Document:

ex10_1.htm

    
      

    

    EXHIBIT
10.1

    

    FOURTH AMENDMENT TO LOAN AND
SECURITY AGREEMENT

     

    This
Fourth Amendment to Loan and Security Agreement, made as of August 29, 2008
(this “Amendment”), is
between FANSTEEL INC., a Delaware corporation (“Fansteel”), and
WELLMAN DYNAMICS CORPORATION, a Delaware corporation (“Wellman”, and
together with Fansteel, “Borrowers”, and each
a “Borrower”),
and Fifth Third Bank, a Michigan banking corporation (the “Lender”).  Capitalized
terms used in this Amendment and not otherwise defined herein have the meanings
assigned to such terms in the Loan Agreement as defined below.

     

     

    WITNESSETH

     

    WHEREAS, the Borrowers and the
Lender are parties to that certain Loan and Security Agreement dated as of July
15, 2005, as amended by that certain First Amendment to Loan and Security
Agreement dated as of December 4, 2006, and as amended by that certain Second
Amendment to Loan and Security Agreement dated as of June 5, 2007, and as
amended by that certain Third Amendment to Loan and Security Agreement dated as
of September 12, 2007, (as such agreement has been amended, restated,
supplemented or otherwise modified from time to time, the “Loan
Agreement”);

     

    WHEREAS, the Borrowers have
requested a reduction in the Maximum Revolving Loan Limit, a new term loan, an
extension of the Maturity Date, and other modifications to the Loan Agreement
and the Lender is willing to modify the Loan Agreement on the terms and subject
to the conditions of this Amendment;

     

    NOW, THEREFORE, in
consideration of the mutual agreements contained in this Amendment, and other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties to this Amendment agree as follows:

     

    SECTION
1.  AMENDMENT TO LOAN
AGREEMENT

     

    On the
date this Amendment becomes effective, after satisfaction by the Borrowers of
each of the conditions set forth in Section 3 (the “Effective Date”), the
Loan Agreement is amended as follows:

     

    1.1           Section
1.57 of the Loan Agreement is hereby deleted in its entirety and in lieu thereof
is inserted the following:

     

    “Maximum Revolving Loan
Limit” shall mean the total of all advances outstanding at any one time
under the Revolving Loan, which at no time shall exceed Nineteen Million Five
Hundred Thousand and No/100 Dollars ($19,500,000).

    

    1.2           The
following definitions are hereby added to the Loan Agreement and inserted in the
appropriate alphabetical order:

    

    “Interest Payment
Date” shall mean, with respect to any LIBOR Rate Loan, the last day of
each Interest Period applicable to such Loan, and, with respect to Prime Rate
Loans, the last Business Day of each calendar month and each date a Prime Rate
Loan is converted into a LIBOR Rate Loan.

     

    “Interest Period”
shall mean any continuous three (3) month period of, as selected from time to
time by Borrower by irrevocable notice (in writing, by telecopy, telex,
electronic mail or cable) given to Lender not less than two (2) Business Days
prior to the first day of each respective Interest Period; provided
that:  (A) each such period occurring after such initial period shall
commence on the day on which the immediately preceding period expires; (B) the
final Interest Period shall be such that its expiration occurs on or before the
maturity date of the Revolving Loan; and (C) if for any reason Borrower shall
fail to timely select a period, then such Loans shall continue as, or revert to,
Prime Rate Loans.  Interest shall be payable on the fifth Business Day
of each month in arrears.

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    “LIBOR Rate” shall
mean, with respect to any LIBOR Rate Loan for any Interest Period, a rate per
annum equal to (a) the offered rate for deposits in United States dollars for a
period equal to such Interest Period as displayed in the Bloomberg Financial Markets
system (or such other authoritative source as selected by Lender in its sole
discretion) as of approximately 11:30 a.m. (London time) two Business Days prior
to the first day of such Interest Period divided by (b) a number equal to 1.0
minus the maximum reserve percentages (expressed as a decimal fraction)
including, without limitation, basic supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal Reserve
System or other governmental authority having jurisdiction with respect thereto,
as now and from time to time in effect, for Eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of such Board) which
are required to be maintained by Lender by the Board of Governors of the Federal
Reserve System.  The LIBOR Rate shall be adjusted automatically on and
as of the effective date of any change in such reserve percentage.

     

    “LIBOR Rate
Loans” shall
mean the Loans bearing interest with reference to the LIBOR Rate.

     

    “Notice of Borrowing”
shall mean a notice given by the Borrower to the Lender pursuant to Section 2.3, in substantially the
form of Exhibit
M hereto.

     

    “Notice of
Continuation/Conversion” shall mean a notice given by the Borrower to the
Lender pursuant to Section 2.10, in
substantially the form of Exhibit N
hereto.

    

    1.3           Section 2.1 of the
Loan Agreement is hereby deleted in its entirety and in lieu thereof is inserted
the following:

     

    2.1           Revolving Loan Facility and
Term Loan.  (A)  Lender may, in its good faith
discretion, make available for Borrowers’ use from time to time during the term
of this Agreement, upon Borrowers’ request therefor, certain revolving loans and
other financial accommodation, including letters of credit (“Revolving Loan
Facility”).  The Revolving Loan Facility shall be subject to all of
the terms and conditions of this Agreement and shall consist of a revolving line
of credit consisting of discretionary Advances against Eligible Accounts,
Eligible Inventory, and Borrowers’ Equipment (the “Revolving Loans”) in
an aggregate principal amount not to exceed, at any time, the lesser of (i)
Nineteen Million Five Hundred Thousand and No/100 Dollars ($19,500,000), less
the greater of (x) One Million Five Hundred Thousand and No/100 Dollars
($1,500,000) or (y) the amount outstanding from time to time on any credit cards
issued by Lender for the benefit of Borrowers, and (ii) the amount of Revolving
Availability of Borrowers, which Revolving Loans shall be evidenced by a
Revolving Loan Note.

     

    As used
in this Agreement, “Revolving Availability” with respect to each Borrower shall
mean, and, at any particular time and from time to time, be equal to the sum of
(i) up to eighty-five percent (85%) of the net amount (after deduction of such
reserves as Lender deems proper and necessary in its sole discretion) of
Eligible Accounts of such Borrower, plus (ii) up to the
lesser of (A) Seven Million Five Hundred Thousand and No/100 Dollars
($7,500,000) and (B) sixty percent (60%) of the lower of cost or market value of
Eligible Inventory of such Borrower (net of such reserves as Lender deems proper
and necessary in its sole discretion), plus (iii) up to
seventy-five percent (75%) of the orderly liquidation value of such Borrower’s
Equipment as determined by an appraiser acceptable to Lender in its sole
discretion (net of such reserves as Lender deems proper and necessary in its
sole discretion), less the face amount
of any Letters of Credit issued on behalf of such Borrower and the amount of any
drawn upon but unpaid Letters of Credit.

     

    At no
time shall a Borrower borrow amounts under the Revolving Loan which in the
aggregate exceed its respective Revolving Availability and in no event shall the
amounts borrowed by Borrowers in the aggregate at any time exceed the Maximum
Revolving Loan Limit.

    
      
         

      

      
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    The
Revolving Loans shall be repayable in full on September 5, 2010 and as provided
in Section 4.2
of this Agreement.  Subject to the foregoing limits and the other
terms and conditions contained herein, and provided that no Default or Event of
Default then exists, funds out of the Revolving Loan Facility may be advanced,
repaid and re-advanced.

     

    It is
expressly understood and agreed by Borrowers that nothing contained in this
Agreement shall, at any time, require Lender to make loans, advances or other
extensions of credit (collectively, “Advances”) to
Borrowers and the making and amount of such loans, advances or other extensions
of credit to Borrowers under this Agreement shall at all times, be in Lender’s
reasonable good faith discretion.  Lender may, in the exercise of such
discretion, at any time and from time to time, upon at least seven (7) days’
prior written notice to Borrowers, increase or decrease the advance percentages
to be used in determining Revolving Availability, which are contained in this
Section 2.1(A)
and, in the event such percentages are decreased, such decrease shall become
effective seven (7) days following Borrowers receipt of such notice for the
purpose of calculating the Revolving Availability.  The amount of any
decrease in the lending formulas shall have a reasonable relationship to the
event, condition or circumstance which is the basis for such decrease as
determined by Lender in good faith.  In determining whether to reduce
the advance percentages, Lender may consider events, conditions, contingencies
or risks which are also considered in determining Eligible Accounts and Eligible
Inventory.

     

    (B)  The
Lender shall also make a Term Loan to Borrowers in the amount of Three Million
and No/100 Dollars ($3,000,000).  The proceeds of the Term Loan shall
be used to repay in full the existing term loan from Fifth Third Bank to
Borrower.  Interest only shall be payable on October 5, 2008 through
and including December 5, 2008.  Commencing January 5, 2009 and on the
fifth (5th) day of
each month thereafter to and including the Term Loan Maturity Date (hereinafter
defined), Borrowers shall make principal payments of Eighty Three Thousand Three
Hundred Thirty Four and No/100 Dollars ($83,334), plus accrued
interest.  The Term Loan shall be repayable in full on the earlier of:
(i) September 5, 2011, or (ii) as provided in Section 4.2 of this
Agreement (the “Term
Loan Maturity Date”).  Amounts repaid under the Term Loan may
not be reborrowed.  The Term Loan shall be evidenced by a Term Loan
Note, the form of which is attached hereto as Exhibit
B.

     

    1.4           Section 2.3 of the
Loan Agreement is hereby deleted in its entirety and in lieu thereof is inserted
the following:

     

    2.3.           Procedure for Revolving
Credit Borrowing.

     

    (a)          
 Each Borrowing under the Revolving Loan shall be made upon the Borrower’s
irrevocable written notice delivered to the Lender in the form of a Notice of
Borrowing (which notice must be received by the Lender prior to noon Chicago
time) on the requested Borrowing date in the case of each Prime Rate Loan and on
the day which is two (2) Business Days prior to the requested Borrowing date in
the case of each LIBOR Rate Loan.  Such Notice of Borrowing shall
specify:

     

    (i)         
   the amount of the Borrowing (which, in the case of a Borrowing
of LIBOR Rate Loans, shall be in an aggregate minimum principal amount of Five
Million Dollars ($5,000,000) or any multiple of Five Hundred Thousand Dollars
($500,000) in excess thereof);

     

    (ii)         
  the requested Borrowing date, which shall be a Business Day;
and

     

    (iii)           whether
the Borrowing is to be comprised of LIBOR Rate Loans or Prime Rate
Loans.

    
      
         

      

      
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    (b)           Lender
will make the amount of the Borrowing available for the account of the Borrower
by 2:00 p.m. (Chicago time) by crediting the account of the Borrower on the
books of the Lender.

     

    (c)           Unless
the Lender shall otherwise agree, during the existence of a Default or an Event
of Default, the Borrower may not elect to have a Loan be made as, or converted
into or continued as, a LIBOR Rate Loan.

     

    (e)           After
giving effect to any Borrowing, there shall not be more than 3 different
Interest Periods in effect, and the maximum amount of LIBOR Rate Loans shall
not, at any one time, exceed $15,000,000.

     

    1.5           The
following Section
2.4(e) is hereby added to the Loan Agreement:

     

    (e)           Excess Cash
Flow.  Ten (10) days after receipt of Borrower’s Fiscal Year
end reviewed financial statements (but in no event more than one hundred thirty
five (135) days after the end of a Fiscal Year) for each Fiscal Year of Borrower
commencing with Borrower’s Fiscal Year ending December 31, 2008, Borrower shall
make a mandatory payment of Term Loan in an amount equal to fifty percent (50%)
of Borrower’s Excess Cash Flow (but not to exceed $300,000 in any Fiscal Year)
for the Fiscal Year just ended, such prepayment to be applied against the
remaining installments of principal in the inverse order of their maturities,
such mandatory prepayments to continue until the date on which Term Loan shall
be repaid in full.  For the purposes of this Section 2.4(e),
“Excess Cash
Flow” shall mean for each Borrower’s Fiscal Year, Borrower’s EBITDA for
such period, minus Borrower’s taxes during such period and distributions to its
members in respect of taxes for such period, minus actual principal payments
made with respect to long term debt during such period (including all debt paid
on the FMRI Notes and the PBGC Note), minus all unfinanced Capital Expenditures
by Borrower during such period

     

    1.6           Section 2.5 of the
Loan Agreement is hereby deleted in its entirety and in lieu thereof is inserted
the following:

     

    2.5           Interest.

     

    (a)           Subject
to Section
2.5(c), interest on the Revolving Loan shall bear interest on the
outstanding principal amount thereof from the date when made at a rate per annum
equal to the LIBOR Rate plus 2.75%, or the Prime Rate.  The Term Loan
shall bear interest on the outstanding principal amount thereof from the date
when made at a rate per annum equal to the Prime Rate.

     

    (b)           Interest
on each Revolving Loan and Term Loan shall be paid in arrears on each Interest
Payment Date.  Interest shall also be paid on the date of any payment
of the Revolving Loans and Term Loan in full and, during the existence of any
Default or Event of Default, interest shall be payable on demand of
Lender.

     

    (c)           While
any Default or Event of Default exists and is continuing and/or after maturity
of the Revolving Loans or Term Loan, as the case may be, (whether by
acceleration or otherwise), unless Lender shall otherwise then agree, Borrowers
shall pay interest (after as well as before entry of judgment thereon to the
extent permitted by law) on the principal amount of all Liabilities due and
unpaid, at a rate per annum equal to the Prime Rate plus two and one-half
percent (2.5%) provided, however, that, on and after the expiration of any
Interest Period applicable to any LIBOR Rate Loan outstanding on the date of
occurrence of such Event of Default or maturity, the principal amount of such
Loan shall, during the continuation of such Event of Default and/or after
acceleration, bear interest at a rate per annum equal to the Base Rate plus two
and one-half percent (2.5%).

     

    (d)           Anything
herein to the contrary notwithstanding, the obligations of Borrowers hereunder
shall be subject to the limitation that payments of interest shall not be
required, for any period for which interest is computed hereunder, to the extent
(but only to the extent) that contracting for or receiving such payment by
Lender would be contrary to the provisions of any law applicable to Lender
limiting the highest rate of interest which may be lawfully contracted for,
charged or received by Lender, and in such event Borrowers shall pay Lender
interest at the highest rate permitted by applicable law.

    
      
         

      

      
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    (e)           Interest
shall be based on the average daily outstanding loans for each month and shall
be computed by applying the ratio of the annual interest rate over a year of 360
days, multiplied by such average daily outstanding principal balance, multiplied
by the actual number of days such average daily principal balance is
outstanding, and shall be payable on the applicable Interest Payment
Date.  With respect to Revolving Loans and the Term Loan, any change
in the Prime Rate shall be effective as of the effective date stated in the
announcement by Lender of such change.  All sums paid, or agreed to be
paid, by Borrowers which are, or hereafter may be construed to be, compensation
for the use, forbearance or detention of money shall, to the extent permitted by
applicable law, be amortized, prorated, spread and allocated throughout the full
term of all such indebtedness until the indebtedness is paid in
full.

     

    1.7           Section 2.8(b) of the
Loan Agreement is hereby deleted in its entirety and in lieu thereof is inserted
the following:

     

    Borrowers
shall pay to Lender an unused line fee of one-quarter of one percent (0.25%) of
the difference between (i) $18,000,000 and (ii) the sum of the average daily
balance of the Revolving Loans plus the average daily Letter of Credit
Obligations for each calendar quarter, which fee shall be fully earned by Lender
and payable quarterly in arrears within five (5) Business Days after the last
Business Day of each calendar quarter.  Said fee shall be calculated
on the basis of a 360 day year.

     

    1.8           The
following Section
2.10 is hereby added to the Loan Agreement:

     

    2.10         Conversion and Continuation
Elections.

     

    (a)           The
Borrower may upon irrevocable written notice to the Lender in accordance with
subsection 2.10(b):

     

    (i)          
 elect to convert on any Business Day, any Prime Rate Loans (or any part
thereof in an amount not less than $5,000,000, or that is in an integral
multiple of $500,000 in excess thereof) into LIBOR Rate Loans or;

     

    (ii)           elect
to convert on the last day of the applicable Interest Period any LIBOR Rate
Loans having Interest Periods maturing on such day (or any part thereof in an
amount not less than $5,000,000, or that is in an integral multiple of $500,000
in excess thereof) into Prime Rate Loans; or

     

    (iii)          elect
to renew on the last day of the applicable Interest Period any LIBOR Rate Loans
having Interest Periods maturing on such day (or any part thereof in an amount
not less than $5,000,000, or that is in an integral multiple of $500,000 in
excess thereof);

     

    provided,
that if the aggregate amount of LIBOR Rate Loans in respect of any Borrowing
shall have been reduced, by payment, prepayment, or conversion of part thereof
to be less than $5,000,000, such LIBOR Rate Loans shall automatically convert
into Prime Rate Loans, and on and after such date the right of the Borrower to
continue such Loans as, and convert such Loans into LIBOR Rate Loans, as the
case may be, shall terminate.

     

    (b)           The
Borrower shall deliver a Notice of Conversion/Continuation to be received by the
Lender not later than noon (Chicago time) at least two (2) Business Days in
advance of the requested Conversion Date or continuation date, if the Loans are
to be converted into or continued as LIBOR Rate Loans and on the requested
Conversion Date, if the Loans are to be converted into Prime Rate Loans,
specifying:

    
      
         

      

      
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    (i)            the
proposed Conversion Date or continuation date;

     

    (ii)           the
aggregate amount of Loans to be converted or renewed;

     

    (iii)          the
nature of the proposed conversion or continuation; and

     

    (iv)          the
duration of the requested Interest Period with respect to any Loans to be
converted or continued as LIBOR Rate Loans.

     

    (c)           If
upon the expiration of any Interest Period applicable to LIBOR Rate Loans, the
Borrower has failed to select timely a new Interest Period to be applicable to
such LIBOR Rate Loans, as the case may be, or if any Default or Event of Default
shall then exist, the Borrower shall be deemed to have elected to convert such
LIBOR Rate Loans into Prime Rate Loans effective as of the expiration date of
such current Interest Period.

     

    (d)           Unless
the Lender shall otherwise agree, during the existence of a Default or Event of
Default, the Borrower may not elect to have a Loan converted into or continued
as a LIBOR Rate Loan.

     

    (e)           Notwithstanding
any other provision contained in this Agreement, after giving effect to any
conversion or continuation of any Loans, there shall not be more than 3
different Interest Periods in effect and the maximum amount of LIBOR Loans
outstanding at any one time shall not exceed $15,000,000.

     

    
      	
               
      

            	
              1.9

            	
              The
      following Section 10.2(t)
      is hereby added to the Loan
Agreement:

            

    

     

    (t)      
     Permit a change in the current senior
management.

     

    SECTION
2.  REPRESENTATIONS AND
WARRANTIES

     

    To induce
the Lender to enter into this Amendment, the Borrowers represent and warrant to
the Lender that:

     

    2.1           Due Authorization:
Authority; No Conflicts; Enforceability. The execution delivery and
performance by the Borrowers of this Amendment and the other documents delivered
under Section 4
(collectively the “Amendment Documents”) are within each of their respective
corporate powers, have been duly authorized by all necessary corporate action,
have received all necessary governmental, regulatory or other approvals (if any
are required), and do not and will not contravene or conflict with any provision
of (i) any law, (ii) any judgment, decree or order or (iii) its respective
articles of incorporation or by-laws, and do not and will not contravene or
conflict with, or cause any lien to arise under, any provision of any agreement
or instrument binding upon the Borrowers or upon any of its respective
properties.  This Amendment, the Loan Agreement, as amended by this
Amendment, and the other Amendment documents are the legal, valid and binding
obligations of the Borrowers enforceable against the Borrowers in accordance
with their respective terms.

     

    2.2           No Default: Representations
and Warranties.  As of the Effective Date, (i) no Default or
Event of Default under the Loan Agreement has occurred and is continuing and
(ii) the representations and warranties of the Borrowers contained in the Loan
Agreement are true and correct.

     

    SECTION
3.  CONDITIONS TO
EFFECTIVENESS

     

    The
obligation of the Lender to make the amendments and modifications contemplated
by this Amendment, and the effectiveness thereof, are subject to the
following:

    
      
         

      

      
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    3.1           Representations and
Warranties. The representations and warranties of the Borrowers contained
in this Amendment are true and correct as of the Effective Date.

     

    3.2           Documents. The Lender
has received all of the following, each duly executed and dated as of the
Effective Date (or such other date as is satisfactory to the Lender) in form and
substance satisfactory to the Lender:

     

    (a)           Amendment.  This
Amendment;

     

    (b)           Revolving
Note.  The Revolving Note in the amount of
$19,500,000;

     

    (c)           Term
Note.  The Term Note in the amount of $3,000,000;
and

     

    (e)           Other. Such other
documents as the Lender may reasonably request.

     

    SECTION
4.  MISCELLANEOUS

     

    4.1           Captions.  The
recitals to this Amendment (except for definitions) and the section captions
used in this Amendment are for convenience only, and do not affect the
construction of this Amendment.

     

    4.2           Governing Law:
Severability. This Amendment is a contract made under and governed by the
internal laws of the State of Illinois.  Wherever possible, each
provision of this Amendment will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Amendment
is prohibited by or invalid under such law, such provision will be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
Amendment.

     

    4.3           Counterparts. This
Amendment may be executed in any number of counterparts and by the different
parties on separate counterparts, and each such counterpart will be deemed to be
an original, but all such counterparts together constitute but one and the same
Amendment.

     

    4.4           Successors and
Assigns. This Amendment is binding upon the Borrowers, the Lender and
their respective successors and assigns, and inures to the sole benefit of the
Borrowers, the Lender and their successors and assigns. The Borrowers have no
right to assign their rights or delegate their duties under this
Amendment.

     

    4.5           References.  From
and after the Effective Date, each reference in the Loan Agreement to “this
Agreement,” “hereunder,” hereof,” “herein “ or words of like import, and each
reference in the Loan Agreement or any other Financing Agreement to the Loan
Agreement or to any term, condition or provision contained “thereunder,”
“thereof,” “therein,” or words of like import, means and be a reference to the
Loan Agreement (or such term, condition or provision, as applicable) as amended,
supplemented, restated or otherwise modified by this Amendment.

     

    4.6           Continued
Effectiveness.  Notwithstanding anything contained in this
Amendment, the terms of this Amendment are not intended to and do not serve to
effect a novation as to the Loan Agreement.  The parties to this
Amendment expressly do not intend to extinguish the Loan
Agreement.  Instead, it is the express intention of the parties to
this Amendment to reaffirm the indebtedness created under the Loan
Agreement.  The Loan Agreement remains in full force and effect and
the terms and provisions of the Loan Agreement are ratified and
confirmed.

     

    4.7           Costs. Expenses and
Taxes.  Borrowers affirm and acknowledge that Section 14.3 of
the Loan Agreement applies to this Amendment and the transactions and agreements
and documents contemplated under this Amendment.

     

     

    (remainder
of page left intentionally blank; signature page follows)

    
      
         

      

      
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    Delivered
as of the day and year first above written.

     

    
      	 
      	FIFTH
      THIRD BANK	 
	 	 	 	 
	 
      	By:
      	
              /s/Michael E. May

            	 
	 
      	Name:	
              Michael E. May

            	 
	 
      	Title:	
              Vice President

            	 
	 	 	 	 
	 	 	 	 
	 
      	FANSTEEL
      INC.	 
	 	 	 	 
	 
      	By:
      	
              /s/R. Michael McEntee

            	 
	 
      	Name:	
              R. Michael McEntee

            	 
	 
      	Title:	
              VP & CFO

            	 
	 	 	 	 
	 	 	 	 
	 
      	WELLMAN
      DYNAMICS CORPORATION
	 	 	 
	 
      	By:
      	
              /s/R. Michael McEntee

            	 
	 
      	Name:	
              R. Michael McEntee

            	 
	 
      	Title:	
              Vice President

            	 

    

    
      
         

      

      
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    REVOLVING LOAN
NOTE

     

    
      	
              $19,500,000

            	
              Chicago,
      Illinois

            
	 
      	
              as
      of  August 29, 2008

            

    

     

    FOR VALUE
RECEIVED, the undersigned, FANSTEEL INC., a Delaware corporation (“Fansteel”), and
WELLMAN DYNAMICS CORPORATION, a Delaware corporation (“Wellman”, and
together with Fansteel, “Borrowers”, and each
a “Borrower”),
hereby jointly and severally unconditionally promise to pay to the order of
FIFTH THIRD BANK, a Michigan banking corporation (“Lender”), at Lender’s
office at 222 South Riverside Plaza, 33rd Floor,
Chicago, Illinois 60606, or at such other place as Lender may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of NINETEEN MILLION FIVE HUNDRED
THOUSAND AND NO/100 DOLLARS ($19,500,000), or the aggregate unpaid principal
amount of all advances made pursuant to subsection 2.1 of the
Loan Agreement (as hereinafter defined) at such times as are specified in and in
accordance with the provisions of the Loan Agreement.  This Revolving
Loan Note (this “Note”) is referred to
in and was executed and delivered pursuant to that certain Loan and Security
Agreement dated as of July 15, 2005 by and among Borrowers and Lender (as
amended, restated, modified or supplemented and in effect from time to time, the
“Loan
Agreement”), to which reference is hereby made for a statement of the
terms and conditions under which the loan and other advances evidenced hereby
were made and are to be repaid and for a statement of Lender’s
remedies.  All terms which are capitalized and used herein (which are
not otherwise specifically defined herein) and which are defined in the Loan
Agreement shall be used in this Note as defined in the Loan
Agreement.

     

    Borrowers
promise to pay interest, including default interest, on the outstanding unpaid
principal amount hereof, as provided in the Loan Agreement.  If demand
is not sooner made, all accrued interest and principal, if not sooner paid,
shall be due and payable on September 5, 2010.

     

    Interest
on this Note shall be payable at the rates and from the dates specified in the
Loan Agreement, on the date of any prepayment hereof, at maturity, whether due
by acceleration or otherwise, and as otherwise provided in the Loan
Agreement.  Interest shall be payable on the fifth Day of each month
hereafter.

     

    This Note
is secured pursuant to the Loan Agreement and the other Ancillary Agreements
referred to therein, and reference is made thereto for a statement of the terms
and conditions of such security.

     

    Lender
shall have the continuing exclusive right to apply and to reapply any and all
payments hereunder against the Liabilities of Borrowers, in accordance with the
terms of the Loan Agreement.

     

    Each
Borrower hereby waives demand, presentment, protest, notice of demand,
presentment, protest and nonpayment.  Each Borrower also waives all
rights to notice and hearing of any kind upon the occurrence of a Default or an
Event of Default prior to the exercise by Lender, of its rights to repossess the
Collateral without judicial process or to replevy, attach or levy upon the
Collateral without notice or hearing.

     

    In
addition to and not in limitation of the foregoing and the provisions of the
Loan Agreement, the undersigned further agrees, subject only to any limitation
imposed by applicable law, to pay all expenses, including reasonable attorneys’
fees and legal expenses, incurred by the holder of this Note in endeavoring to
collect any amounts payable hereunder which are not paid when due whether by
acceleration or otherwise.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    THIS
NOTE SHALL BE DEEMED TO HAVE BEEN MADE AT CHICAGO, ILLINOIS AND SHALL BE
INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS)
AND DECISIONS OF THE STATE OF ILLINOIS.  WHENEVER POSSIBLE EACH
PROVISION OF THIS NOTE SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE
AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS NOTE SHALL BE
PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE PROVISIONS OF THIS
NOTE.  ALL REFERENCES TO THE SINGULAR SHALL BE DEEMED TO INCLUDE THE
PLURAL, AND VICE VERSA, WHERE THE CONTEXT SO REQUIRES.  WHENEVER IN
THIS NOTE REFERENCE IS MADE TO LENDER OR A BORROWER OR BORROWERS, SUCH REFERENCE
SHALL BE DEEMED TO INCLUDE AS APPLICABLE, A REFERENCE TO THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS.  THE PROVISIONS OF THIS NOTE SHALL BE BINDING
UPON AND SHALL INURE TO THE BENEFIT OF SUCH SUCCESSORS AND
ASSIGNS.  EACH BORROWER’S SUCCESSORS AND ASSIGNS SHALL INCLUDE,
WITHOUT LIMITATION, A RECEIVER, TRUSTEE OR DEBTOR IN POSSESSION OF OR FOR SUCH
BORROWER.  EACH BORROWER SHALL BE JOINTLY AND SEVERALLY OBLIGATED
HEREUNDER.

     

    This
Revolving Note replaces that certain Revolving Note in the original principal
amount of $21,500,000, dated September 12, 2007, and does not constitute payment
thereof or a novation therefor.

     

     

    [Remainder of page intentionally left
blank; signature page follows]

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, each Borrower has caused its duly authorized representative to
execute this Revolving Loan Note as of the date first set forth
above.

     

    

    
      	 
      	FANSTEEL
      INC.	 
	 	 	 	 
	 
      	By:	
               /s/R. Michael McEntee

            	 
	 
      	Name:	
              R. Michael McEntee

            	 
	 
      	Title:	
              VP & CFO

            	 
	 	 	 	 
	 	 	 	 
	 
      	WELLMAN
      DYNAMICS CORPORATION
	 	 	 
	 
      	By:	
              /s/R. Michael McEntee

            	 
	 
      	Name:	
              R. Michael McEntee

            	 
	 
      	Title:	
              Vice President

            	 

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    TERM LOAN
NOTE

     

    
      	
              $3,000,000

            	
              Chicago,
      Illinois

            
	 
      	
              as
      of  August 29, 2008

            

    

     

    FOR VALUE
RECEIVED, the undersigned, FANSTEEL INC., a Delaware corporation (“Fansteel”), and
WELLMAN DYNAMICS CORPORATION, a Delaware corporation (“Wellman”, and
together with Fansteel, “Borrowers”, and each
a “Borrower”),
hereby jointly and severally unconditionally promise to pay to the order of
FIFTH THIRD BANK, a Michigan banking corporation (“Lender”), at Lender’s
office at 222 South Riverside Plaza, 33rd Floor,
Chicago, Illinois 60606, or at such other place as Lender may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of THREE MILLION AND NO/100
DOLLARS ($3,000,000), made pursuant to subsection 2.1(B) of
the Loan Agreement (as hereinafter defined) at such times as are specified in
and in accordance with the provisions of the Loan Agreement.  This
Term Loan Note (this “Note”) is referred to
in and was executed and delivered pursuant to that certain Loan and Security
Agreement dated as of July 15, 2005 by and among Borrowers and Lender (as
amended, restated, modified or supplemented and in effect from time to time, the
“Loan
Agreement”), to which reference is hereby made for a statement of the
terms and conditions under which the loan and other advances evidenced hereby
were made and are to be repaid and for a statement of Lender’s
remedies.  All terms which are capitalized and used herein (which are
not otherwise specifically defined herein) and which are defined in the Loan
Agreement shall be used in this Note as defined in the Loan
Agreement.

     

    Borrowers
promise to pay interest, including default interest, on the outstanding unpaid
principal amount hereof, and the Success Fee, all as provided in the Loan
Agreement.  If demand is not sooner made, all accrued interest,
Success Fee and principal, if not sooner paid, shall be due and payable on the
Term Loan Maturity Date.

     

    Interest
on this Note shall be payable at the rates and from the dates specified in the
Loan Agreement, on the date of any prepayment hereof, at maturity, whether due
by acceleration or otherwise, and as otherwise provided in the Loan
Agreement.  Interest shall be payable on the fifth Day of each month
hereafter.

     

    This Note
is secured pursuant to the Loan Agreement and the other Ancillary Agreements
referred to therein, and reference is made thereto for a statement of the terms
and conditions of such security.

     

    Lender
shall have the continuing exclusive right to apply and to reapply any and all
payments hereunder against the Liabilities of Borrowers, in accordance with the
terms of the Loan Agreement.

     

    Each
Borrower hereby waives demand, presentment, protest, notice of demand,
presentment, protest and nonpayment.  Each Borrower also waives all
rights to notice and hearing of any kind upon the occurrence of a Default or an
Event of Default prior to the exercise by Lender, of its rights to repossess the
Collateral without judicial process or to replevy, attach or levy upon the
Collateral without notice or hearing.

     

    In
addition to and not in limitation of the foregoing and the provisions of the
Loan Agreement, the undersigned further agrees, subject only to any limitation
imposed by applicable law, to pay all expenses, including reasonable attorneys’
fees and legal expenses, incurred by the holder of this Note in endeavoring to
collect any amounts payable hereunder which are not paid when due whether by
acceleration or otherwise.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    THIS
NOTE SHALL BE DEEMED TO HAVE BEEN MADE AT CHICAGO, ILLINOIS AND SHALL BE
INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS)
AND DECISIONS OF THE STATE OF ILLINOIS.  WHENEVER POSSIBLE EACH
PROVISION OF THIS NOTE SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE
AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS NOTE SHALL BE
PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE PROVISIONS OF THIS
NOTE.  ALL REFERENCES TO THE SINGULAR SHALL BE DEEMED TO INCLUDE THE
PLURAL, AND VICE VERSA, WHERE THE CONTEXT SO REQUIRES.  WHENEVER IN
THIS NOTE REFERENCE IS MADE TO LENDER OR A BORROWER OR BORROWERS, SUCH REFERENCE
SHALL BE DEEMED TO INCLUDE AS APPLICABLE, A REFERENCE TO THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS.  THE PROVISIONS OF THIS NOTE SHALL BE BINDING
UPON AND SHALL INURE TO THE BENEFIT OF SUCH SUCCESSORS AND
ASSIGNS.  EACH BORROWER’S SUCCESSORS AND ASSIGNS SHALL INCLUDE,
WITHOUT LIMITATION, A RECEIVER, TRUSTEE OR DEBTOR IN POSSESSION OF OR FOR SUCH
BORROWER.  EACH BORROWER SHALL BE JOINTLY AND SEVERALLY OBLIGATED
HEREUNDER.

     

     

    [Remainder of page intentionally left
blank; signature page follows]

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, each Borrower has caused its duly authorized representative to
execute this Term Loan Note as of the date first set forth above.

     

    

    
      	 
      	FANSTEEL
      INC.	 
	 	 	 	 
	 
      	By:	
              /s/R. Michael McEntee

            	 
	 
      	Name:	
              R. Michael McEntee

            	 
	 
      	Title:	
              VP & CFO

            	 
	 	 	 	 
	 	 	 	 
	 
      	WELLMAN
      DYNAMICS CORPORATION
	 	 	 
	 
      	By:	
              /s/R. Michael McEntee

            	 
	 
      	Name:	
              R. Michael McEntee

            	 
	 
      	Title:	
              Vice President

            	 

    

    
 

    14ex10_2.htm

    
      

    

    EXHIBIT
10.2

     

    FIFTH AMENDMENT TO LOAN AND
SECURITY AGREEMENT

     

    This
Fifth Amendment to Loan and Security Agreement, made as of  September
3, 2008 (this “Amendment”), is
between FANSTEEL INC., a Delaware corporation (“Fansteel”), and
WELLMAN DYNAMICS CORPORATION, a Delaware corporation (“Wellman”, and
together with Fansteel, “Borrowers”, and each
a “Borrower”),
and Fifth Third Bank, a Michigan banking corporation (the “Lender”).  Capitalized
terms used in this Amendment and not otherwise defined herein have the meanings
assigned to such terms in the Loan Agreement as defined below.

     

     

    WITNESSETH

     

    WHEREAS, the Borrowers and the
Lender are parties to that certain Loan and Security Agreement dated as of July
15, 2005, as amended by that certain First Amendment to Loan and Security
Agreement dated as of December 4, 2006, and as amended by that certain Second
Amendment to Loan and Security Agreement dated as of June 5, 2007, as amended by
that certain Third Amendment to Loan and Security Agreement dated as of
September 12, 2007, and as amended by that certain Fourth Amendment to Loan and
Security Agreement dated as of August 29, 2008 (as such agreement has been
amended, restated, supplemented or otherwise modified from time to time, the
“Loan
Agreement”);

     

    WHEREAS, the Borrowers have
requested a number of modifications to the Loan Agreement and the Lender is
willing to modify the Loan Agreement on the terms and subject to the conditions
of this Amendment;

     

    NOW, THEREFORE, in
consideration of the mutual agreements contained in this Amendment, and other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties to this Amendment agree as follows:

     

    SECTION
1.  AMENDMENT TO LOAN
AGREEMENT

     

    On the
date this Amendment becomes effective, after satisfaction by the Borrowers of
each of the conditions set forth in Section 3 (the “Effective Date”), the
Loan Agreement is amended as follows:

     

    1.1           Section 2.1(B) of the
Loan Agreement is hereby deleted in its entirety and in lieu thereof is inserted
the following:

     

    (B)  The
Lender shall also make a Term Loan to Borrowers in the amount of Three Million
and No/100 Dollars ($3,000,000).  The proceeds of the Term Loan shall
be used to repay in full the existing term loan from Fifth Third Bank to
Borrower.  Interest only shall be payable on October 5, 2008 through
and including December 5, 2008.  Commencing January 5, 2009 and on the
fifth (5th) day of
each month thereafter to and including the Term Loan Maturity Date (hereinafter
defined), Borrowers shall make principal payments of Eighty Three Thousand Three
Hundred Thirty Four and No/100 Dollars ($83,334), plus accrued
interest.  The Term Loan shall be repayable in full on the earlier of:
(i) September 5, 2011, or (ii) as provided in Section 4.2 of this
Agreement (the “Term
Loan Maturity Date”).  Amounts repaid under the Term Loan may
not be reborrowed.  The Term Loan shall be evidenced by a Term Loan
Note, the form of which is attached hereto as Exhibit
B.

     

    1.2           The
following Section
2.4(e) is hereby added to the Loan Agreement:

     

    (e)           Excess Cash
Flow.  Ten (10) days after receipt of Borrower’s Fiscal Year
end reviewed financial statements (but in no event more than one hundred thirty
five (135) days after the end of a Fiscal Year) for each Fiscal Year of Borrower
commencing with Borrower’s Fiscal Year ending December 31, 2008, Borrower shall
make a mandatory payment of Term Loan in an amount equal to fifty percent (50%)
of Borrower’s Excess Cash Flow (but not to exceed $300,000 in any Fiscal Year)
for the Fiscal Year just ended, such prepayment to be applied against the
remaining installments of principal in the inverse order of their maturities,
such mandatory prepayments to continue until the date on which the outstanding
principal balance of Term Loan is less than $2,000,000.  For the
purposes of this Section 2.4(e),
“Excess Cash
Flow” shall mean for each Borrower’s Fiscal Year, Borrower’s EBITDA for
such period, minus Borrower’s taxes during such period and distributions to its
members in respect of taxes for such period, minus actual principal payments
made with respect to long term debt during such period (including all debt paid
on the FMRI Notes and the PBGC Note), minus all unfinanced Capital Expenditures
by Borrower during such period

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    SECTION
2.  REPRESENTATIONS AND
WARRANTIES

     

    To induce
the Lender to enter into this Amendment, the Borrowers represent and warrant to
the Lender that:

     

    2.1           Due Authorization:
Authority; No Conflicts; Enforceability. The execution delivery and
performance by the Borrowers of this Amendment and the other documents delivered
under Section 4
(collectively the “Amendment Documents”) are within each of their respective
corporate powers, have been duly authorized by all necessary corporate action,
have received all necessary governmental, regulatory or other approvals (if any
are required), and do not and will not contravene or conflict with any provision
of (i) any law, (ii) any judgment, decree or order or (iii) its respective
articles of incorporation or by-laws, and do not and will not contravene or
conflict with, or cause any lien to arise under, any provision of any agreement
or instrument binding upon the Borrowers or upon any of its respective
properties.  This Amendment, the Loan Agreement, as amended by this
Amendment, and the other Amendment documents are the legal, valid and binding
obligations of the Borrowers enforceable against the Borrowers in accordance
with their respective terms.

     

    2.2           No Default: Representations
and Warranties.  As of the Effective Date, (i) no Default or
Event of Default under the Loan Agreement has occurred and is continuing and
(ii) the representations and warranties of the Borrowers contained in the Loan
Agreement are true and correct.

     

    SECTION
3.  CONDITIONS TO
EFFECTIVENESS

     

    The
obligation of the Lender to make the amendments and modifications contemplated
by this Amendment, and the effectiveness thereof, are subject to the
following:

     

    3.1           Representations and
Warranties. The representations and warranties of the Borrowers contained
in this Amendment are true and correct as of the Effective Date.

     

    3.2           Documents. The Lender
has received all of the following, each duly executed and dated as of the
Effective Date (or such other date as is satisfactory to the Lender) in form and
substance satisfactory to the Lender:

     

    (a)           Amendment.  This
Amendment; and

     

    (b)           Other. Such other
documents as the Lender may reasonably request.

     

    SECTION
4.  MISCELLANEOUS

     

    4.1           Captions.  The
recitals to this Amendment (except for definitions) and the section captions
used in this Amendment are for convenience only, and do not affect the
construction of this Amendment.

     

    4.2           Governing Law:
Severability. This Amendment is a contract made under and governed by the
internal laws of the State of Illinois.  Wherever possible, each
provision of this Amendment will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Amendment
is prohibited by or invalid under such law, such provision will be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
Amendment.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    4.3           Counterparts. This
Amendment may be executed in any number of counterparts and by the different
parties on separate counterparts, and each such counterpart will be deemed to be
an original, but all such counterparts together constitute but one and the same
Amendment.

     

    4.4           Successors and
Assigns. This Amendment is binding upon the Borrowers, the Lender and
their respective successors and assigns, and inures to the sole benefit of the
Borrowers, the Lender and their successors and assigns. The Borrowers have no
right to assign their rights or delegate their duties under this
Amendment.

     

    4.5           References.  From
and after the Effective Date, each reference in the Loan Agreement to “this
Agreement,” “hereunder,” hereof,” “herein “ or words of like import, and each
reference in the Loan Agreement or any other Financing Agreement to the Loan
Agreement or to any term, condition or provision contained “thereunder,”
“thereof,” “therein,” or words of like import, means and be a reference to the
Loan Agreement (or such term, condition or provision, as applicable) as amended,
supplemented, restated or otherwise modified by this Amendment.

     

    4.6           Continued
Effectiveness.  Notwithstanding anything contained in this
Amendment, the terms of this Amendment are not intended to and do not serve to
effect a novation as to the Loan Agreement.  The parties to this
Amendment expressly do not intend to extinguish the Loan
Agreement.  Instead, it is the express intention of the parties to
this Amendment to reaffirm the indebtedness created under the Loan
Agreement.  The Loan Agreement remains in full force and effect and
the terms and provisions of the Loan Agreement are ratified and
confirmed.

     

    4.7           Costs. Expenses and
Taxes.  Borrowers affirm and acknowledge that Section 14.3 of
the Loan Agreement applies to this Amendment and the transactions and agreements
and documents contemplated under this Amendment.

     

     

    (remainder
of page left intentionally blank; signature page follows)

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    Delivered
as of the day and year first above written.

     

    
      	 
      	FIFTH
      THIRD BANK	 
	 	 	 	 
	 
      	By:	
              /s/Michael E. May

            	 
	 
      	Name:	
              Michael E. May

            	 
	 
      	Title:	
              Vice President

            	 
	 	 	 	 
	 	 	 	 
	 
      	FANSTEEL
      INC.	 
	 	 	 	 
	 
      	By:
      	
              /s/R. Michael McEntee

            	 
	 
      	Name:	
              R. Michael McEntee

            	 
	 
      	Title:	
              VP & CFO  

            	 
	 	 	 	 
	 	 	 	 
	 
      	WELLMAN
      DYNAMICS CORPORATION
	 	 	 	 
	 
      	By:
      	
              /s/R. Michael McEntee

            	 
	 
      	Name: 	
              R. Michael McEntee

            	 
	 
      	Title:
      	
              Vice President

            	 

    

     

     

    4

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