Document:

ex10_1.htm

    
      

    

    EXHIBIT
      10.1

    

    

    THIRD
      AMENDMENT TO LOAN AND SECURITY AGREEMENT

     

    This
      Third Amendment to Loan and Security Agreement, made as of September 12, 2007
      (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 such agreement has been amended, restated, supplemented or otherwise
      modified from time to time, the “Loan Agreement”);

     

    WHEREAS,
      the Borrowers have requested a Term Loan up to a maximum aggregate amount of
      $3,000,000 maturing on March 2, 2009, and have also requested a waiver of
      certain covenant violations;

     

    WHEREAS,
      the Lender is willing to modify the Loan Agreement and provide additional
      financing and such waiver, all 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
      1.17 of the Loan Agreement is hereby deleted in its entirety and in lieu thereof
      is inserted the following:

     

    “Disposition”
      shall mean the sale, lease, conveyance or other disposition of Property,
      including, without limiting the generality of the foregoing, the sale, transfer
      or other disposition of the capital stock of any Subsidiary.

    

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

     

    “EBITDA”
      shall mean, for any period and any Person, as determined in accordance with
      GAAP, the sum of (a) such Person’s net income (or net loss) for such period,
      plus (b) all amounts deducted from net income (or net loss) for such period
      for
      interest expense, income tax expense, depreciation and amortization for such
      period, all on a consolidated basis, plus (c) extraordinary
      expenses.

    

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

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    “Maximum
      Revolving Loan Limit” shall mean the total of all advances outstanding at
      any one time under the Revolving Loan, which at no time, in the aggregate,
      shall
      exceed Twenty One Million Five Hundred Thousand and No/100 Dollars
      ($21,500,000).

     

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

     

    “Net
      Proceeds” shall mean proceeds in cash, checks or other cash equivalent
      financial instruments as and when received by a Borrower in connection with
      a
      Disposition, net of: (a) the direct costs relating to such a Disposition
      excluding amounts payable to such Borrower, (b) sales, use or other transaction
      taxes paid or payable as a result thereof, and (c) amounts required to be
      applied to repay principal, interest and prepayment premiums and penalties
      on
      Indebtedness secured by a lien, claim, encumbrance or security interest on
      the
      asset which is the subject of such Disposition, but, without limiting the
      generality of the foregoing and for the avoidance of any doubt, not net of
      any
      amounts which constitute Asset Sale Proceeds, (as defined in the FMRI Primary
      Note), which may be payable to one or more of the holders of the FMRI
      Notes.  “Net Proceeds” shall also include proceeds paid on account of
      any Event of Loss, and net of (i) all money actually applied within one hundred
      eighty (180) days of the receipt thereof to repair or reconstruct the damaged
      Property or to replace the damaged or lost Property, (ii) all of the costs
      and
      expenses reasonably incurred in connection with the collection of such proceeds,
      award or other payment, and (iii) any amounts retained by or paid to parties
      having superior rights to such proceeds, awards or other payments.

     

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

     

    “Revolving
      Loans” shall have the meaning ascribed to it in Section 2.1 of
      this Agreement, and where the context so requires shall also mean both the
      Revolving Loans and the Term Loan.

     

    1.6           The
      following definition is hereby added as Section 1.90 to the Loan
      Agreement:

     

    “Term
      Loan” shall mean the aggregate unpaid balance, as of any date, of all
      drawings by Borrowers of the Term Loan Draw Availability advanced by
      Lender.

     

    1.7           The
      following definition is hereby added as Section 1.91 to the Loan
      Agreement:

     

    “Term
      Loan Draw Availability” shall have the meaning ascribed to it in Section
      2.1(B) of this Agreement.

     

    1.8           The
      following definition is hereby added as Section 1.92 to the Loan
      Agreement:

     

    “Success
      Fee” shall have the meaning ascribed to it in Section 2.8(d) of this
      Agreement.

     

    1.9           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) 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) Twenty One Million Five Hundred Thousand and No/100
      Dollars ($21,500,000), 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.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    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) Six
      Million Five Hundred Thousand and No/100 Dollars ($6,500,000) 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 the lesser of (A) Two Million Three Hundred
      Thirty Thousand Six Hundred Forty Five and No/100 Dollars ($2,330,645) and
      (B)
      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.

     

    The
      Revolving Loans shall be repayable in full on March 2, 2009 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 (including any
      advances of the Term Loan Draw Availability), 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)  Until
      February 29, 2008 (or, if earlier, the Term Loan Maturity Date, as defined
      below) and subject to the other terms and conditions of this Agreement, Lender
      will make a non-revolving line of credit available to be drawn by Borrowers
      up
      to a maximum aggregate amount of $3,000,000 (the remaining amount available
      to
      be drawn, as of any date, being the “Term Loan Draw
      Availability”).  The proceeds of each drawing of the Term Loan
      Draw Availability may only be used for Borrowers’ general working capital
      purposes and corporate purposes not in violation of the terms of this
      Agreement.  The Term Loan Draw Availability will be zero ($0) dollars
      on and after February 29, 2008, and Borrowers may not make any further drawings
      of the Term Loan Draw Availability on and after such date.  The
      minimum amount of each drawing that Borrowers can request is
      $250,000.  The Term Loan shall be repayable in full on the earlier of
      (the “Term Loan Maturity Date”): (i) March 2, 2009, or (ii) as provided
      in Section 4.2 of this Agreement.  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.  To request an advance of the Term Loan Draw Availability,
      Borrowers will first provide Lender with a duly completed draw request form
      in
      the form of Exhibit B-1 attached (a “Draw
      Request”).  Subject to the terms and conditions of this Agreement,
      Lender will fund the amount of the requested drawing of the Term Loan Draw
      Availability, as set forth in the Draw Request, by crediting the same to
      Borrowers’ operating account with Lender.  Each Draw Request must be
      received by Lender prior to 12:00 p.m. (Noon) Chicago time) on the requested
      borrowing date, which shall be a Business Day.  Each Draw Request
      submitted to Lender shall be irrevocable by Borrowers.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

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

     

    2.4           Mandatory
      Prepayments of Loans and Commitment Reductions.

    

    (a)           Asset
      Dispositions.  If either Borrower shall at any time or from time
      to time:

     

    (i)        make
      or agree to make
      a Disposition; or

     

    (ii)       suffer
      an Event of
      Loss;

     

    in
      each
      case in an amount in excess of $50,000, then (A) such Borrower shall promptly
      notify Lender of such proposed Disposition or Event of Loss (including the
      amount of the estimated Net Proceeds to be received by such Borrower in respect
      thereof) and (B) promptly upon receipt by such Borrower of the Net Proceeds
      of
      such Disposition or Event of Loss, such Borrower shall deliver such Net Proceeds
      to Lender to be applied against the Liabilities in accordance with the
      provisions of subsection 2.4(d) hereof.

     

    (b)           Equity
      Issuances.  If either Borrower shall issue new common or preferred
      equity, such Borrower shall promptly notify Lender of the estimated Net Issuance
      Proceeds of such issuance to be received by such Borrower in respect thereof
      and
      promptly upon receipt by such Borrower of the Net Issuance Proceeds of such
      issuance, such Borrower shall deliver to Lender, an amount equal to 100% of
      such
      Net Issuance Proceeds, for application against the Liabilities in accordance
      with the provisions of subsection 2.4(d) hereof.

     

    (c)           Reduction
      of Commitment.  Borrowers may permanently reduce the amount of the
      Revolving Loan Facility at any time without penalty or premium.

    

    (d)           Application
      of Net Proceeds.  Any Net Proceeds or the Net Issuance Proceeds
      paid to Lender pursuant to this Section 2.4 shall be applied (i) first to
      pay any unpaid expenses and fees, then to pay any accrued interest due under
      the
      Revolving Loan, (ii) then to pay any principal balance then due under the
      Revolving Loan, until paid in full,(iii) then to pay expenses and fees accrued
      under the Term Loan, including the Success Fee, (iv) then to pay any accrued
      interest due under the Term Loan, and (v) and finally to pay principal due
      under
      the Term Loan.  Any principal payments made under the Term Loan shall
      be accompanied by the Success Fee due under Section 2.8(d)
      hereof.  Nothing in this Section 2.4 shall be construed to
      constitute Lender’s consent to any transaction that is not expressly permitted
      by other provisions of this Agreement or any of the Ancillary
      Agreements.  Borrowers agree that Lender may grant or withhold consent
      to any requested Disposition (that is not expressly permitted by other
      provisions of this Agreement or the Ancillary Agreements) and impose any
      conditions to granting such consent, all in Lender’s sole
      discretion.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    1.11           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), each Revolving 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.  The Term Loan shall bear interest on the
      outstanding principal amount thereof from the date when made at a rate per
      annum
      equal to thirteen percent (13%).

    

    (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%), in the case of the Revolving Loans, and at a rate per annum
      equal to sixteen percent (16%), in the case of the Term Loan.

    

    (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.

     

    (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, 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.

     

    1.12         The
      following subsection 2.8(c) is hereby added to the Agreement:

     

    (c)           Upon
      payment of any principal due under the Term Loan, Borrowers shall pay a success
      fee (“Success Fee”) in the amount as set forth in the following
      grid:

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	
              Date
                of Payment

            	
              Amount
                of Success Fee

            
	 	 
	
              Any
                date prior to February 29, 2008

            	
              3%
                of principal amount repaid during such period

            
	 	 
	
              Any
                date on or after February 29, 2008 and before May 31, 2008

            	
              5%
                of principal amount repaid during such period

            
	 	 
	
              Any
                date on or after May 31, 2008 and before August 31, 2008

            	
              6%
                of principal amount repaid during such period

            
	 	 
	
              Any
                date on or after August 31, 2008

            	
              7%
                of principal amount repaid during such period

            
	 	 

    

    

    Notwithstanding
      the foregoing, Borrowers will pay to Lender, on the Term Loan Maturity Date
      (as
      defined in Section 2.1(B)), any accrued but unpaid Success Fee in accordance
      with this Agreement.

     

    1.13         The
      following Section 2.10 is hereby added to the Agreement:

     

    2.10           Voluntary
      Prepayments of the Term Loan.  As long as Borrowers are not in
      Default under the terms of this Agreement, and provided that Borrowers have
      sufficient Revolving Availability, both before and after making payment under
      the Term Loan, Borrowers may draw on the Revolving Loan Facility to make
      voluntary prepayments of the Term Loan, provided, however, each such payment
      shall be accompanied by the Success Fee required under Section 2.8(d)
      hereof and shall be in minimum amounts of $100,000 each.

    

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

     

    4.1           Borrowers’
      Loan Account; Method of MakingPayments.  Lender shall
      maintain a loan account (“Loan Account”) on its books in which shall be
      recorded (i) all loans and advances made by Lender to Borrowers pursuant to
      this
      Agreement, (ii) all payments made by Borrowers on all such loans and advances
      and (iii) all other appropriate debits and credits as provided  in
      this Agreement, including, without limitation, all fees, charges, expenses
      and
      interest.  All entries in Borrowers’ Loan Account shall be made in
      accordance with Lender’s customary accounting practices as in effect from time
      to time.  Unless otherwise agreed to in writing from time to time
      thereafter, all payments which Borrowers are required to make to Lender under
      this Agreement or under any of the Ancillary Agreements shall be initiated
      by
      Lender in accordance with the terms this Agreement from Borrowers’ accounts at
      Lender or its Affiliates through Lender’s or such Affiliate’s then current
      automated bill paying service (“BillPayer Service”).  Borrowers
      hereby authorize Lender and its Affiliates to initiate such payments from
      Borrowers’ accounts at Lender (or any replacements thereof at Lender or its
      Affiliates).  Borrowers agree that use of Lender’s or its Affiliate’s
      then current BillPayer Service will be governed by the then current standard
      terms and conditions thereof.  Borrowers further acknowledge and agree
      to maintain payments hereunder through such BillPayer Service throughout the
      term of this Agreement.

    

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

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    4.2           Payment
      Terms for Loans.  All of the amounts due under the Revolving Loan
      Facility and Term Loan shall be payable at the address of Lender set forth
      in
Section 14.10 of this Agreement.  (i) Interest shall be payable
      in arrears on the last day of each month (for the immediately preceding month)
      out of the first collections received with respect to any proceeds of
      Collateral, (ii) fees, costs, expenses and similar charges shall be payable
      as
      and when provided in this Agreement or the Ancillary Agreements, (iii) the
      principal balance of the Revolving Loans shall, among other sources, be payable
      from collections received with respect to any proceeds of Collateral as such
      proceeds are received, (iv) the principal balance of the Term Loan shall, among
      other sources, be payable from any proceeds of Collateral as such proceeds
      in
      accordance with this Agreement, and (v) all outstanding Liabilities shall be
      immediately due and payable as provided in Sections 2.1 and 13.2
      and on the termination of this Agreement; provided, however, that if at
      any time the outstanding principal balance of the Liabilities (exclusive of
      the
      Term Loan) exceeds the Revolving Availability, Borrowers shall immediately
      pay
      to Lender such amount as is necessary to eliminate such excess.

    

    1.16          Section
      10.1(d)(v) of the Agreement is hereby deleted in its entirety.  The
      Borrowers will no longer be required to deliver to the Lender a Covenant
      Compliance Certificate.

     

    1.17          Section
      14.3 of the Agreement is hereby deleted in its entirety and in lieu thereof
      is inserted the following:

     

    14.3           Attorneys’
      Fees and Expenses; Lender’s and Participant’s Out-of-Pocket
      Expenses.  If, at any time or times, whether prior or subsequent
      to the date hereof, and regardless of the existence of a Default or an Event
      of
      Default, and regardless of whether any Advances shall have been made hereunder,
      Lender, or any Participant, employs counsel for advice or other representation
      or incurs legal and/or other costs and expenses in connection with:

    

    (a)           The
      preparation, negotiation, delivery, administration and/or execution of this
      Agreement, all Ancillary Agreements, any amendment of or modification of this
      Agreement or the Ancillary Agreements or any sale or attempted sale of any
      interest herein to an assignee or a Participant;

     

    (b)           Any
      litigation, contest, dispute, suit, proceeding or action (whether instituted
      by
      Lender, Borrower or any other Person) in any way relating to the Collateral,
      this Agreement, the Ancillary Agreements or a Borrower’s or Borrowers’
affairs;

     

    (c)           Any
      attempt to enforce any rights of Lender or any Participant against a Borrower
      or
      Borrowers or any other Person which may be obligated to Lender by virtue of
      this
      Agreement or the Ancillary Agreements, including, without limitation, the
      Account Debtors or any guarantor; and/or

     

    (d)           Any
      attempt to inspect, verify, protect, collect, sell, liquidate or otherwise
      dispose of the Collateral; then, in any such event, the reasonable attorneys’
fees arising from such services and all reasonably incurred expenses, costs,
      charges and other fees of such counsel or of Lender or any Participant in any
      way or respect arising in connection with or relating to any of the events
      or
      actions described in this Section 14.3 shall be payable, on demand,
      by Borrowers to Lender and any Participant and shall be additional Liabilities
      hereunder secured by the Collateral.  Without limiting the generality
      of the foregoing, such expenses, costs, charges and fees may include paralegals’
fees, costs and expenses; accountants’ fees, costs and expenses; court costs,
      fees and expenses; photocopying and duplicating expenses; court reporter fees,
      costs and expenses; long distance telephone charges; air express charges;
      telegram and telecopier charges; secretarial overtime charges; and expenses
      for
      travel, lodging and food paid or incurred in connection with the performance
      of
      such services; and all documentation fees, filing fees, taxes, title expenses,
      collateral monitoring expenses, appraisal fees, searches and other
      expenses.

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    SECTION
      2.          WAIVER OF COVENANT
      VIOLATIONS

     

    2.1    Pursuant
      to
      the terms of Section 10.7(a) of the Agreement, Borrowers
      were  required to have EBITDA for the fiscal year ending December 31,
      2006 of not less than $3,600,000.  Pursuant to the terms of Section
      10.7(b), Borrowers were required to have a Leverage Ratio of not greater than
      10:1 for the period ending May 31, 2007.  Pursuant to the terms of
      Section 10.7(c), Borrowers were required to have a Debt Service Ratio of not
      less than 1.25:1 for the period ending December 31, 2006.  Borrowers
      have not met those requirements and have requested a waiver of the foregoing
      provisions for the period stated above.  Lender hereby waives such
      violations for the periods stated herein.  This waiver is  a
      waiver of the specific provisions specified herein for the time periods
      specified and is not, nor should it be construed to be, a waiver of any other
      provision of the Agreement, whether or not similar to the waiver enumerated
      herein.

     

    SECTION
      3.          REPRESENTATIONS AND
      WARRANTIES

     

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

     

    3.1           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.

     

    3.2           No
      Default: Representations and Warranties.  Other than set forth in
Section 2 hereof, 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
      4.          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:

     

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

     

    4.2           Closing
      Fee.  Borrowers shall pay Lender a closing fee of $90,000 in
      connection with the Term Loan.  The fee shall be due and payable and
      shall be deemed fully earned upon execution of this Amendment.

    

    4.3           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, the form of which is attached hereto as
Exhibit A.

     

    (c)           Term
      Note.  The Term Note, the form of which is attached hereto as
Exhibit B.

     

    (d)           Pledge
      and Security Agreement.  The Pledge and Security Agreement,
      executed by Fansteel, Inc., the form of which is attached hereto as Exhibit
      C.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (e)           Wellman
      Dynamics Corporation Stock.  1,000 shares of Wellman Dynamics
      Corporation common stock.

     

    (f)           Regulation
      U Form.  A fully executed Regulation U form, executed by Fansteel,
      Inc.

     

    (g)           Assignment
      Separate from Certificate.  An Assignment separate from
      certificate, executed in blank by Fansteel, Inc.

     

    (h)           Consents.
      Etc. Certified copies of any documents evidencing any necessary corporate
      action, consents and governmental approvals, if any, with respect to this
      Amendment, the Amendment Documents or any other document provided for under
      this
      Amendment.

     

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

     

    SECTION
      5.         
MISCELLANEOUS

     

    5.1           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.

     

    5.2           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.

     

    5.3           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.

     

    5.4           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.

     

    5.5           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.

     

    5.6           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.

     

    5.7           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)

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    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:
                Vice President

            
	 	 
	 	 
	 	
              WELLMAN
                DYNAMICS CORPORATION

            
	 	 
	 	
              By:
                /s/ R. Michael McEntee

            
	 	
              Name:
                R. Michael McEntee

            
	 	
              Title:
                Vice President

            

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    to

    Loan
      and Security Agreement

     

    REVOLVING
      LOAN NOTE

     

    
      	
              $21,500,000

            	
              Chicago,
                Illinois

            
	 	
              as
                of  September 12, 2007

            

    

    

     

    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 TWENTY ONE MILLION FIVE HUNDRED THOUSAND
      AND NO/100 DOLLARS ($21,500,000), or the aggregate unpaid principal amount
      of
      all advances of the Revolving Loan Facility made pursuant to subsection
      2.1(A) 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 the Third Amendment 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 March 2, 2009.

     

    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 last Business 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.

     

    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.

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    This
      Revolving Note replaces that certain Revolving Note in the original principal
      amount of $21,500,000, dated December 4, 2006, and does not constitute payment
      thereof or a novation therefor.

     

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

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    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:

            	 	 
	 	
              Name:

            	 	 
	 	
              Title:

            	 	 
	 	 	 	 
	 	
              WELLMAN
                DYNAMICS CORPORATION  

            
	 	 	 	 
	 	
              By:

            	 	 
	 	
              Name:

            	 	 
	 	
              Title:

            	 	 

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

    to

    Loan
      and Security Agreement

     

    TERM
      LOAN NOTE

     

    
      	
              $3,000,000

            	
              Chicago,
                Illinois

            
	 	
              as
                of  September 12, 2007

            

    

    

     

    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), or the aggregate unpaid principal amount of all advances of the
      Term Loan Draw Availability 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 the Third Amendment 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 last Business 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.

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    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]

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    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:

            	 	 
	 	
              Name:

            	 	 
	 	
              Title:

            	 	 
	 	 	 	 
	 	
              WELLMAN
                DYNAMICS CORPORATION  

            
	 	 	 	 
	 	
              By:

            	 	 
	 	
              Name:

            	 	 
	 	
              Title:

            	 	 

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C

    to

    Loan
      and Security Agreement

     

    PLEDGE
      AND SECURITY AGREEMENT

     

    This
      PLEDGE AND SECURITY AGREEMENT (this “Pledge Agreement”) dated as of September
      12, 2007, is made by FANSTEEL, INC., a Delaware corporation (the “Pledgor”), for
      the benefit of FIFTH THIRD BANK, a Michigan banking corporation (the
“Lender”).

     

    R
      E C I T
      A L S:

     

    WHEREAS,
      Pledgor is a director and shareholder of, and owns 1,000 shares of the issued
      and outstanding common stock in WELLMAN DYNAMICS CORPORATION, a Delaware
      corporation (the “Wellman”);

     

    WHEREAS,
      Pledgor and Wellman (the “Borrowers”) have entered into a Loan and Security
      Agreement with Lender dated as of July 15, 2005 (as amended from time to time,
      the “Agreement”).  The Borrowers have requested the Lender to make a
      Term Loan, subject to the terms and conditions of the Agreement in the amount
      of
      THREE MILLION AND 00/100 DOLLARS ($3,000,000.00).  Terms used in this
      Pledge Agreement but not defined in this Pledge Agreement shall have the meaning
      ascribed to them in the Agreement.

     

    WHEREAS,
      Pledgor has agreed, in consideration of the additional extension by the Lender
      of  the Term Loan, to pledge to the Lender one hundred percent (100%)
      of the issued and outstanding common stock of Wellman owned by it as security
      for the Loans advanced under the Agreement;

     

    NOW,
      THEREFORE, in order to induce the Bank to make the Term Loan and in
      consideration of the mutual representations, warranties, covenants and
      agreements hereinafter set forth, and for other good and valuable consideration,
      the receipt and sufficiency of which are hereby acknowledged, the parties hereto
      hereby agree as follows:

     

    AGREEMENT

     

    1.            
      Grant of Security Interest.  To secure the
      Obligations (as hereinafter defined), the Pledgor hereby pledges and grants
      to
      the Lender a security interest in and transfers and delivers to the Lender
      the
      following: (a) 1,000 shares, which constitute 98.8%) of the issued and
      outstanding capital stock of Wellman, and any and all shares of the capital
      stock of Wellman that Pledgor subsequently acquires, directly or indirectly
      including all substitutions of, and additions to, such stock; (b) executed
      and
      undated stock powers for the capital stock described in (a) above, in form
      and
      content satisfactory to the bank duly executed in blank and all requisite
      federal and state stock transfer tax stamps, if any (the items described in
      (a)
      and (b) above may collectively be referred to as the “Pledged Stock”); (c) all
      income and profits thereof, all distributions thereon, all other proceeds
      thereof and all rights, benefits and privileges pertaining to or arising from
      the Pledged Stock; and (d) such other collateral that may be provided after
      the
      date hereof to secure the Obligations.  All property at any time
      pledged with the Lender hereunder or in which the Lender is granted a security
      interest hereunder (whether described herein or not), subject to the provisions
      of Paragraph 3(c) below all income therefrom and proceeds thereof, may be
      referred to collectively as the “Pledged Security”.

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    2.            
      Obligations.   The obligations secured by this Pledge
      Agreement are the following (referred to collectively hereafter as the
“Obligations”):

     

    (a)           all
      obligations and agreements of Borrowers contained in (including, without
      limitation, the payment of all indebtedness of the Borrowera in respect of)
      the
      Agreement and any and all amendments, modifications or renewals
      thereof;

     

    (b)           all
      amounts due to the Lender under that certain Revolving Note in the amount of
      $21,500,000.00, dated of even date herewith, from the Borrowers to the Lender
      and any and all modifications, extensions, renewals or refinancings thereof
      (the
“Revolving Note”), including, but not limited to, all principal, interest and
      other amounts due under the Revolving Note;

     

    (c)           all
      amounts due to the Lender under that certain Term Loan Note in the amount of
      $3,000,000.00, dated of even date herewith, from the Borrowers to the Lender
      and
      any and all modifications, extensions, renewals or refinancings thereof (the
      “Term Loan Note”), including, but not limited to, all principal, interest and
      other amounts due under the Term Loan Note (the Term Loan Note and the Revolving
      Note are hereafter referred to as the “Notes”);

     

    (d)           all
      sums advanced by, or on behalf of, the Lender in connection with, or relating
      to, the Agreement, the Notes or the Pledged Security including, but not limited
      to, any and all sums advanced to preserve the Pledged Security, or to perfect
      the Lender’s security interest in the Pledged Security; and

     

    (e)           in
      the event of any proceeding to enforce the satisfaction of the Obligations,
      or
      any of them, or to preserve and protect its rights under the Agreement, the
      Notes, this Pledge Agreement or any other agreement, document or instrument
      relating to the transactions contemplated in the Agreement, the reasonable
      expenses of retaking, holding, preparing for sale, selling or otherwise
      disposing of or realizing on the Pledged Security, or of any exercise by the
      Lender of its rights, together with reasonable attorney’s fees, expenses and
      court costs.

     

    3.            
      Additional Terms.

     

    (a)           The
      Pledgor agrees that the Lender, after Default (as hereinafter defined), shall
      have full and irrevocable right, power and authority, to collect, withdraw
      or
      receipt for all amounts due or to become due and payable upon, in connection
      with, or relating to, the Pledged Security, to execute any withdrawal receipts
      respecting the Pledged Security, and to endorse the name of the Pledgor on
      any
      or all documents, instruments or commercial paper given in payment thereof,
      and
      at the Lender’s discretion to take any other action, including, without
      limitation, the transfer of any Pledged Security into the Lender’s own name or
      the name of any nominee for the Lender, which the Lender may deem necessary
      or
      appropriate to preserve or protect the Lender’s interest in any of the Pledged
      Security.

     

    (b)           Unless
      a Default shall have occurred, the Pledgor shall be entitled to vote any and
      all
      shares of the Pledged Stock and to give consents, waivers and ratifications
      in
      respect thereof, provided that no vote shall be cast, no consent, waiver or
      ratification shall be given and no action shall be taken by the Pledgor which
      would violate or be inconsistent with any of the terms of the Agreement, the
      Notes or this Pledge Agreement, or which would have the effect of impairing
      the
      position or interests of the Pledgor or any holder of the Notes.  All
      such rights of the Pledgor to vote and to give consents, waivers and
      ratifications shall cease upon the occurrence of a Default.

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    (c)           Unless
      a Default shall have occurred, all dividends and other distributions payable
      in
      respect of the Pledged Security shall be paid to the Pledgor.  Upon
      the occurrence of a Default, all such dividends and other distributions and
      payments shall be paid to the Lender.  After a Default shall have
      occurred, all such amounts paid in respect of the Pledged Security shall, until
      paid or delivered to the Lender, be held in trust for the benefit of the Lender
      as additional Pledged Security to secure the Obligations.

     

    4.            
      Representations, Warranties and Covenants.  The
      Pledgor further represents, warrants and agrees that:

     

    (a)           The
      Pledgor is the legal, record and beneficial owner of, and has good and
      marketable title to, the Pledged Security, subject to no lien, claim, security
      interest or other encumbrance, except the security interest created by this
      Pledge Agreement.

     

    (b)           Without
      the prior written consent of the Lender, the Pledgor will not sell, assign,
      transfer, exchange, or otherwise dispose of, or grant any option with respect
      to, the Pledged Security, nor will it create, incur or permit to exist any
      lien,
      claim, security interest or other encumbrance with respect to any of the Pledged
      Security, or any interest therein, or any proceeds thereof, except for the
      security interest provided for by this Pledge Agreement.  Without the
      prior written consent of the Lender, the Pledgor agrees that it will not vote
      its shares in any manner which will permit or allow Wellman to: (i) issue or
      reissue any capital stock or other securities (or warrants therefor or other
      rights with respect thereto) in addition to or issue other securities of any
      nature in exchange or substitution for any of the Pledged Security; (ii) redeem
      any of the Pledged Security, or (iii) declare any stock dividend or split or
      otherwise change its capital structure.

     

    (c)           The
      Pledged Security is genuine and in all respects represents what it purports
      to
      be and all the shares of the Pledged Stock have been duly and validly issued,
      and are fully paid and non-assessable.

     

    (d)           The
      pledge, assignment and delivery of the Pledged Security pursuant to this Pledge
      Agreement creates a valid perfected security interest in the Pledged Security,
      and the proceeds thereof, subject to no prior lien, claim, security interest
      or
      other encumbrance or to any agreement purporting to grant to any third party
      a
      perfected security interest in the assets of the Pledgor which would include
      any
      of the Pledged Security.  The Pledgor will at all times defend the
      Lender’s right, title and security interest in and to the Pledged Security and
      the proceeds thereof against any and all claims and demands of any person
      adverse to the claims of the Lender.

     

    (e)           The
      Pledgor will take such action and to execute such documents as the Lender may
      from time to time reasonably request relating to the Pledged Security or the
      proceeds thereof.

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    (f)           The
      Pledgor has full right, power and authority to enter into, to execute and to
      deliver this Pledge Agreement and this Pledge Agreement is binding upon, and
      enforceable against the Pledgor in accordance with its terms.

     

    (g)           The
      Pledgor shall pay any fees, assessments, charges or taxes arising with respect
      to the Pledged Security.  In case of failure by the Pledgor to pay any
      such fees, assessments, charges or taxes, the Lender shall have the right,
      but
      shall not be obligated, to pay such fees, assessments, charges or taxes, as
      the
      case may be, and, in that event, the cost thereof shall be payable by the
      Pledgor to the Lender immediately upon demand together with interest at the
      rate
      equal to the Prime Rate (or, after the occurrence of a Default, the Default
      Rate, as such terms are defined in the Agreement) from the date of disbursement
      by the Lender to the date of payment by the Pledgor.

     

    5.            
      Events of Default.  The Pledgor shall be in default
      under this Pledge Agreement upon the occurrence of any one or more of the
      following events or conditions (each a “Default”):

     

    (a)           the
      nonperformance of any Obligation in any other instrument, document or agreement
      relating to the Obligations, including, without limitation, the Agreement and
      the Notes, which nonperformance continues beyond the applicable cure period,
      if
      any, specifically provided therefor;

     

    (b)           the
      nonperformance of any Obligation made by the Pledgor in the Pledge Agreement
      fifteen (15) days after notice by the Lender;

     

    (c)           any
      breach of any warranty, representation or covenant made by the Pledgor in this
      Pledge Agreement fifteen (15) days after notice by the Lender;

     

    (d)           any
      breach of any warranty, representation or covenant made by the Pledgor in any
      other instrument, document or agreement between the Pledgor and Lender which
      breach remains uncured beyond any applicable time period, if any, specifically
      provided therefor;

     

    (e)           any
      misrepresentation made by the Pledgor in this Pledge Agreement;

     

    (f)           any
      misrepresentation made by the Pledgor or in any document furnished by the
      Pledgor, or in the Pledgor’s behalf, to the Bank in connection with this Pledge
      Agreement or the Pledged Security, which misrepresentation remains uncured
      beyond any applicable time period; if any, specifically provided
      therefor;

     

    (g)           the
      claim or creation of any lien, claim, security interest or other encumbrance
      upon any of the Pledged Security or the making of any levy, judicial seizure,
      or
      attachment thereof; or

     

    (h)           the
      dissolution, bankruptcy, insolvency or failure of the Pledgor.

     

    6.            
      Rights of Parties upon Default.

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    (a)           In
      the event of the occurrence of a Default, in addition to all the rights, power
      and remedies the Lender shall be entitled to exercise, whether vested in the
      Lender by the terms of this Pledge Agreement, the terms of the Agreement, the
      terms of the Notes, by law, in equity, by statute (including, without
      limitation, Article 9 of the Illinois Uniform Commercial Code) or otherwise,
      for
      the protection and enforcement of their rights in respect of the Pledged
      Security, the Lender may be entitled to, without limitation (but is under no
      obligation to the Pledgor to do so):

     

    (i)             transfer
      all or any part of the Pledged Security into the Lender’s name or the name of
      its nominee or nominees;

     

    (ii)          
       after first obtaining all necessary regulatory approvals, vote all or any
      part of the Pledged Security (whether or not transferred into the name of the
      Lender or any nominee) and give all consents, waivers and ratifications in
      respect of the Pledged Security and otherwise act with respect thereto as though
      it were the outright owner thereof;

     

    (iii)           at
      any time or from time to time to sell, assign and deliver, or grant options
      to
      purchase, all or any part of the Pledged Security, or any interest therein, at
      any public or private sale, without demand of performance, advertisement or
      notice of intention to sell or of the time or place of sale or adjournment
      thereof or to redeem or otherwise (all of which are hereby waived by the
      Pledgor), for cash, on credit or for other property, for immediate or future
      delivery without any assumption of credit risk and for such price or prices
      and
      on such terms as the Lender in its absolute discretion may determine, provided
      that unless, in the sole discretion of the Lender, any of the Pledged Security
      threatens to decline in value or is or becomes a type sold on a recognized
      market, the Lender will give the Pledgor reasonable notice of the time and
      place
      of any public sale thereof, or of the time after which any private sale or
      other
      intended disposition is to be made.  Any requirements of reasonable
      notice shall be met if such notice is mailed to the Pledgor as provided in
      Paragraph 14 below, at least fifteen (15) days before the time of the sale
      or
      disposition.  Any sale of any of the Pledged Security conducted in
      conformity with customary practices of banks, insurance companies or other
      financial institutions disposing of property similar to the Pledged Security
      shall be deemed to be commercially reasonable.   Any remaining
      Pledged Security shall remain subject to the terms of this Pledge Agreement;
      and

     

    (iv)           collect
      any and all money due or to become due and enforce in the Pledgor’s name all
      rights with respect to the Pledged Security.

     

    (b)           Pledgor
      agrees to give the Lender, any prospective purchaser (pursuant to Section
      6(a)(iii)) of the Pledged Agreement and their respective representatives,
      reasonable access to further information (including, but not limited to,
      records, files, correspondence, tax work papers and audit work papers) relating
      to or concerning Wellman.

     

    7.            
      Remedies Cumulative.  Each right, power and remedy of
      the Lender provided in this Pledge Agreement or now or hereafter existing at
      law
      or in equity or by statute or otherwise shall be cumulative and concurrent
      and
      shall be in addition to every other right, power or remedy provided for in
      this
      Pledge Agreement or now or hereafter existing at law or in equity or by statute
      or otherwise.  The exercise or partial exercise by the Lender of any
      one or more of such rights, powers or remedies shall not preclude the
      simultaneous or later exercise by the Lender of all such other rights, powers
      or
      remedies, and no failure or delay on the part of the Lender to exercise any
      such
      right, power or remedy shall operate as a waiver thereof.

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    8.            
      Waiver of Defenses.  No renewal or extension of the
      time of payment of the Obligations; no release or surrender of, or failure
      to
      perfect or enforce, any security interest for the Obligations; no release of
      any
      person primarily or secondarily liable on the Obligations (including any maker,
      endorser, or guarantor); no delay in enforcement of payment of the Obligations;
      and no delay or emission in exercising any right or power with respect of the
      Obligations or any security agreement securing the Obligations shall affect
      the
      rights of the Bank in the Pledged Security.

     

    9.            
      Waiver.  Waiver by the Lender of any Default
      hereunder, or of any breach of the provisions of this Pledge Agreement by the
      Pledgor, or any right of the Lender hereunder, shall not constitute a waiver
      of
      any other Default or breach or right, or the same Default or breach or right
      on
      a future occasion.

     

    10.           Law
      Governing.  This Pledge Agreement and the rights and
      obligations of the parties hereunder shall be construed and interpreted in
      accordance with the law of the State of Illinois applicable to agreements made
      and to be wholly performed in such state.  Whenever possible, each
      provision of this Pledge Agreement shall be interpreted in such manner as to
      be
      effective and valid under applicable law, but, if any provision of this Pledge
      Agreement shall be held to be prohibited or invalid under applicable law, such
      provision shall be ineffective only to the extent of such prohibition or
      invalidity, without invalidating the remainder of such provision or the
      remaining provisions of this Pledge Agreement.

     

    11.           Pledgor’s
      Obligations Absolute.  The Obligations of the Pledgor under
      this Pledge Agreement shall be absolute and unconditional and shall remain
      in
      full force and effect without regard to, and shall not be released, discharged
      or in any way impaired by any circumstance whatsoever, including without
      limitation: (a) any amendment or modification of the Notes, the Agreement,
      or
      any document or instrument provided for herein or therein or related thereto,
      or
      any assignment, transfer or other disposition of any thereof; (b) any waiver,
      consent, extension, indulgence or other action or inaction under or in respect
      of any such document or instrument or any exercise or non-exercise of any right,
      remedy, power or privilege under or in respect of any such document or
      instrument or this Pledge Agreement; (c) any bankruptcy, insolvency,
      reorganization, arrangement, readjustment, composition, liquidation, or similar
      proceeding with respect to the Pledgor or any of its properties or creditors;
      or
      (d) any limitation on the Pledgor’s liabilities or obligations under any such
      instrument or any invalidity or lack of enforceability, in whole or in part,
      of
      any such document or instrument or any term thereof, whether or not the Pledgor
      shall have notice or knowledge of the foregoing.

     

    12.           Termination.  This
      Pledge Agreement shall terminate upon the receipt by the Lender of evidence
      satisfactory to the Lender in the Lender’s sole and absolute discretion of the
      payment in full of the Obligations.  At the time of such termination,
      the Lender, at the request and expense of the Pledgor, will execute and deliver
      to the Pledgor a proper instrument or instruments acknowledging the satisfaction
      and termination of this Pledge Agreement, and will duly assign, transfer and
      deliver to the Pledgor such of the Pledged Security as has not yet theretofore
      been sold or otherwise applied or released pursuant to this Pledge
      Agreement.

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    13.           Further
      Assurances.  The Pledgor, at its expense, will duly execute,
      acknowledge and deliver all such instruments and take all such action as the
      Lender from time to time may request in order to further effectuate the purposes
      of this Pledge Agreement and to carry out the terms hereof.  The
      Pledgor, at its expense, will at all times cause this Pledge Agreement (or
      a
      proper notice or statement, in respect hereof) to be duly recorded, published
      and filed and rerecorded, republished and refiled in such manner and in such
      places, if any, and will pay or cause to be paid all such recording, filing
      and
      other taxes, fees and charges, if any, and will comply with all such statutes
      and regulations, if any, as may be required by law in order to establish,
      perfect, preserve and protect the rights and security interests of the Lender
      hereunder.

     

    14.           Notices.   All
      communications provided for or related hereto shall be given in accordance
      with
      Section 14.10 of the Agreement.

     

    15.           Amendments.  Any
      term of this Pledge Agreement may be amended only with the written consent
      of
      the Pledgor and the Lender.  Any amendment effected in accordance with
      this Paragraph 15 shall be binding upon (i) each current holder of the Notes;
      (ii) each future holder of the Notes; and (iii) the Pledgor.

     

    16.           Assigns.  This
      Pledge Agreement and all rights and liabilities hereunder and in and to any
      and
      all Pledged Security shall inure to the benefit of the Lender and its successors
      and assigns, and shall be binding on the Pledgor and the Pledgor’s successors
      and assigns; provided, however, the Pledgor may not assign its rights or
      liabilities hereunder or to any of the Pledged Security without the written
      consent of the Lender.

     

    17.           Miscellaneous.  This
      Pledge Agreement embodies the entire agreement and understanding between the
      Lender and the Pledgor and supersedes all prior agreements and understandings
      relating to the subject matter hereof.  The headings in this Pledge
      Agreement are for purposes of reference only and shall not limit or otherwise
      affect the meaning hereof.

     

    [remainder
      of page left blank; signature page follows]

     

    
      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

    

    

    The
      Pledgor acknowledges that this Pledge Agreement is and shall be effective upon
      execution by the Pledgor and delivery to and acceptance hereof by the Lender,
      and it shall not be necessary for the Lender to execute any acceptance hereof
      or
      otherwise to signify or express its acceptance hereof to the
      Pledgor.

     

    

    
      	 	
              FANSTEEL,
                INC. 

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	 	 
	 	
              Its:

            	 	 

    

    

     

    24ex10_1.htm

    
      

    

    Exhibit
      10.1

     

    AMENDMENT
      NO. 7 TO AMENDED AND RESTATED

    LOAN
      AND SECURITY AGREEMENT

    

    Amendment
      No. 7 to Amended and Restated Loan and Security Agreement dated as of
      _______________, 2007, by and between ZONES, INC. (“Borrower”)
      and GE COMMERCIAL DISTRIBUTION FINANCE CORPORATION (formerly
      known as Transamerica Commercial Finance Corporation) (“Lender”).

    

    PREAMBLE:

    

    Pursuant
      to that certain Amended and Restated Loan and Security Agreement dated as of
      April 11, 2003 by and among Lender, Borrower, and The Mac Zone, Inc. (“Borrower
      3”) (Borrower and Borrower 3 are sometimes hereinafter individually referred
      to
      as an “Original Borrower” and collectively as the “Original Borrowers”) as
      amended from time to time (collectively, the “Loan Agreement”), Lender made
      certain financing available to Original Borrowers.  Borrower and
      Borrower 3 have merged with the surviving entity being Borrower (the
“Borrower/Borrower 3 Merger”).  Borrower has requested Lender to
      modify certain terms and provisions of the Documents.  Lender has
      agreed to do so, upon the terms and conditions of this Amendment.

    

    NOW,
      THEREFORE, in consideration of the premises which are incorporated herein by
      this reference and constitute an integral part of this Amendment, the execution
      and delivery of this Amendment and the mutual covenants and agreements hereafter
      set forth, the parties hereto agree as follows:

    

    1.    The
      parties
      acknowledge and agree that as a result of the Borrower/Borrower 3 Merger, (A)
      Borrower 3 shall no longer be deemed to be a “Borrower” under the Loan Agreement
      and Documents; and (B) all references to “any Borrower” or “Borrowers” in the
      Loan Agreement or the Documents (as defined in the Loan Agreement) shall only
      include, without limitation, the Borrower; and (C) all references to Borrower
      3
      in the Loan Agreement or the Documents are deleted in their
      entirety.

    

    2.    The
      definition of “Maximum Credit Amount” located in Section 1.1 of the Loan
      Agreement is hereby deleted in its entirety and replaced with the
      following:

    

    “‘Maximum
      Credit Amount’ shall mean $50,000,000.00.”

    

    3.    Section
      5.1(W) of the Loan Agreement entitled “Unsubordinated Debt to Tangible Net Worth
      Ratio” is hereby deleted in its entirety and replaced with the
      following:

    

    “(W)  Unsubordinated
      Debt to Tangible Net Worth Ratio.  Commencing on September 30,
      2007, and at all times thereafter, it shall not cause, suffer or permit the
      ratio of (i) Borrower’s total liabilities minus subordinated debt to (ii)
      Borrower’s Tangible Net Worth to be greater than 3.75 to 1.00, as measured at
      the end of each fiscal quarter.”

    

    4.    Section
      5.1(X) of the Loan Agreement entitled “Tangible Net Worth” is hereby deleted in
      its entirety and replaced with the following:

    

    “(X)  Tangible
      Net Worth.  Commencing on September 30, 2007, and at all times
      thereafter, it shall not cause, suffer or permit Borrower’s Tangible Net Worth
      to be less than $30,000,000.00, as measured at the end of each fiscal
      quarter.”

    

    5.    Section
      5.1(Y) of the Loan Agreement entitled “Fixed Charge Coverage” is hereby deleted
      in its entirety.

    

    6.    Section
      5.1(Z) of the Loan Agreement entitled “Current Ratio” is hereby deleted in its
      entirety.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7.    All
      representations and warranties made to the Lender in the Documents are hereby
      restated to the Lender and all of such representations and warranties remain
      true and correct as of the date of this Amendment.

    

    8.    All
      of the
      pledges, assignments, transfers, conveyances, mortgages and grants of security
      interest of any property given to Lender by Borrower pursuant to the Documents,
      including, but not limited to, pursuant to Article 3 of the Loan Agreement,
      have
      constituted and shall and hereinafter do continue to constitute pledges,
      assignments, transfers, conveyances, mortgages and grants of security interests
      of property to secure the Liabilities.

    

    9.    Lender’s
      obligation to enter into this Amendment is subject to the fulfillment of each
      and every one of the following conditions prior to, or contemporaneously with
      the execution and delivery of this Amendment.

    

    A.       All
      of the conditions precedent set forth in the Loan Agreement shall have been
      met;
      and

    

    B.        Lender
      shall have received such instruments, agreements and documents in form and
      manner satisfactory to Lender and its counsel as Lender may reasonably request
      and where applicable, duly executed and recorded.

    

    10.    All
      references to the Loan Agreement in any of the Documents shall mean the Loan
      Agreement, as amended by this Amendment and as may be further amended and/or
      restated from time to time.

    

    11.    The
      Loan
      Agreement (as amended by this Amendment), together with the Documents, contain
      the entire agreement between the parties hereto with respect to the transactions
      contemplated herein and supercede all prior representations, agreements,
      covenants and understandings, whether oral or written, related to the subject
      matter of the Loan Agreement.  Except as specifically set forth in the
      Agreement, Lender makes no covenants to Borrower, including, but not limited
      to,
      any other commitments to provide any additional financing to
      Borrower.

    

    12.    This
      Amendment may be executed in any number of counterparts, each of which
      counterpart, once they are executed and delivered shall be deemed to be an
      original and all of which counterparts taken together shall constitute but
      one
      in the same amendment.

    

    13.    Except
      as
      specifically amended and modified by this Amendment, (A) the Loan Agreement
      shall remain in full force and effect and is hereby restated and incorporated
      herein by this reference; and (B) all terms defined in the Loan Agreement shall
      have the same meanings herein as therein.

    

    [THE
      BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK; 

    SIGNATURE
      PAGE FOLLOWS]

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
      executed and delivered as of the date first above written.

    

    
      	
              BORROWER:

            	
              ZONES,
                INC.

            
	 	 
	 	 
	 	
              By:
                /s/ RONALD MCFADDEN

            
	 	 
	 	
              Title:
                SVP & CFO

            
	 	 
	
              LENDER:

            	
              GE
                COMMERCIAL DISTRIBUTION
                FINANCECORPORATION

            
	 	 
	 	 
	 	
              By:
                /s/ DAVID LYNCH

            
	 	 
	 	
              Title:
                VP - Operations

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