Document:

exv10w1

Exhibit 10.1

ELEVENTH AMENDMENT TO CREDIT AGREEMENT

     This Eleventh Amendment to Credit Agreement (this “Amendment”) is entered into as of
September 15, 2008 by and among Wellman, Inc., a Delaware corporation (the “Funds
Administrator”) and the other borrowers under the Credit Agreement party hereto, each as a
debtor and debtor-in-possession (collectively, and together with the Funds Administrator, the
“Borrowers”), Deutsche Bank Trust Company Americas, as Administrative Agent, and the other
financial institutions party hereto.

RECITALS

     A. The Funds Administrator, the Borrowers, the Administrative Agent and the Lenders are party
to that certain Credit Agreement dated as of February 26, 2008 (the “Credit Agreement”).
Unless otherwise specified herein, capitalized terms used in this Amendment shall have the meanings
ascribed to them by the Credit Agreement.

     B. The Funds Administrator, on behalf of itself and the Borrowers, the Administrative Agent
and the undersigned Lenders wish to amend the Credit Agreement on the terms and conditions set
forth below.

     Now, therefore, in consideration of the mutual execution hereof and other good and valuable
consideration, the parties hereto agree as follows:

          1. Amendments to Credit Agreement. Upon the Effective Date (as defined herein):

          (a) Section 1.1 of the Credit Agreement shall be amended by

          (i) adding the following proviso at the conclusion of clause (a) of the
definition of “Borrowing Base”:

     
     “; provided, that in no event shall the amount calculated in (i) through (v)
above include amounts attributable to operations other than the PET Resin Business
in excess of the amount set forth opposite the relevant time period in the table
below:

 

 

	 	 	 	 	 
	 	 	Maximum Non-PET
	 	 	Resin Business
	Period	 	Borrowing Base Component
	September 30, 2008 to but excluding October 31,
2008
	 	$	68,000,000	 
	October 31, 2008 to but excluding November 30,
2008
	 	$	41,200,000	 
	November 30, 2008 to but excluding December 31,
2008
	 	$	17,600,000	 
	On or after December 31, 2008
	 	$	0	 

          (ii) adding the following definition of “Cash Liquidation Costs”

          “”Cash Liquidation Costs” shall mean all expenditures specifically
related to the liquidation of the Borrowers’ polyester fiber and engineering resins
business with manufacturing facilities in Darlington, S.C. and Johnsonville, S.C.
respectively which shall be identified by a series of line items in the Cash Budget
indicating that they are part of the Cash Liquidation Costs”

          (iii) adding the following definition of “Consolidated PET Resin Operating
Income”:

          “”Consolidated PET Resin Operating Income” shall mean with respect to
any Person, for any period the aggregate of the net operating income (loss) of such
Person and its Subsidiaries for such period attributable to the PET Resin Business,
on a consolidated basis, determined in accordance with GAAP; provided, that (a) the
operating income of any other Person in which such Person or any of its Subsidiaries
has an interest (which interest does not cause the operating income of such other
Person to be consolidated with the operating income of such Person and its
Subsidiaries in accordance with GAAP) shall be included only to the extent of the
amount of dividends or distributions actually paid to such Person or such Subsidiary
by such other Person during such period; (b) the operating income of any Subsidiary
of such Person that is subject to any Payment Restriction shall be excluded to the
extent such Payment Restriction would prevent the payment of an amount that
otherwise could have been paid to such Person or to a Subsidiary of such Person not
subject to any Payment Restriction; and (c) there shall be excluded from
Consolidated PET Resin Operating Income:

          (1) all gains and losses realized on the purchase or other acquisition by such
Person or any of its Subsidiaries of any Securities of such Person or any of its
Subsidiaries,

          (2) all extraordinary gains and losses,

          (3) all deferred financing costs written off or premiums paid in connection
with the early extinguishment of any Indebtedness, in each case, incurred by Wellman
or any of its Subsidiaries in connection with the Financing Transactions,

2

 

          (4) income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such operations
were classified as discontinued),

          (5) in the case of a successor to the referent Person by consolidation or
merger or as transferee of the referent Person’s assets, any earnings of such
successor prior to such consolidation, merger or transfer of assets, and

          (6) the cumulative effect of a change in accounting principles.

          (iv)
deleting the definition of ”Minimum Liquidity Availability” and replacing
it with the following:

          “”Minimum Liquidity Availability” means $20,000,000.”

          (v) deleting the definition of “EBITDA” and replacing it with the following
definition of “PET Resin EBITDA”:

          “”PET Resin EBITDA” shall mean, with respect to any Person, for any
period, the result (without duplication) of:

          (1) Consolidated PET Resin Operating Income; plus

          (2) to the extent Consolidated PET Resin Operating Income has been
reduced thereby:

          (a) all income taxes of such Person and its Subsidiaries paid or accrued
in accordance with GAAP for such period (other than income taxes attributable to
extraordinary gains or losses or non-recurring and non-operational charges or gains
other than restructuring charges);

          (b) Consolidated Interest Expense;

          (c) Consolidated Non-cash Charges;

          (d) non-recurring fees, cash charges and other cash expenses made or
incurred in connection with the Transaction;

          (e) cash charges for professional fees relating to the bankruptcy;

          (f) Cash Liquidation Costs; and

          (f) any impact from FIFO accounting.”

          (vi) adding the following definition of “PET Resin Business”:

3

 

          “”PET Resin Business” means the operations of Funds Administrator and
its Subsidiaries related to the manufacture and sale of PET Resin.”

          (vii) deleting the definition of “Total Commitments” and replacing it with the
following:

          “”Total Commitments” shall mean the aggregate of the Commitments of all the
Lenders, which in the aggregate shall not exceed $170,000,000, and which in the
aggregate as of November 1, 2008 shall not exceed $120,000,000.

          (b) deleting Section 7.1(g) of the Credit Agreement and replacing it with the
following:

“(g) within fifteen (15) days after the last day of each fiscal month, commencing
September 1, 2008, a report in the form of Exhibit K testing PET Resin EBITDA and
reconciling Capital Expenditures as of the last day of the applicable fiscal month;”

          (c) The following is hereby added as Section 7.19 to the Credit Agreement:

“7.19 Borrowers shall cease purchasing raw materials related to their polyester
fiber and engineering resins business with manufacturing facilities in Darlington,
S.C. and Johnsonville, S.C. respectively no later than October 15, 2008.”

          (d) Section 8.1 of the Credit Agreement is hereby amended by adding the following
sentence at the end thereof:

          “Cash Liquidation Costs shall not exceed $14 million in the aggregate for the
period commencing September 15, 2008 and ending on December 1, 2008.”

          (e) Section 8.2(a) of the Credit Agreement is deleted in its entirety and replaced with
the following:

          “8.2(a) Minimum Monthly PET Resin EBITDA. The Borrowers shall not
permit PET Resin EBITDA for any calendar month to be less than the amount listed
below opposite such month:

	 	 	 	 	 
	 	 	Minimum Monthly
	Applicable Month	 	PET Resin EBITDA
	September 2008

	 	$	0	 
	October 2008

	 	$	2,000,000	 
	November 2008

	 	$	2,500,000	 
	December 2008

	 	$	3,000,000	 
	January 2009

	 	$	1,500,000	 

4

 

          (f) Section 9.1 of the Credit Agreement is amended by deleting Section (i)(xv) in its
entirety and replacing it with the following:

     “(xv) The failure of the Borrowers (i) to have filed a
Reorganization Plan and a disclosure statement relating thereto by
September 16, 2008, (ii) to have obtained a binding commitment
without any due diligence or other similar contingencies in form and
substance reasonably satisfactory to the Majority Lenders to
backstop a rights offering or other similar commitment of not less
than $70 million in connection with such Reorganization Plan by
September 30, 2008 (iii) to have obtained a binding, fully
underwritten, commitment letter or letters to provide exit financing
which are not subject to syndication, due diligence, market material
adverse effect and/or other contingencies other than the delivery of
customary corporate and loan documentation or the occurrence of
confirmation of a Reorganization Plan, to provide the exit financing
and any other financial accommodations required to consummate the
Reorganization Plan described in (i), above, in form, substance and
amount reasonably satisfactory to the Majority Lenders by October 7,
2008, (iv) to have obtained entry of an order by the Bankruptcy
Court, in form and substance reasonably satisfactory to the Majority
Lenders, approving the disclosure statement described in (i), above,
by October 20, 2008, (v) to have provided documentation in
substantially final form relating to the rights offering, the exit
financing and any other financial accommodations required to
consummate the Reorganization Plan described in (i), above, in form
and substance reasonably satisfactory to the Majority Lenders by
October 31, 2008, (vi) to have obtained entry of an order by the
Bankruptcy Court, in form and substance reasonably satisfactory to
the Majority Lenders, confirming a Reorganization Plan by December
5, 2008 and (vii) to have caused to occur the Consummation Date by
December 10, 2008; or”;

          (g) Annex I of the Credit Agreement is hereby deemed modified as of November 1, 2008 by
reducing the amount listed as the Commitment for each Lender by 5/17th of the amount
thereof.

          (h) Exhibit K of the Credit Agreement is deleted and replaced with Exhibit K hereto.

          2. Representations and Warranties of the Borrowers. The Borrowers represent and
warrant that:

5

 

          (a) The execution, delivery and performance by the Borrowers of this Amendment have
been duly authorized by all necessary corporate action and that this Amendment is a legal,
valid and binding obligation of the Borrowers enforceable against the Borrowers in
accordance with its terms, except as the enforcement thereof may be subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting
creditors’ rights generally;

          (b) Each of the representations and warranties of the Borrowers contained in the Credit
Agreement (treating this Amendment as a Loan Document for purposes thereof) is true and
correct on and as of the date hereof as if made on the date hereof except to the extent any
such representation or warranty is stated to relate solely to an earlier date, in which case
such representation or warranty shall have been true and correct on and as of such earlier
date; and

          (c) After giving effect to this Amendment, no Default or Event of Default has occurred
and is continuing.

          3. Amendment Fee. Borrowers shall pay to the Agent, for the ratable benefit of the
Lenders, a fee in the amount of $450,000 (the “Amendment Fee”), which fee shall be fully
earned on the Effective Date of this Amendment and due and payable in accordance with the terms
hereof, shall be nonrefundable for any reason whatsoever and shall be in addition to any other
fees, costs or expenses payable pursuant to the Credit Agreement, the Fee Letter or any other Loan
Documents, including without limitation the fees payable under the joinder letter dated February
20, 2008. The Amendment Fee shall be paid to the Agent on the earliest to occur of December 10,
2008, the Facility Termination Date, and the Consummation Date.

          4. Waiver. The Administrative Agent and the Lenders hereby waive any Default or Event
of Default that exists on the Effective Date due to the Borrowers’ inability to comply with Section
8.2(a) of the Credit Agreement for periods ending on or before August 31. 2008.

          5. Cooperation Covenant. The Borrowers hereby agree that, upon the occurrence of an
Event of Default, the Borrowers shall fully cooperate with Agent and Lenders in connection with any
exercise of remedies by the Agent and Lenders, including without limitation the filing of a motion
to sell the Borrowers’ assets pursuant to section 363 of the Bankruptcy Code, the filing of a
Reorganization Plan, or the liquidation or other disposition of the Collateral, in each case on
such terms and conditions as are requested by Agent and Lenders.

          6. Effective Date. This Amendment shall become effective on the date of the execution
and delivery hereof by the Funds Administrator on behalf of itself and the Borrowers, the
Administrative Agent and the Required Lenders (the “Effective Date”).

          7. Reference to and Effect Upon the Credit Agreement.

          (a) Except as specifically amended above, the Credit Agreement and the other Loan
Documents shall remain in full force and effect and are hereby ratified and confirmed.

6

 

          (b) The execution, delivery and effectiveness of this Amendment (i) shall not operate
as a waiver of any right, power or remedy of the Administrative Agent or any Lender under
the Credit Agreement or any Loan Document, nor constitute a waiver of any Default or
provision of the Credit Agreement or any Loan Document, except as specifically set forth
herein and (ii) shall not give rise to any obligation on the part of the Administrative
Agent or the Lenders to further modify or waive any term or condition of the Credit
Agreement or any of the other Loan Documents or give rise to any defenses or counterclaims
to the right of the Administrative Agent or the Lenders, subject to the terms hereof, to
enforce their rights and remedies under the Credit Agreement and the other Loan Documents.
Except as expressly limited herein, the Administrative Agent and the Lenders hereby
expressly reserve all of their rights and remedies under the Loan Documents and under
applicable law with respect to all existing and future Defaults. Upon the effectiveness of
this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”,
“hereof”, “herein” or words of similar import shall mean and be a reference to the Credit
Agreement as amended hereby.

          (c) The parties acknowledge that this Amendment embodies the entire agreement and
understanding among the Borrowers, the Administrative Agent and the Lenders with respect to
the subject matter hereof and supersedes all prior discussions, agreements and
understandings among the Borrowers, the Administrative Agent and the Lenders relating to the
subject matter hereof.

          8. Governing Law. This Agreement shall be construed in accordance with and governed
by the law of the State of New York.

          9. Headings. Section headings in this Amendment are included herein for convenience
of reference only and shall not constitute a part of this Amendment for any other purposes.

          10. Counterparts. This Amendment may be executed in any number of counterparts, each
of which when so executed shall be deemed an original but all such counterparts shall constitute
one and the same instrument.

[Signature Pages Follow]

7

 

          IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and year first
above written.

[SIGNATURE PAGES FOLLOW]

 

 

	 	 	 	 	 	 	 
	 	 	DEUTSCHE BANK TRUST COMPANY AMERICAS, as
Administrative Agent, Collateral Agent and a
Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 

 Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	GENERAL ELECTRIC CAPITAL CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	LASALLE BUSINESS CREDIT, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL)	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	WELLS FARGO FOOTHILL, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	GMAC COMMERCIAL FINANCE LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	MERRILL LYNCH CAPITAL	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	PNC BANK, NATIONAL ASSOCIATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	ALLIED IRISH BANK, PLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	WEBSTER BUSINESS CREDIT CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	UPS CAPITAL CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	E*TRADE BANK	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 	 	 
	 	 	WELLMAN, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Keith R. Phillips
 

Keith R. Phillips
	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	PRINCE, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Keith R. Phillips
 

Keith R. Phillips
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	WELLMAN OF MISSISSIPI, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Keith R. Phillips
 

Keith R. Phillips
	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	CARPET RECYCLING OF GEORGIA, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Keith R. Phillips
 

Keith R. Phillips
	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	ALG, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Keith R. Phillips
 

Keith R. Phillips
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	FIBER INDUSTRIES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Keith R. Phillips
 

Keith R. Phillips
	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	PTA RESOURCES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Keith R. Phillips
 

Keith R. Phillips
	 	 
	 

	 	Title:
	 	Authorized Representative	 	 

 

 

EXHIBIT K

FORM OF PET RESINS EBITDA REPORT

	 	 	 	 	 
	Consolidated Net Income is defined as follows:
	 	 	 	 
	 
	 	 	 	 
	Consolidated net income during the measuring period excluding:
	 	$	 	 
	 
	 	 	 
	all gains and losses realized on the purchase or other
acquisition by such Person or any of its Subsidiaries of
any Securities of such Person or any of its Subsidiaries
	 	 	 	 
	 
	 	 	 
	all extraordinary gains and losses
	 	 	 	 
	 
	 	 	 
	all deferred financing costs written off or premiums paid
in connection with the early extinguishment of any
Indebtedness, in each case, incurred by Wellman or any of
its Subsidiaries in connection with the Transactions
	 	 	 	 
	 
	 	 	 
	income or loss attributable to discontinued operations
(including, without limitation, operations disposed of
during such period whether or not such operations were
classified as discontinued)
	 	 	 	 
	 
	 	 	 
	in the case of a successor to the referent Person by
consolidation or merger or as transferee of the referent
Person’s assets, any earnings of such successor prior to
such consolidation, merger or transfer of assets
	 	 	 	 
	 
	 	 	 
	the cumulative effect of a change in accounting principles
	 	 	 	 
	 
	 	 	 
	Consolidated Net Income
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	EBITDA is defined as follows:
	 	 	 	 
	Consolidated Net Income (from above)
	 	$	 	 
	 
	 	 	 
	Plus: (in each case to the extent deducted in the calculation of
Consolidated Net Income, but without duplication):
	 	 	 	 
	all income taxes of such Person and its Subsidiaries paid
or accrued in accordance with GAAP for such period (other
than income taxes attributable to extraordinary gains or
losses or non-recurring and non-operational charges or
gains other than restructuring charges)
	 	 	 	 
	 
	 	 	 
	Consolidated Interest Expense
	 	 	 	 
	 
	 	 	 
	Consolidated Non-cash Charges
	 	 	 	 
	 
	 	 	 
	non-recurring fees, cash charges and other cash expenses
made or incurred in connection with the Transactions
	 	 	 	 
	 
	 	 	 
	EBITDA
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	PET Resin EBITDA is defined as follows:
	 	 	 	 
	EBITDA (from above)
	 	$	 	 
	 
	 	 	 
	Minus: Consolidated Net Income attributable to operations other than
the PET Resin Business
	 	$	 	 
	 
	 	 	 

Eleventh Amendment to Credit Agreement Signature Page

 

 

	 	 	 	 	 
	Minus: (in each case to the extent deducted in the calculation of
Consolidated Net Income attributable to operations other than the PET
Resin Business, but without duplication):
	 	 	 	 
	all income taxes of such Person and its Subsidiaries paid
or accrued in accordance with GAAP for such period (other
than income taxes attributable to extraordinary gains or
losses or non-recurring and non-operational charges or
gains other than restructuring charges)
	 	 	 	 
	 
	 	 	 
	Consolidated Interest Expense
	 	 	 	 
	 
	 	 	 
	Consolidated Non-cash Charges
	 	 	 	 
	 
	 	 	 
	non-recurring fees, cash charges and other cash expenses
made or incurred in connection with the Transactions
	 	 	 	 
	 
	 	 	 
	PET Resin EBITDA
	 	$	 	 
	 
	 	 	 
	Minimum PET Resin EBITDA requirement for the end of the current
month, as set forth in Section 8.2(a) of the Credit Agreement
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	In compliance?
	 	Yes/No

Eleventh Amendment to Credit Agreement Signature Pageexv10w01

Exhibit 10.1

INDEMNIFICATION AGREEMENT

     This INDEMNIFICATION AGREEMENT (this “Agreement”) is made and entered into this ___
day of ______, 2008, by and between Lawson Products, Inc., a Delaware corporation (the
“Company”), and _________ (“Indemnitee”).

     WHEREAS, Indemnitee now serves or will serve as a member of the Board of Directors or as an
officer of, or in another similar position with, the Company; and

     WHEREAS, the Company will derive substantial benefits from Indemnitee’s undertaking of the
responsibilities of such position, and the protection afforded by this Agreement will enhance
Indemnitee’s ability to discharge and carry out such responsibilities.

     NOW, THEREFORE, in consideration of the premises, mutual covenants and agreements contained
herein and Indemnitee’s service as a director or an officer of, or in another similar position
with, the Company, the parties hereto agree as follows:

     1. Indemnification.

     (a) General. The Company shall indemnify and hold harmless Indemnitee to the fullest extent
permitted by law if Indemnitee was or is or becomes a party to or witness or other participant in,
or is threatened to be made a party to or witness or other participant in, any threatened, pending
or completed action, suit, arbitration, alternative dispute resolution proceeding, investigation,
administrative hearing or any other proceeding, whether civil, criminal, administrative or
investigative and whether instituted by or on behalf of the Company or any other party, or any
inquiry or investigation that Indemnitee in good faith believes might lead to the institution of
any such action, suit or proceeding, whether civil (including intentional and unintentional tort
claims), criminal, administrative, investigative or other (hereinafter a “Claim”) by reason
of (or arising in part out of) any event or occurrence (i) related to the fact that Indemnitee is
or was or may be deemed a director, officer, employee, controlling person, agent or fiduciary of
the Company or any subsidiary of the Company, (ii) related to the fact that Indemnitee is or was or
may be deemed to be serving at the request of the Company as a director, officer, employee,
controlling person, trustee, agent or fiduciary of another corporation, partnership, limited
liability company, joint venture, trust or other enterprise, or (iii) by reason of any action or
inaction on the part of Indemnitee while serving in any such capacity from and against any and all
expenses (including reasonable and documented attorneys’ fees, retainers, court costs, transcript
costs, fees of experts, witness fees, travel charges, postage and delivery services fees, and all
other costs, expenses and obligations) incurred in connection with investigating, defending, being
a witness in or participating in (including an appeal), or preparing to defend, be a witness in or
participate in, any such Claim (collectively, hereinafter “Expenses”), losses, liabilities,
judgments, fines, penalties and amounts paid in settlement arising under or resulting from any such
Claim and any federal, state, local or foreign taxes payable by Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement, including all interest, assessments
and other charges paid or payable in connection with or in respect of such Expenses, losses,
liabilities, judgments, fines, penalties and amounts paid in settlement; provided that Indemnitee
acted in good faith and in a manner Indemnitee reasonably

 

 

believed to be in, or not opposed to, the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

     (b) Reviewing Party.

          (i) Notwithstanding the foregoing, (A) the indemnification obligations of the Company
under Section 1(a) shall be subject to the condition that it shall not have been
determined in accordance with Section 1(b)(ii) below that Indemnitee would not be
permitted to be indemnified under applicable law, and (B) the obligation of the Company to
make an advance payment of Expenses to Indemnitee pursuant to Section 2(a) (an
“Expense Advance”) shall be subject to the condition that if, when and to the extent
that it is determined in accordance with Section 1(b)(ii) below that Indemnitee is
not permitted to be indemnified under applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all Expense
Advances theretofore paid; provided, however, that if Indemnitee has commenced or thereafter
commences legal proceedings in a court of competent jurisdiction to secure a determination
that he or she should be indemnified under applicable law, any determination made by the
Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable
law shall not be binding and Indemnitee shall not be required to reimburse the Company for
any Expense Advance until a final judicial determination is made with respect thereto (as to
which all rights of appeal therefrom have been exhausted or lapsed).

          (ii) The Reviewing Party shall determine whether or not the Indemnitee would be
permitted to be indemnified under applicable law and any such determination shall be made in
writing, specifying in reasonable detail the reasons therefore, and delivered to Indemnitee.
The Reviewing Party shall be selected by the Board of Directors, unless Indemnitee shall
have requested that the Reviewing Party shall be Independent Legal Counsel, in which case
the Reviewing Party shall be Independent Legal Counsel, reasonably acceptable to Indemnitee,
to be engaged by the Company. Indemnitee shall be presumed in all cases to be entitled to
indemnification and, unless the Company shall deliver to Indemnitee a written notice that
Indemnitee is not entitled to indemnification within 30 days after the Company’s receipt of
Indemnitee’s initial written request for indemnification, Indemnitee’s right to
indemnification shall conclusively be deemed to have been made in favor of the Company’s
provision of indemnification, and the Company hereby agrees not to assert otherwise. Any
determination by the Reviewing Party that Indemnitee is entitled to indemnification shall be
conclusive and binding on the Company and Indemnitee.

     (c) Contribution. If the indemnification provided for in Section 1(a) above for any
reason is held by a court of competent jurisdiction to be unavailable to Indemnitee in respect of
any Expenses, losses, liabilities, judgments, fines, penalties and amounts paid in settlement of a
Claim referred to therein, then the Company, in lieu of indemnifying Indemnitee thereunder, shall,
to the extent permitted by applicable law, contribute to the amount paid or payable by Indemnitee
as a result of such Expenses, losses, liabilities, judgments, fines, penalties and

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amounts paid in settlement (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and Indemnitee, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative fault of the Company
and Indemnitee in connection with the action or inaction which resulted in such Expenses, losses,
liabilities, judgments, fines, penalties and amounts paid in settlement, as well as any other
relevant equitable considerations. The Company and Indemnitee agree that it would not be just and
equitable if contribution pursuant to this Section 1(c) were determined by pro rata or per
capita allocation or by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding sentence.

     (d) Survival Regardless of Investigation. The indemnification and contribution provided for
in this Section 1 as well as the advancement of expenses provided for in Section
2(a) below will remain in full force and effect regardless of any investigation made by or on
behalf of Indemnitee.

     (e) Mandatory Payment of Expenses. Notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits or otherwise in the defense of any
Claim, or any issue or matter therein (as to which all rights of appeal therefrom have been
exhausted or lapsed), Indemnitee shall be indemnified against all Expenses incurred by Indemnitee
in connection therewith. For purposes of this Agreement and without limitation of the foregoing,
the term “successful on the merits or otherwise” shall include, but not be limited to, (i) any
termination, withdrawal or dismissal (with or without prejudice) of any Claim against Indemnitee
without a conviction or an express finding of liability against Indemnitee and in connection
therewith Indemnitee shall not have paid more than $10,000 in settlement of the applicable Claim or
(ii) the expiration of 180 days after the occurrence of a Claim without the institution of an
action, suit, arbitration, alternative dispute resolution proceeding, administrative hearing or
other proceeding with respect to such Claim and without any promise of payment or payment made to
induce a settlement of such Claim.

     2. Expenses; Indemnification Procedure.

     (a) Advancement of Expenses. Subject to Section 1(a), Section 1(b) and
Section 9, the Company shall pay in advance of the final disposition of a Claim all
Expenses that, by reason of Indemnitee’s indemnified capacity, were incurred by Indemnitee in
connection with such Claim. The advances to be made hereunder shall be paid by the Company to
Indemnitee as soon as reasonably practicable but in no event later than thirty (30) days after
written demand by Indemnitee therefor to the Company, which demand shall be accompanied by
vouchers, invoices or similar evidence documenting the Expenses incurred or to be incurred by
Indemnitee.

     (b) Notice and Cooperation by Indemnitee. Indemnitee shall give the Company written notice
as soon as reasonably practicable of any Claim made against Indemnitee for which indemnification
will or could be sought under this Agreement; provided, that the failure to give or delay in giving
such notice shall not affect Indemnitee’s right to indemnification or advancement of Expenses
hereunder unless, and then only to the extent that, the Company is actually materially prejudiced
thereby. Indemnitee agrees to cooperate in all reasonable respects

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with the Company in responding to any Claim, providing all required information and documents and
being available for testimony, in each case as reasonably requested by the Company. The failure to
cooperate with the Company will not relieve the Company from any liability for indemnification or
advancement of Expenses which it may have to Indemnitee unless, and then only to the extent that,
the Company is actually materially prejudiced thereby.

     (c) No Presumptions; Burden of Proof. For purposes of this Agreement, the termination of any
Claim by judgment, order, settlement (whether with or without court approval) or conviction, or
upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law. In addition, neither the
failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any
particular standard of conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief,
prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination
that Indemnitee should be indemnified under this Agreement or otherwise, shall be a defense to
Indemnitee’s claim or create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the
Reviewing Party shall presume that Indemnitee is entitled to indemnification hereunder and the
burden of proof shall be on the Company to establish that Indemnitee is not so entitled.

     (d) Notice to Insurers. If, at the time of the receipt by the Company of a notice of a Claim
pursuant to Section 2(b) hereof, the Company has liability insurance in effect which may
cover such Claim, the Company shall use commercially reasonably efforts to provide prompt written
notice of the commencement of such Claim to such insurers in accordance with the procedures set
forth in each of such policies. The Company shall thereafter use commercially reasonable efforts
to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such
Claim in accordance with the terms of such policies.

     (e) Selection of Counsel. In the event the Company shall be obligated hereunder to pay the
Expenses of any Claim, the Company shall be entitled to assume the defense of such Claim, with
counsel reasonably approved by Indemnitee, upon the delivery to Indemnitee of written notice of the
Company’s election to do so. After delivery of such notice, the approval of such counsel by
Indemnitee and the retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same Claim; provided, that (i) Indemnitee shall have the right to employ separate
counsel in any such Claim at Indemnitee’s expense; and (ii) if (A) the employment of counsel by
Indemnitee has been previously authorized by the Company, (B) counsel for Indemnitee shall have
provided the Company with written advice that there is a conflict of interest between the Company
and Indemnitee in the conduct of any such defense, or (C) the Company shall not, in fact, retain or
continue to retain such counsel to defend such Claim, then the fees and expenses of Indemnitee’s
counsel shall be at the expense of the Company.

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     (f) Settlements. The Company shall not be liable to Indemnitee under this Agreement for any
amounts paid in settlement of any Claim effected without its written consent, except for cash
settlements not in excess of $10,000 per Claim. The Company shall not settle any Claim in any
manner that would impose any penalty or limitation on Indemnitee without Indemnitee’s written
consent. Neither the Company nor Indemnitee shall unreasonably withhold or delay its consent to
any proposed settlement; provided, that Indemnitee may withhold consent to any settlement that does
not provide a complete release of Indemnitee.

     3. Enforcement. In the event that any claim for indemnity, whether an Expense Advance or
otherwise, is made hereunder and is not paid in full within 60 days after written notice of such
claim is delivered to the Company, Indemnitee may at any time thereafter commence litigation in any
court in the State of Delaware or the State of Illinois having subject matter jurisdiction thereof
and in which venue is proper to recover the unpaid amount of the claim (an “Enforcement
Action”), and the Company hereby consents to service of process and to appear in any such
proceeding. In any Enforcement Action, Indemnitee shall be presumed to be entitled to
indemnification hereunder and the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled. In the event that Indemnitee brings an Enforcement Action, the
Company shall pay all of Indemnitee’s fees and expenses in bringing and pursuing the Enforcement
Action (including reasonable and documented attorneys’ fees, retainers, court costs, transcript
costs, fees of experts, witness fees, travel charges, postage and delivery services fees, and all
other costs, expenses and obligations); provided, that the Company shall not be required to provide
such payment for such fees and expenses if a final decision by a court of competent jurisdiction
determines that the material assertions made by the Indemnitee in such Enforcement Action were not
made in good faith.

     4. Scope; Nonexclusivity.

     (a) Scope. In the event of any change or amendment after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, controlling person, agent or fiduciary,
the parties hereto agree that Indemnitee shall enjoy by this Agreement the greater benefits
afforded by such change or amendment. In the event of any change or amendment in any applicable
law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, employee, controlling person, agent or fiduciary, such change or
amendment, to the extent not otherwise required by such law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder.

     (b) Nonexclusivity. The indemnification provided by this Agreement shall not be deemed to be
exclusive of any rights to which Indemnitee may otherwise be entitled under the Company’s
certificate of incorporation, bylaws, any other agreement to which the Company is a party, any vote
of the Company’s stockholders or disinterested directors or the laws of the State of Delaware. No
amendment, alteration or repeal of this Agreement or of any provision hereof shall be effective as
to Indemnitee with respect to any action taken or not taken by Indemnitee in such person’s
indemnified capacity prior to such amendment, alteration or repeal. The indemnification provided
under this Agreement shall continue as to Indemnitee for any action

5

 

taken or not taken by Indemnitee while serving in an indemnified capacity even though Indemnitee
may have ceased to serve in such capacity at the time of any Claim.

     5. No Duplication of Payments. The Company shall not be liable under this Agreement to make
any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has
otherwise actually received payment (under the terms of any insurance policy, any other agreement,
the Company’s certificate of incorporation or bylaws, or otherwise) of the amounts otherwise
indemnifiable hereunder.

     6. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement
to indemnification by the Company for some or any portion of Expenses, losses, liabilities,
judgments, fines, penalties and amounts paid in settlement of a Claim, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for that portion to which
Indemnitee is entitled. If it is determined that Indemnitee has not met the applicable standard of
care as to one or more but less than all Claims, or issues or matters in any Claim, the Company
shall indemnify Indemnitee against all Expenses, losses, liabilities, judgments, fines, penalties
and amounts paid in settlement of a Claim actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection with each such Claim, issue or matter with respect to which
Indemnitee has met the applicable standard of care.

     7. Securities and Exchange Commission Undertaking. Indemnitee understands and acknowledges
that the Company may be required to undertake with the Securities and Exchange Commission to submit
in certain circumstances the question of indemnification to a court for a determination of the
Company’s right under public policy to indemnify Indemnitee.

     8. Liability Insurance. The Company shall use commercially reasonable efforts to continue to
maintain directors’ and officers’ liability insurance policies for the benefit of Indemnitee having
liability coverage amounts commensurate with directors’ and officers’ liability insurance policies
maintained by other similarly situated companies. To the extent the Company maintains liability
insurance applicable to directors and officers of the Company or any other enterprise which such
persons serve at the request of the Company, Indemnitee shall be covered by such policies in
accordance with its or their terms to the maximum extent of the coverage available for any other
such director or officer under such policy or policies.

     9. Exceptions. Notwithstanding any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:

     (a) Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee with
respect to Claims initiated or brought voluntarily by Indemnitee and not by way of defense, except
(i) with respect to actions or proceedings to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company’s certificate of
incorporation or bylaws now or hereafter in effect, (ii) if the Company’s Board of Directors has
approved the initiation or bringing of such action or proceeding, or (iii) as otherwise required
under Delaware statute or law;

6

 

     (b) Improper Personal Benefit. To indemnify Indemnitee against Expenses, losses,
liabilities, judgments, fines, penalties and amounts paid in settlement of a Claim for any
transaction from which Indemnitee, or any affiliate of Indemnitee, derived an improper personal
benefit, including, but not limited to, self-dealing or usurpation of a corporate opportunity;

     (c) Claims Under Section 16(b). To indemnify Indemnitee for an accounting of profits arising
from the purchase and sale of securities by Indemnitee in violation of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or any similar successor statute; or

     (d) Unlawful Indemnification. To indemnify Indemnitee if a final decision by a court having
jurisdiction in the matter shall determine that such indemnification is not lawful.

     10. Construction of Certain Phrases.

     (a) Independent Legal Counsel. For purposes of this Agreement, “Independent Legal
Counsel” shall mean an attorney or firm of attorneys who shall not have otherwise performed
services for the Company or Indemnitee within the last three (3) years.

     (b) Reviewing Party. For purposes of this Agreement, a “Reviewing Party” shall mean
(i) any appropriate person or body consisting of a member or members of the Company’s Board of
Directors or any other person or body appointed by the Board of Directors who is not a party to the
particular Claim for which Indemnitee is seeking indemnification or (ii) Independent Legal Counsel.

     (c) Other. For purposes of this Agreement, references to “other enterprises” shall
include employee benefit plans; references to “fines” shall include any excise taxes
assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at
the request of the Company” shall include any service as a director, officer, employee, agent
or fiduciary of the Company which imposes duties on, or involves services by, such director,
officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or
its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an employee benefit plan,
Indemnitee shall be deemed to have acted in a manner “not opposed to the bests interests of the
Company” as referred to in this Agreement.

     11. Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall constitute an original.

     12. Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective assigns, successors
(including any direct or indirect successor by purchase, merger, consolidation or otherwise to all
or substantially all of the business and/or assets of the Company), spouses, heirs, and personal
and legal representatives.

     13. Notice. All notices and other communications required or permitted under this Agreement
shall be in writing, shall be effective when given, and shall in any event be deemed to

7

 

be given (a) three (3) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by
hand, (c) one (1) business day after the deposit with reputable overnight courier, freight prepaid,
or (d) one (1) business day after the delivery by facsimile transmission, if deliverable by
facsimile transmission, with copy by first class mail, postage prepaid, and shall be addressed, if
to Indemnitee, at Indemnitee’s address as set forth beneath Indemnitee’s signature to this
Agreement, and, if to the Company, at the address of its principal corporate offices (attention:
Executive Vice President, Secretary and General Counsel), or at such other address as such party
may designate by written notice to the other parties hereto.

     14. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to
the jurisdiction and venue of the courts of the States of Delaware and Illinois for all purposes in
connection with any action or proceeding which arises out of or relates to this Agreement and agree
that any action instituted under this Agreement shall be commenced, prosecuted and continued only
in the courts of the States of Delaware and Illinois.

     15. Severability. The provisions of this Agreement shall be severable in the event that any
of the provisions hereof (including any provision within a single section, paragraph or sentence)
are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and
the remaining provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without
limitation, each portion of this Agreement containing any provision held to be invalid, void or
otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so
as to give effect to the extent manifested by the provision held invalid, illegal or unenforceable.

     16. Choice of Law. This Agreement shall be governed by and its provisions construed and
enforced in accordance with the laws of the State of Delaware, without regard to the conflict of
laws principles thereof.

     17. Injunctive Relief. The parties hereto agree that Indemnitee may enforce this Agreement
by seeking specific performance hereof, without any necessity of showing irreparable harm or
posting a bond, which requirements are hereby waived, and that by seeking specific performance,
Indemnitee shall not be precluded from seeking or obtaining any other relief to which Indemnitee
may be entitled.

     18. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of Indemnitee who shall
execute all documents required and shall do all acts that may be necessary to secure such rights
and to enable the Company effectively to bring suit to enforce such rights.

     19. Amendment and Termination. No amendment, modification, termination or cancellation of
this Agreement shall be effective unless it is in writing signed by the parties to be bound
thereby. Notice of same shall be provided to all parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

8

 

     20. No Construction as Employment Agreement. Nothing contained in this Agreement shall be
construed as giving Indemnitee any right to be retained in the employ of the Company or any of its
subsidiaries.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and
year first above written.

	 	 	 	 	 
	 	LAWSON PRODUCTS, INC.

 	 
	 	By 	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Address:

1666 East Touhy Avenue

Des Plaines, IL 60018

Facsimile: (847) 795-3030

 
	 
	 	INDEMNITEE

 	 
	 	 	 
	 	Name:  	 	 
	 	 	 
	 
	 	Address:

 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 

9

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