SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

EX-10.1 2 ex101to8k06447003_01222015.htm ex101to8k06447003_01222015.htm

Exhibit 10.1

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

This Second Amendment to Amended and Restated Credit Agreement (the “Amendment”) is made as of this 22nd day of January, 2015, by and among HANDY & HARMAN GROUP LTD., a Delaware corporation (the “Borrower”), each of the each of the EXISTING GUARANTORS listed on the signature pages hereto (each, an “Existing Guarantor” and collectively, the “Existing Guarantors”), each of the JOINING GUARANTORS named on the signature pages hereto and further defined below (“Joining Guarantors” and together with Existing Guarantors, the “Guarantors” and each is individually referred to herein as a “Guarantor”, and together with the Borrower, the “Loan Parties” and each is individually referred to herein as a “Loan Party”), the financial institutions from time to time party to the Credit Agreement (defined below) as lenders (collectively, the “Lenders” and each is individually referred to as a “Lender”), and PNC BANK, NATIONAL ASSOCIATION (“PNC”), in its capacity as administrative agent (PNC, in such capacity, the “Administrative Agent”) and in its capacity as a Lender.

BACKGROUND

A. On August 29, 2014, Borrower, Existing Guarantors, Lenders and Administrative Agent entered into an Amended and Restated Credit Agreement to reflect certain financing arrangements between the parties thereto (as amended, modified, renewed, extended, replaced or substituted from time to time, the “Credit Agreement”). The Credit Agreement and all other documents executed in connection therewith are collectively referred to herein as the “Existing Financing Agreements.” All capitalized terms used herein but not otherwise defined herein shall have the meaning given to them in the Credit Agreement.

B. The Loan Parties have informed Administrative Agent and Lenders that the Parent intends to pursue the acquisition of 100% of the outstanding shares of JPS Industries, Inc. (the “Target Company”), a company of which Steel Partners Holdings L.P., the owner of 66.1% of Parent, owns an approximate 38.7% interest in accordance with the terms of the tender offer described below (the “Share Purchase”). The Loan Parties intend to consummate the Share Purchase in the following manner: (i) Borrower has formed two Subsidiaries, HNH Group Acquisition LLC, a Delaware limited liability company (“HNH Group Acquisition”) and HNH Acquisition LLC, a Delaware limited liability company (“HNH Acquisition”, and sometimes referred to collectively with HNH Group Acquisition herein as the “Joining Guarantors”), each of which is, pursuant to Section 8.1.11(ii) of the Credit Agreement, joining as a Guarantor under the Credit Agreement and other Existing Financing Agreements, (ii) HNH Group Acquisition will make a tender offer for the shares of the Target Company on or about January 23, 2015 (“Tender Offer”), (iii) Parent will contribute certain of its own issued shares to HNH Group Acquisition, (iv) as part of the Tender Offer, Steel Partners Holdings L.P. will exchange all of the shares it owns in the Target Company with HNH Group Acquisition for the shares of Parent which had been contributed to HNH Group Acquisition, (v) subsequent thereto, Target Company, through a reverse merger, will take all action to effect a merger with and into HNH Group Acquisition with Target Company being the surviving entity (“Target Merger”), (vi) Target Company will then merge with and into HNH Acquisition, and (vii) Borrower will ultimately own 100% of HNH Acquisition and HNH Acquisition will remain as a Guarantor under the Existing Financing Agreements (collectively, the “JPS Transaction”).

C. Borrower has informed Administrative Agent that all of the conditions of a Permitted Acquisition (including, without limitation, the Specified Transaction Requirements, as modified herein) other than that the initial Share Purchase corresponding to the Tender Offer may result in Target Company not being a wholly-owned Subsidiary of Borrower, will have been satisfied both prior to and upon completion of the JPS Transaction.

D. Contemporaneous herewith, each Joining Guarantor is joining and becoming a Guarantor under the Credit Agreement and the other Existing Financing Agreements pursuant to a certain Guarantor Joinder and Assumption Agreement dated of even date herewith, the form of which is attached hereto as Exhibit A.

E. The Loan Parties have requested, and the Administrative Agent and the Lenders have agreed, to amend certain terms and provisions contained in the Credit Agreement, in each case subject to the terms and conditions set forth in this Amendment.

NOW THEREFORE, with the foregoing background hereinafter deemed incorporated by reference herein and made part hereof, the parties hereto, intending to be legally bound, promise and agree as follows:

1. Consent.

(a) In reliance upon the documentation and information provided to Administrative Agent, and notwithstanding anything to the contrary contained in Section 2.8 [Use of Revolving Credit Loan Proceeds], Section 8.2.4 [Loans and Investments], or Section 8.2.6 [Liquidations, Mergers, Consolidations, Amalgamations, Acquisitions] of the Credit Agreement, respectively, upon the Effective Date of this Amendment and subject to the terms hereof, Administrative Agent and Lenders hereby consent to the JPS Transaction, and each such Section shall be deemed amended to allow for the use of the proceeds of the Revolving Credit Loans in an amount not to exceed $71,000,000 (Section 2.8 [Use of Revolving Credit Loan Proceeds]), the Investment by HNH Group Acquisition of an amount not to exceed $71,000,000 in the Target Company (Section 8.2.4 [Loans and Investments]), and the Target Merger (Section 8.2.6 [Liquidations, Mergers, Consolidations, Amalgamations, Acquisitions]). For the avoidance of doubt, it is condition of this Consent that the Target Merger constitutes a Permitted Acquisition and Borrower shall provide reasonable evidence that the conditions set forth in Section 8.2.6(v) of the Credit Agreement have been satisfied.

(b) This consent shall be effective only as to the items set forth in the preceding paragraph. This consent shall not be deemed to constitute a consent to the breach by Borrower of any covenants or agreements contained in any Existing Financing Agreement with respect to any other transaction or matter. Borrower agrees that the consents set forth in the preceding paragraph (a) shall be limited to the precise meaning of the words as written therein and shall not be deemed (i) to be a consent to, or any waiver or modification of, any other term or condition of any Existing Financing Agreement, or (ii) to prejudice any right or remedy that Administrative Agent or Lenders may now have or may in the future have under or in connection with any Existing Financing Agreement other than with respect to the matters for which the consent in the preceding paragraph (a) has been provided. Other than as described in this Amendment, the consents described in the preceding paragraph (a) shall not alter, affect, release or prejudice in any way any Obligations under the Existing Financing Agreements. This consent shall not be construed as establishing a course of conduct on the part of Administrative Agent or Lenders upon which the Borrower may rely at any time in the future. Borrower expressly waives any right to assert any claim to such effect at any time.

(c) Notwithstanding the foregoing, in the event the JPS Transaction is not completed on or before June 30, 2015 (unless such date is extended by Administrative Agent in writing in its discretion) (the “Termination Date”), this consent shall cease to be effective on the day immediately following the Termination Date.

2. Financial Covenants.

(a) JPS Transaction. Notwithstanding anything to the contrary contained in the Credit Agreement (i) at the time of consummating the initial steps of the JPS Transaction, (ii) after giving pro forma effect to such transaction, and (iii) upon actual completion of the JPS Transaction, the Leverage Ratio shall not exceed 3.00 to 1.00.

(b) Calculation of Consolidated Adjusted EBITDA. Notwithstanding anything to the contrary contained in the Credit Agreement, for the purpose of determining (i) Borrower’s compliance with Section 8.2.17 [Maximum Leverage Ratio], (ii) the Applicable Margin, and (iii) whether the Specified Transaction Requirements have been satisfied, to the extent the Tender Offer results in HNH Group Acquisition acquiring more than 50% but less than 100% of the shares of Target Company, the definition of Consolidated Adjusted EBITDA shall be deemed amended for the period commencing upon the initial acquisition of shares of the Target Company corresponding to the Tender Offer and ending on the date of the Target Merger, to permit Borrower to include the Consolidated EBITDA of Target Company based on the most recent quarterly financial statements of Target Company as of the closing of the Tender Offer, based upon the pro rata portion of the ownership interest percentage actually acquired by HNH Group Acquisition through the initial phase of the Tender Offer; provided, however, that Borrower shall deliver, within sixty (60) days following the closing of the Tender Offer, a quality of earnings report in form and substance satisfactory to Administrative Agent and Required Lenders, and Administrative Agent and Required Lenders reserve the right to adjust any previous adjustments based upon such quality of earnings report.

3. Schedules. The following Schedules to the Credit Agreement shall be amended and restated in their entirety and replaced with the updated Schedules attached hereto as Exhibit B: Schedule 6.1.1 and Schedule 6.1.2.

4. Representations and Warranties. Each Loan Party hereby:

(a) reaffirms all representations and warranties made to Administrative Agent and Lenders under the Credit Agreement and all of the other Existing Financing Agreements and confirms that all are true and correct in all material respects as of the date hereof, in each case other than representations and warranties that relate to a specific date;

(b) reaffirms all of the covenants contained in the Credit Agreement and covenants to abide thereby until all Loans, Obligations and other liabilities of Loan Parties to Administrative Agent and Lenders, of whatever nature and whenever incurred, are satisfied and/or released by Administrative Agent and Lenders;

(c) represents and warrants that no Potential Default or Event of Default has occurred and is continuing under any of the Existing Financing Agreements;

(d) represents and warrants that since September 30, 2014, no event or development has occurred which has had or is reasonably likely to have a Material Adverse Change;

(e) represents and warrants that it has the authority and legal right to execute, deliver and carry out the terms of this Amendment and all related agreements, instruments, and documents to which such Loan Party is a party, that such actions were duly authorized by all necessary corporate or company action and that the officers executing this Amendment and any related agreements, instruments or documents on its behalf were similarly authorized and empowered, and that neither this Amendment, or any related agreements, instruments, or documents contravenes any provisions of its Articles of Incorporation or Certificate of Formation, as applicable and Bylaws or Operating Agreement, as applicable, or of any contract or agreement to which it is a party or by which any of its properties are bound; and

(f) represents and warrants that this Amendment and all assignments, instruments, documents, and agreements executed and delivered by such Loan Party in connection herewith, are valid, binding and enforceable in accordance with their respective terms.

5. Security Interest. As security for the payment and performance of the Secured Obligations (as defined in the Security Agreement), and satisfaction by the Loan Parties of all covenants and undertakings contained in the Credit Agreement, the Loan Documents and the Existing Financing Agreements, the Borrower and each of the Existing Guarantors reconfirms the prior grant of the security interest in and first priority, perfected lien in favor of PNC Bank, National Association, in its capacity as Collateral Agent (as defined in the Security Agreement), for its benefit and the ratable benefit of each Secured Party (as defined in the Security Agreement), upon and to, all of its right, title and interest in and to the Collateral, whether now owned or hereafter acquired, created or arising and wherever located, and Joining Guarantors each hereby assign and grant in favor of PNC Bank, National Association, in its capacity as Collateral Agent, for its benefit and the ratable benefit of each Secured Party, a continuing first priority, perfected lien and security interest in and upon the Collateral (as defined in the Security Agreement) of each Joining Guarantor, whether now owned or hereafter acquired or arising and wherever located.

6. Confirmation of Indebtedness. Loan Parties confirm and acknowledge that as of the close of business on January 22, 2015, Borrower was indebted to Administrative Agent and Lenders under the Credit Agreement in the aggregate principal amount of $194,833,395.00, consisting of $191,800,000.00 on account of Revolving Credit Loans and $3,033,395.00 on account of Letters of Creedit, without any deduction, defense, setoff, claim or counterclaim, plus all fees, costs and expenses incurred to date in connection with the Credit Agreement and the other Loan Documents.

7. Acknowledgment of Guarantors. Each Guarantor hereby covenants and agrees that the Continuing Agreement of Guaranty and Suretyship dated November 8, 2012, as amended, restated, reaffirmed, supplemented and otherwise modified from time to time, most recently by that certain Omnibus Reaffirmation and Ratification Agreement dated August 29, 2014 and the Guarantor Joinder and Assumption Agreement of even date herewith, shall remain in full force and effect and shall continue to cover the existing and future Obligations of Borrowers and each other Guarantor (including Joining Guarantors) to Administrative Agent and Lenders under the Credit Agreement and the other Loan Documents.

8. Conditions Precedent/Effectiveness Conditions. This Amendment shall be effective upon (the “Effective Date”) the satisfaction of each of the following conditions (all documents to be in form and substance reasonably satisfactory to Administrative Agent and Administrative Agent’s counsel):

(a) Administrative Agent shall have received this Amendment duly executed by Required Lenders and all Loan Parties;

(b) Administrative Agent shall have received the results of UCC, tax lien, and judgment searches against the Target Company and Joining Guarantors;

(c) Administrative Agent shall have received a Guarantor Joinder and Assumption Agreement executed by each of the Joining Guarantors;

(d) Administrative Agent shall have received the updated Schedules attached hereto as Exhibit B;

(e) Administrative Agent shall have received a certificate certified by the secretary or manager of each Joining Guarantor, and an incumbency certificate for each Joining Guarantor identifying all authorized officers with specimen signatures, and authorizing resolutions of each Joining Guarantor authorizing the execution, delivery, and performance with respect to the terms of this Amendment and the Existing Financing Agreements;

(f) Administrative Agent shall have received each Joining Guarantor’s state certified Certificate of Formation and each Joining Guarantor’s Operating Agreement, each certified by the manager of Joining Guarantor;

(g) Administrative Agent shall have received in form and substance satisfactory to Administrative Agent, evidence that each Joining Guarantor was added as a named insured to Borrowers’ casualty insurance policies and liability insurance policies;

(h) Administrative Agent shall have received, on behalf of the Required Lenders, an amendment fee equal to the greater of (x) $5,000 and (y) .025% of such Required Lender’s Revolving Credit Commitment, in immediately available funds, which fee shall be fully earned upon the date of this Amendment;

(i) Administrative Agent shall have received a Fee Letter executed by Borrower;

(j) Administrative Agent shall have received a perfection certificate supplement executed by each Joining Guarantor;

(k) Administrative Agent shall have received a pledge agreement from Borrower pledging its interest in the Joining Guarantors and from the Joining Guarantors pledging all now owned or hereafter acquired Equity Interests in third party entities that either may own, including without limitation, as of the completion of the Tender Offer, all of their respective interests in Target Company;

(l) After giving effect to this Amendment, no Potential Default or Event of Default shall have occurred and be continuing; and

(m) Execution and/or delivery of all other agreements, instruments and documents requested by Agent to effectuate and implement the terms hereof.

9. Post Closing Items. Administrative Agent shall receive the following items prior to or contemporaneously with the closing of the Tender Offer (except item (c) below which shall be received within 60 days following the Tender Offer and item (d) below which shall be received within 10 days following the Tender Offer) (all documents to be in form and substance reasonably satisfactory to Administrative Agent and Administrative Agent’s counsel):

(a) An opinion from Borrowers’ counsel regarding the Joining Guarantors and that each step of the JPS Transaction is valid, binding, enforceable, and complies with applicable laws, including with respect to the inapplicability or compliance with, Regulations U,T and X;

(b) All agreements, documents, and instruments related to the JPS Transaction;

(d) A perfection certificate supplement updated to reflect the acquisition of the Target Company; and

(e) Execution and/or delivery of all other agreements, instruments and documents reasonably requested by Agent to effectuate and implement the terms hereof.

10. Payment of Expenses. Loan Parties shall pay or reimburse Administrative Agent for its reasonable attorneys’ fees and expenses in connection with the preparation, negotiation and execution of this Amendment and the documents provided for herein or related hereto.

11. Reaffirmation of Existing Financing Agreements. Except as modified by the terms hereof, all of the terms and conditions of the Credit Agreement, as amended, and all other of the Existing Financing Agreements, are hereby reaffirmed and shall continue in full force and effect as therein written.

12. Release. As further consideration for Administrative Agent’s and Lenders’ agreement to grant the accommodations set forth herein, each Loan Party hereby waives and releases and forever discharges Administrative Agent and Lenders and their respective officers, directors, attorneys, agents and employees from any liability, damage, claim, loss or expense of any kind that Loan Parties, or any of them, may have against Administrative Agent or Lender arising out of or relating to the Obligations, this Amendment or the Existing Financing Agreements, other than any liability, damage, claim loss or expense as a result of the gross negligence or willful misconduct of the Administrative Agent or any Lender.

13. Miscellaneous.

(a) No rights are intended to be created hereunder for the benefit of any third party donee, creditor, or incidental beneficiary.

(b) The headings of any paragraph of this Amendment are for convenience only and shall not be used to interpret any provision hereof.

(c) No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed on behalf of the party against whom enforcement is sought.

(d) The terms and conditions of this Amendment shall be governed by the laws of the State of New York.

(e) This Amendment may be executed in any number of counterparts and by facsimile, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery by facsimile or electronic transmission shall bind the parties hereto.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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

BORROWER:	HANDY & HARMAN GROUP LTD.

	By:	/s/ James F. McCabe, Jr.
	Name:		James F. McCabe, Jr.
	Title:		Senior Vice President