are now due and payable
for any such fiscal period or any basis therefor.

 

4.15 Intellectual Property. The Borrower and its Subsidiaries own or license all
the material patents, patent applications, trademarks, trademark applications,
permits, service marks, trade names, copyrights, copyright applications,
licenses, franchises, authorizations and other intellectual property rights that
are necessary for the operations of their respective businesses, without
infringement upon or conflict with the rights of any other Person with respect
thereto. To the best knowledge of the Borrower, no slogan or other advertising,
device, product, process, method, substance, part or component or other material
now employed, or now contemplated to be employed, by the Borrower or any of its
Subsidiaries infringes upon or conflicts with any rights owned by any other
Person, and no claim or litigation regarding any of the foregoing is pending or
threatened. All of the material patents, trademarks, permits, service marks,
trade names, copyrights, licenses, franchises and authorizations of the Borrower
and its Subsidiaries are listed on Schedule 4.15.

 

4.16 Insurance. The Borrower currently maintains, and the Borrower has caused
its Subsidiaries to maintain, insurance which meets or exceeds the requirements
of Section 5.7 hereof and the applicable insurance requirements set forth in the
other Loan Documents, and such insurance is provided by reputable and
financially sound insurers and is of such types and at least in such amounts as
are customarily carried by, and insures against such risks as are customarily
insured against by similar businesses similarly situated and owning, leasing and
operating similar properties to those owned, leased and operated by the Borrower
and its Subsidiaries. All of such insurance policies are valid and in full force
and effect. No notice has

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been given or claim made, and, to the Borrower’s knowledge, no grounds exist to
cancel or avoid any of such policies or to reduce the coverage provided thereby.
All of the existing insurance coverage of the Borrower and its Subsidiaries is
described on Schedule 4.16.

 

4.17 Consents and Approvals. Except for the filing of Security Documents with
the appropriate Governmental Authority, no order, authorization, consent,
license, validation or approval of, or notice to, filing, recording, or
registration with any Governmental Authority, or the exemption by any such
Governmental Authority, is required to authorize, or is required in connection
with, (i) the execution, delivery and performance of any of the Loan Documents
or (ii) the legality, binding effect or enforceability of any such Loan
Document.

 

4.18 No Defaults. No event has occurred and is continuing and no condition
exists which constitutes a Default or an Event of Default. No Loan Party is in
violation of (i) any term or provision its certificate of incorporation, by-laws
or other organizational documents, (ii) any material agreement or instrument to
which it is a party or by which it or any of its properties may be bound or
subject, or (iii) any material agreement or instrument evidencing any
Indebtedness.

 

4.19 Plans and Benefit Arrangements. (i) All Plans and Benefit Arrangements
maintained by the Borrower or any ERISA Affiliate for employees are set forth on
Schedule 4.19. Neither the Borrower nor any ERISA Affiliate has made any
promises of retirement or other benefits to employees or former employees (A)
except as set forth in any Plan or Benefit Arrangement, (B) except for such
promises under unfunded plans maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees, which in the aggregate are not material in amount and (C) except for
any other promises which in the aggregate are not material in amount.

 

(ii) Each Plan and Benefit Arrangement has been maintained and administered in
all material respects in compliance with ERISA and the Internal Revenue Code and
all rules, orders and regulations issued thereunder.

 

(iii) Except as set forth on Schedule 4.19, the Internal Revenue Service has
determined that each Plan and Benefit Arrangement which constitutes an employee
pension benefit plan as defined in Section 3(2) of ERISA and which is intended
to qualify under Section 401(a) of the Internal Revenue Code so qualifies under
Section 401(a) of the Internal Revenue Code, and that the trusts related thereto
are exempt from tax under the provisions of Section 501(a) of the Internal
Revenue Code. Nothing has occurred with respect to any such Plan or Benefit
Arrangement or to the related trusts since the date of the most recent favorable
determination letter issued by the Internal Revenue Service which has affected
or may reasonably be expected to affect adversely such qualification or
exemption.

 

(iv) The Borrower and each ERISA Affiliate have complied fully in all material
respects with their respective obligations under the minimum funding standards
of ERISA and the Internal Revenue Code with respect to each Plan and Money
Purchase Plan. Neither the Borrower nor any ERISA Affiliate has sought a waiver
of the minimum funding standard under Section 412 of the Internal Revenue Code
or has applied for an extension of any amortization period under Section 412 of
the Code with respect to any Plan or Money Purchase

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Plan. Neither the Borrower nor any ERISA Affiliate has failed to make any
contribution or payment to any Plan which has resulted or may reasonably be
expected to result in the imposition of a lien under ERISA or the Internal
Revenue Code against the property or rights to property of the Borrower or any
ERISA Affiliate.

 

(v) No Unfunded Benefit Liabilities exist with respect to any Plans, and no
Unfunded Benefit Liabilities would exist with respect to any Plan if such Plan
were terminated immediately.

 

(vi) No Reportable Event (other than a Reportable Event described in Section
4043(b) of ERISA or in PBGC Regulation Section 2615.23) has occurred with
respect to any Plan.

 

(vii) No Termination Event has occurred or is reasonably anticipated to occur
with respect to any Plan which has resulted in or which will result in the
incurrence by the Borrower or any ERISA Affiliate of any liability to the PBGC
under Title IV of ERISA which has not been discharged or satisfied. No such
Termination Event is reasonably anticipated to occur which will result in an
Encumbrance in favor of the PBGC against the property or rights to property of
the Borrower or any ERISA Affiliate.

 

(viii) Neither the Borrower nor any ERISA Affiliate which is a “party in
interest” (as that term is defined in Section 3(14) of ERISA) or a “disqualified
person” (as that term is defined in Section 4975 of the Internal Revenue Code)
with respect to any “employee benefit plan” (as defined in Section 3(3) of
ERISA), has engaged in a “prohibited transaction” (as defined in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code) involving any such employee
benefit plan which will subject the Borrower or such ERISA Affiliate to the tax
or penalty imposed under Section 502(i) of ERISA and Section 4975 of the
Internal Revenue Code.

 

(ix) Except as set forth on Schedule 4.19, neither the Borrower nor any ERISA
Affiliate currently contributes to, or is obligated to contribute to, or is a
member of, any Multiemployer Plan. Neither the Borrower nor any ERISA Affiliate
has incurred, or is reasonably expected to incur, any Withdrawal Liability to
any Multiemployer Plan.

 

(x) The Borrower and each ERISA Affiliate has complied in all material respects
with all requirements of Sections 10001 and 10002 of the Consolidated Omnibus
Budget Reconciliation Act of 1985 (Public Law No. 99-272); Title I, Subtitle B,
Part 6 of ERISA; and Section 4980B of the Internal Revenue Code.

 

(xi) Neither the Borrower nor any ERISA Affiliate has entered into any
transaction described in Section 4069(a) of ERISA.

 

(xii) No Benefit Arrangement provides postretirement welfare benefits of any
type which will have a material adverse effect on the financial condition of the
Borrower and the ERISA Affiliates taken as a whole and which will required to be
accounted for in the income statement, balance sheet and footnotes of the
financial report of the Borrower or any ERISA

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

Affiliate in the manner described in the Financial Accounting Standards Board,
Proposed Statement of Financial Accounting Standards, Employer’s Accounting for
Postretirement Benefits Other Than Pensions, if the same were effective for the
current Fiscal Year of the Borrower or any ERISA Affiliate.

 

4.20 Environmental Matters. (i) Except as set forth on Schedule 4.20 attached
hereto :

 

(A) the Borrower and each Subsidiary of the Borrower are in material compliance
with all applicable Environmental Laws;

 

(B) there has been no material Contamination or material release of Hazardous
Substances, at, upon, under or within any property owned or leased by the
Borrower or any Subsidiary of the Borrower since August 15, 1994, and, to the
best of the Borrower’s knowledge based exclusively on the Phase I and Phase II
environmental site assessments (the Phase II environmental site assessments
relate only to the Borrower’s Titusville property) by Chester Engineers, Inc.,
Ground Water Technology, Inc., and Crouse & Company, copies of which have been
delivered to the Bank, there has been no Contamination or release of Hazardous
Substances on any other property that has migrated or threatens to migrate to
any property owned or leased by the Borrower or any Subsidiary of the Borrower
except as may be set forth in the Phase II environmental site assessment;

 

(C) to the best of the Borrower’s knowledge there are no above ground storage
tanks at any property owned or leased by the Borrower or any Subsidiary of the
Borrower except as set forth on Schedule 4.20 attached hereto;

 

(D) there are no transformers, capacitors or other items of Equipment containing
PCBs at levels in excess of 49 parts per million, which violate applicable
Environmental Law, at any property owned or leased by the Borrower or any
Subsidiary of the Borrower;

 

(E) other than materials used or produced, held, transported and disposed of in
accordance with all Environmental Laws, neither Borrower nor any Subsidiary of
the Borrower has used in its respective operations, nor stored on properties
owned or leased by it Hazardous Substances;

 

(F) no Hazardous Substances are present at any property owned or leased by the
Borrower or any Subsidiary of the Borrower in any material amount, except those
which are transported, used, stored, disposed of and otherwise handled in
accordance with all Environmental Laws, in proper storage containers; and

 

(G) (i) All permits and authorizations required under Environmental Laws for all
operations of the Borrower and the Subsidiaries of the Borrower have been duly
issued and are in full force and effect, including but not limited to those for
air emissions, water discharges and treatment, storage tanks and the generation,
treatment, storage and disposal of Hazardous Substances.

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(ii) Except as set forth in Schedule 4.20, (A) there are no pending or, to the
best of the Borrower’s knowledge, threatened Environmental Claims against the
Borrower, any Subsidiary of the Borrower or any property owned or leased by the
Borrower or any Subsidiary of the Borrower; and (B) there is no condition or
occurrence on any property owned or leased by the Borrower or any Subsidiary of
the Borrower that to the best of the Borrower’s knowledge could reasonably be
anticipated (1) to form the basis of an Environmental Claim against the
Borrower, any Subsidiary of the Borrower or their respective properties or (2)
to cause any property owned or leased by the Borrower or any Subsidiary of the
Borrower to be subject to any restrictions on its ownership, occupancy or
transferability under any Environmental Law.

 

(iii) Except as set forth in Schedule 4.20, no notice relating to Hazardous
Substances is contained in any deed relating to any property owned or leased by
the Borrower and the Borrower is aware of no facts or conditions on any such
property that would require that such a notice be placed in the deed to any such
property.

 

(iv) Except as set forth in Schedule 4.20, no portion of any property owned or
leased by a Loan Party contains asbestos-containing material that is or
threatens to become friable to the best knowledge of the Borrower.

 

(v) The representations and warranties set forth in this Section 4.20 shall
survive repayment of the Obligations and the termination of this Agreement and
the other Loan Documents.

 

4.21 Margin Stock. Neither the Borrower nor any Subsidiary of the Borrower is
engaged principally or as one of its important activities in the business of
extending credit for the purpose, immediately, incidentally or ultimately, of
purchasing or carrying margin stock (within the meaning of Regulation U).
Furthermore, the proceeds of the Loans will be applied as set forth in Section
5.1 hereof.

 

4.22 Business of Subsidiaries.

 

4.22a Holdings Business. Holdings is a Delaware corporation and has as its sole
business purpose the purchase of, holding of and sale or other disposition of
investments permitted pursuant to Section 6.10, the advance of funds to the
Borrower pursuant to the Holdings Credit Agreement and the holding of intangible
assets.

 

4.22b Dunkirk Business. Dunkirk is a Delaware limited liability company; and
Dunkirk’s primary line of business is manufacturing specialty steel bar, rod and
wire.

 

4.23 Violations of Anti-Terrorism Laws. Neither the Borrower nor any Subsidiary
of the Borrower is in violation of any Anti-Terrorism Law; and neither the
Borrower nor any Subsidiary of the Borrower has engaged in, or conspired to
engage in, any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.

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4.24 Blocked Persons. To the knowledge of the Borrower, the proceeds from any
Loan and the issuance of any Letter of Credit will not benefit a Blocked Person.

 

4.25 Fiscal Year. The Fiscal Year of the Borrower ends on December 31 of each
year.

 

4.26 Material Contracts; Burdensome Restrictions. All material contracts
relating to the business operations of each of the Borrower and its
Subsidiaries, including all employee benefit plans and labor contracts, are
valid, binding and enforceable upon the Borrower or its Subsidiary, as the case
may be, and each of the other parties thereto in accordance with their
respective terms; and except as set forth on Schedule 4.26, there is no default
thereunder, to the knowledge of the Borrower, with respect to the other parties
to such contracts which has given rise to, or would reasonably be expected to
give rise to, a Material Adverse Change. No contract, lease, agreement or other
instrument to which the Borrower or any Subsidiary of the Borrower is a party or
is bound and no provision of any applicable law or governmental regulation
applicable to the Borrower or any Subsidiary of the Borrower or their respective
properties could reasonably be expected to have a Material Adverse Change.

 

4.27 Encumbrances. The Security Documents create in favor of the Bank valid,
binding and perfected (when registered) Encumbrances on all right, title and
interest in all of the Collateral which is the subject matter of the Security
Documents and those Encumbrances have first priority for all purposes over any
other Encumbrances on the Collateral, except for priority liens permitted by the
Bank.

 

4.28 Property Descriptions. The Security Documents, including their attached
schedules (if any), contain accurate descriptions of all of the assets of the
Borrower, Dunkirk or Holdings, as the case may be.

 

4.29 Investment Company Act. Neither the Borrower nor any Subsidiary of the
Borrower is an “investment company” registered or required to be registered
under the Investment Company Act of 1940, as amended from time to time, or a
company under the “control” of an “investment company,” as those terms are
defined in such Act, and shall not become such an “investment company” or under
such “control.”

 

4.30 Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary
of the Borrower is a “holding company,” or a “subsidiary company” of a “holding
company,” or an “affiliate” of a “holding company” or a “subsidiary company” of
a “holding company” within the meaning of the Public Utility Holding Company Act
of 1935, as amended from time to time.

 

4.31 Jurisdictions. The jurisdictions in which the Borrower and its Subsidiaries
carry on business and have assets are accurately set forth in Schedule 4.31.

 

4.32 Bank Accounts. Schedule 4.32 accurately sets out each bank account
maintained by the Borrower and its Subsidiaries and accurately sets forth the
institution and location where each such account is maintained.

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4.33 Full Disclosure. Neither this Agreement nor any other document, certificate
or statement furnished to the Bank by or on behalf of the Borrower pursuant to
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Borrower which materially and
adversely affects the business, property, assets, financial condition, results
of operations or prospects of the Borrower or any Subsidiary of the Borrower
which has not been set forth in this Agreement or in the other documents,
certificates and statements (financial or otherwise) furnished to the Bank by or
on behalf of the Borrower or any Subsidiary of the Borrower prior to or on the
date hereof in connection with the transactions contemplated hereby.

 

ARTICLE 5. AFFIRMATIVE COVENANTS

 

From the date hereof and thereafter until the last to occur of (i) the
termination of the Revolving Credit Commitment and (ii) the payment in full of
the Notes and the other Obligations of the Borrower hereunder, the Borrower
agrees, for the benefit of the Bank, that it will comply, or cause compliance by
its Subsidiaries, with each of the following affirmative covenants:

 

5.1 Use of Proceeds. Proceeds of the Revolving Credit Loans shall be used by the
Borrower only for Capital Expenditures and general working capital purposes; and
proceeds of the Term Loan shall be used to refinance outstanding term loans
under the Original Agreement in the principal amount of $1,950,000, to refinance
outstanding revolving credit loans under the Original Agreement in the principal
amount of $8,050,000 and to finance capital projects for the Loan Parties.

 

5.2 Delivery of Financial Statements and Other Information. During the term
hereof, the Borrower shall deliver or cause to be delivered to the Bank the
following financial statements and other information:

 

5.2a Annual Reports. As soon as available and in any event within 90 days after
the end of each Fiscal Year of the Borrower, the Borrower shall deliver to the
Bank an audited Consolidated balance sheet as of the end of such Fiscal Year and
the related audited Consolidated statements of operations and cash flows for
such Fiscal Year, each of which shall be prepared in accordance with GAAP
consistently applied and setting forth in each case in comparative form the
figures for the previous Fiscal Year, when available, all presenting fairly the
Consolidated financial condition of the Borrower in such reasonable detail as
the Bank may request from time to time, and all to be accompanied by an
unqualified opinion of Schneider Downs & Co., Inc., or other certified public
accountants acceptable to the Bank.

 

5.2b Quarterly Reports. As soon as available and in any event within 45 days
after the end of each Fiscal Quarter of each Fiscal Year of the Borrower, the
Borrower shall deliver to the Bank (i) an unaudited Consolidated balance sheet
as of the end of such Fiscal Quarter and (ii) the related unaudited Consolidated
statements of operations and cash flows for such Fiscal Quarter and for the
period beginning on the first day of the current Fiscal Year through the last

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day of the Fiscal Quarter for which such financial statements are being
delivered, each of which shall be prepared in accordance with GAAP consistently
applied and setting forth in each case in comparative form the figures for the
Fiscal Quarter in the prior Fiscal Year, when available, which corresponds to
the Fiscal Quarter for which the statements are being delivered, all presenting
fairly the Consolidated financial condition of the Borrower in such reasonable
detail as the Bank may request from time to time and certified (subject to
normal year-end adjustments) as to fairness of presentation, GAAP and
consistency by the chief financial officer of the Borrower.

 

5.2c Compliance Certificate. Simultaneously with the delivery of each set of
financial statements referred to in Sections 5.2a and 5.2b, the Borrower shall
deliver to the Bank a completed Compliance Certificate substantially in the form
of Exhibit “H”, executed by an Authorized Officer, and containing such
additional information as the Bank may request from time to time, (i) stating
that the financial statements being delivered with such Compliance Certificate
are true, complete and correct, (ii) setting forth in reasonable detail the
calculations required to establish whether the Borrower was in compliance with
the requirements of Sections 6.4 and 6.5 for the fiscal period in question,
(iii) stating (A) whether any Default or Event of Default exists on the date of
such certificate, (B) whether any Material Adverse Change has occurred since the
date of the previously delivered Compliance Certificate, (C) whether any event
has occurred since the date of the previously delivered Compliance Certificate
which may result in a Material Adverse Change; and (D) if any Default or Event
of Default, or any Material Adverse Change has occurred during the Fiscal
Quarter or Fiscal Year to which the Compliance Certificate relates or is in
existence, setting forth the details thereof and the action which the Borrower
has taken, is taking or proposes to take with respect thereto.

 

5.2d Accountant’s Certificate. Simultaneously with the delivery of each set of
annual financial statements referred to in Section 5.2a, the Borrower shall
deliver to the Bank a certificate of the certified public accountant preparing
such statements stating either that his examination has not disclosed the
occurrence or continuance of a Default or an Event of Default or, if his
examination has disclosed a Default or an Event of Default, a description of
such occurrence.

 

5.2e Business Plan. As soon as available and in any event not more than 30 days
after the end of each Fiscal Year, the Borrower shall deliver to the Bank its
annual business plan for the then current Fiscal Year, containing additional
information as the Bank may reasonably request from time to time.

 

5.2f Other Reports, Information and Notices. The Borrower will deliver or cause
to be delivered to the Bank, within the time periods set forth below, the
following other reports, information and notices:

 

(i) Auditor’s Reports. As soon as practicable after they have become available,
copies of all other reports and management letters submitted to the Borrower by
its accountants in connection with any annual or interim audit of the books of
the Borrower made by such accountants.

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(ii) Reports to Shareholders. As soon as practicable after they have become
available, all reports, notices and proxy statements sent by the Borrower to its
shareholders.

 

(iii) Securities Reports. As soon as practicable after they have become
available, all regular and periodic reports, if any, filed by the Borrower with
the SEC or any other Governmental Authority succeeding to any of the functions
of the SEC or any similar or corresponding board, bureau or agency, or to any
state securities commission.

 

(iv) Notice of Defaults and Material Adverse Changes. Promptly after any officer
of the Borrower has learned of the occurrence or existence of a Default or Event
of Default, or of an event or set of circumstances which has caused or which may
cause a Material Adverse Change, telephonic notice thereof specifying the
details thereof, the anticipated effect thereof and the action which the
Borrower has taken, is taking or proposes to take with respect thereto, which
notice shall be promptly confirmed in writing within five days by the president,
any vice president or the chief financial officer of the Borrower.

 

(v) Notice of Litigation. (A) Promptly after the commencement thereof, written
notice of any action, suit, proceeding or investigation before any Governmental
Authority, court or arbitrator, affecting the Borrower or any Subsidiary of the
Borrower, except for actions, suits, proceedings and investigations which, if
adversely determined, would not and could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change and (B) promptly
after any Authorized Officer has notice thereof, written notice of any decision,
ruling, judgment, appeal, reversal or other significant action in connection
with any existing action, suit, proceeding or investigation before any
Governmental Authority, court or arbitrator affecting the Borrower or any
Subsidiary of the Borrower, which would or could reasonably be expected to
result in a Material Adverse Change.

 

(vi) Orders, Etc. Promptly after receipt thereof, a copy of any material order,
writ, decree, judgment, decision or injunction issued by any Governmental
Authority in any material proceeding, action, suit or investigation to which the
Borrower or any Subsidiary of the Borrower is a party.

 

(vii) ERISA Reports.

 

(A) As soon as possible, and in any event not later than the date notice is sent
to the PBGC, notice of any Reportable Event regarding any Plan and an
explanation of any action which has been or which is proposed to be taken with
respect thereto;

 

(B) concurrent with the filing thereof, a copy of any request to the United
States Secretary of the Treasury for a waiver or variance of the minimum funding
standards of Section 302 of ERISA and Section 412 of the Internal Revenue Code
with respect to any Plan or Money Purchase Plan;

 

(C) as soon as possible, but in no event later than 60 days after an officer of
the Borrower becomes aware of unfunded accumulated benefit obligations for any
Plan, as determined in accordance with the Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 87, Employer’s Accounting for
Pensions, (or any superseding statement thereto), written notice of the
occurrence of such event;

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(D) upon the request of the Bank, copies of each annual report (Form 5500
Series) with accompanying schedules filed with respect to any Plan or Money
Purchase Plan;

 

(E) promptly after receipt thereof, a copy of any notice which the Borrower or
any ERISA Affiliate may receive from the PBGC relating to the intention of the
PBGC to terminate any Plan or Money Purchase Plan, or to appoint a trustee to
administer any Plan or Money Purchase Plan, or to assert any liability under
Title IV of ERISA against the Borrower or any ERISA Affiliate;

 

(F) a copy of any notice of assessment of Withdrawal Liability received by the
Borrower or any ERISA Affiliate from any Multiemployer Plan;

 

(G) as soon as possible, and in no event later than the date notification is
sent to the PBGC, notice of the failure by the Borrower or any ERISA Affiliate
to make a required installment or other payment under Section 302 of ERISA and
Section 412 of the Internal Revenue Code;

 

(H) concurrent with the filing thereof, a copy of any Notice of Intent to
Terminate any Plan filed under Section 4041(c) of ERISA; and

 

(I) promptly after receipt thereof, but without any obligation or responsibility
to secure the same, copies of any calculations of estimated Unfunded Benefit
Liabilities (or, if applicable, the portions of any estimated Unfunded Benefit
Liabilities that would be allocated to the Borrower or any ERISA Affiliate under
Sections 4063 and 4064 or Section 4062(e) of ERISA) for any Plans.

 

(ix) Notice of Environmental Claims. Promptly after receipt thereof, the
Borrower shall deliver to the Bank a copy of any Environmental Claim.

 

(x) Tax Returns. The Borrower shall deliver to the Bank, promptly upon the
request of the Bank, copies of all Federal, state, local and foreign tax returns
and reports filed by the Borrower or a Subsidiary of the Borrower in respect of
taxes measured by income (excluding sales, use and like taxes).

 

(xi) Notices of Tax Audits. Promptly, and in any event within 10 days after
receipt thereof by the Borrower, the Borrower shall furnish to the Bank a copy
of each notice from any Governmental Authority received by the Borrower or a
Subsidiary of the Borrower of such Governmental Authority’s intention to audit
any Federal, state, local or foreign tax return of the Borrower or a Subsidiary
of the Borrower and a copy of each subsequent notice with respect thereto from
any such Governmental Authority.

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5.2g Additional Information; Visitation. The Borrower shall deliver to the Bank
such additional financial statements, reports, financial projections and other
information, whether or not financial in nature, as the Bank may reasonably
request from time to time. The Borrower will permit, and will cause its
Subsidiaries to permit, the Bank and the Bank’s designated employees and agents
to have access, at any time and from time to time, upon reasonable notice and
during normal business hours, to visit any of the properties of the Borrower or
any of its Subsidiaries, to examine and make copies of any of its respective
books of record and account and such reports and returns as the Borrower may
file with any Governmental Authority and discuss the affairs and accounts of the
Borrower or any of its Subsidiaries with, and be advised about them by, any
Authorized Officer and the Borrower’s certified public accountants.

 

5.2h Borrowing Base Certificate. Upon the written request of the Bank and
thereafter no later than the fifteenth day of each month, the Borrower shall
deliver to the Bank a completed Borrowing Base Certificate executed by an
Authorized Officer and containing such additional information as may be
requested by the Bank from time to time, for the month just ended.

 

5.2i Receivables and Payables Aging Reports. Upon written request of the Bank
and thereafter semiannually on July 15 and January 15 (or more frequently as may
be requested by the Bank from time to time within 15 days of such request), a
report detailing the aging of each Loan Party’s accounts payable and accounts
receivable as of the month most recently completed, in form and substance
satisfactory to the Bank.

 

5.2j Inventory Reports. Upon written request of the Bank and thereafter
semiannually on July 15 and January 15 (or more frequently as may be requested
by the Bank from time to time, within 15 days of such request), a report
detailing the Value and turnover of the each Loan Party’s Inventory as of the
month most recently completed, in form and substance satisfactory to the Bank.

 

5.2k Schedule of Major Account Debtors. Schedule 5.2k attached hereto identifies
major Account Debtors of each Loan Party as of the Closing Date. Upon the
written request of the Bank, the Borrower shall revise and update Schedule 5.2k.

 

5.3 Preservation of Existence; Qualification. At its own cost and expense, the
Borrower will do all things necessary to preserve and keep in full force and
effect its and each Subsidiary of the Borrower respective corporate existence
and qualification under the laws of the state of their respective incorporation
and each state where, due to the nature of their respective activities or the
ownership of their respective properties, qualification to do business is
required or if not so qualified in any state, the lack of such qualification
will not materially affect the Bank’s ability to enforce the Agreement, the
Notes or the other Loan Documents or materially affect the Borrower’s or each
Subsidiary’s of the Borrower ability to carry on its business.

 

5.4 Compliance with Laws and Contracts. The Borrower shall be, and shall cause
each Subsidiary of the Borrower to be, in material compliance with all
applicable Governmental Rules (including, but not limited to, Environmental
Laws). The Borrower shall comply, and shall cause any Subsidiary of the Borrower
to comply, with all material provisions of each material contract and agreement
to which the Borrower or any Subsidiary of the Borrower is a party.

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5.5 Accounting System; Books and Records. The Borrower shall maintain a system
of accounting established and administered in accordance with GAAP consistently
applied and will set aside on its books all such proper reserves as shall be
required by GAAP. Further, the Borrower will maintain, and will cause each
Subsidiary of the Borrower to maintain, proper books of record and account in
accordance with GAAP in which full, true and correct entries shall be made of
all of its respective properties and assets, including but not limited to the
Collateral, and its respective dealings and business affairs.

 

5.6 Payment of Taxes and Other Liabilities. The Borrower shall promptly pay and
discharge, and cause each Subsidiary of the Borrower to promptly pay and
discharge, all obligations, accounts and liabilities to which it is subject,
including but not limited to all taxes, assessments and governmental charges and
levies upon it or upon any of its income, profits, or property, prior to the
date on which penalties attach thereto; provided, however, that for purposes of
this Agreement, neither the Borrower nor any Subsidiary of the Borrower shall be
required to pay any tax, assessment, charge or levy (i) the payment of which is
being contested in good faith by appropriate and lawful proceedings diligently
conducted and (ii) as to which the Borrower shall have set aside on its books
reserves for such claims as are determined to be adequate by the application of
GAAP consistently applied, but only to the extent that failure to discharge any
such liabilities would not result in any additional material liability; and
provided, further, that the Borrower shall pay all such contested liabilities
forthwith upon the commencement of proceedings to foreclose any lien or other
Encumbrance which may have attached as security therefor.

 

5.7 Insurance. The Borrower shall maintain, and shall cause its Subsidiaries to
maintain, at all times adequate insurance to the satisfaction of the Bank with
the insurers shown on Schedule 4.16 or other financially sound and reputable
insurers acceptable to the Bank against such risks of loss as are customarily
insured against and in amounts customarily carried by Persons owning, leasing or
operating similar properties, including, but not limited to: (i) fire and theft
and extended coverage insurance in an amount at least equal to the total full
replacement cost of its insurable property, (including boiler coverage, if
applicable); (ii) liability insurance on account of injury to persons or
property; (iii) insurance which complies with all applicable workers’
compensation, unemployment and similar laws; (iv) interruption of the business
and loss of income of a Loan Party; (v) flood insurance, at any time when any
real property of a Loan Party on which the Bank has a mortgage is designated to
be in an area of special flood hazard; and (vi) such other insurance as the Bank
may reasonably request from time to time, all of the foregoing to be acceptable
to the Bank at all times during the term hereof. The Borrower shall cause all
such insurance to be issued with a long form lender’s and mortgagee’s loss
payable endorsement in favor of the Bank, providing for at least 30 days’
written notice to the Bank prior to cancellation and the Borrower shall cause a
copy of each policy and an original certificate of insurance to be delivered to
the Bank prior to the first extension of credit under this Agreement and no
later than 30 days prior to the expiration of any such insurance coverage. Prior
to the first extension of credit under this Agreement and thereafter within 90
days of the close of each Fiscal Year, the Borrower will deliver to the Bank a
schedule indicating all insurance coverage then in effect for the Borrower, in
such detail as the Bank may reasonably request from time to time.

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5.8 Maintenance of Properties. The Borrower shall maintain, preserve, protect
and keep, and the Borrower shall cause each of its Subsidiaries to maintain,
preserve, protect and keep, its respective properties in good repair, working
order and condition (ordinary wear and tear excepted), and make all necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly and advantageously conducted at all times.

 

5.9 Maintenance of Leases. The Borrower shall maintain, and shall cause its
Subsidiaries to maintain, in full force and effect all leases for its respective
real properties, and all other leases for personal property if the failure to
maintain such personal property lease would constitute a Material Adverse
Change; provided, however, that the provisions of this Section 5.9 shall not
prohibit the Borrower from acquiring a fee interest in real properties and
improvements thereto the subject of a current lease of real properties located
in Bridgeville, Allegheny County, Pennsylvania between AK Steel Corporation, as
lessor, and the Borrower, as lessee.

 

5.10 Maintenance of Patents, Trademarks, Permits, Etc. The Borrower shall
maintain, and shall cause its Subsidiaries to maintain, in full force and
effect, and investigate and prosecute all infringements of, all patents,
trademarks, trade names, copyrights and other intellectual property and all
licenses, franchises, permits and other authorizations necessary in the judgment
of the Borrower for the ownership and operation of its properties and business,
and the properties and business of its Subsidiaries.

 

5.11 Bank Accounts. Except as otherwise provided for herein, the Borrower shall
maintain, and shall cause its Subsidiaries to maintain, all of its respective
bank accounts with the Bank.

 

5.12 Plans and Benefit Arrangements. The Borrower shall, and shall cause each
ERISA Affiliate to, comply with ERISA, the Internal Revenue Code and all other
applicable Governmental Rules which are applicable to Plans and Benefit
Arrangements, except where the failure to do so, alone or in conjunction with
any other failure, would not result in a Material Adverse Change.

 

5.13 Environmental Matters and Indemnification.

 

(i) Each Loan Party shall be in material compliance with all Environmental Laws.

 

(ii) At least annually, each Loan Party shall inspect all property owned or
leased by it and audit operations thereon to maintain compliance with all
Environmental Laws.

 

(iii) Each Loan Party shall employ appropriate technology in order to maintain
compliance with all applicable Environmental Laws, including without limitation
the replacement or updating, if required, of underground or aboveground storage
tanks owned by a Loan Party.

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(iv) The Borrower shall investigate and remediate any Contamination in
compliance with Governmental Rules, using a reputable environmental remediation
firm, and shall inform the Bank in writing from time to time as to the status of
any such remediation.

 

(v) Following the occurrence of an Event of Default, the Bank shall have the
right, but not the duty, to enter upon the Collateral and to perform such
inspections, testing, sampling and analysis as it deems fit, invasive or
otherwise, of soil, groundwater, surface water, air or of Collateral, to
ascertain the presence of Contamination or to monitor compliance with the
environmental provisions of this Agreement or any of the other Loan Documents.
Following any Event of Default, or upon the discovery of the presence of
Contamination or a violation of any environmental provision of this Agreement or
the other Loan Documents, the Bank shall have the right, but not the duty, to
enter upon such real estate and perform such investigation or remediation as it
deems fit in order to protect its security interests and the value of Collateral
and such real estate. Any expenses incurred by the Bank under this item (v)
shall be at the sole expense of Borrower and shall be indemnified by Borrower
pursuant to item (vi) below.

 

(vi) The Borrower shall defend and indemnify the Bank and hold it harmless from
and against all loss, liability, damage, expense, claims, costs, fines,
penalties, assessments (including without limitation, interest on any of the
foregoing), reasonable attorneys’ fees and reasonable consultants’ and
contractors’ fees, asserted against or suffered or incurred by the Bank which
arise, result from or in any way relate to (A) a breach or violation of any
Environmental Law, (B) the imposition of any Encumbrance on the Borrower’s
assets, (C) Contamination or the presence of a Hazardous Substance and (D) an
Environmental Claim. The Borrower’s obligations hereunder shall arise at the
inception or upon the discovery of the event giving rise to the obligation to
indemnify, whether or not any Governmental Authority has taken or has threatened
any action, so that the Borrower shall bear all expenses from the outset. The
Borrower’s obligations pursuant to this item (vi) shall survive the termination
of this Agreement and the repayment of the Obligations.

 

5.14 Key Management. The Borrower shall employ Clarence M. McAninch as President
and Chief Executive Officer, and shall use its best efforts to cause such key
manager to continue to serve in such capacity. In the event of the voluntary or
involuntary termination of the key manager for any reason, the Borrower shall,
as soon as practicable, replace such individual with another qualified manager
with comparable management skills and experience in the Borrower’s industry and
reasonably satisfactory to the Bank.

 

5.15 Visitation Rights. The Borrower shall permit, and shall cause its
Subsidiaries to permit, any of the officers or authorized employees or
representatives of the Bank to visit and inspect any of the properties of the
Borrower, or a Subsidiary of the Borrower, and to examine and make excerpts from
its books and records and discuss its respective business affairs, finances and
accounts with its officers, all in such detail and at such times and as often as
the Bank may reasonably request, provided that Bank shall provide the Borrower,
or the Subsidiary of the Borrower, as the case may be, with reasonable notice
prior to any visit or inspection.

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5.15 Further Assurances; Power of Attorney. At any time and from time to time,
upon the Bank’s request, the Borrower shall make, execute and deliver, and shall
cause any other Person to make, execute and deliver, to the Bank, and where
appropriate shall cause to be recorded or filed, and from time to time
thereafter to be re-recorded and refiled, at such time and in such offices and
places as shall be deemed desirable by the Bank, any and all such further
Security Documents, certificates and other documents and instruments as the Bank
may consider necessary or desirable in order to effectuate, complete, perfect,
continue or preserve the obligations of the Borrower hereunder or under the
other Loan Documents and the Encumbrances created hereby and thereby. The
Borrower hereby appoints the Bank, and any of its officers, directors, employees
and authorized agents, with full power of substitution, upon any failure by the
Borrower to take or cause to be taken any action described in the preceding
sentence, to make, execute, record, file, re-record or refile any and each such
Security Document, instrument, certificate and document for and in the name of
the Borrower. The power of attorney granted pursuant to this Section 5.15 is
coupled with an interest and shall be irrevocable until all of the Obligations
are paid in full, the Revolving Credit Commitment is terminated and all Letters
of Credit have expired or have been terminated.

 

ARTICLE 6. NEGATIVE COVENANTS

 

From the date hereof and thereafter until the last to occur of (i) the
termination of the Revolving Credit Commitment and (ii) the payment in full of
the Notes and the other Obligations of the Borrower hereunder, the Borrower
agrees, for the benefit of the Bank, that it will comply, or cause compliance by
its Subsidiaries, with each of the following negative covenants:

 

6.1 Indebtedness. The Borrower shall not, nor shall the Borrower permit any
Subsidiary of the Borrower, to create, incur, assume, cause, permit or suffer to
exist or remain outstanding, any Indebtedness, except for:

 

(i) Indebtedness owed by a Loan Party to the Bank or an affiliate of the Bank;

 

(ii) Indebtedness in existence as of the date hereof as set forth on Schedule
6.1, including all extensions and renewals thereof; provided, however that no
such extension or renewal may involve an increase in the principal amount of
such Indebtedness or any other significant change in the terms thereof;

 

(iii) Indebtedness due under Governmental Loans; provided, however that (A) the
outstanding principal amount of all such Indebtedness shall not exceed, in the
aggregate at any one time outstanding, $6,500,000, (B) all such Indebtedness
(other than Indebtedness to (x) the New York Job Development Authority incurred
in connection with the Dunkirk Acquisition, or (y) the Dunkirk Local Development
Corporation incurred in connection with the acquisition of a multiple bar
shotblaster for the steel factory of Dunkirk located at 83 Brigham Road in
Dunkirk, New York) must (I) be subject to an Intercreditor Agreement or (II) be
subordinated to the repayment of the Obligations, as to security and repayment,
in a manner in form and substance satisfactory to the Bank, and (C) no such
Indebtedness may be secured by an Encumbrance on the Bridgeville Property;

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(iv) Purchase money Indebtedness incurred by the Borrower or Dunkirk in
connection with the acquisition of significant assets not already part of the
Collateral under the Original Agreement;

 

(v) Indebtedness incurred by the Borrower, other than Indebtedness enumerated in
items (i) through (iv) above, incurred after the date hereof; provided, however,
that the outstanding principal amount of such Indebtedness shall not exceed, in
the aggregate at any one time, $1,500,000, and, provided further however, no
such Indebtedness may be secured by an Encumbrance on the Bridgeville Property;

 

(vi) Subordinated Indebtedness incurred by the Borrower and due to Holdings
pursuant to the Holdings Credit Agreement; and

 

(vii) Indebtedness incurred to finance a Funded Acquisition which indebtedness,
if not a Government Loan, must be subordinated to the Bank as to security and
payment in a manner in form and substance reasonably satisfactory to the Bank;
provided, however, no such Indebtedness may be secured by an Encumbrance on the
Bridgeville Property.

 

6.2 Guarantees. The Borrower shall not enter into any Guarantees, nor permit any
Subsidiary of the Borrower to enter into any Guarantees, except for (i)
endorsements of negotiable instruments for deposit and collection and similar
transactions in the ordinary course of business and (ii) unsecured Guaranties of
the Borrower to support the obligations of a wholly owned Subsidiary created
pursuant to Section 6.7.

 

6.3 Encumbrances. The Borrower shall not create, assume, incur, permit or suffer
to exist, and Borrower shall not permit any Subsidiary to create, assume, incur,
permit or suffer to exist, any Encumbrance upon any of their respective assets
and properties, whether tangible or intangible and whether now owned or in
existence or hereafter acquired or created and wherever located, nor acquire nor
agree to acquire any assets or properties subject to an Encumbrance, except for:

 

(i) The security interests granted to the Bank as security for the Obligations,
pursuant to Article 3 hereof and the Security Documents;

 

(ii) The Encumbrances in existence as of the date hereof, as listed on Schedule
6.3;

 

(iii) Permitted Encumbrances; and

 

(iv) Encumbrances on real or personal property in favor of sellers, lessors or
lenders, in order to secure indebtedness permitted pursuant to items (ii)
through (v) of Section 6.1; provided, however, no such Encumbrances may be
secured by an Encumbrance on the Bridgeville Property.

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6.4 Financial Covenants.

 

(i) Minimum Consolidated Tangible Net Worth. At all times during the term
hereof, the Borrower’s Consolidated Tangible Net Worth shall not be less than:

 

Period

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

  

Minimum Consolidated

Tangible Net Worth

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

From the Closing Date to and including December 30, 2005    $57,000,000 From
December 31, 2005 to and including March 30, 2006    An amount equal to the sum
of (a) the Minimum Consolidated Tangible Net Worth as set forth immediately
above plus (b) 50% of Consolidated Net Income (if positive) for the Fiscal
Quarter ending December 31, 2005 From March 31, 2006 through June 30, 2006 and
for each successive fiscal period thereafter, each such fiscal period beginning
with the last date of a Fiscal Quarter and continuing to the penultimate day of
the next Fiscal Quarter.    An amount equal to the sum of (a) the required
Minimum Consolidated Tangible Net Worth for the immediately preceding period
plus (b) 50% of Consolidated Net Income (if positive) earned during the Fiscal
Quarter ending on the first day of the period being tested.

 

(ii) Leverage. Beginning with the Fiscal Quarter ending June 30, 2005, and as at
the end of each Fiscal Quarter thereafter, the Borrower’s ratio of Consolidated
Total Indebtedness to EBITDA shall not exceed 3.00:1.00.

 

(iii) Consolidated Debt Service Ratio. Beginning with the Fiscal Quarter ending
June 30, 2005, and as at the end of each Fiscal Quarter thereafter, the ratio of
the Borrower’s EBITDA to Consolidated Debt Service shall not be less than
2.0:1.0.

 

6.5 [RESERVED].

 

6.6 Limitation on Dividends. The Borrower shall not declare or pay any dividends
on, or make any distributions relating to or returns of capital on, any of its
capital stock, or purchase or redeem any of its capital stock; provided,
however, that, so long as no Default or Event of Default exists or would be
caused by such distribution, the Borrower may pay dividends in any Fiscal Year
which do not in the aggregate exceed fifty percent (50%) of the Borrower’s
Consolidated Excess Cash Flow for such Fiscal Year.

 

6.7 Liquidations, Mergers, Consolidations, Acquisitions, Etc. No Loan Party
shall dissolve, liquidate or wind up its affairs, or become a party to any
merger or consolidation, or acquire by purchase, lease or otherwise all or
substantially all of the assets, capital stock or other

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equity interests of any other Person, or become or agree to become a general
partner in any general or limited partnership or a joint venturer in any joint
venture, except for:

 

(i) the consolidation or merger of any wholly-owned Subsidiary with or into the
Borrower or with or into any other wholly-owned Subsidiary;

 

(ii) the creation of a wholly owned Subsidiary to consummate a transaction
permitted in items (iii), (iv) and (v) below;

 

(iii) mergers, stock acquisitions or asset acquisitions, the cost of which to
the Borrower either in the form of capital investment or assumption of
liabilities (including without limitation (A) the issuance of a Guaranty
permitted by Section 6.2 hereof, (B) a loan or advance permitted by Section 6.9
hereof or (C) investments permitted by Section 6.10 hereof) in the aggregate in
any one Fiscal Year is $2,000,000 or less;

 

(iv) mergers, stock acquisitions or asset acquisitions, the cost of which to the
Borrower either in the form of capital investment or assumption of liabilities
(including without limitation (A) the issuance of a Guaranty permitted by
Section 6.2 hereof (B) a loan or advance permitted by Section 6.9 hereof or (C)
investments permitted by Section 6.10 hereof) in the aggregate in any one Fiscal
Year is greater than $2,000,000; provided, that for each such merger or
acquisition the amount by which such investment or assumption of liabilities
exceeds $2,000,000 in the aggregate in any one Fiscal Year shall, immediately
upon the consummation of such merger or acquisition, be added to the minimum
required amount of the Borrower’s Tangible Net Worth for the purposes of Section
6.4; and

 

(v) a Funded Acquisition.

 

The foregoing notwithstanding, no merger, stock acquisition or asset acquisition
otherwise permitted by items (ii), (iii), or (iv) above shall be permitted
unless both immediately prior to and immediately after such merger or
acquisition and taking into account such merger or acquisition no Default or
Event of Default has occurred and is continuing.

 

6.8 Dispositions of Assets. No Loan Party shall sell, convey, assign, lease,
abandon or otherwise transfer or dispose of, voluntarily or involuntarily, any
of its properties or assets, whether tangible or intangible (including but not
limited to sales, assignments, discounts or other dispositions of Accounts,
contract rights, Chattel Paper, Equipment or General Intangibles, with or
without recourse, and sale/leaseback transactions), except for:

 

(i) any sale of Inventory in the ordinary course of business;

 

(ii) any sale, transfer or lease in the ordinary course of business of assets
which are no longer necessary or required in the conduct of a Loan Party’s
business; and

 

(iii) any sale, transfer or lease of assets in the ordinary course of business
which assets are replaced by substitute assets acquired or leased by a Loan
Party; provided, however, that such substitute assets are subject to a first and
prior lien and security interest in favor of the Bank to the extent they are not
subject to an Encumbrance in favor of the seller or lessor of such assets.

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The foregoing notwithstanding, (A) Net Cash Proceeds aggregating during the term
hereof in excess of $2,500,000 derived from a disposition of assets permitted by
items (ii) and (iii) hereof shall be applied to reduce the outstanding principal
balance of the Term Loan in accordance with the provisions of Section 2.2d
hereof, and (B) nothing set forth in clauses (i), (ii) or (iii) of this Section
6.8 shall permit any sale, conveyance, lease, assignment, abandonment, transfer
or other disposition of the Bridgeville Property.

 

6.9 Loans and Other Advances. The Borrower shall not make, and the Borrower
shall not allow any Subsidiary of the Borrower to make, loans or other advances
of funds, except that (i) the Borrower may make loans or other advances to a
wholly owned Subsidiary created pursuant to Section 6.7 to fund acquisitions
permitted by Section 6.7 and (ii) Holdings may advance funds to the Borrower
under and pursuant to the Holdings Credit Agreement.

 

6.10 Investments. No Loan Party shall at any time nor shall it allow any
Subsidiary of the Borrower at any time purchase, acquire or own any stock,
bonds, notes, or securities of, or any partnership interest (whether general or
limited) in, or any other interest in, or make any capital contribution to, any
other Person, or become a joint venture partner in any joint venture, or agree,
become or remain liable to do any of the foregoing, except for:

 

(i) debt securities having a maturity of not more than one year issued or
guaranteed by the United States government or by an agency or instrumentality
thereof;

 

(ii) certificates of deposit, bankers acceptances and time deposits, which in
each case mature within one year from the date of purchase thereof and which are
issued by a Qualified Bank;

 

(iii) commercial paper maturing in 270 days or less from the date of issuance
which, at the time of acquisition by a Loan Party either (A) is accorded the
highest rating by Standard and Poor’s Rating Group, a division of McGraw Hill,
Inc. or Moody’s Investors Service, Inc. or (B) is issued by the Bank;

 

(iv) direct obligations of the United States of America or any agency or
instrumentality of the United States of America, the payment or guarantee of
which constitutes a full faith and credit obligation of the United States of
America, in each case maturing in 12 months or less from the date of
acquisition;

 

(v) ownership of the capital stock of Subsidiaries as permitted by Section 6.7
of this Agreement; provided, however, no Subsidiary of the Borrower shall own
the stock of any other Subsidiary; and

 

(vi) money market funds or income funds with a history of maintaining a stable
net asset value per share.

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6.11 Affiliate Transactions. No Loan Party shall enter into or carry out any
transaction with an Affiliate (including, without limitation, purchasing
property or services from or selling property or services to, any Affiliate or
other Person) unless such transaction (i) is not otherwise prohibited by this
Agreement, (ii) is entered into in the ordinary course of business upon fair and
reasonable arm’s-length terms and conditions which are fully disclosed to the
Bank and (iii) is in accordance with all applicable Governmental Rules.

 

6.12 Use of Proceeds. The Borrower shall not use any proceeds of the Loans or
any Letter of Credit either directly or indirectly (i) for the purpose of
“purchasing or carrying any margin stock” within the meaning of Regulations T, U
or X, or (ii) (x) to knowingly purchase any Ineligible Securities from a Section
20 Subsidiary during any period in which such Section 20 Subsidiary makes a
market in such Ineligible Security, (y) to knowingly purchase during the
underwriting or placement period Ineligible Securities being underwritten or
privately placed by a Section 20 Subsidiary or (z) to make payments of principal
or interest on Ineligible Securities underwritten or privately placed by a
Section 20 Subsidiary and issued by or for the benefit of the Borrower or an
Affiliate of the Borrower.

 

6.13 Change of Business. (i) The Borrower shall not engage directly or
indirectly in any business other than the production, conversion or marketing of
specialty and low alloy steels, and (ii) the Borrower shall not allow a
Subsidiary to engage in any business except as set forth in Section 4.22.

 

6.14 Change of Fiscal Year. The Borrower shall not change its Fiscal Year which
now ends on December 31.

 

6.15 ERISA. The Borrower shall not:

 

(i) (A) With respect to any Plan or Money Purchase Plan, incur any material
liability for failure to make timely payment of any contribution or installment
required under Section 302 of ERISA and Section 412 of the Internal Revenue
Code, whether or not waived, or otherwise materially fail to comply with the
funding provisions set forth therein, (B) with respect to any Plan or Money
Purchase Plan, suffer to exist any lien under Section 302(f) of ERISA or Section
412(n) of the Internal Revenue Code against the property and rights to property
of the Borrower or any ERISA Affiliate or (C) terminate, or permit any ERISA
Affiliate to terminate, any Plan or Money Purchase Plan in a manner which could
reasonably be expected to result in the imposition of a lien upon the property
or rights to property of the Borrower or any ERISA Affiliate pursuant to Section
4068 of ERISA;

 

(ii) Engage in any “prohibited transaction” (as defined in Section 406 of ERISA
or Section 4975 of the Internal Revenue Code) with respect to any “employee
benefit plan” (as defined in Section 3(3) of ERISA) for which a statutory or
administrative exemption is not available under Section 408 of ERISA or Section
4975 of the Internal Revenue Code; or

 

(iii) Without the prior written consent of the Bank, partially or completely
withdraw from any Multiemployer Plan where such withdrawal could reasonably be
expected to subject the Borrower or any ERISA Affiliate to Withdrawal Liability.

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6.16 Amendments to Certain Documents. No Loan Party shall amend in any material
respect its certificate of incorporation, by-laws, or other organizational
documents, without providing at least 10 days’ prior written notice to the Bank
and, in the event that such amendment would be adverse to the Bank, as
determined in the Bank’s sole discretion, obtaining the prior written consent of
the Bank.

 

6.17 Limitation on Negative Pledge Clauses. Neither the Borrower nor any of its
Subsidiaries shall enter into any agreement with any Person (other than the Bank
pursuant hereto) which prohibits or limits the ability of the Borrower or any of
its Subsidiaries to create, incur, assume or suffer to exist any Encumbrance
upon any of its property, assets or revenues, whether now owned or hereafter
acquired.

 

ARTICLE 7. CONDITIONS TO MAKING EXTENSIONS OF CREDIT

 

7.1 All Loans. The obligation of the Bank to amend and restate the Original
Agreement under and pursuant to the terms hereof, to make any Loan and to issue
any Letter of Credit hereunder is subject to the satisfaction of each of the
following conditions precedent:

 

7.1a Work Cash Sweep Agreement. No advance pursuant to Section 2.1 shall occur
if either the Borrower or the Bank has terminated the Working Cash Sweep
Agreement.

 

7.1b Term Loan Disbursement. As to the amending and recasting under the Term
Loan Commitment the Borrower shall have satisfied the conditions of Section 2.2.

 

7.1c No Default or Event of Default. The Borrower shall have performed and
complied with all agreements and conditions which are required hereby or by any
other Loan Document to be performed or complied with by it prior to such Loan
being made or such Letter of Credit being issued, and, at the time of such Loan
or the issuance of such Letter of Credit, no Default or Event of Default has
occurred and is continuing or will result from the making such Loan or the
issuance of such Letter of Credit.

 

7.1d No Material Adverse Change. At the time of making such Loan or the issuance
of such Letter of Credit, no Material Adverse Change has occurred and is
continuing.

 

7.1e Representations Correct. The representations and warranties contained in
Article 4 hereof and in the other Loan Documents and otherwise made in writing
by or on behalf of the Borrower in connection with the transactions contemplated
by this Agreement shall be (i) correct when made and (ii) correct in all
material respects at the time of such Loan or the issuance of such Letter of
Credit.

 

Each request for a Loan or for the issuance of a Letter of Credit or amendment
thereto whether made orally or in writing, shall be deemed to be, as of the time
made, a certification by the Borrower as to the accuracy of the matters set
forth in Sections 7.1c, 7.1d and 7.1e.

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7.2 Initial Extension of Credit. The obligation of the Bank to make the first
Revolving Credit Loan or to amend and recast the Term Loan (or the issuance of
the first Letter of Credit hereunder) is subject to the satisfaction of each of
the following conditions precedent, in addition to the conditions precedent set
forth in Section 7.1:

 

7.2a Credit Agreement. Receipt by the Bank of a fully executed copy of this
Agreement.

 

7.2b Schedules. Receipt by the Bank of all schedules and exhibits to this
Agreement and the other Loan Documents prepared by the Borrower, and a
determination by the Bank that all exceptions shown on such schedules are
satisfactory to it.

 

7.2c Notes. Receipt by the Bank of the Notes, each executed by the Borrower.

 

7.2d Security Agreement. Receipt by the Bank of a Security Agreement executed by
each of the Borrower, Dunkirk and Holdings.

 

7.2e Financing Statements. Receipt by the Bank of all Uniform Commercial Code
financing statements or amendments to existing financing statements requested by
it.

 

7.2f Mortgage. Receipt by the Bank of the Third Amendment to Leasehold Mortgage
executed by the Borrower and in recordable form.

 

7.2g Guaranty Agreement. Receipt by the Bank of a Guaranty Agreement executed by
each Subsidiary of the Borrower.

 

7.2h Environmental Indemnity Agreement. Receipt by the Bank of an environmental
indemnity agreement executed by the Borrower in form and substance satisfactory
to the Bank.

 

7.2i Working Cash Agreements. The Bank shall have received duly executed
counterpart originals of the Working Cash Sweep Agreement and the Trust
Agreement.

 

7.2j Landlord’s Consents. Receipt by the Bank of such Landlord’s Consents for
the real property location leased by the Borrower or Dunkirk executed by the
lessor of such location as the Bank shall request.

 

7.2k Subordination Agreement. Receipt by the Bank of the acknowledgment of
subordination agreement duly executed by a Borrower and Holdings in form and
substance satisfactory to the Bank.

 

7.2l Deposit Account; Lockbox Agreements. Receipt by the Bank of (i) evidence
satisfactory to it that each of the Borrower and Dunkirk has opened a deposit
account with the Bank, (ii) the fully-executed Lockbox Agreements.

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7.2m Hazard Liability Insurance. Receipt by the Bank of (i) copies of the Loan
Parties’ insurance policies, containing long-form lender loss payable and
mortgagee endorsements satisfactory to the Bank and which in all other respects
comply with the requirements of Sections 4.16 and 5.7 and the insurance
requirements set forth in the other Loan Documents, (ii) satisfactory evidence
of flood insurance and (iii) current insurance certificates for all such
policies.

 

7.2n Lien Searches. Receipt by the Bank of Uniform Commercial Code, tax lien and
judgment searches satisfactory to the Bank.

 

7.2o Business Plan. Receipt by the Bank of the Borrower’s business plan for the
Fiscal Year ending December 31, 2005, in form and substance satisfactory to the
Bank.

 

7.2p Corporate Documents of Loan Parties. Receipt by the Bank of the following
corporate documents for each Loan Party:

 

(i) a copy of its certificate of incorporation (or certificate of organization,
as applicable), certified as true and correct by the Secretary of State of the
state of its incorporation or organization, as the case may be, not more than 30
days prior to the date hereof;

 

(ii) good standing certificates issued by the Secretaries of State of the state
where such a Loan Party is incorporated (or organized, as applicable) and each
state where such a Loan Party is required to be qualified to do business, each
dated not more than 30 days prior to the date hereof;

 

(iii) resolutions of its board of directors (or other managing body) authorizing
the execution of the Loan Documents and the performance by such a Loan Party
pursuant thereto, certified by the secretary of such a Loan Party as being true,
correct, complete and in effect as of the Closing Date and in form and substance
satisfactory to the Bank;

 

(iv) a copy of its by-laws (or operating agreement, as applicable) and all
amendments thereto, certified by the secretary of such a Loan Party as being
true, correct, complete and in effect; and

 

(v) an incumbency certificate for such a Loan Party, showing the names of the
officers of such a Loan Party, their respective titles and containing their true
signatures.

 

7.2q Opinion of Counsel. Receipt by the Bank of an opinion of counsel to the
Loan Parties, Paul A. McGrath, Esquire, addressed to the Bank and in all
respects satisfactory to the Bank.

 

7.2r No Default Certificates. On the Closing Date (after giving effect to the
Loan or other extension of credit made on the Closing Date) receipt by the Bank
of a certificate executed by an Authorized Officer, stating that, as of such
date, and no Default or Event of Default exists or will exist after giving
effect to the transaction entered into by the Loan Parties under the Loan
Documents, no Material Adverse Change has occurred and all representations and
warranties made by any Loan Party in the Agreement and the other Loan Documents
are true and correct as of such date.

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7.2s Cash Management Agreements. Receipt by the Bank of the various documents
each executed by the Borrower required by the Bank to establish the various
accounts required to implement the cash management program agreed upon between
the Borrower and the Bank.

 

7.2t Request for Initial Disbursement. Receipt by the Bank of written
instructions addressed to the Bank and executed by the Borrower, instructing the
Bank as to the disbursement of the Loans to be made, and as to the issuance of
any Letters of Credit to be issued, on the Closing Date, and containing complete
wire transfer instructions, if applicable.

 

7.2u Closing Fee. Receipt by the Bank of the Closing Fee.

 

7.2v Legal Fees. Receipt by the Bank’s counsel, Tucker Arensberg, P.C., of the
legal fees and expenses incurred by it in connection with the preparation and
negotiation of the Loan Documents and the closing.

 

7.2w Closing Instructions. Receipt by the Bank of closing instructions executed
by the Borrower with instructions for all disbursements to be made on the
Closing Date.

 

7.2x No Material Adverse Change. At the time of making the initial Loan or the
issuance of the initial Letter of Credit hereunder, no condition, event or
development has occurred and is continuing which is, or could reasonably be
expected to be, a Material Adverse Change.

 

7.2y Material Litigation. Except as listed on Schedule 4.10 attached hereto, no
actions, suits, proceedings or investigations shall be pending or to the
Borrower’s knowledge threatened against the Borrower or any of its Subsidiaries,
or any of their respective businesses, operations, properties, prospects,
profits or condition (financial or otherwise), at law or in equity, which,
individually or in the aggregate, if adversely determined, could reasonably be
expected to cause a Material Adverse Change, or which purport to affect the
rights and remedies of the Bank pursuant to the Loan Documents or which purport
to restrain or enjoin (either temporarily, preliminarily or permanently) the
performance by the Borrower or any of its Subsidiaries of any action
contemplated by the Loan Documents.

 

7.2z No Material Contingent Obligation. At the time of making the initial Loan
or the issuance of the initial Letter of Credit hereunder, no material
contingent obligation has been incurred or assumed by the Borrower or any of its
Subsidiaries.

 

7.2aa Evaluation of Financial Condition. The Bank shall have completed a
satisfactory review and evaluation of the 2004 audit of Borrower and its
Subsidiaries, and the projected consolidated earnings before interest expense,
income tax expense, depreciation expense and amortization expense of the
Borrower and its Subsidiaries for the Fiscal Year ending December 31, 2005,
together with a satisfactory review and evaluation of the amount and nature of
all litigation (including threatened or potential litigation), tax, ERISA,
employee retirement benefit, employment and labor matters, environmental and
other contingent liabilities of the Borrower and its Subsidiaries.

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ARTICLE 8. EVENTS OF DEFAULT; REMEDIES

 

8.1 Events of Default. Each of the following events shall constitute an Event of
Default:

 

8.1a Nonpayment of Obligations. The Borrower shall default (i) in any payment of
principal of either Note when due and such default in the payment of principal
shall have continued for a period of two Business Days after such due date or
(ii) in the payment of interest on either Note when due or in the payment of any
of the Fees, expenses or other amounts due hereunder or under any of the other
Loan Documents when due, and such default in payment of interest, Fees, expenses
or other amounts shall have continued for a period of five Business Days after
such due date; or the Borrower shall default in the payment when due of any
Obligation not evidenced by the Notes and such default in payment shall have
continued for a period of five Business Days after such due date.

 

8.1b Nonpayment of Other Indebtedness. Any Loan Party shall (i) default in the
payment of any other Indebtedness, which Indebtedness has an aggregate principal
outstanding balance of $100,000 or more, when such payment is due (whether by
acceleration or otherwise) and any applicable grace periods with respect thereto
have expired, or (ii) default in the performance of any term of any agreement
under which any such Indebtedness is created, if the effect of any default
described in this item (ii), after the expiration of any grace periods
applicable thereto, is to cause such Indebtedness to become, or to permit the
holder or holders of such Indebtedness (or any Person on behalf of such holder)
to declare such Indebtedness due prior to its stated maturity.

 

8.1c Insolvency, Etc.

 

(i) Involuntary Proceedings. A proceeding shall have been instituted in a court
having jurisdiction seeking a decree or order for relief in respect of the
Borrower or any Subsidiary of the Borrower in an involuntary case under the
Federal bankruptcy laws, or any other similar applicable Federal or state law,
now or hereafter in effect, or for the appointment of a receiver, liquidator,
trustee, sequestrator or similar official for the Borrower or any Subsidiary of
the Borrower or for a substantial part of their respective property, or for the
winding up or liquidation of their respective affairs, and such shall remain
undismissed or unstayed and in effect for a period of 60 days.

 

(ii) Voluntary Proceedings. The Borrower or any Subsidiary of the Borrower shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall consent
to the filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization under the Federal bankruptcy laws, or
any other similar applicable Federal or state law now or hereinafter in effect,
or shall consent or acquiesce to the filing of any such petition, or shall
consent to or acquiesce in the appointment of a receiver, liquidator, trustee,
sequestrator

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or similar official for the Borrower or any Subsidiary of the Borrower or for a
substantial part of their respective property, or shall make an assignment for
the benefit of creditors, or shall be generally unable to pay their respective
debts generally as they become due, or action shall be taken by the Borrower or
any Subsidiary of the Borrower in furtherance of any of the foregoing.

 

8.1d Dissolution; Cessation of Business. Any Loan Party shall terminate its
existence or cease to exist or permanently cease operations.

 

8.1e ERISA.

 

(i) One or more of the following events occur which results in or could result
in liability to the Borrower or any other Loan Party:

 

(A) A Notice of Intent to Terminate any Plan (including any Plan of an ERISA
Affiliate) is filed under Section 4041(c) of ERISA;

 

(B) Proceedings shall be instituted for the appointment of a trustee by the
appropriate United States court to administer any Plan (including any Plan of an
ERISA Affiliate);

 

(C) The PBGC shall institute proceedings to terminate any Plan (including any
Plan of an ERISA Affiliate) or to appoint a trustee to administer any such Plan;

 

(D) A notice assessing Withdrawal Liability in an amount in excess of $250,000
with respect to any Multiemployer Plan (including any Multiemployer Plan of an
ERISA Affiliate) shall have been received by the Borrower or any ERISA
Affiliate; or

 

(ii) Any Governmental Rule is adopted, changed or interpreted by any
Governmental Authority or agency or court with respect to or otherwise affecting
one or more Plans, Multiemployer Plans or Benefit Arrangements which, in the
reasonable opinion of the Bank, could have a material adverse effect on the
priority of any lien or security interest in favor of the Bank as established or
described in this Agreement or the other Loan Documents.

 

8.1f Adverse Judgments. The aggregate amount of final judgments against the
Borrower or any Subsidiary of the Borrower for which no further appellate review
exists shall, at any one time, exceed, by $250,000 or more, the aggregate amount
of insurance proceeds available to pay such judgments.

 

8.1g Failure to Take Certain Action. The Borrower shall fail to take measures
satisfactory to the Bank, within 30 days after notice to the Borrower by the
Bank, with respect to any action, suit, investigation, proceeding or
Environmental Claim then pending or threatened against the Borrower or any
Subsidiary of the Borrower the outcome of which, in the judgment of the Bank,
may be material.

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8.1h Failure to Comply with Loan Documents.

 

(i) Failure to Comply with Negative Covenants. The Borrower shall default in the
due performance or observance of any covenant contained in Article 6 of this
Agreement.

 

(ii) Failure to Comply with Other Covenants and Loan Documents. Any Loan Party
shall default in the due performance or observance of any covenant, condition or
provision set forth in this Agreement or any of the other Loan Documents which
is not set forth elsewhere in this Section 8.1, and such default described in
this item (ii) shall not be remedied for a period of 30 days after the earlier
of (A) such default becoming known to any Authorized Officer or (B) notice of
such default being delivered by the Bank to the Borrower.

 

(iii) Failure to Comply with Security Documents. The occurrence of an “event of
default” as defined in any of the Security Documents.

 

8.1i Misrepresentation. Any representation or warranty made by a Loan Party in
any Loan Document to which it is a party is untrue in any material respect as of
the date made, or any schedule, statement, report, notice, certificate or other
writing furnished by such a Loan Party to the Bank is untrue in any material
respect on the date as of which the facts set forth therein are stated or
certified.

 

8.1j Invalidity, Etc. of Loan Documents. Any material provision of this
Agreement or any of the other Loan Documents shall at any time for any reason
cease to be valid and binding on a Loan Party a party thereto; any Loan Document
shall be declared to be null and void, or the validity or enforceability of any
Loan Document shall be contested by a Loan Party a party to any such Loan
Document, or a Loan Party shall deny that it has any or further liability or
obligation under any Loan Document to which it is a party.

 

8.1k Material Adverse Change. The occurrence of any Material Adverse Change.

 

8.1l Termination of Working Cash Sweep Agreement. The termination upon thirty
(30) days prior written notice by either the Bank or the Borrower of the Working
Cash Sweep Agreement.

 

8.1m Intercreditor Agreement. The occurrence of an “event of default” as defined
in the Intercreditor Agreement.

 

8.1n Change of Control. (i) any Person or group of Persons (within the meaning
of Sections 13(a) or 14(a) of the Securities Exchange Act of 1934, as amended),
or the current officers or directors of the Borrower, shall have acquired
beneficial ownership of (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) 30% or more of the voting
capital stock of the Borrower; or

 

(ii) within a period of 12 consecutive calendar months, individuals who were
directors of the Borrower on the first day of such period shall cease to
constitute a majority of the board of directors of the Borrower.

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8.2 Remedies.

 

8.2a Events of Default Under Section 8.1c. Upon the occurrence of an Event of
Default set forth in Section 8.1c, the Revolving Credit Commitment shall
automatically terminate and the Notes, interest accrued thereon and all other
Obligations of the Borrower to the Bank shall become immediately due and
payable, without the necessity of demand, presentation, protest, notice of
dishonor or notice of default, all of which are hereby expressly waived by the
Borrower. Thereafter, the Bank shall have no further obligation to make any
additional Loans or other extensions of credit hereunder. In addition, during
any 60-day period described in Section 8.1c(i), the Bank shall not have any
obligation to make additional Loans hereunder.

 

8.2b Remaining Events of Default. Upon the occurrence and during the continuance
of any Event of Default set forth in Sections 8.1a, 8.1b, 8.1d, 8.1e, 8.1f,
8.1g, 8.1h, 8.1i, 8.1j, 8.1k, 8.1l, 8.1m, or 8.2n the Bank shall have no further
obligation to make any additional Loans hereunder and the Bank may, at its
option, declare the Revolving Credit Commitment terminated and the Notes,
interest accrued thereon and all other Obligations of the Borrower to the Bank
to be due and payable, without the necessity of demand, presentation, protest,
notice of dishonor or notice of default, all of which are hereby expressly
waived by the Borrower. Thereafter, the Bank shall have no further obligation to
make any additional Loans hereunder.

 

8.2c Letter of Credit Amount. Upon the occurrence of any Event of Default
described in the foregoing Section 8.1c or upon the declaration by the Bank of
any other Event of Default and the termination of the Revolving Credit
Commitment, the obligation of the Bank to issue or amend Letters of Credit shall
terminate, the Bank may provide written demand to any beneficiary of a Letter of
Credit to present a draft against such Letter of Credit, and an amount equal to
the maximum amount which may at any time be drawn under the Letters of Credit
then outstanding (whether or not any beneficiary of such Letters of Credit shall
have presented, or shall be entitled at such time to present, the drafts or
other documents required to draw under the Letters of Credit) shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by the Borrower. So long as the Letters of Credit shall remain
outstanding, any amounts declared due pursuant to this Section 8.2c with respect
to the outstanding Letters of Credit when received by the Bank shall be
deposited and held by the Bank in an interest bearing account denominated in the
name of the Bank over which the Bank shall have sole dominion and control of
withdrawals (the “Cash Collateral Account”) as cash collateral for the
obligation of the Borrower to reimburse the Bank in the event of any drawing
under the Letters of Credit and upon any drawing under such Letters of Credit in
respect of which the Bank has deposited in the Cash Collateral Account any
amounts declared due pursuant to this Section 8.2c, the Bank shall apply such
amounts held by the Bank to reimburse the Bank for the amount of such drawing.
In the event that any Letter of Credit in respect of which the Bank has
deposited in the Cash Collateral Account any amounts described above is
cancelled or expires or in the event of any reduction in the maximum amount
available at any time for drawing under the Letters of Credit outstanding, the
Bank shall apply the amount then in the Cash Collateral Account designated to
reimburse the Bank for any drawings under the Letters of Credit less the maximum
amount available at any time for drawing under the Letters of Credit outstanding
immediately after such cancellation, expiration or reduction, if any, to the
payment in full of the outstanding Obligations, and second, to the payment of
any excess, to the Borrower.

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8.2d Additional Remedies. In addition to the remedies set forth above, upon the
occurrence of any Event of Default, the Bank shall have all of the rights and
remedies granted to it under this Agreement and the other Loan Documents and all
other rights and remedies granted to creditors by law, in equity, or otherwise.

 

8.2e Exercise of Remedies; Remedies Cumulative. No delay on the part of the Bank
or failure by the Bank to exercise any power, right or remedy under this
Agreement or any other Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any power, right or remedy or any
abandonment or discontinuance of steps to enforce such right, power or remedy
preclude other or further exercises thereof, or the exercise of any other power,
right or remedy. The rights and remedies in this Agreement and the other Loan
Documents are cumulative and not exclusive of any rights or remedies (including,
without limitation, the right of specific performance) which the Bank would
otherwise have.

 

ARTICLE 9. GENERAL PROVISIONS

 

9.1 Amendments and Waivers. The Bank and the Borrower may from time to time
enter into amendments, extensions, supplements and replacements to and of this
Agreement and the other Loan Documents to which they are parties, and the Bank
may from time to time waive compliance with a provision of any of such
documents. No amendment, extension, supplement, replacement or waiver shall be
effective unless it is in writing and is signed by the Bank and the Borrower.
Each waiver shall be effective only for the specific instance and for the
specific purpose for which it is given. All of the rights of the Bank set forth
in this Agreement or in the other Loan Documents shall apply to any amendment,
extension, supplement and replacement to and of this Agreement and the other
Loan Documents.

 

9.2 Taxes. The Borrower shall pay any and all stamp, document, transfer and
recording taxes, filing fees and similar impositions payable or hereafter
determined by the Bank to be payable in connection with this Agreement, the
other Loan Documents and any other documents, instruments and transactions
pursuant to or in connection with any of the Loan Documents. The Borrower agrees
to save the Bank harmless from and against any and all present and future claims
or liabilities with respect to, or resulting from, any delay in paying or
failure to pay any such taxes or similar impositions. The obligations of the
Borrower pursuant to this Section 9.2 shall survive the termination of this
Agreement and the repayment of the Obligations.

 

9.3 Expenses. The Borrower shall pay:

 

(i) All reasonable costs and expenses of the Bank (including without limitation
the reasonable fees and disbursements of the Bank’s counsel, which may include
the Bank’s in-house counsel) in connection with the preparation, execution and
delivery of this Agreement and the other Loan Documents and any and all other
documents and instruments

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prepared in connection herewith and therewith, including but not limited to all
amendments, waivers, consents and other documents and instruments prepared or
entered into from time to time, including after the Closing Date;

 

(ii) All reasonable costs and expenses of the Bank (including without limitation
the reasonable fees and disbursements of the Bank’s counsel) in connection with
(A) the enforcement of this Agreement and the other Loan Documents arising
pursuant to a breach by any Loan Party of any of the terms, conditions,
representations, warranties or covenants of any Loan Document to which he or it
is a party, and (B) defending or prosecuting any actions, suits or proceedings
relating to any of the Loan Documents;

 

(iii) All reasonable costs and expenses of the Bank (including without
limitation the reasonable fees and disbursements of the Bank’s counsel,
consultants and contractors) in connection with environmental investigation,
testing or other due diligence (A) contemplated by this Agreement and the other
Loan Documents, and (B) following the occurrence of an Event of Default; and

 

(iv) All reasonable costs and expenses incurred by the Bank in connection with
its periodic review and evaluation of the Collateral for the Loans.

 

All of such costs and expenses shall be payable by the Borrower to the Bank upon
demand or as otherwise agreed upon by the Bank and the Borrower, and shall
constitute Obligations under this Agreement. The Borrower’s obligation to pay
such costs and expenses shall survive the termination of this Agreement and the
repayment of the Obligations.

 

9.4 Notices.

 

9.4a Notice to the Borrower. All notices required to be delivered to the
Borrower pursuant to this Agreement shall be in writing and shall be sent to the
following address, by hand delivery, recognized national overnight courier
service, telecopier or by the United States certified mail, return receipt
requested:

 

Universal Stainless & Alloy Products, Inc.

600 Mayer Street

Bridgeville, Pennsylvania 15107

Attention: Richard M. Ubinger

Telecopier: 412-257-7640

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9.4b Notice to the Bank. All notices required to be delivered to the Bank
pursuant to this Agreement shall be in writing and shall be sent to the
following address, by hand delivery, recognized national overnight courier
service, telecopier or by United States certified mail, return receipt
requested:

 

PNC Bank, National Association One PNC Plaza, 2nd Floor 249 Fifth Avenue
Pittsburgh, PA 15222 Attention:    David Gookin, Managing Director     
Corporate Finance Group      Telecopier: 412-762-6484

 

9.4c Effectiveness of Notices. All such notices shall be effective three days
after mailing, or on the date of telecopy transmission or when received,
whichever is earlier. The Borrower and the Bank may each change the address for
service of notice upon it by a notice in writing to the other party hereto.

 

9.5 Participations.

 

9.5a Sale of Participations. The Bank may, in the ordinary course of its
commercial banking business and in accordance with applicable law, and without
the consent of the Borrower, at any time sell to one or more Participants (which
Participants may be Affiliates of the Bank) Participations in the Revolving
Credit Commitment, the Loans, the Notes, the Letters of Credit and the other
interest of the Bank hereunder provided that each such Participation shall be in
an initial minimum amount of $5,000,000. In the event of any such sale of a
Participation, the Bank’s obligations under this Agreement to the Borrower shall
remain unchanged, the Bank shall remain solely responsible for its performance
under this Agreement, the Bank shall remain the holder of the Notes made payable
to it for all purposes under this Agreement and the Borrower shall continue to
deal solely and directly with the Bank in connection with the Bank’s rights and
obligations under this Agreement and the other Loan Documents.

 

9.5b Right of Setoff. The Borrower agrees that if amounts outstanding under this
Agreement and the Notes are due and unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have, to the extent permitted by applicable law,
the right of setoff in respect of its Participation in amounts owing under this
Agreement and the Notes to the same extent as if the amount of its Participation
were owing directly to it as a lender under this Agreement or the Notes.

 

9.5c Withholding of Income Taxes. If any Participant or purchasing lender is not
a United States person within the meaning of Section 7701(a)(30) of the Internal
Revenue Code such Participant of purchasing lender shall promptly (but in any
event prior to the initial payment of interest hereunder) deliver to the
Borrower and the Bank two executed copies of (i) Internal Revenue Service Form
W-8BEN or any successor form specifying the applicable tax treaty between the
United States and the jurisdiction of such Participant’s or purchasing lender’s

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domicile that provides for the exemption from withholding on interest payments
to such Participant or purchasing lender, (ii) Internal Revenue Service Form
W-8ECI or any successor form evidencing that the income to be received by such
Participant or purchasing lender hereunder is effectively connected with the
conduct of a trade or business in the United States or (iii) other evidence
satisfactory to the Borrower and the Bank that such Participant or purchasing
lender is exempt from United States income tax withholding with respect to such
income. Such Participant or purchasing lender shall amend or supplement any such
form or evidence as required to insure that it is accurate, complete and
non-misleading at all times. In addition, from time to time upon the reasonable
request of Borrower and the Bank, each Participant or purchasing lender shall
complete and provide Borrower and the Bank with such forms, certificates or
other documents as may be reasonably necessary to allow Borrower or the Bank, as
applicable, to make any payment under this Agreement or the other Loan Documents
without any withholding for or on the account of any Tax pursuant to Section
2.5b hereof.

 

9.6 Successors and Assigns. This Agreement shall be binding upon the Borrower
and the Bank and their respective successors and assigns, and shall inure to the
benefit of the Borrower, the Bank and their respective successors and assigns;
provided, however, that the Borrower shall not assign its rights or duties
hereunder or under any of the other Loan Documents without the prior written
consent of the Bank.

 

9.7 Confidentiality. The Bank shall keep confidential and not disclose to any
Person, other than its directors, officers, employees, Affiliates and agents,
and to actual or potential Participants, all non-public information concerning
the Borrower and the Borrower’s Affiliates which comes into the Bank’s
possession during the term hereof. Notwithstanding the foregoing, the Bank may
disclose information concerning the Loan Parties (i) in accordance with normal
banking practices and the Bank’s policies concerning disclosure of such
information, (ii) to any Participant or potential Participant, (iii) pursuant to
what the Bank believes to be the lawful requirements or request of any
Governmental Authority regulating banks or banking, (iv) as required by any
Governmental Rule, judicial process or subpoena, and (v) to its attorneys,
accountants and auditors.

 

9.8 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or enforceability without invalidating the
remaining portions hereof in such jurisdiction or affecting the validity or
enforceability of such or any other provision hereof in any other jurisdiction.

 

9.9 Interest Limitation. Notwithstanding anything to the contrary herein
contained, the total liability of the Borrower for payment of interest pursuant
hereto shall not exceed the maximum amount, if any, of such interest permitted
by any applicable Governmental Rule to be contracted for, charged or received,
and if any payment by the Borrower to the Bank includes interest in excess of
such a maximum amount, the Bank shall apply such excess to the reduction of the
unpaid principal amount due pursuant hereto, or if none is due, such excess
shall be refunded to the Borrower; provided that, to the extent permitted by
applicable Governmental Rules, in the event the interest is not collected, is
applied to principal or is refunded pursuant to this sentence and interest
thereafter payable pursuant hereto shall be less than such maximum

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amount, then such interest thereafter so payable shall be increased up to such
maximum amount to the extent necessary to recover the amount of interest, if
any, theretofore uncollected, applied top principal or refunded pursuant to this
sentence. Any such application or refund shall not cure or waive any Default or
Event of Default. In determining whether or not any interest payable under this
Agreement exceeds the highest rate permitted by law, any non-principal payment
(except payments specifically stated in this Agreement to be “interest”) shall
be deemed, to the extent permitted by applicable law, to be an expense, fee,
premium or penalty rather than interest. To the extent permitted by applicable
law, the Borrower hereby waives any provision of law which renders any provision
hereof prohibited, unenforceable or not authorized in any respect.

 

9.10 Survival. Except as otherwise provided in Sections 4.20, 5.13, 9.2 and 9.3,
all representations, warranties, covenants and agreements of the Borrower
contained herein or in the other Loan Documents or made in writing in connection
herewith shall survive the issuance of the Notes and shall continue in full
force and effect so long as the Borrower may borrow hereunder and so long
thereafter until all of the Obligations are paid in full.

 

9.11 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF
LAWS, EXCEPTING APPLICABLE FEDERAL LAW AND EXCEPT ONLY TO THE EXTENT PRECLUDED
BY THE MANDATORY APPLICATION OF THE LAW OF ANOTHER JURISDICTION.

 

9.12 FORUM. THE PARTIES HERETO AGREE THAT ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS TO WHICH THE
BORROWER IS A PARTY MAY BE COMMENCED IN THE COURT OF COMMON PLEAS OF ALLEGHENY
COUNTY, PENNSYLVANIA OR IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
WESTERN DISTRICT OF PENNSYLVANIA, AND THE PARTIES HERETO AGREE THAT A SUMMONS
AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING IN EITHER OF SUCH COURTS SHALL
BE PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED PERSONALLY
OR BY CERTIFIED MAIL TO THE PARTIES AT THEIR ADDRESSES SET FORTH IN SECTION 9.4,
OR AS OTHERWISE PROVIDED UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.
FURTHER, THE BORROWER HEREBY SPECIFICALLY CONSENTS TO THE PERSONAL JURISDICTION
OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA AND THE DISTRICT
COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF PENNSYLVANIA AND WAIVES
AND HEREBY ACKNOWLEDGES THAT IT IS ESTOPPED FROM RAISING ANY OBJECTION BASED ON
FORUM NON CONVENIENS, ANY CLAIM THAT EITHER SUCH COURT LACKS PROPER VENUE OR ANY
OBJECTION THAT EITHER SUCH COURT LACKS PERSONAL JURISDICTION OVER THE BORROWER
SO AS TO PROHIBIT EITHER SUCH COURT FROM ADJUDICATING ANY ISSUES RAISED IN A
COMPLAINT FILED

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WITH EITHER SUCH COURT AGAINST THE BORROWER BY THE BANK CONCERNING THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR PAYMENT TO THE BANK. THE BORROWER
HEREBY ACKNOWLEDGES AND AGREES THAT THE CHOICE OF FORUM CONTAINED IN THIS
SECTION 9.12 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN ANY FORUM OR THE TAKING OF ANY ACTION UNDER THE LOAN DOCUMENTS TO
ENFORCE THE SAME IN ANY APPROPRIATE JURISDICTION.

 

9.13 Non-Business Days. Whenever any payment hereunder or under the Notes is due
and payable on a day which is not a Business Day, such payment may be made on
the next succeeding Business Day (except as specifically required by the terms
of this Agreement), and such extension of time shall in each such case be
included in computing interest in connection with such payment.

 

9.14 Integration. This Agreement, together with the other Loan Documents,
constitutes the entire agreement between the parties hereto relating to this
financing transaction and it supersedes all prior understandings and agreements,
whether written or oral, between the parties hereto relating to the transactions
provided for herein.

 

9.15 Headings. Article, Section and other headings used in this Agreement are
intended for convenience only and shall not affect the meaning or construction
of this Agreement.

 

9.16 Counterparts; Effectiveness. This Agreement and any amendment hereto may be
executed in several counterparts and by each party on a separate counterpart,
each of which, when so executed and delivered, shall be an original, but all of
which together shall constitute but one and the same instrument. In proving this
Agreement, it shall not be necessary to produce or account for more than one
such counterpart signed by the other party against whom enforcement is sought.
This Agreement shall become binding when the parties have delivered (which
delivery may be by telecopier) at least one executed counterpart hereof or of
the signature page hereto.

 

9.17 WAIVER OF JURY TRIAL. IN ORDER TO EXPEDITE THE RESOLUTION OF ANY DISPUTES
WHICH MAY ARISE UNDER THIS AGREEMENT OR UNDER ANY OTHER LOAN DOCUMENT TO WHICH
THE BORROWER IS A PARTY, AND IN LIGHT OF THE COMPLEXITY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, THE PARTIES HERETO
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR
NATURE IN ANY COURT TO WHICH THEY MAY BOTH BE PARTIES, WHETHER ARISING OUT OF,
UNDER, OR BY REASON OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY
ASSIGNMENT OR OTHER TRANSACTION CONTEMPLATED HEREBY OR BY REASON OF ANY OTHER
CAUSE OR DISPUTE WHATSOEVER BETWEEN THEM OF ANY KIND OR NATURE. BOTH PARTIES
ACKNOWLEDGE THAT THIS WAIVER OF JURY TRIAL HAS BEEN SPECIFICALLY NEGOTIATED AS A
PART OF THIS AGREEMENT.

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9.18 General Indemnity

 

9.18a Indemnity Obligation. In addition to all the rights and remedies available
to the Bank at law or in equity, the Borrower hereby agrees to defend and
indemnify the Bank and its successors and permitted assigns and its Affiliates,
shareholders, officers, directors, employees, agents, and representatives
(collectively, the “Indemnified Persons”) and save and hold each of them
harmless against and pay on behalf of, or reimburse each of them for, any loss
(including diminutions in value and consequential damages), liability, demand,
suit, claim, action, cause of action, judgment, cost, damage, debt, obligation,
deficiency, any Tax imposed with respect to other indemnity payments made under
this Agreement (but not Excluded Taxes other than Taxes imposed on the net
income or capital of the Bank with respect to another indemnity payment made
hereunder), penalty, fine, charge and expense, whether or not arising out of any
claims by or on behalf of the Borrower or any other Person, including interest,
penalties, reasonable lawyers’ fees and expenses and all amounts paid in
investigation, defense or settlement of any of the foregoing (collectively, the
“Losses”) which any Indemnified Persons may suffer, sustain, or become subject
to, as a result of, in connection with, relating or incidental to, or by virtue
of:

 

(a) any misrepresentation or breach of warranty on the part of the Borrower
under Article III of this Agreement or a Subsidiary of the Borrower under a
Security Document to which it is a party;

 

(b) without duplication of clause (a) above, any misrepresentation in or
omission from any of the representations, warranties, statements, schedules and
exhibits in or to this Agreement or any certificate or other instrument or
document furnished to the Bank by the Borrower or any Subsidiary of the Borrower
pursuant to this Agreement or any other Loan Document;

 

(c) any non-fulfillment or breach of any covenant or agreement on the part of
the Borrower or any Subsidiary of the Borrower under this Agreement or any other
Loan Document; or

 

(d) any claim whenever made, relating in any way to the Borrower or any
Subsidiary and any claim, whenever made, arising out of, relating to, resulting
from or caused by any transaction, status, event, condition, occurrence or
situation relating to, arising out of or in connection with the execution,
performance and delivery by the Borrower or any Subsidiary of the Borrower or
any Subsidiary of this Agreement and the other Loan Documents and agreements
contemplated hereby or (ii) any actions taken by or omitted to be taken by any
of the Indemnified Persons in connection with this Agreement or any of the other
Loan Documents and agreements contemplated hereby.

 

The obligations under this Section shall not extend to Losses of an Indemnified
Person arising because of the gross negligence or willful misconduct of such
Indemnified Person.

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9.19 Timing. Upon determination that an indemnification payment described in
Section 9.19a is payable to an Indemnified Party, the indemnification of any
Indemnified Person by the Borrower pursuant to this Section 9.19 shall be
effected by wire transfer of immediately available funds from the Borrower to an
account designated by the Indemnified Person within 15 days after determination
of the requirement for indemnification.

 

9.20 Bank Not Liable. The Borrower agrees that the Bank shall not be liable to
the Borrower for any Losses which the Borrower may suffer, sustain or become
subject to as a result of, in connection with, relating or incidental to or by
virtue of any action taken or not taken or anything done or not done by the Bank
under or in respect of this Agreement or any Loan or Letter of Credit, save and
except for any Losses which arise out of, or result from, the negligence, fraud
or willful misconduct of the Bank, provided that the Bank shall not be liable
for any special, consequential or punitive damages under any circumstances.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have caused this Third Amended and Restated Credit Agreement to be executed by
their respective duly authorized officers as of the date first written above.

 

ATTEST/WITNESS       UNIVERSAL STAINLESS & ALLOY             PRODUCTS, INC.    
By:  

/s/    Paul A. McGrath

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      By:  

/s/    Richard M. Ubinger

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  (SEAL) Name:   Paul A. McGrath       Name:   Richard M. Ubinger     Title:  
Vice President Operations,       Title:   Vice President Finance, Chief        
General Counsel and Secretary           Financial Officer and Treasurer        
        PNC BANK, NATIONAL ASSOCIATION             By:  

/s/    David B. Gookin

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  (SEAL)             Name:   David B. Gookin                 Title:   Senior
Vice President