Document:

Exhibit 10.4

 

 

 

	
	
General Electric Capital Corporation

GE Capital Markets, Inc.

500 West Monroe Street

Chicago, Illinois  60661 

CONFIDENTIAL

October 17, 2014

Mr. Craig Bouchard

Chairman and Chief Executive Officer

Signature Group Holdings, Inc.

15301 Ventura Boulevard

Suite 400

Sherman Oaks, CA  91403

$110 million Senior Secured Revolving Credit Facilities

Commitment Letter

Dear Craig:

General Electric Capital Corporation (“GE Capital”) hereby commits to provide (directly and/or through one or more of its direct or indirect subsidiaries) a $110,000,000 senior secured revolving credit facility (the “Credit Facilities”) and to act as administrative agent for the Credit Facilities. The Credit Facilities will be used by you, or a newly formed entity controlled by you, in connection with the acquisition (the “Acquisition”)  of the issued and outstanding capital stock of Aleris Global Recycling and Specification Alloys (the “Acquired Business”) (it being agreed that as specified in the Term Sheet referred to below, such entity or the Acquired Business and certain other affiliates shall be the borrowers (each a “Borrower”) in respect of the Credit Facilities) (the transactions described above are collectively referred to as the “Transaction”).  

GE Capital’s commitment is subject only to the conditions set forth in Schedule I to the Summary of Terms attached hereto as Exhibit A ( the “Term Sheet” and, together with this letter, the “Commitment Letter”) and in the Fee Letter (as defined in the Term Sheet).   GE Capital Markets, Inc. (the “Lead Arranger” and, together with GE Capital, the “Commitment Parties”) is pleased to act, on such conditions and on the terms in this Commitment Letter and in the Fee Letter, as the sole lead arranger and sole bookrunner for the Credit Facilities.  Capitalized terms used in the text of this Commitment Letter without definition have the meanings assigned in the Term Sheet.  

Syndication. 

The Lead Arranger may syndicate, prior to and/or after the execution of definitive documentation for the Credit Facilities (the “Credit Documentation”), all or a portion of the loans and commitments to one or 

 

 

more other lenders (collectively with GE Capital, the “Lenders”) pursuant to a syndication managed by the Lead Arranger (the “Syndication Process”) on the terms set forth in this Commitment Letter and in the Fee Letter.  The Lead Arranger may commence the Syndication Process promptly after your acceptance of this Commitment Letter and the Fee Letter.  The Lead Arranger will, in consultation with you, control all aspects of the Syndication Process, including timing, selection of prospective Lenders, the awarding of any titles, the determination of allocations and the amount of fees.  You agree that no Lender will be permitted to receive compensation of any kind for its participation in the Credit Facilities, except as expressly provided for in this Commitment Letter or the Fee Letter, without the prior written consent of the Lead Arranger.  You agree to assist (and use commercially reasonable efforts to cause the Acquired Business, each of its and your respective affiliates and all other necessary persons to assist) the Lead Arranger with the Syndication Process, provided that this sentence will not apply to Aleris Corporation or its subsidiaries that will not constitute part of the Acquired Business.  For the avoidance of doubt, neither the commencement nor the completion of the syndication of the Credit Facilities shall constitute a condition precedent to the availability of the Credit Facilities on the Closing Date.   

Evaluation Material.

You hereby represent to the best of your knowledge (but only to your knowledge with respect to any of the information referred to below that is provided by another person that is not your affiliate) and covenant that (a) all written information other than projections (“Projections”) and general economic or specific industry information developed by, and obtained from, third-party sources (the “Information”) that has been or will be made available to the Commitment Parties and/or the Lenders by you, the Acquired Business or any of your or its respective affiliates or representatives is or will be complete and correct in all material respects and does not or will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to the Commitment Parties by you, the Acquired Business or any of your or its respective affiliates or representatives have been or will be prepared in good faith based upon reasonable assumptions (it being understood and agreed that financial projections are not a guarantee of financial performance and actual results may differ from financial projections and such differences may be material).  You agree that if at any time prior to the later of the closing of the Credit Facilities and the completion of the Syndication Process, any of the representations in the preceding sentence would be incorrect if the Information or Projections were being furnished, and such representations were being made, at such time, then you will promptly supplement the Information or the Projections, as the case may be, so that such representations will be correct under those circumstances.  You understand that in arranging and syndicating the Credit Facilities the Lead Arranger may use and rely on the Information and Projections without independent verification thereof.  

You hereby authorize and agree, on behalf of yourself, the Acquired Business and your and its respective affiliates, that the Information, the Projections and all other information (including third party reports) provided by or on behalf of you, the Acquired Business and your and its respective affiliates to the Commitment Parties regarding you, the Acquired Business and your and its respective affiliates, the Transaction and the other transactions contemplated hereby in connection with the Credit Facilities may be disseminated by or on behalf of the Commitment Parties, and made available, to prospective Lenders and other persons, who have agreed to be bound by customary confidentiality undertakings (including “click-through” agreements) and, if applicable, ratings agencies, all in accordance with the Lead Arranger’s standard loan syndication practices (whether transmitted electronically by means of a website, e-mail or otherwise, or made available orally or in writing, including at prospective Lender or other meetings).  You hereby further authorize the Lead Arranger to download copies of your and your affiliates’ logos and agree to use commercially reasonable efforts to obtain authorization to permit the Lead Arranger to download copies of your logos, from their respective websites and post copies thereof 

- 2 -

 

on an IntraLinks® or similar workspace and use such logos on any materials prepared in connection with the Syndication Process.

Expenses.  

Regardless of whether the Credit Facilities close, you hereby agree to pay upon demand to the Commitment Parties all reasonable fees and expenses (including, but not limited to,  (i) all reasonable  costs and out-of-pocket expenses of one legal counsel and, to the extent necessary, one local counsel in each relevant jurisdiction and regulatory counsel for all Commitment Parties and (ii) a field examination fee of $1000 per person per diem incurred by them in connection with this Commitment Letter, the Fee Letter, the Transaction, and the Credit Facilities. 

Confidentiality.  

You agree that you will not disclose the contents of this Commitment Letter, the Fee Letter or the Commitment Parties’ involvement with, GE Capital’s commitment to provide or the Lead Arranger’s agreement to arrange the Credit Facilities to any third party (including, without limitation, any financial institution or intermediary) without GE Capital’s prior written consent other than to (a) those individuals who are your directors, officers, employees or advisors in connection with the Credit Facilities; provided that this Commitment Letter (but not the Fee Letter) may also be disclosed to your and the Acquired Business’ respective equity holders, directors, officers, employees and advisors, (b) the underwriters of the Private Placement, and (c) as may be compelled in a judicial or administrative proceeding or as otherwise required by law (in which case you agree to inform GE Capital promptly thereof).  You agree to inform all such persons who receive information concerning the Commitment Parties, this Commitment Letter or the Fee Letter that such information is confidential and may not be used for any purpose other than in connection with the Transaction and may not be disclosed to any other person.  The Commitment Parties reserve the right to review and approve, in advance, all materials, press releases, advertisements and disclosures that contain GE Capital’s or any affiliate’s name or describe GE Capital’s financing commitment or the Lead Arranger’s role and activities.

Indemnity.  

Regardless of whether the Credit Facilities close, you agree to (a) indemnify, defend and hold each of the Commitment Parties, each Lender, and their respective affiliates and the principals, directors, officers, employees, representatives, agents and third party advisors of each of them (each, an “Indemnified Person”), harmless from and against all losses, disputes, claims, investigations, litigation, proceedings, expenses (including, but not limited to, attorneys’ fees), damages, and liabilities of any kind to which any Indemnified Person may become subject in connection with this Commitment Letter, the Fee Letter, the Credit Facilities, the use or the proposed use of the proceeds thereof, the Transaction or any other transaction contemplated by this Commitment Letter (each, a “Claim”, and collectively, the “Claims”), regardless of whether such Indemnified Person is a party thereto (and regardless of whether such matter is initiated by a third party, you, the Acquired Business or any of your or its respective affiliates), and (b) reimburse each Indemnified Person upon demand for all legal and other expenses incurred in connection with investigating, preparing to defend or defending, or providing evidence in or preparing to serve or serving as a witness with respect to, any lawsuit, investigation, claim or other proceeding relating to any of the foregoing (each, an “Expense”); provided that no Indemnified Person shall be entitled to indemnity hereunder in respect of any Claim or Expense to the extent that the same is found by a final, non-appealable judgment of a court of competent jurisdiction to have resulted directly from (i) the gross negligence or willful misconduct of such Indemnified Person, (ii) a material breach by an Indemnified Person of its obligations under this Commitment Letter or the Fee Letter at a time when you have not breached your obligations hereunder in any material respect or (iii) a dispute among Indemnified  Parties 

- 3 -

 

at a time when you have not breached your obligations hereunder in any material respect (other than a Claim against any Commitment Party solely in its capacity as Lead Arranger or Agent). No party hereto or any of their respective affiliates shall be liable for any punitive, exemplary, consequential or indirect damages alleged in connection with, arising out of, or relating to, any Claims, this Commitment Letter, the Fee Letter, the Credit Facilities, the use or the proposed use of the proceeds thereof, the Transaction, and any other transaction contemplated by this Commitment Letter.  

Furthermore, you hereby acknowledge and agree that the use of electronic transmission is not necessarily secure and that there are risks associated with such use, including risks of interception, disclosure and abuse.  You agree to assume and accept such risks and hereby authorize the use of electronic transmissions, and that none of the Commitment Parties nor any of their respective affiliates will have any liability for any damages arising from the use of such electronic transmission systems.   

Sharing Information; Absence of Fiduciary Relationship.

You acknowledge that the Commitment Parties and their affiliates may be providing debt financing, equity capital or other services to other companies with which you may have conflicting interests.  You further acknowledge and agree that (a) no fiduciary, advisory or agency relationship between you and any of the Commitment Parties has been or will be created in respect of any of the transactions contemplated by this Commitment Letter, irrespective of whether the Commitment Parties and/or their respective affiliates have advised or are advising you on other matters and (b) you will not assert any claim against any of the Commitment Parties for breach or alleged breach of fiduciary duty and agree that none of the  Commitment Parties shall have any direct or indirect liability to you in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of you, including your stockholders, employees or creditors.  

Assignments and Amendments.  

This Commitment Letter shall not be assignable by you without the prior written consent of the Commitment Parties (and any purported assignment without such consent shall be null and void), and is solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto and the Indemnified Persons. GE Capital may assign its commitment hereunder, in whole or in part, to any of its affiliates or to any prospective Lender in connection with the Syndication Process or otherwise provided that notwithstanding such assignment, any assignment by GE Capital to any affiliate or prospective Lender made prior to the Closing Date will not relieve GE Capital of its obligations set forth herein to fund that portion of the commitments so assigned on the Closing Date. Notwithstanding the right to assign the commitments hereunder, GE Capital must retain exclusive control over all rights and obligations with respect to the Credit Facilities prior to close. This Commitment Letter may not be amended or waived except in a written instrument signed by you and the Commitment Parties.   

Counterparts and Governing Law.  

This Commitment Letter may be executed in counterparts, each of which shall be deemed an original and all of which counterparts shall constitute one and the same document.  Delivery of an executed signature page of this Commitment Letter by facsimile or electronic (including “PDF”) transmission shall be effective as delivery of a manually executed counterpart hereof.  

The laws of the State of New York shall govern all matters arising out of, in connection with or relating to this Commitment Letter, including, without limitation, its validity, interpretation, construction, 

- 4 -

 

performance and enforcement and any claims sounding in contract law or tort law arising out of the subject matter hereof.

Venue and Submission to Jurisdiction.  

The parties hereto consent and agree that the state or federal courts located in New York County, State of New York, shall have exclusive jurisdiction to hear and determine any claims or disputes between or among any of the parties hereto pertaining to this Commitment Letter, the Fee Letter, the Credit Facilities, the Transaction, any other transaction relating hereto or thereto, and any investigation, litigation, or proceeding in connection with, related to or arising out of any such matters, provided, that the parties hereto  acknowledge that any appeal from those courts may have to be heard by a court located outside of such jurisdiction.  The parties hereto expressly submit and consent in advance to such jurisdiction in any action or suit commenced in any such court, and hereby waive any objection, which each of the parties may have based upon lack of personal jurisdiction, improper venue or inconvenient forum.

Waiver of Jury Trial. 

THE PARTIES HERETO, TO THE EXTENT PERMITTED BY LAW, WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR RELATING TO, THIS COMMITMENT LETTER, THE FEE LETTER, THE CREDIT FACILITIES, THE TRANSACTION AND ANY OTHER TRANSACTION RELATED HERETO OR THERETO.  THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.

Survival.  

The provisions of this letter set forth under this heading and the headings “Syndication”, “Evaluation Material”, “Expenses”, “Confidentiality”, “Indemnity”, “Sharing Information; Absence of Fiduciary Relationship”, “Assignments and Amendments”, “Counterparts and Governing Law”, “Venue and Submission to Jurisdiction” and “Waiver of Jury Trial” shall survive the termination or expiration of this Commitment Letter and shall remain in full force and effect regardless of whether the Credit Facilities close or the Credit Documentation shall be executed and delivered; provided that if the Credit Facilities close and  the Credit Documentation shall be executed and delivered, (i) the provisions under the heading “Evaluation Material” and “Syndication” shall survive only until the completion of the Syndication Process (as determined by Lead Arranger), and (ii) the provisions under the heading “Expenses”, “Confidentiality”, “Indemnity”, and “Sharing Information; and Absence of Fiduciary Relationship” shall be superseded and deemed replaced by the terms of the Credit Documentation governing such matters.

Integration.  

This Commitment Letter and the Fee Letter supersede any and all discussions, negotiations, understandings or agreements, written or oral, express or implied, between or among the parties hereto and their affiliates as to the subject matter hereof. Without limiting the generality of the immediately preceding sentence, this Commitment Letter supersedes and replaces the Commitment Letter dated September 29, 2014 issued by GE Capital with respect to the Credit Facilities.

Patriot Act.

The Commitment Parties hereby notify you that pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “PATRIOT Act”), each Lender may be required to obtain, verify and record information that identifies each Borrower and each Guarantor, which 

- 5 -

 

information includes the name, address, tax identification number and other information regarding each Borrower and each Guarantor that will allow such Lender to identify each Borrower and each Guarantor in accordance with the PATRIOT Act.  This notice is given in accordance with the requirements of the PATRIOT Act and is effective as to each Lender.

 [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

 

 

- 6 -

 

Please indicate your acceptance of the terms hereof and of the Fee Letter by signing in the appropriate space below and in the Fee Letter  and returning to GE Capital on behalf of the Commitment Parties such signature pages by 5:00 p.m., Chicago time on October 20, 2014. Unless extended in writing by the Commitment Parties, the commitments and agreements of the Commitment Parties contained herein (subject to the provisions under the heading “Survival”) shall automatically expire on the first to occur of (a) the date and time referred to in the previous sentence unless you shall have executed and delivered a copy of this Commitment Letter and the Fee Letter, as provided above, (b) 5:00 p.m. Chicago time on January 31, 2015, (c) execution and delivery of the Credit Documentation and funding of the Credit Facilities and (d) the closing of the Acquisition without the use of the Credit Facilities. 

Sincerely,

 

		
	
General Electric Capital Corporation

	
By:
	
/s/ Michael Todorow

	
Name: 
	
Michael Todorow

	
Its Duly Authorized Signatory

	
 

	
 

	
GE CAPITAL MARKETS, INC.

	
By:
	
/s/ Gary Kidd

	
Name: 
	
Gary Kidd

	
Its Duly Authorized Signatory

	
 

	
 

	
Agreed and accepted

this 17TH day of OCTOBER 2014

	
 

	
SIGNATURE GROUP HOLDINGS, INC.

	
By:
	
/s/ Craig Bouchard

	
Name: 
	
Craig Bouchard

	
Title:
	
Chairman and Chief Executive Officer

 

 

 

- 7 -

 

Exhibit A to Commitment Letter

Summary of Terms and Conditions (“Term Sheet”)

 

$110,000,000 Senior Secured Revolving Credit Facilities

October 17, 2014

 

	
BORROWERS:
	
A newly formed corporate entity (“Acquisition NewCo”) to be controlled by Signature Group Holdings, Inc. that will acquire all of the outstanding equity interests of Aleris Global Recycling and Specification Alloys (“Target”) and certain domestic subsidiaries (together with Acquisition NewCo, collectively, the “U.S. Borrowers”) and Canadian subsidiaries (collectively, the “Canadian Borrowers”) of Acquisition NewCo (the U.S. Borrowers and the Canadian Borrowers, collectively, the “Borrowers”). 

	
SPONSOR:
	
Signature Group Holdings, Inc. (“Sponsor”)

ADMINISTRATIVE 

	
AGENT:
	
General Electric Capital Corporation (“GE Capital” or “Agent”)

 

SOLE LEAD 

ARRANGER AND

	
BOOKRUNNER:
	
GE Capital Markets, Inc. (“GECM”)

	
LENDERS:
	
GE Capital and/or one or more of its direct or indirect subsidiaries and a syndicate of financial institutions arranged by GECM for the portion not held by GE Capital or its subsidiaries.

	
CREDIT FACILITIES:
	
A revolving credit facility (the “Revolving Credit Facility” or “Credit Facilities”) in an aggregate principal amount equal to $110,000,000 (the “Maximum Commitment Amount”), consisting of:

 

	
(i)
	
a U.S. subfacility (the “U.S. Subfacility”) in an amount to be mutually agreed upon (the “U.S. Subfacility Cap”) available to be advanced to U.S. Borrowers in U.S. dollars, which will include:

 

	
a.
	
a letter of credit subfacility in an amount to be mutually agreed upon available to U.S. Borrowers (the “U.S. L/C Subfacility”); and

 

	
b.
	
a swing line subfacility available to U.S. Borrowers in an amount equal to $11,000,000 provided by Agent; and

 

	
(ii)
	
a Canadian dollar subfacility (the “Canadian Subfacility”) in an amount (the “Canadian Subfacility Cap”) and on terms and conditions, in each case to be mutually agreed upon, available to be advanced to the Canadian Borrowers in Canadian dollars, which will include a letter of credit subfacility in an amount to be mutually agreed upon available to the Canadian Borrowers (the “Canadian L/C Subfacility”; together with the U.S. L/C Subfacility, collectively, the “L/C Subfacilities”; it being understood by the parties hereto that the aggregate amount of the Canadian L/C Subfacility and the U.S. L/C Subfacility shall not exceed $15,000,000).

1

 

REVOLVING CREDIT

	
AVAILABILITY:
	
U.S. Borrowing Base: Availability under the U.S. Subfacility would be limited to a borrowing base (the “U.S. Borrowing Base”) of up to the lesser of (A) the U.S. Subfacility Cap and (B) the sum of (x) 85% (assuming dilution of no greater than 5%) of U.S. Borrowers’ eligible accounts receivable plus (y) the lesser of (i) 75% (or 65% at all times prior to completion of the Post-Closing Appraisal (as defined below)) of U.S. Borrowers’ eligible inventory and (ii) 85% of the NOLV Factor (as defined below) of U.S. Borrowers’ eligible inventory, less in each of clauses (x) and (y) above, reserves.  

The aggregate amount of the loans outstanding under the U.S. Subfacility and letters of credit outstanding under the U.S. L/C Subfacility and the unreimbursed drawings under the letters of credit issued for the account of any U.S. Borrower under the U.S. L/C Subfacility shall not exceed the U.S. Borrowing Base.

The U.S. L/C Subfacility would provide for the issuance of letters of credit for the account of U.S. Borrowers. Outstanding letters of credit under the U.S. L/C Subfacility will be reserved from availability under the U.S. Borrowing Base.  

Canadian Borrowing Base: Availability under the Canadian Subfacility would be limited to a borrowing base (the “Canadian Borrowing Base”) of up to the lesser of (A) the Canadian Subfacility Cap and (B) the sum of (x) 85% (assuming dilution of no greater than 5%) of Canadian Borrowers’ eligible accounts receivable plus (y) the lesser of (i) 75% (or 65% at all times prior to completion of the Post-Closing Appraisal) of Canadian Borrowers’ eligible inventory and (ii) 85% of the NOLV Factor of Canadian Borrowers’ eligible inventory, less in each of clauses (x) and (y) above, reserves. 

The aggregate amount of the loans outstanding under the Canadian Subfacility and letters of credit outstanding under the Canadian L/C Subfacility and the unreimbursed drawings under the letters of credit issued for the account of any Canadian Borrower under the Canadian L/C Subfacility shall not exceed the Canadian Borrowing Base.

The Canadian L/C Subfacility would provide for the issuance of letters of credit for the account of Canadian Borrowers. Outstanding letters of credit under the Canadian Subfacility will be reserved from availability under the Canadian Borrowing Base.  

The U.S. Borrowing Base and the Canadian Borrowing Base are collectively referred to herein as the “Borrowing Base.”

The “NOLV Factor” is the net orderly liquidation value of inventory expressed as a percentage of net book value, as periodically updated by appraisals.  Agent will retain the right from time to time to establish or modify reserves against availability and standards of eligibility.

2

 

 “Excess Availability” shall mean the amount, as determined by Agent, calculated at any time, equal to: (1) the Borrowing Base less (2) the sum of (a) the amount of then outstanding loans under the Revolving Credit Facility plus (b) the aggregate amount of unreimbursed drawings under the letters of credit issued for the account of any Borrower under the L/C Subfacilities plus (c) the aggregate undrawn amount of all outstanding letters of credit under the Credit Facilities. 

On or before the date that is 60 days following the Closing Date (as defined below), Agent shall have received acceptable inventory appraisals prepared by an appraiser retained by Agent (collectively, the “Post-Closing Appraisal”).

	
USE OF PROCEEDS:
	
To provide funds for the acquisition of Target by the Sponsor (the “Acquisition”) and to provide for working capital and for general corporate purposes.

	
TERM:
	
5 years

 

INTEREST RATES;

	
APPLICABLE MARGIN:
	
For all U.S. dollar denominated loans under the U.S. Subfacility, at Borrowers’ option, either (i) absent a default, 1, 2, 3 or 6-month interest periods at LIBOR (as defined below) plus the Applicable Margin(s) or (ii) floating at the Base Rate (as defined below), plus the Applicable Margin(s).

For all Canadian dollar denominated loans under the Canadian Subfacility, at Borrowers’ option, either (i) absent a default, 1, 2, 3 or 6-month interest periods at BA Rate (as defined below) plus the Applicable Margin(s) or (ii) floating at the Canadian Index Rate (as defined below), plus the Applicable Margin(s). 

The outstanding principal balance of the Credit Facilities initially shall bear interest, at Borrowers’ option, at a fluctuating rate per annum equal to (a) the Base Rate or Canadian Index Rate, as applicable, plus 0.75% or (b) LIBOR or the BA Rate, as applicable, plus 1.75%; provided that, after the first full fiscal quarter ending after the Closing Date (as defined below), the Credit Facilities shall bear interest according to the following pricing table based upon the most recent quarter-end daily average Excess Availability.

				
	
Average Excess Availability
	
Applicable Revolver Base Rate Margin/Canadian Index Rate Margin
	
Applicable Revolver LIBOR Margin/BA Rate Margin
	
Applicable L/C Margin

	
[TBD]
	
0.25%
	
1.25%
	
1.25%

	
[TBD]
	
0.50%
	
1.50%
	
1.50%

	
[TBD]
	
0.75%
	
1.75%
	
1.75%

	
[TBD]
	
1.00%
	
2.00%
	
2.00%

 

3

 

“Base Rate” will be a floating rate of interest defined as the highest of (a) the rate last quoted by the Wall Street Journal (or another national publication selected by Agent) as the U.S. “Prime Rate,” (b) the Federal Funds Rate plus 50 basis points, and (c) the sum of LIBOR for an interest period of one month plus the excess of the LIBOR Applicable Margin over the Base Rate Applicable Margin.

 “LIBOR” will be defined as the offered rate per annum for deposits of U.S. dollars for the applicable interest period that appears on Reuters Screen LIBOR01 Page as of 11:00 a.m. (London time) two (2) business days prior to the first day in each interest period. 

“BA Rate” will be the rate per annum determined by Agent by reference to the average rate quoted on the Reuters Monitor Screen Page CDOR (displaying Canadian interbank bid rates for Canadian dollar bankers acceptances) applicable to bankers’ acceptances for the applicable term as of 11:00 a.m. (Toronto time) two (2) business days prior to the beginning of such term; provided that at no time will the BA Rate be deemed to be below the 3-month BA Rate as determined two (2) business days prior to the start of the applicable interest period.

“Canadian Index Rate” will be the higher of (a) the annual rate of interest quoted from time to time in the “Report on Business” section of The Globe and Mail as being “Canadian prime”, “chartered bank prime rate” or words of similar description and (b) the BA Rate in respect of a BA period for 30 days, plus 1.35%.  Interest on Canadian Index Rate loans would be adjusted as of each change in the Canadian Index Rate.

Interest would be payable monthly in arrears except LIBOR rate loans and BA rate loans which shall be paid at the expiration of each LIBOR or BA Rate interest period, as the case may be (but in any event at least quarterly), and calculated on the basis of a 360-day year and actual days elapsed. LIBOR and BA Rate mechanics and breakage fees to be contained in the Credit Documentation (as defined below). 

No loan may be converted into, or continued as, a LIBOR rate loan or BA Rate loan at any time when a default shall have occurred and be continuing.

At the election of Agent or Requisite Lenders, upon the occurrence and during the continuance of a default, the obligations shall bear interest at a default rate of interest equal to an additional two percent (2%) per annum over the rate otherwise applicable and such interest will be payable on demand.

	
SECURITY:
	
Agent, for the benefit of itself and the Lenders, shall receive a fully perfected (1) first priority security interest in all of the following property, whether now existing or hereafter arising, of Borrowers, their domestic, and subject to the remaining provisions hereof, foreign subsidiaries (“Subsidiaries”) and any holding company (“Holdings”) formed to own the capital stock or equity securities of Borrowers: (a) all accounts and other receivables for goods sold or leased or services rendered whether or not earned (“Receivables”); (b) all inventory of any kind wherever located (“Inventory”); (c) all instruments, chattel paper and other contracts evidencing, or substituted for, any Receivable; (d) all 

4

 

		
guarantees, letters of credit, security and other credit enhancements for the Receivables; (e) all documents of title for any Inventory; (f) all claims and causes of action in any way relating to any of the Receivables or Inventory; (g) all bank accounts into which any proceeds of Receivables or Inventory are deposited (including all cash and other funds on deposit therein); (h) all books and records relating to any of the foregoing; and (i) all substitutions, replacements, accessions, products or proceeds (including, without limitation, insurance proceeds) of any of the foregoing (together with clauses (a) through (h), collectively, the “First Priority Collateral”); and (2) a second priority security interest in all of the outstanding capital stock and other equity securities of Borrowers and each of their domestic, and subject to the remaining provisions hereof, foreign Subsidiaries, and all furniture, fixtures, equipment, patents, trademarks, copyrights and other intellectual property of the Credit Parties, a second priority mortgage lien on all owned real property of the Credit Parties and a second priority security interest in all other assets of the Credit Parties, and all substitutions, replacements, accessions, products and proceeds of such property (the “Second Priority Collateral” and together with the First Priority Collateral, collectively, the “Collateral”).  In addition, Agent would have the right to utilize, at no cost or expense, any trade names, trademarks, copyrights or other intellectual property to the extent necessary or appropriate in order to sell, lease or otherwise dispose of any of the Collateral and shall be granted access to real property of the Credit Parties to realize upon the First Priority Collateral.  All Collateral would be free and clear of other liens, claims and encumbrances, except permitted liens and encumbrances acceptable to Agent.  

	

	
To the extent that no material incremental income tax liability will result under Section 956 of the Internal Revenue Code, taking into account actual anticipated repatriations of funds, foreign tax credits and all other relevant factors (a “956 Impact”), all direct or indirect foreign (non-U.S. organized) subsidiaries of Holdings will grant liens and security interests on their assets to secure guaranties required to be provided by such subsidiaries as hereinafter provided, and 100% of the stock of those subsidiaries will be pledged as collateral for such guaranties.  If a 956 Impact exists with respect to a subsidiary, then with respect to such subsidiary no asset pledge shall be required, the collateral pertaining to such subsidiary shall be limited to a pledge of 66% of the voting stock and 100% of the non-voting stock of such subsidiary, and such subsidiary shall not be included within the term “Subsidiaries” as used in this Term Sheet.

Agent’s liens and security interests shall be evidenced by documentation reasonably satisfactory to Agent, including search results, collateral releases from prior lenders, landlord, mortgagee and bailee waivers.  All obligations under the Credit Facilities shall be cross-collateralized with each other and with collateral provided by any subsidiary of any Borrower or any other guarantor; provided, however, that obligations of U.S. Borrowers under the U.S. Subfacility shall not be cross-collateralized with obligations under the Canadian Subfacility or secured by Collateral provided by the Canadian Borrowers or any of their subsidiaries.

	
GUARANTEES:
	
Obligations under the Credit Facilities will be guaranteed by all Subsidiaries of Borrowers and by Holdings (collectively, the “Guarantors”; together with the Borrowers, collectively, the “Credit Parties”).  Holdings shall be a single purpose 

5

 

		
entity and conduct no business other than ownership of the equity securities of Borrowers and incur no indebtedness except as permitted in the Credit Documentation. To the extent no 956 Impact exists with respect to a subsidiary, all direct or indirect foreign subsidiaries of Holdings will unconditionally guarantee each Borrower’s obligations to Agent and the Lenders.  If a 956 Impact exists with respect to a subsidiary, then with respect to such subsidiary no guarantee shall be required. For greater certainty, all subsidiaries of the Canadian Borrowers shall guarantee the Canadian Subfacility but not the U.S. Subfacility.

	
CASH MANAGEMENT:  
	
Cash management system acceptable to Agent.  Agent will require springing blocked account agreements including daily sweep mechanisms in respect of all deposit accounts of the Credit Parties into which any proceeds of Receivables

or Inventory are deposited, which daily sweep mechanisms shall be activated if either (i) Excess Availability is less than an amount to be determined or (ii) an event of default exists.

VOLUNTARY

	
PREPAYMENTS:
	
Borrowers may voluntarily prepay any loans outstanding under the Credit Facilities, in each case, subject to concurrent payments of any applicable LIBOR or BA Rate, as applicable, breakage costs.  Prepayment of such loans shall be applied in the manner set forth in the Credit Documentation.

 

MANDATORY

	
PREPAYMENTS:
	
In addition to regularly scheduled payments of principal, subject to the terms of the Intercreditor Agreement (as defined below), Borrowers will be required to make prepayments as are customary for transactions of this type, including: (i) 100% of the net cash proceeds of any sale or other disposition of Collateral (net of amounts reinvested in replacement assets within 180 days or required to pay taxes or other costs applicable to the disposition), other than certain dispositions of other assets to be agreed; (ii) 100% of the net cash proceeds any sales or issuances of equity (subject to certain customary exceptions) or debt securities of Holdings, any Borrower or any of its Subsidiaries and/or any other indebtedness for borrowed money incurred by any Borrower or any its Subsidiaries after the Closing Date (other than permitted issuances of equity and permitted amounts and types of indebtedness, each to be agreed upon); (iii) 100% of insurance proceeds and condemnation awards to the extent not reinvested in the business; and (iv) prepayments in an amount equal to indemnification payments, purchase price adjustments, and similar payments received under the Acquisition Agreement (as defined below), excluding amounts required to be paid to third parties and other amounts to be mutually agreed upon.  Subject to the terms of the Intercreditor Agreement, such prepayments shall be applied in the manner set forth in the Credit Documentation. 

 

	
FEES:
	
The fees payable to Agent as specified in the fee letter between Sponsor and Agent dated on or about the date hereof (the “Fee Letter”).

An Unused Facility Fee in an amount equal to the Applicable Unused Facility Fee Margin on the average unused daily balance of the Revolving Credit Facility, payable quarterly in arrears to Agent for the account of each of the Lenders under the Revolving Credit Facility on the first day of each calendar quarter.  The Applicable Unused Facility Fee Margin shall initially be 0.375%; provided that, after the first full calendar quarter ending after the Closing Date, the Applicable 

6

 

Unused Facility Fee Margin shall be adjusted based upon the most recent quarter-end average unused daily balance of the Revolving Credit Facility as set forth in the following table:

		
	
Average Unused Daily Balance
	
Applicable Unused Facility Fee Margin

	
Greater than 50%
	
0.375%

	
Less than or equal to 50%
	
0.25%

 

Letter of credit fees for all letters of credit under the Credit Facilities in an amount equal to the Applicable L/C Margin on the outstanding face amount of all letters of credit, payable to Agent for the account of the respective Lenders on the first day of each calendar month.  The Applicable L/C Margin shall be 1.75% until adjusted as set forth in the applicable pricing table above. 

Customary letter of credit fees to each issuer of letters of credit under the Credit Facilities upon the issuance, amendment or extension of letters of credit at the prevailing rates.  Such fees will be due and payable to Agent for the account of the issuing bank or issuing banks, as the case may be, in respect of such letters of credit.

All fees will be calculated using a 360-day year and actual days elapsed.

	
DOCUMENTATION:
	
The Credit Documentation will contain conditions precedent, affirmative, negative, financial reporting and financial covenants, permitted acquisition conditions, indemnities, events of default and remedies, and other provisions, and Borrowers will make representations and warranties, all in a manner customary for transactions of this type.  Transactions between Borrowers and their respective officers, directors, employees and affiliates shall be restricted in a manner acceptable to Agent. Management fees payable to Borrowers’ affiliates up to an amount to be determined per annum, exclusive of the transaction fee, if any, that is payable at closing, are permitted so long as no default is existing.  Sponsor shall be required to maintain voting control of Holdings’ board of directors or other similar governing body and shall be required to maintain ownership of not less than a specified amount of capital stock or other equity securities of Holdings acquired by it.  

FINANCIAL

	
COVENANTS:
	
The Credit Documentation will contain a springing minimum fixed charge coverage ratio covenant pursuant to which, if at any time Excess Availability is less than 12.5% of the Maximum Commitment Amount (a “Trigger Event”), the fixed charge coverage ratio (to be defined in the Credit Documentation) measured as of the last day of the most recent fiscal month prior to the applicable Trigger Event for which monthly financial statements have been delivered or are required to be delivered and the last day of each fiscal month shall be not less than 1.00 to 1.00, in each case on a trailing twelve-month basis. 

 

7

 

	
FINANCIAL 
	
Borrowers shall deliver, at a minimum, the following statements and 

	
STATEMENTS
	
other reports:

& OTHER REPORTS:

	
·
	
a borrowing base certificate and supporting information on a monthly basis (and more frequently if excess availability is less than an amount to be determined)

	
·
	
inventory summaries on a monthly basis

	
·
	
accounts receivable agings on a monthly basis

	
·
	
semiannual collateral audits and appraisals 

	
·
	
inventory, accounts receivable, and accounts payable reconciliations on a monthly basis

	
·
	
monthly interim and year end audited financials

	
·
	
annual projections

 

	
CONDITIONS TO CLOSING:
	
Solely as set forth in Schedule I hereto (the date upon which all such conditions precedent shall be satisfied and the initial funding under the Credit Facilities shall take place, the “Closing Date”). 

 

ASSIGNMENTS AND

	
PARTICIPATIONS:
	
Lenders would have the right at any time to sell and assign interests and sell participations under the Credit Facilities in accordance with customary terms.  All assignments of a Lender’s interest in the Credit Facilities will be made via an electronic settlement system designated by Agent.  As to assignments requiring Agent’s consent (not to be unreasonably withheld or delayed), the withholding of such consent for assignments to Borrowers, their affiliates or a holder of subordinated debt issued by any Borrower or its affiliates shall not be deemed to be unreasonable.  

 

	
REQUISITE LENDERS:
	
Lenders holding greater than 50% of the loan exposure (including unfunded commitments under the Revolving Credit Facility) under the Credit Facilities; provided that if there are two or more Lenders, at such time, at least two Lenders then holding greater than 50% of the loan exposure (including unfunded commitments under the Revolving Credit Facility) under the Credit Facilities.

	
GOVERNING LAW:
	
New York.

 

 

 

8

 

SCHEDULE I

to

Term Sheet

 

Conditions to Closing

 

The availability of the Credit Facilities set forth in the Commitment Letter shall be subject to the satisfaction of the following conditions: 

 

	
1.
	
Due Diligence: Agent shall be satisfied with the results of a collateral audit as is customary for transactions of this type.

 

	
2.
	
Minimum Liquidity.  After giving effect to the funding on the Closing Date, or creation of a reserve for, and payment of all costs and expenses related to the closing, Borrowers are required to have minimum liquidity of at least $30,000,000, consisting of Excess Availability under the Revolving Credit Facility and unrestricted cash and cash equivalents.  For the avoidance of doubt, the calculation of Excess Availability pursuant to the preceding sentence shall be exclusive of amounts available under the German factoring facility provided by GE Capital Bank AG. 

 

	
3.
	
Equity/Debt Structure. Sponsor and other co-investors reasonably acceptable to Agent shall have invested a minimum of 30% of the total pro forma capitalization (including debt and equity) of Holdings and its subsidiaries on the Closing Date in the form of cash equity (including $30,000,000 of preferred equity issued to Aleris Corporation or an affiliate) on terms and conditions reasonably acceptable to Agent (collectively, the “Specified Equity Issuance”).  Agent hereby acknowledges that the terms of the Specified Equity Issuance set  forth in the Commitment Letter between Sponsor, Chatham Asset Management, LLC and Zell Credit Opportunities Master Fund L.P. dated October 17, 2014 are reasonably satisfactory to Agent.  Borrowers shall have raised at least $300,000,000 in gross cash proceeds from the issuance of indebtedness in a private placement (or the borrowing of a bridge loan in lieu of all or a part of such indebtedness) (the “Private Placement”) having such terms and provisions as are reasonably acceptable to Agent, with such indebtedness to be subject to the terms of the Intercreditor Agreement (as defined below) (it being acknowledged that the Private Placement terms set forth in the commitment letter related thereto dated October 17, 2014 are reasonably satisfactory to the Agent).   

 

	
4.
	
Evidence of Solvency.  Agent shall have received certification from the Borrowers that each Borrower and each Guarantor, taken as a whole, after incurring the indebtedness contemplated by the Credit Facilities and other indebtedness contemplated hereby and the consummation of the Acquisition, are solvent.  

 

	
5.
	
No Material Adverse Effect.  (a) Since December 31, 2013 through the date of the Acquisition Agreement, there not having been any Effect (as defined in the Acquisition Agreement) which has had or would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect (as defined in the Acquisition Agreement) and (b) no Effect shall have occurred since the date of the Acquisition Agreement that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  Following the Closing Date, Material Adverse Effect, as defined in the Credit Agreement (as defined below), shall mean an effect that results in or causes, or could reasonably be expected to result in or cause, a material adverse 

9

 

		
change in any of (i) the condition (financial or otherwise), business, performance, operations or property of the Credit Parties and their Subsidiaries taken as a whole; (ii) the ability of any Credit Party, any Subsidiary of any Credit Party or any other person (other than Agent or Lenders) to perform its obligations under any loan document; or (iii) the validity or enforceability of any loan document or the rights and remedies of Agent, the Lenders and the other secured parties under any loan document.

 

	
6.
	
Documentation and Other Customary Deliveries.  The preparation, execution and delivery of a definitive credit agreement (the “Credit Agreement”) and other definitive documentation executed in connection therewith, including an intercreditor agreement (the “Intercreditor Agreement”) entered into by the trustee or agent, as applicable, in respect of the indebtedness issued in the Private Placement, and Agent (collectively, with the Credit Agreement, the “Credit Documentation”), incorporating substantially the terms and conditions as outlined herein and in the Commitment Letter to which this Term Sheet is attached and otherwise reasonably acceptable to Borrowers and Agent and the delivery of other customary closing documentation.

 

	
7.
	
Representations and Warranties.  Subject to the Funds Certain Provisions, the Specified Acquisition Agreement Representations and the Specified Representations shall be true and correct in all material respects.  

 

	
8.
	
Acquisition.  The Acquisition shall have been consummated in accordance with the terms of the Purchase and Sale Agreement dated as of October 17, 2014 (together with all exhibits and schedules attached thereto, the “Acquisition Agreement”) (without any amendment, modification or waiver of any of the provisions thereof that would be materially adverse to the Lenders without the consent of Agent).  For purposes of the foregoing condition, it is hereby understood and agreed that an increase in the purchase price to be paid in connection with the Acquisition shall not be deemed to be materially adverse to the Lenders if it is not funded by any incurrence of indebtedness, but is instead funded by cash on the balance sheet of the Borrowers and/or the net cash proceeds of the Specified Equity Issuance and a decrease in the purchase price of less than 10% shall not be deemed to be materially adverse to the Lenders. 

 

	
9.
	
PATRIOT Act.  Agent shall have received at least 10 days prior to the Closing Date all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the PATRIOT Act.

 

	
10.
	
Payment of Fees and Expenses. Fees and expenses required to be paid on the Closing Date pursuant to the Commitment Letter and Fee Letter shall have been paid (in the case of expenses, to the extent invoiced in summary form at least three calendar days prior to the Closing Date). 

 

	
11.
	
Collateral.  All actions necessary to establish that Agent will have a perfected first priority security interest, in the case of the First Priority Collateral, and a second priority security interest, in the case of the Second Priority Collateral, in each case subject to liens permitted under the Credit Documentation, shall have been taken; provided, however, that this condition is subject to the Funds Certain Provisions. 

10

 

 

Notwithstanding anything in the Term Sheet, the Commitment Letter, the Fee Letter, the Credit Documentation or any other letter agreement or other undertaking concerning the financing of the Acquisition to the contrary, (i) the only representations and warranties related to the Acquired Business in the Credit Documentation the accuracy of which will be a condition to the availability of the Credit Facilities on the Closing Date will be (A) such representations and warranties regarding the Acquired Business in the Acquisition Agreement as are material to the interests of Agent and the Lenders, but only to the extent that you or your affiliates have the right to terminate your or your affiliates’ obligations under the Acquisition Agreement (or the right not to consummate the Acquisition pursuant to the Acquisition Agreement) as a result of a failure of such representations and warranties to be true and correct (to such extent, the “Specified Acquisition Agreement Representations”) and (B) the Specified Representations (as defined below) and (ii) the terms of the Credit Documentation will not impair availability of the Credit Facilities on the Closing Date if the conditions expressly set forth in this Schedule I of the Commitment Letter are satisfied (it being understood that, to the extent a perfected security interest in any Collateral (the security interest in respect of which cannot be perfected by means of the filing of a UCC or PPSA financing statement, the making of a federal intellectual property filing or delivery of possession of capital stock or other certificated security) is not able to be provided on the Closing Date after the Borrowers’ use of commercially reasonable efforts to do so, the perfection of such security interest in such Collateral will not constitute a condition precedent to the availability of the Credit Facilities on the Closing Date, but a security interest in such Collateral will be required to be perfected after the Closing Date pursuant to arrangements to be mutually agreed between the Borrowers and Agent); provided that nothing herein shall limit the applicability of the individual conditions to closing expressly set forth in Schedule I to this Term Sheet except to the extent expressly stated to be subject to this paragraph. For purposes hereof, “Specified Representations” mean the representations and warranties set forth in the Term Sheet relating to legal existence, corporate power and authority; the authorization, execution and delivery, and legality, validity and enforceability, of the Credit Documentation; the creation and perfection of liens (subject to the limitations on perfection set forth above); status of the Credit Facilities as first lien (or, in the case of Second Priority Collateral, second lien) senior debt; Federal Reserve margin regulations; the Investment Company Act; Patriot Act, OFAC, FCPA and other anti-terrorism laws; the status of the Credit Facilities as senior debt; solvency; financial statements; use of proceeds; governmental and third party approvals and litigation relating to the Credit Documentation; and no violation of, or conflict with, applicable law, charter documents or material agreements as it relates to the Credit Documentation. For the avoidance of doubt, the foregoing provisions of this paragraph are sometimes referred to as the “Funds Certain Provisions.”

11Exhibit 10.5

CERTIFICATE OF DESIGNATION
OF
SERIES B NON-PARTICIPATING PREFERRED STOCK 
OF 
SIGNATURE GROUP HOLDINGS, INC.

Signature Group Holdings, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the “Corporation”), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation (hereinafter called the “Board of Directors”) on [●].

RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of Directors in accordance with the provisions of the Amended and Restated Certificate of Incorporation of the Corporation, the Board of Directors hereby creates a series of Preferred Stock, par value $0.001 per share (the “Preferred Stock”), of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, powers and preferences, and qualifications, limitations and restrictions thereof as follows: 

Section 1.Designation; Number of Shares. The shares of such series shall be classified and designated as Series B Non-Participating Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), and the number of shares constituting such series shall be [100,000].  That number may from time to time be increased or decreased (but not below the number of Shares then outstanding) by the Board of Directors in accordance with the Certificate of Incorporation and applicable law.  The Series B Preferred Stock shall be issued in certificated form.

Section 2.Defined Terms. For purposes hereof, the following terms shall have the following meanings:

“Applicable Dividend Rate” shall mean, from the Issuance Date until and including the eighteen (18) month anniversary thereof, seven percent (7.00%), after the eighteen (18) month anniversary and through the thirty (30) month anniversary of the Issuance Date, eight percent (8.00%), and after the thirty (30) month anniversary of the Issuance Date, nine percent (9.00%).

“Board of Directors” has the meaning set forth in the Recitals.

“Business Day” means a day other than Saturday, Sunday or other day on which commercial banks in New York, New York, United States of America, are required to or may be closed.

 

 

“Certificate of Designation” means this Certificate of Designation creating the Series B Preferred Stock. 

“Certificate of Incorporation” means the Amended and Restated Certificate of Incorporation of the Corporation.

“Change of Control” means the occurrence of a “change of control” or words of similar meaning or effect under those high yield debt securities or, in the event some or all of such high yield debt securities are unable to be issued at the time the consummation of the acquisition pursuant to the Purchase Agreement, borrowings of bridge loans, contemplated by the commitment letter dated as of [●], 2014, by and among the Corporation, Goldman Sachs Bank USA, Deutsche Bank Securities Inc. and Deutsche Bank AG Cayman Islands Branch (the “Secured Notes/Bridge”), or any debt instrument or facility which initially refinances or replaces such Secured Notes/Bridge (or subsequently refinances or replaces such instrument or facility) in whole or in part which permits the holder of any such instrument or facility to require the Corporation or any of its subsidiaries to redeem or repurchase any such instrument or requires the Corporation or any of its subsidiaries to repay such instruments or facility (any such debt instrument or facility, together with the Secured Notes/Bridge, the “Notes”). 

 “Change of Control Date” mean the date on which a Change of Control is consummated.

“Change of Control Notice” has the meaning set forth in Section 9.2.

“Change of Control Redemption Right” has the meaning set forth in Section 9.1.

“Change of Control Redemption Right Expiration Date” has the meaning set forth in Section 9.2. 

“Common Stock” means the common stock, par value $0.001 per share, of the Corporation. 

“Corporation” has the meaning set forth in the Preamble.

“Dividend Payment Date” has the meaning set forth in Section 4.1.

“Dividend Period” has the meaning set forth in Section 4.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect at the time.

“Issuance Date” means [●], 2014. 

2

 

“Junior Securities” means, collectively, the Series A Junior Participating Preferred Stock, the Common Stock and any other class of securities hereafter authorized that is specifically designated as junior to the Series B Preferred Stock.

“Liquidation Event” has the meaning set forth in Section 5.1.

 “Liquidation Preference” means, with respect to any Share on any given date, the sum of (i) the Liquidation Value and (ii) the amount of any accrued but unpaid dividends thereof, if any, whether or not declared, to and including such date.

 “Liquidation Value” means, with respect to any Share on any given date, $1,000.00. 

“Parity Securities” means any class of securities hereafter authorized that is specifically designated as ranking pari passu with the Series B Preferred Stock.

“Person” means an individual, firm, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, trust or other entity or organization of any kind, including a governmental authority.

“Preferred Stock” has the meaning set forth in the Recitals.

“Purchase Agreement” means that certain Purchase and Sale Agreement, dated as of [●], 2014, by and among Aleris Corporation, a Delaware corporation, Aleris International, Inc., a Delaware corporation, Aleris Holding Canada Limited, a corporation organized under the laws of Canada, Aleris Aluminum Netherlands B.V., a limited liability company organized under the laws of the Netherlands, Aleris Deutschland Holding GmbH, a limited liability company organized under the laws of Germany, Dutch Aluminum C.V., a limited partnership organized under the laws of the Netherlands, and Aleris Deutschland Vier GmbH Co KG, a limited partnership organized under the laws of Germany, SGH Acquisition Holdco, Inc., a Delaware corporation, Evergreen Holding Germany GmbH, a limited liability company organized under the laws of Germany, and the Corporation.  

“Requisite Holders” has the meaning set forth in Section 8.1.

“Securities Act” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect at the time.

“Senior Securities” means any class of securities hereafter authorized that is specifically designated as senior to the Series B Preferred Stock.

“Series B Election Notice” has the meaning set forth in Section 8.1.

“Series B Redemption” has the meaning set forth in Section 8.1.

3

 

“Series B Redemption Date” has the meaning set forth in Section 8.2(b).

“Series B Redemption Notice” has the meaning set forth in Section 8.2.

“Series B Redemption Price” has the meaning set forth in Section 7.1.

“Share” means a share of Series B Preferred Stock. 

“Subsidiary” or “subsidiary” means, with respect to any Person:  (a) any other Person of which such Person beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities of such other Person, (ii) the total combined equity interests of such other Person, or (iii) the capital or profit interests of such other Person; or (b) any other Person of which such Person has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body of such other Person.

Section 3.Rank. With respect to payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, all Shares of the Series B Preferred Stock shall rank (i) pari passu with all Parity Securities, (ii) senior to all Junior Securities and (iii) junior to all Senior Securities.

Section 4.Dividends.

4.1Accrual and Payment of Dividends. From and after the Issuance Date of any Share, cumulative dividends on such Share shall accrue, whether or not declared by the Board of Directors and whether or not there are funds legally available for the payment of dividends, in arrears at a per annum rate equal to the Applicable Dividend Rate on the Liquidation Preference.  The dividends on the Series B Preferred Stock shall accrue from the Issue Date and shall be payable quarterly in arrears within five (5) Business Days following the last day of March, June, September and December of each calendar year (each such date, a “Dividend Payment Date”) to the holders of record of the Series B Preferred Stock on such Dividend Payment Date, except that if any such date is not a Business Day, then such dividend shall be payable on the next Business Day. Subject to Section 4.2, all accrued dividends on any Share shall be paid in cash only when, as and if declared by the Board of Directors out of funds legally available therefor or upon a liquidation or redemption of the Series B Preferred Stock in accordance with the provisions of Section 5, Section 7, Section 8 or Section 9. All accrued and accumulated dividends on the Shares shall be prior and in preference to any dividend on any Junior Securities and shall be fully declared and paid before any dividends are declared and paid, or any other distributions or redemptions are made, on any Junior Securities, other than to declare or pay any dividend or distribution payable on the Common Stock in shares of Common Stock.

Each dividend period (a “Dividend Period”) shall commence on and include a Dividend Payment Date and shall end on and include the calendar day 

4

 

preceding the next Dividend Payment date, except that (x) the initial Dividend Period for Series B Preferred Stock issued on the Issuance Date shall commence on and include the date of original issue of the Series B Preferred Stock, (y) the initial Dividend Period for any Series B Preferred Stock issued after the Issuance Date shall commence on and include such date as the Board of Directors shall determine and disclose at the time such additional shares are issued, or if no such determination is made, the date of issuance of such Series B Preferred Stock; and (z) the final Dividend Period with respect to redeemed shares shall end on and include the calendar day preceding the date of redemption. Dividends payable on the Series B Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. 

If, on any Dividend Payment Date, the Corporation fails to pay dividends in respect of the Shares equal to all dividends on the Shares accrued but unpaid as of such date, the accrued but unpaid dividends on the Shares shall nonetheless accumulate and compound at the Applicable Dividend Rate on such Dividend Payment Date and shall remain accumulated, compounding dividends on such Applicable Dividend Rate, until paid pursuant hereto.

4.2Payments in Kind.  Notwithstanding any other provision of this Section 4, any dividends accruing on the Series B Preferred Stock shall be paid in lieu of cash dividends by the issuance of additional Shares of Series B Preferred Stock (including fractional shares) having an aggregate Liquidation Value at the time of such payment equal to the amount of the dividend to have been paid; provided, however, on any Dividend Payment Date following the twenty-four month (24) month anniversary of the Issuance Date, any such dividend shall be paid in cash.  

Section 5.Liquidation.  

5.1Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation (a “Liquidation Event”), the holders of Shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of Junior Securities by reason of their ownership thereof, an amount in cash equal to the aggregate Liquidation Preference of all Shares held by such holder. 

5.2Insufficient Assets. If upon any Liquidation Event the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of the Shares of Series B Preferred Stock the full preferential amount to which they are entitled under Section 5.1 and the holders of any Parity Securities the full preferential amount to which they are entitled under the terms of the relevant instrument governing such Parity Securities, (a) the holders of the Shares and any Parity Securities shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective full preferential amounts which would 

5

 

otherwise be payable in respect thereof upon such Liquidation Event if all amounts payable on or with respect to such Shares and Parity Securities were paid in full, and (b) the Corporation shall not make or agree to make any payments to the holders of Junior Securities.

Section 6.Voting Rights.

6.1Voting Generally. The holders of Series B Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law.

6.2Amendment of Series B Preferred Stock; Dividends; Material Acquisitions; Mergers and Consolidations. So long as any shares of Series B Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of a majority of the Shares of Series B Preferred Stock at the time outstanding and entitled to vote thereon, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating, either directly or indirectly by amendment, merger, consolidation or otherwise: 

(i)Any amendment, alteration or repeal, as applicable, of any provision of the Certificate of Incorporation or Bylaws of the Corporation so as to adversely affect the rights, preferences, privileges or voting powers of the Series B Preferred Stock;

(ii)At any time until the second (2nd) anniversary of the Issuance Date, (x) any declaration or payment of cash dividends on any Common Stock or other Junior Stock, (y) any purchase, redemption or other acquisition for consideration of any Common Stock or other Junior Stock, whether directly or indirectly; provided, however, that the Corporation may redeem up to [] shares of Common Stock issued to Chatham Asset Management, LLC and Zell Credit Opportunities Master Fund L.P.  without the consent of holders of the Series B Preferred Stock or (z) if and only if the Corporation is delinquent in the payment of dividends on the Shares, any declaration or payment of cash dividends or purchase, redemption or other acquisition for consideration of any Parity Stock, whether directly or indirectly; provided, further, however, that the consent of the holders of the Series B Preferred Stock shall not be required in connection with any repurchase of any Junior Stock held by any employee or consultant of the Corporation (x) upon any termination of such employee’s or consultant’s employment or consultancy pursuant to any agreement providing for such repurchase or (y) otherwise permitted pursuant to an agreement between the Corporation and an employee or consultant thereof;

(iii)So long as at least the aggregate Liquidation Preference of the issued and outstanding Series B Preferred Stock is in excess of $10,000,000.00, acquire, or cause a Subsidiary of the Corporation to acquire, in any transaction or series of related 

6

 

transactions, the stock or all or substantially all of the assets of another Person, for aggregate consideration (including the direct or indirect assumption of liabilities) valued at more than 5.0% of the total consolidated assets of the Corporation and its Subsidiaries as of the most recent month-end prior to such acquisition as reflected on the consolidated balance sheet of the Corporation prepared in accordance with generally accepted accounting principles consistently applied; or

(iv)Any consummation of a binding share exchange or reclassification involving the Series B Preferred Stock, or of a merger or consolidation of the Corporation with another corporation or other entity, unless in each case (x) the shares of Series B Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, in each case, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and (y) such shares of Series B Preferred Stock remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series B Preferred Stock immediately prior to such consummation, taken as a whole; provided, however, that this clause (iv) shall not apply to the extent a plan of merger, binding share exchange or similar event provides that the holders of Series B Preferred Stock would receive an amount of cash in such merger, share exchange or similar event equal to the Liquidation Preference as of the consummation of such merger, share exchange or similar event.

Section 7.Redemption by the Corporation.

7.1At any time following the Issuance Date, the Corporation may, upon thirty (30) days’ notice, redeem all or any portion of the then outstanding shares of Series B Preferred Stock for cash at a redemption price per Share equal to the Liquidation Preference (the “Series B Redemption Price”); provided, however, that to the extent the Corporation or any Subsidiary thereof is entitled to recover any Damages (as such term is defined in the Purchase Agreement) by causing Aleris Corporation or any of its Subsidiaries or affiliates to forfeit shares of Series B Preferred Stock pursuant to Section 9.08 of the Purchase Agreement, the Corporation may, upon five (5) days’ notice, redeem such portion of the then outstanding shares of Series B Preferred Stock (or fraction thereof) with a Liquidation Preference equal to the amount of such Damages (as such term is defined in the Purchase Agreement) without any payment being made to the holder of Series B Preferred Stock.  

7.2In order to exercise its right of redemption, the Corporation shall, not less than thirty (30) days prior to the redemption date (or five (5) days in the event of a redemption related to Section 9.08 of the Purchase Agreement), give to each holder of 

7

 

record of the Series B Preferred Stock, at such holder’s address as it shall appear upon the stock register of the Corporation on such date, notice by first class mail, postage prepaid.  Each such notice of redemption shall be irrevocable and shall specify the date that is the redemption date, the redemption price, the number of Shares to be redeemed, the place or places of payment and that payment will be made upon presentation and, to the extent that such Shares are certificated, surrender of the certificate(s) evidencing the Shares of Series B Preferred Stock to be redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require).

Section 8.Redemption by the Holders.

8.1At any time following the sixty-sixth (66th) month anniversary of the Issuance Date, the holders of the then outstanding shares of Series B Preferred Stock shall have the right (a “Series B Redemption”), to require the Corporation to redeem all, but not less than all of such holder’s Series B Preferred Stock, out of funds legally available therefor, at the Series B Redemption Price; provided, however, that the Corporation shall not be obligated to redeem any shares of Series B Preferred Stock pursuant to this Section 8.1 unless and until the holders of a majority of the then outstanding shares of Series B Preferred Stock (the “Requisite Holders”) have made such a Redemption Election. Any such Series B Redemption shall occur not more than ninety (90) days following receipt by the Corporation of a written election notice (the “Series B Election Notice”) from the Requisite Holders. Upon receipt of a Series B Election Notice, all holders of Series B Preferred Stock shall be deemed to have elected to have all of their Shares redeemed pursuant to this Section 8 and such election shall bind all holders of Series B Preferred Stock. In exchange for the surrender to the Corporation by the respective holders of Shares of Series B Preferred Stock of their certificate or certificates representing such Shares (to the extent that such Shares are certificated) in accordance with Section 8.4 below, the aggregate Series B Redemption Price for all Shares held by each holder of Shares shall be payable in cash in immediately available funds to the respective holders of the Series B Preferred Stock on the applicable Series B Redemption Date and the Corporation shall contribute all of its assets to the payment of the Series B Redemption Price, and to no other corporate purpose, except to the extent prohibited by applicable Delaware law. 

8.2Redemption Notice. As promptly as practicable, but in no event later than twenty (20) days following receipt of a Series B Election Notice from the Requisite Holders, the Corporation shall send written notice (the “Series B Redemption Notice”) of its receipt of a Series B Election Notice to each holder of record of Series B Preferred Stock. Each Series B Redemption Notice shall state:

(a)the number of Shares of Series B Preferred Stock held by the holder that the Corporation shall redeem on the Series B Redemption Date specified in the Series B Redemption Notice;

8

 

(b)the date of the closing of the redemption, which pursuant to Section 8.1 shall be no later than ninety (90) days following receipt by the Corporation of the Series B Election Notice (the applicable date, the “Series B Redemption Date”) and the Series B Redemption Price; and

(c)to the extent such Shares are certificated, the manner and place designated for surrender by the holder to the Corporation of his, her or its certificate or certificates representing the Shares of Series B Preferred Stock to be redeemed.

8.3Insufficient Funds; Remedies For Nonpayment.  

(a)Insufficient Funds. If on any Series B Redemption Date, the assets of the Corporation legally available are insufficient to pay the full Series B Redemption Price for the total number of Shares elected to be redeemed pursuant to Section 8.1, the Corporation shall (i) redeem out of all such assets legally available therefor on the applicable Series B Redemption Date the maximum possible number of Shares that it can redeem on such date, pro rata among the holders of such Shares to be redeemed in proportion to the aggregate number of Shares elected to be redeemed by each such holder on the applicable Series B Redemption Date and (ii) following the applicable Series B Redemption Date, at any time and from time to time when additional assets of the Corporation become legally available to redeem the remaining Shares, the Corporation shall immediately use such assets to pay the remaining balance of the aggregate applicable Series B Redemption Price. 

(b)Remedies For Nonpayment. If on any Series B Redemption Date, all of the Shares elected to be redeemed pursuant to a Series B Election Notice are not redeemed in full by the Corporation by paying the entire Series B Redemption Price, until such Shares are fully redeemed and the aggregate Series B Redemption Price paid in full, (i) all of the unredeemed Shares shall remain outstanding and continue to have the rights, preferences and privileges expressed herein, including the accrual and accumulation of dividends thereon as provided in Section 4, (ii) interest on the portion of the aggregate Series B Redemption Price applicable to the unredeemed Shares shall accrue daily in arrears at a rate equal to the lesser of (x) 4.0% or (y) the prime rate, as published in the Eastern Edition of the Wall Street Journal per annum, compounded quarterly. 

8.4Surrender of Certificates. To the extent that such Shares are certificated, on or before the Series B Redemption Date, each holder of Shares of Series B Preferred Stock shall surrender the certificate or certificates representing such Shares to the Corporation, in the manner and place designated in the Series B Redemption Notice, duly assigned or endorsed for transfer to the Corporation (or accompanied by duly executed stock powers relating thereto), or, in the event the certificate or certificates are lost, stolen or missing, shall deliver an affidavit of loss, in the manner and place designated in the Series B Redemption Notice. To the extent that such Shares are certificated, each surrendered certificate shall be canceled and retired and the Corporation shall thereafter make payment of the applicable Series B Redemption Price by certified 

9

 

check or wire transfer to the holder of record of such certificate; provided, however, that if less than all the Shares represented by a surrendered certificate are redeemed, then a new stock certificate representing the unredeemed Shares shall be issued in the name of the applicable holder of record of canceled stock certificate. 

8.5No Rights Subsequent to Redemption. If on the applicable Series B Redemption Date, the Series B Redemption Price is paid (or tendered for payment) for any of the Shares to be redeemed on such Series B Redemption Date, then on such date all rights of the holder in the Shares so redeemed and paid or tendered, including any rights to dividends on such Shares, shall cease, and such Shares shall no longer be deemed issued and outstanding. 

Section 9.Change of Control.

9.1Change of Control Redemption Right.  Notwithstanding anything to the contrary in this Certificate of Designation, upon consummation of a Change of Control, the holders of the then outstanding Shares of Series B Preferred Stock shall have the right (a “Change of Control Redemption Right”) to require the Corporation to redeem each Share held by such holder for cash at a price per Share equal to the Liquidation Preference; provided, however, this Section 9.1 shall not apply, and no holder of any Shares of Series B Preferred Stock shall have a Change of Control Redemption Right, to the extent the Change of Control would result in the holders of Series B Preferred Stock receiving an amount of cash equal to the Liquidation Preference as of the consummation of such Change of Control.

9.2The Corporation shall give each holder of Series B Preferred Stock notice of any Change of Control within ten (10) calendar days of entering into any arrangement or agreement that, if consummated, would constitute a Change of Control.  In addition, no later than five (5) calendar days following the Change of Control Date, the Corporation shall give each holder notice of the holder’s right to require the Corporation to repurchase any or all shares of Series B Preferred Stock held by such holder (the “Change of Control Notice”). The Change of Control Notice shall be mailed to each holder of record at such holder’s address as it shall appear upon the stock register of the Corporation on such date, notice by first class mail, postage prepaid and shall state (i) the date by which the Change of Control Redemption Right must be exercised, which date shall be no earlier than thirty (30) calendar days and no later than sixty (60) calendar days after the date of the Change of Control Notice (and, if necessary to cause the repurchase of the Shares not to constitute a default or event of default under the Corporation’s Material Debt Instruments, shall be no earlier than the change of control payment date (or words of similar meaning or effect under the Corporation’s Material Debt Instruments), (the “Change of Control Redemption Right Expiration Date”), (ii) the Liquidation Preference and (iii) a description of the procedures that a holder must follow to exercise the Change of Control Redemption Right. 

10

 

9.3To exercise the Change of Control Redemption Right, a holder of Series B Preferred Stock shall deliver to the Corporation, on or before the Change of Control Redemption Right Expiration Date, a written notice specifying the number of Shares to be repurchased by the Corporation. Each holder of Series B Preferred Stock shall retain the right to withdraw an election to have such shares repurchased at any time on or prior to the Change of Control Redemption Right Expiration Date, which withdrawal shall be evidenced by delivery to the Secretary of the Corporation and receipt by the Corporation at the Corporation’s principal executive offices of such notice of withdrawal, by hand delivery during regular business hours or by first class mail, postage prepaid, on or prior to the Change of Control Redemption Right Expiration Date. To the extent that (and as) funds are legally available therefor, the Corporation shall repurchase, within ten (10) calendar days following the Change of Control Redemption Right Expiration Date (or, to the extent funds are not legally available on the Change of Control Redemption Right Expiration Date, on the first date that funds become legally available therefor) all Shares with respect to which the Change of Control Redemption Right is exercised.

9.4Notwithstanding anything herein to the contrary, (i) the Corporation shall comply with all requirements under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the Change of Control Redemption Right; (ii) no failure by the Corporation to give the Change of Control Notice and no defect in any Change of Control Notice shall limit any holder’s right to exercise its Change of Control Redemption Right or affect the validity of any proceedings for the repurchase of Shares; and (iii) the Corporation shall not be required to (and may not) repurchase the Shares pursuant to the provisions of this Section 9 to the extent such repurchase constitutes a default or event of default under the Notes or such Change of Control requires the Corporation or any of its subsidiaries to repay or repurchase or offer to repay or repurchase the Notes.

Section 10.Reissuance of Series B Preferred Stock. Any Shares of Series B Preferred Stock redeemed or otherwise acquired by the Corporation or any Subsidiary shall become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. 

Section 11.Notices. Except as otherwise provided herein, all notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); or (c) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent (a) to the Corporation, at its principal executive offices and (b) to any stockholder, at such holder’s address at it appears in the stock records of the 

11

 

Corporation (or at such other address for a stockholder as shall be specified in a notice given in accordance with this Section 10).

Section 12.Transfer Restrictions.

12.1Series B Preferred Stock held by Aleris Corporation or one or more of its Subsidiaries having a Liquidation Preference of $30,000,000.00 shall not be transferrable (other than to one or more subsidiaries of Aleris Corporation) except as expressly permitted by Section 7 hereof, without the consent of the Corporation, at its sole discretion, until eighteen (18) months following the Issuance Date; provided that, to the extent that upon the eighteenth (18th) month anniversary of the Issuance Date, the Corporation shall have pending claims for Damages against the Buyer under the Purchase Agreement, Aleris Corporation and its Subsidiaries shall not be entitled to transfer shares of Series B Preferred Stock having a Liquidation Preference equal to the amount of such pending claims until such claims are resolved.

12.2The certificates, if any, evidencing the Series B Preferred Stock shall, unless otherwise agreed to by the Corporation and the holders of any such certificates, bear a legend substantially to the following effect: 

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. 

IN CONNECTION WITH ANY TRANSFER, IF REASONABLY REQUESTED BY THE CORPORATION THE HOLDER SHALL DELIVER TO THE CORPORATION AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE CORPORATION, TO THE EFFECT THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND/OR APPLICABLE STATE SECURITIES LAW IS AVAILABLE AND SUCH CERTIFICATES AND OTHER INFORMATION AS THE CORPORATION MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. 

12

 

THESE SECURITIES ARE SUBJECT TO REDEMPTION BY THE CORPORATION. THE CORPORATION SHALL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE DESIGNATIONS, POWERS, PREFERENCES AND RELATIVE AND OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES OF STOCK OF THE CORPORATION AUTHORIZED TO BE ISSUED, SO FAR AS THEY HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR SERIES.

THESE SECURITIES ARE SUBJECT TO FORFEITURE PURSUANT TO SECTION 9.08 OF THE PURCHASE AND SALE AGREEMENT (THE “PURCHASE AGREEMENT”), DATED AS OF OCTOBER [●], 2014, BY AND AMONG ALERIS CORPORATION, ALERIS INTERNATIONAL, INC., ALERIS ALUMINUM NETHERLANDS B.V., ALERIS DEUTSCHLAND HOLDING GMBH, ALERIS HOLDING CANADA LIMITED, DUTCH ALUMINUM C.V., ALERIS DEUTSCHLAND VIER GMBH CO KG, SGH ACQUISITION HOLDCO, INC., EVERGREEN HOLDING COMPANY GERMANY GMBH, AND THE CORPORATION, AS SUCH PURCHASE AGREEMENT MAY BE AMENDED FROM TIME TO TIME.  THE CORPORATION SHALL FURNISH WITHOUT EACH CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE TERMS AND CONDITIONS OF SUCH PURCHASE AGREEMENT”.

12.3The Corporation shall be entitled to refuse to register any attempted transfer of shares of Series B Preferred Stock not in compliance with Section 12.1 or Section 12.2, and any such purported non-compliant transfer shall be null, void and of no effect. As a condition to any registration of transfer, the Corporation may require an opinion of counsel or other evidence reasonably satisfactory to it that such transfer is in compliance with the legend in Section 12.2.

13

 

Section 13.Conversion Rights.  The Series B Preferred Stock shall not be convertible into Senior Securities, Junior Securities or any other security, and does not otherwise have any conversion rights.

Section 14.Waiver. The Holders of at least a majority of the outstanding shares of Series B Preferred Stock, voting as one class, may also amend and waive compliance with any provision of this Certificate of Designation. 

Section 15.No Preemptive Rights. No share of Series B Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

Section 16.No Sinking Fund. No sinking fund shall be created for the redemption or purchase of shares of the Series B Preferred Stock.

Section 17.Transfer Taxes.  The Corporation shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any initial issuance or delivery of the Series B Preferred Stock or certificates representing such Shares, if any.  The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of Shares in a name other than that in which the Shares were registered, or in respect of any payment to any Person other than a payment to the initial registered holder thereof.

Section 18.Other Rights. The shares of Series B Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law.

 

 

 

[SIGNATURE PAGE FOLLOWS]

 

14

 

 

IN WITNESS WHEREOF, Signature Group Holdings, Inc. has caused its corporate seal to be hereunto affixed and this Certificate of Designation to be signed by its[●], this [●] day of [●].

		
	
 
	
 

SIGNATURE GROUP HOLDINGS, INC.

	
 
	
 

 

By:________________________________

Name:

Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00236-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00236-of-00352.parquet"}]]