DESCRIPTION OF EXCHANGE
NOTES
You can find the definitions of certain
terms used in this description under the subheading Certain Definitions. In
this description, the word
Xerium
refers only to Xerium
Technologies, Inc. and not to any of its subsidiaries.
Xerium issued the old notes under an
indenture dated as of August 9, 2016 (the
Indenture
), among itself, the
Guarantors and U.S. Bank National Association, as trustee and collateral agent,
in a private transaction that was not subject to the registration requirements
of the Securities Act. The exchange notes will be issued under the Indenture and
will be identical in all material respects to the old notes, except that the
exchange notes will have been registered under the Securities Act and will not
bear legends restricting their transfer, and will be free of any obligation
regarding registration, including the payment of additional interest upon
failure to file or have declared effective an exchange offer registration
statement or to consummate an exchange offer by certain dates. Unless
specifically stated to the contrary, references to the term Notes in the
following description applies equally to the old notes and the exchange notes.
The old notes and the exchange notes will be treated as a single class for all
purposes under the Indenture, including, without limitation, amendments,
waivers, redemptions and offers to purchase. The terms of the Notes will include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (the
Trust Indenture Act
). The Collateral
Documents and the Intercreditor Agreement referred to below under the caption
Security define the terms of the agreements that secure the Notes and the
Note Guarantees.
The following description is a summary of
the material provisions of the Indenture, the Collateral Documents and the
Intercreditor Agreement. It does not restate those agreements in their entirety.
We urge you to read the Indenture, the Collateral Documents and the
Intercreditor Agreement because they, and not this description, define your
rights as holders of the Notes. Copies of the Indenture, the Collateral
Documents and the Intercreditor Agreement are available as set forth below under
Additional Information. Certain defined terms used in this description but
not defined below under Certain Definitions have the meanings assigned to
them in the Indenture.
The registered holder of a note will be
treated as the owner of it for all purposes. Only registered holders will have
rights under the Indenture.
Brief Description of the Notes and the
Note Guarantees
The Notes
The Notes:
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are general obligations of
Xerium;
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are secured by (i) a first priority lien
on all of Xeriums existing and future property and assets constituting
Notes
Priority Collateral and (ii) a second
priority lien on all of Xeriums existing and future property and assets
constituting
ABL Priority Collateral, in
each case, subject to Permitted Liens;
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are
pari passu
in right of payment with all existing and future
senior Indebtedness of Xerium (including the ABL Credit
Agreement);
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are effectively senior to all existing
and future unsecured senior Indebtedness of Xerium, to the extent of the
value of
the Collateral;
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are (i) effectively subordinated to all
of Xeriums Obligations with respect to the ABL Credit Agreement to the
extent of
the value of the ABL Priority
Collateral and (ii) effectively senior to all of Xeriums Obligations with
respect to the ABL
Credit Agreement to the
extent of the value of the Notes Priority Collateral;
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are effectively subordinated to any
existing and future Indebtedness of Xerium that is secured by Liens on
property
and assets that do not constitute
Collateral to the extent of the value of such property and assets;
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are structurally subordinated to all
existing and future Indebtedness, claims of holders of Preferred Stock and
other
liabilities of Xeriums subsidiaries
that are not guaranteeing the Notes;
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are senior in right of payment to any
future Subordinated Indebtedness of Xerium; and
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are unconditionally guaranteed on a
senior secured basis by the Guarantors.
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The Note
Guarantees
The Notes are guaranteed by each of the
Guarantors. The Note Guarantee of each Guarantor:
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is a general obligation of such
Guarantor;
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is secured by (i) a first priority lien
on all of such Guarantors existing and future property and assets
constituting
Notes Priority Collateral and
(ii) a second priority lien on all of such Guarantors existing and future
property and
assets constituting ABL
Priority Collateral, in each case, subject to Permitted Liens;
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ranks
pari passu
in right of payment with all existing and future
senior Indebtedness (including the ABL Credit
Agreement) of such Guarantor;
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is effectively senior to all existing
and future unsecured senior Indebtedness of such Guarantor, to the extent
of the
value of the Collateral;
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is (i) effectively subordinated to all
of such Guarantors Obligations with respect to the ABL Credit Agreement
to the
extent of the value of the ABL
Priority Collateral and (ii) effectively senior to all of such Guarantors
Obligations with
respect to the ABL Credit
Agreement to the extent of the value of the Notes Priority
Collateral;
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is effectively subordinated to any
existing and future Indebtedness of such Guarantor that is secured by
Liens on
property and assets that do not
constitute Collateral to the extent of the value of such property and
assets; and
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is senior in right of payment to any
future Subordinated Indebtedness of such
Guarantor.
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Substantially all of the operations of
Xerium are conducted through its Subsidiaries. Not all of Xeriums Subsidiaries
guarantee the Notes, and, as described under Note Guarantees, Note
Guarantees may be released under certain circumstances. In addition, future
Subsidiaries of Xerium may not be required to guarantee the Notes. Claims of
creditors of such non-guarantor Subsidiaries, including trade creditors and
creditors holding Indebtedness or Note Guarantees issued by such non-guarantor
Subsidiaries, and claims of holders of Preferred Stock of such non-guarantor
Subsidiaries, generally will have priority with respect to the assets and
earnings of such non-guarantor Subsidiaries over the claims of the creditors of
Xerium, including holders of Notes. Accordingly, the Notes will be structurally
subordinated to creditors (including trade creditors) and holders of Preferred
Stock, if any, of such non-guarantor Subsidiaries.
Our non-guarantor Subsidiaries accounted
for $249.1 million, or 70%, of our net sales for the twelve months ended
September 30, 2016. These non-guarantor Subsidiaries had total assets of $417.2
million, or 73%, of our total assets as of September 30, 2016. Although the
Indenture limits the incurrence of Indebtedness and the issuance of Preferred
Stock by certain Subsidiaries of Xerium, such limitation is subject to a number
of significant qualifications. Moreover, the Indenture does not impose any
limitation on the incurrence by such Subsidiaries of liabilities that are not
considered Indebtedness under the Indenture. See Certain Covenants
Incurrence of Indebtedness and Issuance of Preferred Stock.
Principal, Maturity and
Interest
Xerium issued $480.0 million in aggregate
principal amount of the old notes on August 9, 2016. Xerium may issue additional
Notes under the Indenture from time to time after this offering. Any issuance of
additional Notes is subject to all of the covenants in the Indenture, including
the covenants described below under the captions Certain Covenants
Incurrence of Indebtedness and Issuance of Preferred Stock and Liens. The
Notes and any additional Notes subsequently issued under the Indenture will be
treated as a single class for all purposes under the Indenture, including,
without limitation, waivers, amendments, redemptions and offers to purchase.
However, if any additional Notes are not fungible with the Notes for federal
income tax purposes, they will have a different CUSIP number or numbers and will
be represented by one or more different Global Notes (as defined under Book
Entry, Delivery and Form). Any additional Notes issued after this offering will
be secured by the Collateral, equally and ratably, with the Notes. As a result,
the issuance of additional Notes will have the effect of diluting the security
interest of the Collateral for the then outstanding Notes. Unless the context
otherwise requires, for all purposes of the Indenture and this Description of
Exchange Notes, references to Notes include any additional Notes actually
issued. Xerium will issue Notes in denominations of $2,000 and integral
multiples of $1,000 in excess of $2,000. The Notes will mature on August 15,
2021.
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Interest on the Notes accrues at the rate
of 9.500% per annum and will be payable semi-annually in arrears on February 15
and August 15, commencing on February 15, 2017. Xerium will make each interest
payment to the holders of record on the immediately preceding February 1 and
August 1.
Interest on the Notes accrues from the
Issue Date or, if interest has already been paid, from the date from which it
was most recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
If an interest payment date falls on a day
that is not a Business Day, the interest payment to be made on such interest
payment date will be made on the next succeeding Business Day with the same
force and effect as if made on such interest payment date, and no additional
interest will accrue solely as a result of such delayed payment.
Methods of Receiving Payments on the
Notes
If a holder of Notes has given wire
transfer instructions to Xerium, Xerium will pay all principal, interest and
premium, if any, on that holders Notes in accordance with those instructions.
All other payments on the Notes will be made at the office or agency of the
paying agent and registrar within the City and State of New York unless Xerium
elects to make interest payments by check mailed to the holders at their address
set forth in the register of holders.
Paying Agent and Registrar for the
Notes
The trustee acts as paying agent and
registrar for the Notes. Xerium may change the paying agent or registrar without
prior notice to the holders of the Notes, and Xerium or any of its Subsidiaries
may act as paying agent or registrar.
Transfer and Exchange
A holder may transfer or exchange Notes in
accordance with the provisions of the Indenture. The registrar and the trustee
may require a holder, among other things, to furnish appropriate endorsements
and transfer documents in connection with a transfer of Notes. Holders will be
required to pay all taxes due on transfer. Xerium will not be required to
transfer or exchange any note selected for redemption. Also, Xerium will not be
required to transfer or exchange any note for a period of 15 days before a
selection of Notes to be redeemed.
Note Guarantees
Not all of Xeriums Subsidiaries guarantee
the Notes. All of the direct and indirect wholly-owned Domestic Subsidiaries of
Xerium existing as of the Issue Date guarantee the Notes. The obligations of
each Guarantor under its Note Guarantee are limited as necessary to prevent that
Note Guarantee from constituting a fraudulent conveyance under applicable law.
This provision may not, however, be effective to protect a Note Guarantee from
being voided under fraudulent transfer law, or may reduce the applicable
Guarantors obligation to an amount that effectively makes its Note Guarantee
worthless. If a Note Guarantee was rendered voidable, it could be subordinated
by a court to all other indebtedness (including guarantees and other contingent
liabilities) of the Guarantor, and, depending on the amount of such
indebtedness, a Guarantors liability on its Note Guarantee could be reduced to
zero. See Risk Factors Risks Relating to the Notes Federal and state
fraudulent transfer laws may permit a court to void the exchange notes, the
guarantees and the liens granted in respect thereof, subordinate claims in
respect of the exchange notes and the guarantees and require noteholders to
return payments received, and, if that occurs, you may not receive any payments
on the exchange notes.
Any Guarantor that makes a payment under
its Note Guarantee will be entitled upon payment in full of all guaranteed
obligations under the Indenture to a contribution from each other Guarantor in
an amount equal to such other Guarantors pro rata portion of such payment based
on the respective net assets of all the Guarantors at the time of such payment
determined in accordance with GAAP.
Security
General
Pursuant to one or more Collateral
Documents made by Xerium and the Guarantors in favor of the collateral agent for
the benefit of the Notes Secured Parties, the Notes, the Note Guarantees and all
other Obligations under the other Indenture Documents are secured by a Lien on
substantially all of the assets of Xerium and the Guarantors, including a pledge
of the Capital Stock of each Subsidiary owned directly by Xerium or a
Guarantor.
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ABL
Priority Collateral
means all Collateral
consisting of the following (including for the avoidance of doubt, any such
assets that, but for the application of Section 552 of the Bankruptcy Code (or
any similar provision of any foreign Bankruptcy Law) would be ABL Priority
Collateral):
(1)
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all account receivables, other
than account receivables which constitute identifiable proceeds of Notes
Priority Collateral;
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(2)
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cash, money and cash equivalents,
other than identifiable cash proceeds from the sale or disposition of
Notes Priority Collateral;
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(3)
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all (x) deposit accounts (other
than PPE Priority Accounts), (y) securities accounts (other than PPE
Priority Accounts), security entitlements and securities credited to such
a securities account (other than Equity Interests in any Restricted
Subsidiary of Xerium or their Affiliates), and (z) commodity accounts
(other than PPE Priority Accounts) and commodity contracts and, in each
case, all cash, money, cash equivalents, checks and other property held
therein or credited thereto;
provided
,
however
, to the
extent that identifiable proceeds of Notes Priority Collateral are
deposited in any such deposit accounts, securities accounts or commodity
account, after the delivery of a PPE Cash Proceeds Notice, such
identifiable proceeds shall be treated as Notes Priority
Collateral;
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(4)
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all inventory;
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(5)
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to the extent relating to or
arising from, evidencing or governing any of the items referred to in the
preceding clauses (1) through (4) constituting ABL Priority Collateral,
all documents, general intangibles (including all rights under contracts
but excluding any intellectual property), instruments (including
promissory notes other than any intercompany note made in favor of Xerium
or any Guarantor by Xerium or any Subsidiary thereof), chattel paper
(including tangible chattel paper and electronic chattel paper), and
commercial tort claims;
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(6)
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all federal, state, provincial,
municipal and other tax refunds or rebates;
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(7)
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to the extent relating to any of
the items referred to in the preceding clauses (1) through (6)
constituting ABL Priority Collateral, all supporting obligations and
letter-of-credit rights;
provided
, that to the extent
that any of the foregoing also relates to Notes Priority Collateral, only
that portion related to the items referred to in the preceding clauses (1)
through (6) shall be included in the ABL Priority Collateral;
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(8)
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all books and records relating to
the items referred to in the preceding clauses (1) through (7)
constituting ABL Priority Collateral (including all books, databases,
customer lists, engineer drawings, and records, whether tangible or
electronic, which contain any information relating to any of the items
referred to in the preceding clauses (1) through (7) constituting ABL
Priority Collateral but, in each case, excluding any intellectual
property);
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(9)
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all collateral security and
guarantees with respect to any of the foregoing and all cash, money, cash
equivalents, insurance proceeds, instruments, securities and financial
assets received as proceeds of any of the foregoing; and
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all proceeds of any of the items
referred to in the preceding clauses (1) through
(9).
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Notes
Priority Collateral
means all Collateral
(including for the avoidance of doubt, any such assets that, but for the
application of Section 552 of the Bankruptcy Code (or any similar provision of
any foreign Bankruptcy Law) would be Notes Priority Collateral) other than ABL
Priority Collateral.
Notwithstanding the foregoing, the
Collateral does not include (collectively, the
Excluded Assets
):
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(i) the Voting Stock of any direct foreign subsidiary
(that is not a Guarantor) of Xerium or a Guarantor in excess of 65% of all
of the outstanding Voting Stock of such foreign subsidiary or (ii) Equity
Interests in joint ventures to the extent prohibited by the terms of any
applicable charter, joint venture or similar agreement;
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(2)
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any lease, license, franchise, charter, authorization,
contract, property right or agreement to which Xerium or any Guarantor is
a party or any of its rights or interests thereunder if and only for so
long as the grant of a Lien under the Collateral Documents will constitute
or result in a breach, termination or default under any such lease,
license, franchise, charter, authorization, contract, property right or
agreement (other than to the extent that any such
term
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would be rendered ineffective
pursuant to Section 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial
Code (
UCC
) (or any successor provision or provisions) of any relevant
jurisdiction or any other applicable law (including the Bankruptcy Code)
or principles of equity);
provided
that such lease, license, franchise,
charter, authorization, contract, property right or agreement (including
any proceeds of any of the foregoing) or, to the extent severable, any
portion thereof, will be an Excluded Asset only to the extent and for so
long as the consequences specified above will result and will cease to be
an Excluded Asset and will become subject to the Lien granted under the
Collateral Documents, promptly at such time as such consequences will no
longer result;
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(3)
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any asset or property right of
any nature if the grant of such security interest shall constitute or
result in (A) the abandonment, invalidation or unenforceability of such
asset or property right or the loss of use of such asset or property right
or (B) a breach, termination or default under any lease, license, contract
or agreement, other than to the extent that any such term would be
rendered ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of
the UCC (or any successor provision or provisions) of any relevant
jurisdiction or any other applicable law or principles of equity, to which
Xerium or any Guarantor is party;
provided
that (I) in each case,
such asset or property right will be an Excluded Asset only to the extent
and for so long as the consequences specified above will result and will
cease to be an Excluded Asset and will become subject to the Liens granted
under the Indenture Documents promptly after such time as such
consequences will no longer result and (II) the foregoing exclusions of
this clause (3) shall in no way be construed to limit, impair, or
otherwise affect any of the collateral agents or any noteholders
continuing security interests in and Liens upon any rights or interests of
Xerium or any Guarantor in or to (A) monies due or to become due under or
in connection with any described asset, property right, lease, license,
contract or agreement, or (B) any proceeds from the sale, license, lease,
or other dispositions of any such asset, property right, lease, license,
contract or agreement;
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(4)
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Real Estate Assets that are not
Material Real Estate Assets;
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(5)
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all cars, trucks, trailers and
other vehicles and items covered by certificates of title or ownership to
the extent that a Lien on such assets cannot be perfected by the filing of
UCC financing statements in any jurisdiction in the United
States;
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(6)
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assets located outside the United
States (other than Equity Interests of foreign subsidiaries that are
directly held by Xerium or any Guarantor) to the extent a Lien on such
assets cannot be perfected by the filing of UCC financing statements in
any jurisdiction in the United States;
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(7)
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any intent-to-use application
for registration of a trademark filed in the United States Patent and
Trademark Office pursuant to Section 1(b) of the Lanham Act, 15 U.S.C.
§1051, prior to the filing of a Statement of Use pursuant to Section
1(d) of the Lanham Act or an Amendment to Allege Use pursuant to Section
1(c) of the Lanham Act with respect thereto, solely to the extent, if any,
that, and solely during the period, if any, in which the grant of a
security interest therein would impair the validity or enforceability of
any registration that issues from such intent-to-use application under
applicable federal law;
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(8)
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property and assets owned by
Xerium or any Guarantors that are the subject of Permitted Liens described
in clause (6) of the definition thereof for so long as such Permitted
Liens are in effect and the Indebtedness secured thereby otherwise
prohibits such property or asset from being Collateral;
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(9)
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any Capital Stock and
other securities of a Subsidiary of Xerium to the extent that the pledge
of such Capital Stock and other securities results in Xeriums being
required to file separate financial statements of such Subsidiary with the
SEC, but only to the extent necessary to not be subject to such
requirement and only for so long as such requirement is in existence;
provided
that neither Xerium nor any Restricted Subsidiary shall take any
action in the form of a reorganization, merger or other restructuring a
principal purpose of which is to provide for the release of the Lien on
any Capital Stock pursuant to this clause (9). In addition, in the event
that Rule 3-16 of Regulation S-X under the Securities Act is amended,
modified or interpreted by the SEC to require (or is replaced with another
rule or regulation, or any other law, rule or regulation is adopted, which
would require) the filing with the SEC (or any other governmental agency)
of separate financial statements of any Subsidiary of Xerium due to the
fact that such Subsidiarys Capital Stock secures the Notes affected
thereby, then the Capital Stock of such Subsidiary will automatically be
deemed not to be part of the Collateral securing the Notes but only to the
extent necessary to not be subject to such requirement and only for so
long as required to not be subject to such requirement. In
such
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event, the Collateral
Documents may be amended or modified, without the consent of any holder of
the Notes, to the extent necessary to release the security interests in
favor of the collateral agent on the shares of Capital Stock that are so
deemed to no longer constitute part of the Collateral. In the event that
Rule 3-16 of Regulation S-X under the Securities Act is amended, modified
or interpreted by the SEC to permit (or is replaced with another rule or
regulation, or any other law, rule or regulation is adopted, which would
permit) such Subsidiarys Capital Stock to secure the Notes in excess of
the amount then pledged without the filing with the SEC (or any other
governmental agency) of separate financial statements of such Subsidiary,
then the Capital Stock of such Subsidiary will automatically be deemed to
be a part of the Collateral; and
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(10)
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proceeds and products
from any and all of the foregoing excluded collateral described in clauses
(1) through (9), unless such proceeds or products would otherwise
constitute Collateral securing the Notes;
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provided
, that notwithstanding anything to the contrary, to the extent that
Xerium or a Guarantor grants a Lien on any asset or right described in clause
(1) through (8) or (10) above to secure any Obligations under the ABL Credit
Agreement or any other Credit Facility or any other ABL Obligations or any
Obligations under any Pari Passu Payment Lien Documents or any other Pari Passu
Payment Lien Obligations, such asset or right shall not constitute an Excluded
Asset.
So long as no Event of Default has
occurred and is continuing, subject to certain terms and conditions, Xerium and
the Guarantors will be entitled to receive all cash dividends, interest and
other payments made upon or with respect to the Collateral and to exercise any
voting and other consensual rights pertaining to the Collateral.
Upon the occurrence and during the
continuance of an Event of Default, subject to terms of the Intercreditor
Agreement (as defined below):
(1)
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upon notice to Xerium
of the intent to exercise remedies, all voting or other consensual rights
pertaining to the Collateral will become vested solely in the collateral
agent and the right of Xerium and the Guarantors to exercise any such
voting and consensual rights will cease; and
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(2)
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the collateral agent
may, subject to the terms of the Intercreditor Agreement, take possession
of and sell the Collateral or any part of the Collateral in accordance
with the terms of the Collateral Documents.
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Subject to terms of the Intercreditor
Agreement, the collateral agent acting at the direction of the trustee will
determine the circumstances and manner in which the Collateral will be disposed
of, including, but not limited to, the determination of whether to release all
or any portion of the Collateral from the Liens created by the Collateral
Documents and whether to foreclose on the Collateral following an Event of
Default that has occurred and is continuing.
All of the Liens created by the Indenture
and the Collateral Documents to secure the Obligations of Xerium and the
Guarantors under the Notes and the Note Guarantees will be immediately and
automatically released upon:
(1)
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the full and final
payment (other than contingent indemnification obligations for which no
claim has been asserted) and performance of the Obligations of Xerium and
the Guarantors under the Indenture, the Notes, the Note Guarantees and the
other Indenture Documents;
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(2)
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legal or covenant
defeasance pursuant to the provisions set forth under the caption Legal
Defeasance and Covenant Defeasance or discharge of the Indenture in
accordance with the provisions set forth under the caption Satisfaction
and Discharge; or
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(3)
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the consent of holders
of at least 66⅔% in aggregate principal amount of the Notes then
outstanding.
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In addition, the collateral agent will
immediately and automatically release from the Lien created by the Collateral
Documents:
(1)
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Collateral that is sold,
transferred, disbursed or otherwise disposed of to a Person other than
Xerium or a Guarantor to the extent such sale, transfer, disbursement or
disposition is not prohibited by the provisions of the Indenture;
provided
that any products or proceeds received by Xerium or a Guarantor in
respect of any such Collateral shall continue to constitute Collateral to
the extent required by the Indenture and the Collateral
Documents;
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(2)
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the property and assets of a
Guarantor upon the release of such Guarantor from its Note Guarantee in
accordance with the terms of the Indenture;
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(3)
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any property or asset of Xerium
or a Guarantor that is or becomes an Excluded Asset;
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(4)
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any portion of the Collateral not
constituting all or substantially all of the Collateral upon consent of
holders of a majority in aggregate principal amount of Notes then
outstanding; and
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(5)
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to the extent required by the
Intercreditor Agreement or the Collateral
Documents;
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provided
that, notwithstanding any other provision of the Indenture or the
Collateral Documents, Liens securing all or substantially all of the Collateral
may be released only pursuant to the terms of the previous paragraph.
The collateral agents ability to
foreclose on the Collateral may be subject to lack of perfection, the consent of
third parties, prior liens and practical problems associated with the
realization of the collateral agents Lien on the Collateral.
Certain security interests in the
Collateral may not be in place on the issue date of the exchange notes or may
not be perfected on the issue date of the exchange notes. For example, some of
the instruments and other documents, such as Mortgages and account control
agreements, required to perfect a security interest may not be delivered and/or,
if applicable, recorded on or prior to such date. To the extent any such
security interest is not perfected by such date, Xerium and the Guarantors will
use their commercially reasonable efforts to perform all acts and things that
may be required, including obtaining any required consents from third parties,
to have all security interests in the Collateral duly created and enforceable
and perfected, to the extent required by the Collateral Documents, promptly
following the issue date of the exchange notes (but within 120 days following
the Issue Date). Xerium and the Guarantors will not be required to: (a) cause
the collateral agent to have control with respect to (i) any deposit account
that is exclusively a payroll account, zero balance employee benefit account or
other employee wage and benefit payment account that Xerium or any Guarantor may
hold in trust for the benefit of an unaffiliated third party, (ii) any deposit
account used exclusively for payment of payroll taxes or tax accounts,
including, without limitation, sales tax accounts, (iii) escrow accounts, (iv)
fiduciary or trust accounts, (v) zero-balance accounts or (vi) an individual
deposit account or securities account that has an average monthly balance of
less than $1,500,000; or (b) perfect a security interest in (i) commercial tort
claims that do not exceed $1,000,000 individually or (ii) letter of credit
rights that do not exceed $1,000,000 individually. Notwithstanding anything to
the contrary in the immediately preceding sentence, Xerium and the Guarantors
will be required, in the case of clause (a) of the preceding sentence, to cause
the collateral agent to have control with respect to such accounts to the
extent that (and at such time as) the ABL Agent has control with respect to
such accounts and, in the case of clause (b) of the preceding sentence, to
perfect security interests in any commercial tort claims or letter of credit
rights to the extent that (and at such time as) a security interest securing any
ABL Obligations is perfected, in each case, subject to the terms of the
Intercreditor Agreement.
No appraisals of any Collateral have been
prepared in connection with this offering of Notes. The value of the Collateral
at any time will depend on market and other economic conditions, including the
availability of suitable buyers for the Collateral. In the event of a
foreclosure, liquidation, bankruptcy or similar proceeding, no assurance can be
given that the proceeds from any sale or liquidation of the Collateral will be
sufficient to pay Xeriums Obligations under the Notes or the Guarantors
Obligations under the Note Guarantees, in full or at all. See Risk
FactorsRisks Related to the NotesThe value of the collateral may not be
sufficient to satisfy all the obligations secured by such collateral. As a
result, holders of the exchange notes may not receive full payment on their
exchange notes following an event of default.
If the proceeds of any of the Collateral
were not sufficient to repay all amounts due on the Notes, the holders of the
Notes (to the extent not repaid from the proceeds of the sale of the Collateral)
would have only an unsecured claim against the remaining assets of Xerium and
the Guarantors.
Intercreditor Agreement
In connection with the issuance of the old
notes, the collateral agent entered into an intercreditor agreement (the
Intercreditor Agreement), on behalf of itself and the other PPE Secured
Parties (including the holders of the Notes), with the ABL Agent, on behalf of
itself and the other ABL Secured Parties, which agreement was acknowledged by
Xerium and the Guarantors (the Guarantors, together with Xerium, are referred to
hereinafter as the
Credit
Parties
). The Intercreditor Agreement
defines the relative rights and related matters of the ABL Secured Parties and
the PPE Secured Parties with respect to the Collateral. The Intercreditor
Agreement applies to the exchange notes. The following description is a summary
of the principal terms that are contained in the Intercreditor Agreement, rather
than a complete and definitive description of all of the terms of the
Intercreditor Agreement.
25
Lien Priorities
Lien Priority
(a) Notwithstanding (i) the date, time,
method, manner or order of grant, attachment or perfection (including any defect
or deficiency or alleged defect or deficiency in any of the foregoing) of any
Liens granted to the ABL Secured Parties in respect of all or any portion of the
Collateral or of any Liens granted to the PPE Secured Parties in respect of all
or any portion of the Collateral and regardless of how any such Lien was
acquired (whether by grant, statute, operation of law, subrogation or
otherwise), (ii) the order or time of filing or recordation of any document or
instrument for perfecting the Liens in favor of the ABL Agent or the collateral
agent (or ABL Secured Parties or PPE Secured Parties) in any Collateral, (iii)
any provision of the UCC, Bankruptcy Laws or any other applicable law, or of the
ABL Documents or the PPE Documents (including the Indenture Documents), (iv)
whether the ABL Agent or the collateral agent, in each case, either directly or
through agents, holds possession of, or has control over, all or any part of the
Collateral, (v) the date on which the ABL Obligations or the PPE Obligations
(including the Notes Obligations) are advanced or made available to the Credit
Parties, (vi) the fact that any such Liens in favor of the ABL Agent or the ABL
Lenders or the collateral agent or the other PPE Secured Parties securing any of
the ABL Obligations or PPE Obligations, respectively, are (x) subordinated to
any Lien securing any obligation of any Credit Party other than the PPE
Obligations or the ABL Obligations, respectively, or (y) otherwise subordinated,
voided, avoided, invalidated or lapsed, or (vii) any other circumstance of any
kind or nature whatsoever, the ABL Agent, on behalf of itself and the ABL
Secured Parties, and the collateral agent, on behalf of itself and the PPE
Secured Parties, agree that:
(1)
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any Lien in respect of all or any
portion of the ABL Priority Collateral now or hereafter held by or on
behalf of
(a) the collateral agent or any PPE Secured Party that
secures all or any portion of the PPE Obligations shall in all respects be
junior and subordinate to all Liens granted to the ABL Agent and the ABL
Secured Parties in such ABL Priority Collateral to secure all or any
portion of the ABL Obligations and (b) the ABL Agent or any ABL Secured
Party that secures all or any portion of the ABL Obligations shall in all
respects be senior and prior to all Liens granted to the collateral agent
or any PPE Secured Party in such ABL Priority Collateral to secure all or
any portion of the PPE Obligations;
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(2)
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any Lien in respect of all or any
portion of the Notes Priority Collateral now or hereafter held by or on
behalf of
(a) the ABL Agent or any ABL Secured Party that secures all
or any portion of the ABL Obligations shall in all respects be junior and
subordinate to all Liens granted to the collateral agent and the PPE
Secured Parties in such Notes Priority Collateral to secure all or any
portion of the PPE Obligations and (b) the collateral agent or any PPE
Secured Party that secures all or any portion of the PPE Obligations shall
in all respects be senior and prior to all Liens granted to the ABL Agent
or any ABL Secured Party in such Notes Priority Collateral to secure all
or any portion of the ABL Obligations.
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(b) Notwithstanding any failure by any ABL
Secured Party or PPE Secured Party to perfect its security interests in the
Collateral or any avoidance, invalidation, priming or subordination by any third
party or court of competent jurisdiction of the security interests in the
Collateral granted to the ABL Secured Parties or the PPE Secured Parties, the
priority and rights as between the ABL Secured Parties and the PPE Secured
Parties with respect to the Collateral shall be as set forth in the
Intercreditor Agreement.
(c) Each Agent, for and on behalf of
itself and the Secured Parties that such Agent represents, acknowledges and
agrees that the other Agent, for the benefit of itself and the Secured Parties
that the other Agent represents, has been, or may be, granted Liens upon all of
the Collateral in which such Agent has been granted Liens and such Agent, for
and on behalf of itself and the Secured Parties that such Agent represents,
consents thereto. The subordination of Liens by each Agent in favor of the other
Agent as set forth in the Intercreditor Agreement shall not be deemed to
subordinate such Agents Liens to the Liens of any other Person, nor shall such
subordination be affected by the subordination of such Liens to any Lien of any
other Person.
(d) The Intercreditor Agreement shall not
restrict any of the ABL Agent and the other ABL Secured Parties rights and
remedies (including without limitation, the rights and remedies of J.P. Morgan
Europe Limited, as European Collateral Agent and European Administrative Agent
under the ABL Documents (in such capacities, together with any successors and
assigns, referred to herein as the
European
Agents
)) with respect to the assets of any
Foreign Subsidiary of Xerium for so long as any such assets do not constitute
Collateral that secures the Notes or any Note Guarantee. In recognition of the
foregoing, each Agent will acknowledge and agree that, notwithstanding any
provision thereof, for purposes of the Intercreditor Agreement (i) the term
Collateral shall not include the assets or property of any Foreign Subsidiary
of Xerium that is a borrower or guarantor under (or in respect of) the ABL
Credit Agreement, (ii) no Foreign Subsidiary of Xerium is a guarantor under (or
in respect of) the Indenture unless it shall have executed a supplemental
indenture to the Indenture pursuant to which it shall have become a Guarantor
thereunder, (iii) no such Foreign Subsidiary constitutes a Credit Party under
the Intercreditor Agreement unless it shall have executed a
supplemental indenture to the Indenture pursuant to which it shall have become a
Guarantor thereunder and (iv) until such time, if any, as any of the assets of a
Foreign Subsidiary of Xerium also constitutes Collateral that secures the Notes
or any Note Guarantee, the ABL Agent and the other ABL Secured Parties
(including, for the avoidance of doubt, the European Agents) shall be free to
deal with the assets and properties of any such Foreign Subsidiary (including
the exercise of any remedies with respect thereto) and retain and/or apply
proceeds thereof without regard to any of the provisions or restrictions set
forth in the Intercreditor Agreement.
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Waiver of Right to Contest
Liens
Each Agent, for and on behalf of itself
and the Secured Parties that such Agent represents, agrees that such Agent and
the Secured Parties that such Agent represents shall not (and will waive any
right to) take any action to contest or challenge (or assist or support any
other Person in contesting or challenging), directly or indirectly, whether or
not in any proceeding (including in any Insolvency Proceeding), the validity,
priority, enforceability or perfection of the Secured Obligations of the other
Agent and the Secured Parties that the other Agent represents or the Liens of
the other Agent and the Secured Parties that the other Agent represents in
respect of any of the Collateral or the provisions of the Intercreditor
Agreement. Each Agent, for itself and on behalf of the Secured Parties that such
Agent represents, further agrees that neither such Agent nor the Secured Parties
that such Agent represents will take any action that would interfere with any
Exercise of Secured Creditor Remedies undertaken by the other Agent or any
Secured Party that the other Agent represents under the Credit Documents that
evidences or governs the Secured Obligations of the other Agent and the Secured
Parties that the other Agent represents with respect to the Priority Collateral
that secures such Secured Obligations. Each Agent, for itself and on behalf of
the Secured Parties that such Agent represents, waives any and all rights such
Agent or the Secured Parties that such Agent represents may have as a junior
lien creditor or otherwise to contest, protest, object to, or interfere with the
manner in which the other Agent or any Secured Party that the other Agent
represents seeks to enforce its Liens in any Priority Collateral that secures
the Secured Obligations of the other Agent and the Secured Parties. The
foregoing shall not be construed to prohibit either Agent from enforcing the
provisions of the Intercreditor Agreement or otherwise acting in accordance with
the Intercreditor Agreement.
Remedies Standstill
(a) The collateral agent, on behalf of
itself and the PPE Secured Parties, agrees that, from the date of the
Intercreditor Agreement until the earlier of (i) the date which is 270 days
after the ABL Agents receipt of an Enforcement Notice from the collateral agent
(the
PPE Enforcement Date
), or (ii) the date upon which the Discharge of ABL
Obligations shall have occurred, neither the collateral agent nor any PPE
Secured Party will Exercise Any Secured Creditor Remedies with respect to any of
the ABL Priority Collateral without the written consent of the ABL Agent, and
will not take, receive or accept any proceeds of ABL Priority Collateral, it
being understood and agreed that the temporary deposit of proceeds of ABL
Priority Collateral in a deposit account controlled by the collateral agent
shall not constitute a breach of the Intercreditor Agreement so long as such
proceeds are promptly (but in no event later than five Business Days after
receipt) remitted to the ABL Agent. From and after the date upon which the
Discharge of ABL Obligations shall have occurred (or prior thereto upon the
occurrence of the PPE Enforcement Date), the collateral agent or any PPE Secured
Party may Exercise Any Secured Creditor Remedies under the PPE Documents or
applicable law as to any ABL Priority Collateral;
provided
,
however
, that any Exercise of Secured
Creditor Remedies with respect to any Collateral by the collateral agent or the
PPE Secured Parties is at all times subject to the provisions of the
Intercreditor Agreement;
provided
further
, that the collateral agent shall not
Exercise Any Secured Parties Remedies against the ABL Priority Collateral after
the PPE Enforcement Date and prior to Discharge of ABL Obligations (A) at any
time the ABL Agent or the ABL Secured Parties have commenced and are diligently
pursuing an Exercise of Secured Creditor Remedies against a material portion of
the ABL Priority Collateral, (B) at any time that any Credit Party is then a
debtor under or with respect to (or otherwise subject to) any Insolvency
Proceeding, or (C) if the Event of Default under the PPE Documents is waived
in accordance with the terms of the PPE Documents.
(b) The ABL Agent, on behalf of itself and
the ABL Secured Parties, agrees that, from the date of the Intercreditor
Agreement until the earlier of (i) the date which is 180 days after the
collateral agents receipt of an Enforcement Notice from the ABL Agent (the
ABL Enforcement Date
), or (ii) the date upon which the Discharge of PPE
Obligations shall have occurred, neither the ABL Agent nor any ABL Secured Party
will Exercise Any Secured Creditor Remedies with respect to the Notes Priority
Collateral without the written consent of the collateral agent, and will not
take, receive or accept any proceeds of the Notes Priority Collateral, it being
understood and agreed that the temporary deposit of proceeds of Notes Priority
Collateral in a deposit account controlled by the ABL Agent shall not constitute
a breach of the Intercreditor Agreement so long as such proceeds are remitted to
the collateral agent in accordance with Actions of the PartiesTracing of and
Priorities in Proceeds or paragraph (a) of Application of Proceeds
Application of Proceeds below. From and after the date upon which the Discharge
of PPE Obligations shall have occurred (or prior thereto upon the occurrence of
the ABL Enforcement Date), the ABL Agent or any ABL Secured Party may Exercise
Any Secured Creditor Remedies under the ABL Documents or applicable law as to any Notes Priority Collateral;
provided
,
however
,
that any Exercise of Secured Creditor Remedies with respect to any Collateral by
the ABL Agent or the ABL Secured Parties is at all times subject to the
provisions of the Intercreditor Agreement;
provided further
, that the ABL Agent
shall not Exercise Any Secured Parties Remedies with respect to the Notes
Priority Collateral after the ABL Enforcement Date and prior to the Discharge of
PPE Obligations (A) at any time the collateral agent or the PPE Secured Parties
have commenced and are diligently pursuing an Exercise of Secured Creditor
Remedies against any material portion of the Notes Priority Collateral, (B) at
any time that any Credit Party is then a debtor under or with respect to (or
otherwise subject to) any Insolvency Proceeding or (C) if the Event of Default
under the ABL Credit Agreement is waived in accordance with the terms of the ABL
Credit Agreement.
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(c) Notwithstanding the provisions of
paragraph (a) or (b) of this Remedies Standstill or any other provision of
the Intercreditor Agreement, nothing contained in the Intercreditor Agreement
shall be construed to prevent any Agent or any Secured Party from (i) filing a
claim or statement of interest with respect to the ABL Obligations or PPE
Obligations owed to it in any Insolvency Proceeding commenced by or against any
Credit Party, (ii) taking any action (not adverse to the priority status of the
Liens of the other Agent or other Secured Parties on the Collateral in which
such other Agent or other Secured Party has a priority Lien or the rights of the
other Agent or any of the other Secured Parties to Exercise Any Secured Creditor
Remedies in respect thereof) in order to create, perfect, preserve or protect
(but not enforce) its Lien on any Collateral, (iii) filing any necessary or
responsive pleadings in opposition to any motion, adversary proceeding or other
pleading filed by any Person objecting to or otherwise seeking disallowance of
the claim or Lien of such Agent or Secured Party or (iv) voting on any plan of
reorganization or file any proof of claim in any Insolvency Proceeding of any
Credit Party, in each case (i) through (iv) above to the extent not inconsistent
with the express terms of the Intercreditor Agreement.
Exercise of Rights
(a)
No Other Restrictions
. Except
as expressly set forth in the Intercreditor Agreement, each PPE Secured Party
and each ABL Secured Party shall have any and all rights and remedies it may
have as a creditor under applicable law, including the right to the Exercise of
Secured Creditor Remedies;
provided
,
however
, that the Exercise of Secured
Creditor Remedies with respect to the Collateral shall be subject to the Lien
Priority and to the provisions of the Intercreditor Agreement. The ABL Agent may
enforce the provisions of the ABL Documents, the collateral agent may enforce
the provisions of the PPE Documents and each may Exercise Any Secured Creditor
Remedies, all in such order and in such manner as each may determine in the
exercise of its sole discretion, consistent with the terms of the Intercreditor
Agreement and mandatory provisions of applicable law;
provided
,
however
, that each of the ABL Agent
and the collateral agent agrees to provide to the other (x) an Enforcement
Notice prior to the commencement of an Exercise of Any Secured Creditor Remedies
and (y) copies of any notices that it is required under applicable law to
deliver to any Credit Party;
provided
further
,
however
, that the ABL Agents failure
to provide the Enforcement Notice (other than in connection with Actions of
the PartiesInspection and Access Rights) or any such copies to the collateral
agent shall not impair any of the ABL Agents rights under the Intercreditor
Agreement or under any of the ABL Documents and the collateral agents failure
to provide the Enforcement Notice or any such copies to the ABL Agent shall not
impair any of the collateral agents rights under the Intercreditor Agreement or
under any of the PPE Documents. Each of the collateral agent, each PPE Secured
Party, the ABL Agent and each ABL Secured Party agrees that it will not
institute any suit or other proceeding or assert in any suit, Insolvency
Proceeding or other proceeding any claim, in the case of the collateral agent
and each PPE Secured Party, against either the ABL Agent or any other ABL
Secured Party, and in the case of the ABL Agent and each other ABL Secured
Party, against either the collateral agent or any other PPE Secured Party,
seeking damages from, or other relief by way of specific performance,
instructions or otherwise, with respect to, any action taken or omitted to be
taken by such Person with respect to the Collateral which is consistent with the
terms of the Intercreditor Agreement, and no such Agent shall be liable for any
such action taken or omitted to be taken.
(b)
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Release of
Liens
.
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(i)
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In the event of (A) any private
or public sale of all or any portion of the ABL Priority Collateral in
connection with any Exercise of Secured Creditor Remedies by the ABL Agent
(other than in connection with a refinancing of the ABL Obligations
permitted under the Intercreditor Agreement) or after the occurrence and
during the continuation of an Event of Default under the ABL Credit
Agreement with the consent of the ABL Agent, including by any Credit
Party, or (B) in any circumstance not included in preceding clause (A),
any sale, transfer or other disposition of all or any portion of the ABL
Priority Collateral (other than in connection with a refinancing of the
ABL Obligations permitted under the Intercreditor Agreement) or with the
consent of the ABL Agent, including by any Credit Party, so long as such
sale, transfer or other disposition under this clause (B) is then
permitted by the ABL Documents and the PPE Documents as each in effect on
the date of the Intercreditor Agreement (or is consented to by the
requisite ABL Lenders and the requisite PPE Secured Parties), the
collateral agent agrees, on behalf of itself and the PPE Secured Parties
that, so long as the collateral agent, for
the benefit of the PPE Secured Parties, shall retain a Lien on the
proceeds of such sale, transfer or other disposition (to the extent that
such proceeds are not applied to the ABL Obligations as provided in
paragraph (b) of Application of ProceedsApplication of Proceeds), such
sale, transfer or other disposition will be free and clear of the Liens on
such ABL Priority Collateral (but not the proceeds thereof) securing the
PPE Obligations, and the collateral agents and the PPE Secured Parties
Liens with respect to the ABL Priority Collateral (but not the proceeds
thereof) so sold, transferred, or disposed shall terminate and be
automatically released without further action concurrently with, and to
the same extent as, the release of the ABL Secured Parties Liens on such
ABL Priority Collateral. In furtherance of, and subject to, the foregoing,
the collateral agent agrees that it will promptly execute any and all Lien
releases or other documents reasonably requested by the ABL Agent in
connection therewith. The collateral agent appoints the ABL Agent and any
officer or duly authorized person of the ABL Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power of attorney in the place and stead of the collateral
agent and in the name of the collateral agent or in the ABL Agents own
name, from time to time, in the ABL Agents sole discretion, for the
purposes of carrying out the terms of this paragraph, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments as may be necessary or desirable to accomplish the purposes of
this paragraph, including any financing statements, endorsements,
assignments, releases or other documents or instruments of transfer (which
appointment, being coupled with an interest, is irrevocable).
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(ii)
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In the event of (A) any private
or public sale of all or any portion of the Notes Priority Collateral in
connection with any Exercise of Secured Creditor Remedies by the
collateral agent (other than in connection with a refinancing of the PPE
Obligations permitted under the Intercreditor Agreement) or after the
occurrence and during the continuation of an Event of Default with the
consent of the collateral agent, including by any Credit Party, or (B) in
any circumstance not included in preceding clause (A), any sale, transfer
or other disposition of all or any portion of the Notes Priority
Collateral (other than in connection with a refinancing of the PPE
Obligations permitted under the Intercreditor Agreement), so long as such
sale, transfer or other disposition under this clause (B) is then
permitted by the ABL Documents and the PPE Documents as each in effect on
the date of the Intercreditor Agreement (or is consented to by the
requisite ABL Lenders and the requisite PPE Secured Parties), the ABL
Agent agrees, on behalf of itself and the ABL Secured Parties that, so
long as the ABL Agent, for the benefit of the ABL Secured Parties, shall
retain a Lien on the proceeds of such sale, transfer or other disposition
(to the extent that such proceeds are not applied to the PPE Obligations
as provided in paragraph (c) of Application of ProceedsApplication of
Proceeds), such sale, transfer or disposition will be free and clear of
the Liens on such Notes Priority Collateral (but not the proceeds thereof)
securing the ABL Obligations and the ABL Agents and the ABL Secured
Parties Liens with respect to the Notes Priority Collateral (but not the
proceeds thereof) so sold, transferred, or disposed shall terminate and be
automatically released without further action concurrently with, and to
the same extent as, the release of the PPE Secured Parties Liens on such
Notes Priority Collateral. In furtherance of, and subject to, the
foregoing, the ABL Agent agrees that it will promptly execute any and all
Lien releases or other documents reasonably requested by the collateral
agent in connection therewith. The ABL Agent appoints the collateral agent
and any officer or duly authorized person of the collateral agent, with
full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power of attorney in the place and stead of the ABL Agent
and in the name of the ABL Agent or in the collateral agents own name,
from time to time, in the collateral agents sole discretion, for the
purposes of carrying out the terms of this paragraph, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments as may be necessary or desirable to accomplish the purposes of
this paragraph, including any financing statements, endorsements,
assignments, releases or other documents or instruments of transfer (which
appointment, being coupled with an interest, is
irrevocable).
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No New Liens
(a) It is the anticipation of the Agents
that, until the date upon which the Discharge of ABL Obligations shall have
occurred, no PPE Secured Party shall acquire or hold any Lien on any assets of
any Credit Party securing any PPE Obligation which assets are not also subject
to the Lien of the ABL Agent under the ABL Documents. If any PPE Secured Party
shall acquire or hold any Lien on any assets of any Credit Party securing any
PPE Obligation which assets are not also subject to the Lien of the ABL Agent
under the ABL Documents, then the collateral agent (or the relevant PPE Secured
Party) shall, without the need for any further consent of any other PPE Secured
Party or Credit Party and notwithstanding anything to the contrary in any other
PPE Document, be deemed to also hold and have held such Lien as agent or bailee
for the benefit of the ABL Agent as security for the ABL Obligations (subject to
the Lien Priority and other terms of the Intercreditor Agreement) and shall
promptly notify the ABL Agent in writing of the existence of such Lien upon
becoming aware thereof.
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(b) It is the anticipation of the Agents,
that until the date upon which the Discharge of PPE Obligations shall have
occurred, no ABL Secured Party shall acquire or hold any Lien on any assets of
any Credit Party (other than a Foreign Subsidiary of Xerium) securing any ABL
Obligation which assets are not also subject to the Lien of the collateral agent
under the PPE Documents. If any ABL Secured Party shall acquire or hold any Lien
on any assets of any Credit Party (other than a Foreign Subsidiary of Xerium)
securing any ABL Obligation which assets are not also subject to the Lien of the
collateral agent under the PPE Documents, then the ABL Agent (or the relevant
ABL Secured Party) shall, without the need for any further consent of any other
ABL Secured Party, Xerium or any Guarantor and notwithstanding anything to the
contrary in any other ABL Document be deemed to also hold and have held such
Lien as agent or bailee for the benefit of the collateral agent as security for
the PPE Obligations (subject to the Lien Priority and other terms of the
Intercreditor Agreement) and shall promptly notify the collateral agent in
writing of the existence of such Lien upon becoming aware thereof.
Waiver of Marshalling
(a) Until the Discharge of ABL
Obligations, the collateral agent, on behalf of itself and the PPE Secured
Parties, agrees not to assert and waives, to the fullest extent permitted by
law, any right to demand, request, plead or otherwise assert or otherwise claim
the benefit of, any marshalling, appraisal, valuation or other similar right
that may otherwise be available under applicable law with respect to the ABL
Priority Collateral or any other similar rights a junior secured creditor may
have under applicable law.
(b) Until the Discharge of PPE
Obligations, the ABL Agent, on behalf of itself and the ABL Secured Parties,
agrees not to assert and waives, to the fullest extent permitted by law, any
right to demand, request, plead or otherwise assert or otherwise claim the
benefit of, any marshalling, appraisal, valuation or other similar right that
may otherwise be available under applicable law with respect to the Notes
Priority Collateral or any other similar rights a junior secured creditor may
have under applicable law.
Actions of the Parties
Certain Actions
Permitted
The collateral agent and the ABL Agent may
make such demands or file such claims in respect of the PPE Obligations or the
ABL Obligations, as applicable, as are necessary to prevent the waiver or bar of
such claims under applicable statutes of limitations or other statutes, court
orders, or rules of procedure at any time. Nothing in the Intercreditor
Agreement shall prohibit the receipt by the collateral agent or any PPE Secured
Party of the required payments of interest, principal and other amounts owed in
respect of the PPE Obligations so long as such receipt is not the direct or
indirect result of the Exercise of any Secured Creditor Remedies by the
collateral agent or any PPE Secured Party with respect to any of the ABL
Priority Collateral or enforcement in contravention of the Intercreditor
Agreement of any Lien held by any of them. Nothing in the Intercreditor
Agreement shall prohibit the receipt by the ABL Agent or any ABL Secured Party
of the required payments of interest, principal and other amounts owed in
respect of the ABL Obligations so long as such receipt is not the direct or
indirect result of the Exercise of any Secured Creditor Remedies by the ABL
Agent or any ABL Secured Party with respect to any of the Notes Priority
Collateral or enforcement in contravention of the Intercreditor Agreement of any
Lien held by any of them. None of the collateral agent, PPE Secured Parties, ABL
Agent or ABL Secured Parties shall take any other action in connection with the
PPE Obligations or the ABL Obligations in contravention of the terms of the
Intercreditor Agreement (including if for any reason such party is deemed an
unsecured or undersecured creditor with respect to such PPE Obligations or ABL
Obligations, as applicable).
Agent for Perfection
The ABL Agent, for and on behalf of itself
and each ABL Secured Party, and the collateral agent, for and on behalf of
itself and each PPE Secured Party, as applicable, each agree to hold all
Collateral in their respective possession, custody, or control (including as
defined in Sections 9-104, 9-105, 9-106, 9-107 and 8-106 of the UCC) (or in the
possession, custody, or control of agents or bailees for either) as gratuitous
bailee for the other solely for the purpose of perfecting the security interest
granted to each in such Collateral, subject to the terms and conditions of this
Agent for Perfection. Solely with respect to any Control Collateral under the
control (within the meaning of Section 9-104 of the UCC) of the ABL Agent or the
collateral agent, the ABL Agent and the collateral agent, respectively, agrees
to also hold control over such Control Collateral as gratuitous agent for the
PPE Secured Parties and the ABL Secured Parties, subject to the terms and
conditions of this Agent for Perfection. None of the ABL Agent, the ABL
Secured Parties, the collateral agent, or the PPE Secured Parties, as
applicable, shall have any obligation whatsoever to the others to assure that
the Collateral is genuine or owned by Xerium, any Guarantor, or any other Person
or to preserve rights or benefits of any Person. The duties or responsibilities
of the ABL Agent and the collateral agent under this Agent for Perfection are
and shall be limited solely to holding or maintaining control of the Control Collateral as gratuitous
bailee for the other Agent for purposes of perfecting the Lien held by the
collateral agent or the ABL Agent, as applicable. The ABL Agent is not and shall
not be deemed to be a fiduciary of any kind for the PPE Secured Parties or any
other Person. Without limiting the generality of the foregoing, except as
expressly provided in the Intercreditor Agreement, the ABL Secured Parties shall
not be obligated to see to the application of any proceeds of the Notes Priority
Collateral deposited into any deposit account or be answerable in any way for
the misapplication thereof. The collateral agent is not and shall not be deemed
to be a fiduciary of any kind for the ABL Secured Parties, or any other Person.
Without limiting the generality of the foregoing, except as expressly provided
in the Intercreditor Agreement, the PPE Secured Parties shall not be obligated
to see to the application of any proceeds of the ABL Priority Collateral
deposited into any deposit account or be answerable in any way for the
misapplication thereof.
30
Sharing of Information and Access
(a) In the event that the ABL Agent shall,
in the exercise of its rights under the ABL Collateral Documents or otherwise,
receive possession or control of any books and records of any Credit Party which
contain information identifying or pertaining to the Notes Priority Collateral,
the ABL Agent shall, upon request from the collateral agent and as promptly as
practicable thereafter, either make available to the collateral agent such books
and records for inspection and duplication or provide to the collateral agent
copies thereof. In the event that the collateral agent shall, in the exercise of
its rights under the Collateral Documents or otherwise, receive possession or
control of any books and records of any Credit Party which contain information
identifying or pertaining to any of the ABL Priority Collateral, the collateral
agent shall, upon request from the ABL Agent and as promptly as practicable
thereafter, either make available to the ABL Agent such books and records for
inspection and duplication or provide the ABL Agent copies thereof.
(b) Each Agent upon the written request of
the other Agent shall, upon prior written notice to Xerium, provide such Agent
with copies of Credit Documents, other than any fee letters and all amendments
thereto,
provided
that the failure to provide such Credit Documents or
Amendments shall impose no liability on any Agent.
Insurance
Proceeds of Collateral include insurance
proceeds and, therefore, the Lien Priority shall govern the ultimate disposition
of casualty insurance proceeds. The ABL Agent and the collateral agent shall
each be named as additional insured or loss payee, as applicable, with respect
to all insurance policies relating to the Collateral in the manner required in
the PPE Documents or the ABL Credit Agreement, as applicable. The ABL Agent
shall have the sole and exclusive right, as against the collateral agent, to
adjust settlement of insurance claims in the event of any covered loss, theft or
destruction of any of the ABL Priority Collateral. The collateral agent shall
have the sole and exclusive right, as against the ABL Agent, to adjust
settlement of insurance claims in the event of any covered loss, theft or
destruction of any of the Notes Priority Collateral. If any insurance claim
includes both ABL Priority Collateral and Notes Priority Collateral, the insurer
will not settle such claim separately with respect to ABL Priority Collateral
and Notes Priority Collateral, and if the Agents are unable after negotiating in
good faith to agree on the settlement for such claim, either Agent may apply to
a court of competent jurisdiction to make a determination as to the settlement
of such claim, and the courts determination shall be binding upon the Agents.
All proceeds of such insurance shall be remitted to the ABL Agent or the
collateral agent, as the case may be, subject, in each case, to the terms of
their respective Credit Documents, and each of the collateral agent and ABL
Agent shall cooperate (if necessary) in a reasonable manner in effecting the
payment of insurance proceeds in accordance with Application of
ProceedsApplication of Proceeds.
No Additional Rights for the Credit
Parties under the Intercreditor Agreement
Except as provided in Inspection and
Access Rights below, if any ABL Secured Party or PPE Secured Party shall
enforce its rights or remedies in violation of the terms of the Intercreditor
Agreement, the Credit Parties shall not be entitled to use such violation as a
defense to any action by any ABL Secured Party or PPE Secured Party, nor to
assert such violation as a counterclaim or basis for set off or recoupment
against any ABL Secured Party or PPE Secured Party.
Inspection and Access
Rights
(a) Without limiting any rights the ABL
Agent or any other ABL Secured Party may otherwise have under applicable law or
by agreement, in the event of any liquidation of the ABL Priority Collateral (or
any other Exercise of Any Secured Creditor Remedies by the ABL Agent) and
whether or not the collateral agent or any other PPE Secured Party has commenced
and is continuing to Exercise Any Secured Creditor Remedies of the collateral
agent with respect to the Notes Priority Collateral or otherwise, the ABL Agent
or any other Person (including any Credit Party) acting with the consent, or on
behalf, of the ABL Agent, shall have the right (a) during the Use Period during
normal business hours on any Business Day, to access ABL Priority Collateral that (i) is stored or
located in or on, (ii) has become an accession with respect to (within the
meaning of Section 9- 335 of the Uniform Commercial Code), or (iii) has been
commingled with (within the meaning of Section 9-336 of the Uniform Commercial
Code) Notes Priority Collateral, and (b) during the Use Period, shall have the
irrevocable right to use the Notes Priority Collateral (including, without
limitation, equipment, intellectual property and general intangibles) on a
rent-free, royalty-free basis, each of the foregoing solely for the limited
purposes of assembling, inspecting, copying or downloading information stored
on, taking actions to perfect its Lien on, completing a production run of
inventory involving, taking possession of, moving, preparing and advertising for
sale, selling (by public auction, private sale or a store closing, going out
of business or similar sale, whether in bulk, in lots or to customers in the
ordinary course of business or otherwise and which sale may include augmented
inventory of the same type sold in any Credit Partys business), storing or
otherwise dealing with the ABL Priority Collateral, in each case without notice
to, the involvement of or interference by any PPE Secured Party (and whether or
not the collateral agent or any PPE Secured Party has commenced and is
continuing to Exercise any Secured Creditor Remedies) or liability to any PPE
Secured Party;
provided
,
however
, that the expiration of the Use Period shall be without
prejudice to the sale or other disposition of the ABL Priority Collateral in
accordance with the Intercreditor Agreement and applicable law. In the event
that any ABL Secured Party has commenced and is continuing the Exercise of Any
Secured Creditor Remedies with respect to any ABL Priority Collateral or any
other sale or liquidation of the ABL Priority Collateral has been commenced by a
Credit Party (with the consent of the ABL Agent), the collateral agent may not
sell, assign or otherwise transfer the related Notes Priority Collateral prior
to the expiration of the Use Period, unless the purchaser, assignee or
transferee thereof agrees in writing to be bound by the provisions of this
Inspection and Access Rights.
31
(b) The ABL Agent and the ABL Secured
Parties shall not be obligated to pay any amounts to the collateral agent or the
PPE Secured Parties (or any person claiming by, through or under the PPE Secured
Parties, including any purchaser of the Notes Priority Collateral) or to the
Credit Parties, for or in respect of the use by the ABL Agent and the ABL
Secured Parties of the Notes Priority Collateral and none of the ABL Agent or
the ABL Secured Parties shall be obligated to secure, protect, insure or repair
any such Notes Priority Collateral (other than for damages caused by the ABL
Agent, the ABL Secured Parties or their respective employees, agents and
representatives (other than as a result from ordinary wear and tear of such
Notes Priority Collateral)). The ABL Agent and the ABL Secured Parties shall not
have any liability to the collateral agent or the PPE Secured Parties (or any
person claiming by, through or under the collateral agent or the PPE Secured
Parties, including any purchaser of the Notes Priority Collateral) as a result
of any condition (including environmental condition, claim or liability) on or
with respect to the Notes Priority Collateral other than those arising from the
gross negligence or willful misconduct of the ABL Agent, the ABL Secured Parties
or their respective employees, agents and representatives, and the ABL Agent and
the ABL Secured Parties shall have no duty or liability to maintain the Notes
Priority Collateral in a condition or manner (taking into account ordinary wear
and tear of such Notes Priority Collateral) better than that in which it was
maintained prior to the use thereof by the ABL Agent and the ABL Secured
Parties.
(c) The ABL Secured Parties shall (i) use
the Notes Priority Collateral in accordance with applicable law, (ii) insure or
cause to be insured for damage to property and liability to persons, including
property and liability insurance for the benefit of the PPE Secured Parties, and
(iii) reimburse the PPE Secured Parties for any injury or damage to Persons or
property (ordinary wear-and-tear excepted) caused by the acts or omissions of
Persons under their control arising from the gross negligence or willful
misconduct of any such Person;
provided
,
however
, that the ABL Secured Parties
will not be liable for any diminution in the value of the Notes Priority
Collateral caused by the absence of the ABL Priority Collateral therefrom or
from the use of the Notes Priority Collateral.
(d) The collateral agent and the PPE
Secured Parties shall use commercially reasonable efforts to not hinder or
obstruct the ABL Agent and the ABL Secured Parties from exercising the rights
described in paragraph (a) of this Inspection and Access Rights.
(e) Subject to the terms hereof, the
collateral agent may advertise and conduct public auctions or private sales of
the Notes Priority Collateral without notice (except as required by applicable
law or the Intercreditor Agreement) to any ABL Secured Party, the involvement of
or interference by any ABL Secured Party or liability to any ABL Secured Party
as long as, in the case of an actual sale, the respective purchaser assumes and
agrees in writing to the obligations of the collateral agent and the PPE Secured
Parties under this Inspection and Access Rights.
(f) In furtherance of the foregoing in
this Inspection and Access Rights, the collateral agent, in its capacity as a
secured party (or as a purchaser, assignee or transferee, as applicable), and to
the extent of its interest therein, grants to the ABL Agent a nonexclusive,
irrevocable, royalty-free, worldwide license to use, license or sublicense any
and all intellectual property now owned or hereafter acquired by the Credit
Parties (except to the extent such grant is prohibited by any rule of law,
statute or regulation), included as part of the Notes Priority Collateral (and
including in such license access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof) as is or may be necessary or advisable in the
ABL Agents reasonable judgment for the ABL Agent to process, ship, produce,
store, supply, lease, complete, sell, liquidate or otherwise deal with the ABL
Priority Collateral, or to collect or otherwise realize upon any account
receivable (as defined in the ABL Credit Agreement) comprising ABL Priority
Collateral, in each case solely in connection with any Exercise of Secured
Creditor Remedies or by a Credit Party with the consent of the ABL Agent;
provided
that (i) any such license shall terminate upon the sale of the applicable ABL
Priority Collateral and shall not extend or transfer to the purchaser of such
ABL Priority Collateral, (ii) the ABL Agents use of such intellectual property
shall be reasonable and lawful, and (iii) any such license is granted on an AS
IS basis, without any representation or warranty whatsoever. The collateral
agent (i) acknowledges and consents to the grant to the ABL Agent by the Credit
Parties of the license referred to in the US Pledge and Security Agreement (as
defined in the ABL Credit Agreement) and (ii) agrees that its Liens in the Notes
Priority Collateral shall be subject in all respects to such license.
Furthermore, the collateral agent agrees that, in connection with any Exercise
of Secured Creditor Remedies conducted by the collateral agent or by a Credit
Party with the consent of the collateral agent in respect of Notes Priority
Collateral, (x) any notice required to be given by the collateral agent in
connection with such Exercise of Secured Creditor Remedies shall contain an
acknowledgement of the existence of such license and (y) the collateral agent
shall provide written notice to any purchaser, assignee or transferee pursuant
to an Exercise of Secured Creditor Remedies that the applicable assets are
subject to such license.
32
Tracing of and Priorities in
Proceeds
The ABL Agent, for itself and on behalf of
the ABL Secured Parties, and the collateral agent, for itself and on behalf of
the PPE Secured Parties, further agree that prior to an issuance of any notice
of Exercise of Any Secured Creditor Remedies by such Secured Party (unless a
bankruptcy or insolvency Event of Default then exists), any proceeds of
Collateral, whether or not deposited in Accounts under control agreements, which
are used by any Credit Party to acquire other property which is Collateral shall
not (solely as between the Agents and the Secured Parties) be treated as
proceeds of Collateral for purposes of determining the relative priorities in
the Collateral which was so acquired. Notwithstanding anything to the contrary
contained in the Intercreditor Agreement or any PPE Document, unless and until
the Discharge of the ABL Obligations, the ABL Agent will be permitted to deem
all collections and payments deposited in any ABL Deposit and Securities Account
(for the avoidance of doubt other than a PPE Priority Account) to be proceeds of
ABL Priority Collateral and the collateral agent and the other PPE Secured
Parties each will consent to the application of such funds to the ABL
Obligations, and no such funds credited to such account shall be subject to
disgorgement or be deemed to be held in trust by the ABL Agent for the benefit
of the collateral agent and other Credit Parties;
provided
that with respect to any such
funds that are identifiable proceeds of Notes Priority Collateral credited to
any such account (i) which funds the ABL Agent has received a Credit Party PPE
Proceeds Notice prior to the application of such funds by the ABL Agent to the
ABL Obligations and a subsequent credit extension under the ABL Credit
Agreement, or (ii) the ABL Agent has received a PPE Cash Proceeds Notice prior
to the application of such funds by the ABL Agent to the ABL Obligations and a
subsequent credit extension under the ABL Credit Agreement, the ABL Agent shall
turn over any misdirected proceeds of the Notes Priority Collateral to the
collateral agent.
Purchase Right
(a) If (i) after the occurrence and during
the continuation of an Event of Default, the ABL Agent shall sell, lease,
license or dispose of all or substantially all of the ABL Priority Collateral by
private or public sale, (ii) an Insolvency Proceeding with respect to Xerium
shall have occurred or shall have been commenced, or (iii) the ABL Obligations
under the ABL Credit Agreement shall have been accelerated (including as a
result of any automatic acceleration), (each such event described in clauses (i)
through (iii) above, a
Purchase Option
Event
), the PPE Secured Parties shall have
the opportunity to purchase (at par and without premium) all (but not less than
all) of the ABL Obligations pursuant to this Purchase Right;
provided
, that such option
shall expire if the applicable PPE Secured Parties fail to deliver a written
notice (a
Purchase Notice
) to the ABL Agent with a copy to Xerium within ten (10)
Business Days following the first date the collateral agent obtains actual
knowledge of the occurrence of the earliest Purchase Option Event, which
Purchase Notice shall (A) be signed by the applicable PPE Secured Parties
committing to such purchase (the
Purchasing
Creditors
) and indicate the percentage of
the ABL Obligations to be purchased by each Purchasing Creditor (which aggregate
commitments must add up to 100% of the ABL Obligations) and (B) state that (1)
it is a Purchase Notice delivered pursuant to this Purchase Right and (2) the
offer contained therein is irrevocable. Upon receipt of such Purchase Notice by
the ABL Agent, the Purchasing Creditors shall have from the date of delivery
thereof to and including the date that is ten (10) Business Days after the
Purchase Notice was received by the ABL Agent to purchase all (but not less than
all) of the ABL Obligations pursuant to this Purchase Right (the date of such
purchase, the
Purchase Date
).
33
(b) On the Purchase Date, the ABL Agent
and the ABL Secured Parties shall, subject to any required approval of any
governmental authority and any limitation in the ABL Credit Agreement, in each
case then in effect, if any, sell to the Purchasing Creditors all (but not less
than all) of the ABL Obligations. On such Purchase Date, the Purchasing
Creditors shall (i) pay to the ABL Agent, for the benefit of the ABL Secured
Parties, as directed by the ABL Agent, in immediately available funds the full
amount (at par and without premium) of all ABL Obligations then outstanding,
including all accrued and unpaid interest and fees thereon, all in the amounts
specified by the ABL Agent and determined in accordance with the applicable ABL
Documents, (ii) furnish such amount of cash collateral in immediately available
funds as the ABL Agent determines is reasonably necessary to secure ABL Secured
Parties in connection with any (x) indemnification obligations of the Credit
Parties under the ABL Documents (other than on account of indemnification
obligations for unknown claims), (y) ABL Cash Management Obligations and ABL
Bank Product Obligations, or (z) issued and outstanding letters of credit issued
under the ABL Credit Agreement but, with respect to this clause (z), not in any
event in an amount greater than 105% of the aggregate undrawn amount of all such
outstanding letters of credit (and in the case of clauses (x), (y) and (z)
above, any excess of such cash collateral for such indemnification obligations,
ABL Cash Management Obligations, ABL Bank Product Obligations or letters of
credit remaining at such time when there are no longer any such indemnification
obligations, ABL Cash Management Obligations, ABL Bank Product Obligations or
letters of credit outstanding and there are no unreimbursed amounts then owing
in respect of such indemnification obligations, ABL Cash Management Obligations,
ABL Bank Product Obligations or drawings under such letters of credit shall be
promptly paid over to the collateral agent) and (iii) agree to reimburse the ABL
Secured Parties for any loss, cost, damage or expense (A) resulting from the
granting of provisional credit for any checks, wire or ACH transfers that are
reversed or not final or other payments provisionally credited to the ABL
Obligations under the ABL Credit Agreement and as to which the ABL Agent and ABL
Secured Parties have not yet received final payment as of the Purchase Date, or
(B) for any indemnification obligations (other than on account of
indemnification obligations for unknown claims as of the Purchase Date), ABL
Cash Management Obligations, ABL Bank Product Obligations or letters of credit,
to the extent that the cash collateral delivered pursuant to clauses (x), (y)
and (z), above, are insufficient to pay such ABL Obligations in full, and (iv)
assume the remaining commitments (if any) of the ABL Secured Parties to extend
credit under the ABL Credit Agreement. Such purchase price shall be remitted by
wire transfer in immediately available funds to such bank account of the ABL
Agent (for the benefit of the ABL Secured Parties) as the ABL Agent shall have
specified in writing to the collateral agent. Interest and fees shall be
calculated to but excluding the Purchase Date if the amounts so paid by the
applicable PPE Secured Parties to the bank account designated by the ABL Agent
are received in such bank account prior to 1:00 p.m., New York time, and
interest shall be calculated to and including such Purchase Date if the amounts
so paid by the applicable PPE Secured Parties to the bank account designated by
the ABL Agent are received in such bank account after 1:00 p.m., New York
time.
(c) Any purchase pursuant to the purchase
option set forth in this Purchase Right shall, except as provided below, be
expressly made without representation or warranty of any kind by the ABL Agent
or the other ABL Secured Parties as to the ABL Obligations, the collateral or
otherwise, and without recourse to the ABL Agent and the other ABL Secured
Parties as to the ABL Obligations, the collateral or otherwise, except that the
ABL Agent and each of the ABL Secured Parties, as to itself only, shall
represent and warrant only (i) the principal amount of the ABL Obligations being
sold by it, (ii) that such Person has not created any Lien on any ABL
Obligations being sold by it, (iii) that such Person has the right to assign the
ABL Obligations being assigned by it and its assignment agreement has been duly
authorized and delivered, and (iv) such other representations, if any, as are
set forth in the Assignment and Assumption (as defined in, and in the form
annexed to, the ABL Credit Agreement as in effect on the date of the
Intercreditor Agreement).
(d) Upon notice to the Credit Parties by
the collateral agent that the purchase of ABL Obligations pursuant to this
Purchase Right has been consummated by delivery of the purchase price to the
ABL Agent, the Credit Parties shall treat the applicable PPE Secured Parties as
holders of the ABL Obligations and the collateral agent shall be deemed
appointed to act in such capacity as the agent or administrative agent (or
analogous capacity) (the
Replacement
Agent
) under the ABL Documents, for all
purposes under the Intercreditor Agreement and under each ABL Document (it being
agreed that the ABL Agent shall have no obligation to act as such replacement
agent or administrative agent (or analogous capacity)). In connection with
any purchase of ABL Obligations pursuant to this Purchase Right, each ABL
Lender and the ABL Agent will agree to enter into and deliver to the applicable
PPE Secured Parties on the Purchase Date, as a condition to closing, an
assignment agreement customarily used by the ABL Agent in connection with the
ABL Credit Agreement and the ABL Agent and each other ABL Lender shall deliver
all possessory collateral (if any), together with any necessary endorsements and
other documents (including any applicable stock powers or bond powers), then in
its possession or in the possession of its agent or bailee, or turn over control
as to any pledged collateral, deposit accounts or securities accounts of which
it or its agent or bailee then has control, as the case may be, to the
Replacement Agent, and deliver the loan register and participant register, if
applicable and all other records pertaining to the ABL Obligations to the
Replacement Agent and otherwise take such actions as may be reasonably
appropriate to effect an orderly transition to the Replacement Agent. Upon the
consummation of the purchase of the ABL Obligations pursuant
to this Purchase Right, the ABL Agent (and all other agents under the ABL
Credit Agreement) shall be deemed to have resigned as an agent or
administrative agent for the ABL Secured Parties under the ABL Documents;
provided
that the ABL Agent (and all other agents under the ABL Credit Agreement) shall
be entitled to all of the rights and benefits of a former agent or
administrative agent under the ABL Credit Agreement.
34
(e) Notwithstanding the foregoing purchase
of the ABL Obligations by the Purchasing Creditors, the ABL Secured Parties
shall retain those contingent indemnification obligations and other obligations
owing or to be owing to them under the ABL Documents which by their express
terms would survive any repayment of the ABL Obligations pursuant to this
Purchase Right.
Payments Over
(a) So long as the Discharge of PPE
Obligations has not occurred, any Notes Priority Collateral or proceeds thereof
not constituting ABL Priority Collateral received by the ABL Agent or any other
ABL Secured Party in connection with the Exercise of Any Secured Creditor
Remedies (including set off) relating to the Notes Priority Collateral in
contravention of the Intercreditor Agreement (it being understood that the
application of proceeds from any ABL Deposit and Securities Account prior to the
delivery of a PPE Cash Proceeds Notice or Credit Party PPE Proceeds Notice shall
not be deemed in contravention of the Intercreditor Agreement) shall be
segregated and held in trust and forthwith paid over to the collateral agent for
the benefit of the PPE Secured Parties in the same form as received, with any
necessary endorsements or as a court of competent jurisdiction may otherwise
direct. The collateral agent is authorized to make any such endorsements as
agent for the ABL Agent or any such other ABL Secured Parties. This
authorization is coupled with an interest and is irrevocable until such time as
the Intercreditor Agreement is terminated in accordance with its
terms.
(b) So long as the Discharge of ABL
Obligations has not occurred, any ABL Priority Collateral or proceeds thereof
not constituting Notes Priority Collateral received by the collateral agent or
any PPE Secured Parties in connection with the Exercise of Any Secured Creditor
(including set off) relating to the ABL Priority Collateral in contravention of
the Intercreditor Agreement shall be segregated and held in trust and forthwith
paid over to the ABL Agent for the benefit of the ABL Secured Parties in the
same form as received, with any necessary endorsements or as a court of
competent jurisdiction may otherwise direct. The ABL Agent is authorized to make
any such endorsements as agent for the collateral agent or any such PPE Secured
Parties. This authorization is coupled with an interest and is irrevocable until
such time as the Intercreditor Agreement is terminated in accordance with its
terms.
Application of Proceeds
Application of Proceeds
(a)
Revolving Nature of ABL
Obligations
. The collateral agent, for and on behalf of itself and the PPE
Secured Parties, expressly acknowledges and agrees that (i) the ABL Credit
Agreement includes a revolving commitment, that in the ordinary course of
business the ABL Agent and the ABL Lenders will apply payments and make advances
thereunder, and that no application of any Collateral or the release of any Lien
by the ABL Agent upon any portion of the Collateral in connection with a
permitted disposition by the Credit Parties under the ABL Credit Agreement shall
constitute the Exercise of Secured Creditor Remedies under the Intercreditor
Agreement; (ii) the amount of the ABL Obligations that may be outstanding at any
time or from time to time may be increased or reduced and subsequently
reborrowed, and that the terms of the ABL Obligations may be modified, amended
and restated, extended or amended from time to time, and that the aggregate
amount of the ABL Obligations may be increased, replaced or refinanced, in each
event, without notice to or consent by the PPE Secured Parties and without
affecting the provisions of the Intercreditor Agreement; and (iii) all
Collateral received by the ABL Agent may be applied, reversed, reapplied,
credited, or reborrowed, in whole or in part, to the ABL Obligations at any
time;
provided, however,
that from and after the date on which the ABL Agent (or any
ABL Secured Party) or the ABL Agent receives written notice from the collateral
agent that the collateral agent (or any PPE Secured Party) has commenced the
Exercise of Any Secured Creditor Remedies, all amounts received by the ABL Agent
or any ABL Lender shall be applied as specified in this Application of
ProceedsApplication of Proceeds. The Lien Priority shall not be altered or
otherwise affected by any such amendment, modification, supplement, extension,
repayment, reborrowing, increase, replacement, renewal, restatement or
refinancing of either the ABL Obligations or the PPE Obligations, or any portion
thereof.
Notwithstanding anything to the contrary
contained in the Intercreditor Agreement, any PPE Document or any ABL Document,
each Credit Party and the collateral agent, for itself and on behalf of the PPE
Secured Parties, agrees that (i) only Notes Priority Collateral or proceeds of
the Notes Priority Collateral shall be deposited in the PPE Priority Accounts
and (ii) prior to the receipt of a PPE Cash Proceeds Notice, the ABL Secured
Parties will be permitted to treat all cash, cash equivalents, money,
collections and payments deposited in any ABL Deposit and Securities Account or
otherwise received by any ABL Secured Parties as ABL Priority Collateral, and no
such amounts credited to any such ABL Deposit and Securities Account or received
by any ABL Secured Parties or applied to the ABL Obligations shall be subject to
disgorgement or deemed to be held in trust for the benefit of the PPE Secured
Parties (and all claims of the collateral agent or any other PPE Secured Party
to such amounts will be waived).
35
(b)
Application of proceeds of ABL
Priority Collateral
. The ABL Agent and the collateral agent agree that all ABL
Priority Collateral and all proceeds thereof, received by either of them in
connection with any Exercise of Secured Creditor Remedies with respect to the
ABL Priority Collateral shall be applied,
first, to the payment of costs and
expenses of the ABL Agent in connection with such Exercise of Secured Creditor
Remedies,
second, to the payment or discharge or
cash collateralization of the ABL Obligations in accordance with the ABL
Documents until the Discharge of ABL Obligations shall have occurred,
third, to the payment of the PPE
Obligations in accordance with the PPE Documents until the Discharge of PPE
Obligations shall have occurred, and
fourth, the balance, if any, to the Credit
Parties or as a court of competent jurisdiction may direct.
(c)
Application of proceeds of Notes
Priority Collateral
. The ABL Agent and the collateral agent agree that all Notes
Priority Collateral and all other proceeds thereof, received by either of them
in connection with any Exercise of Secured Creditor Remedies with respect to the
Notes Priority Collateral shall be applied,
first, to the payment of costs and
expenses of the collateral agent in connection with such Exercise of Secured
Creditor Remedies,
second, to the payment of the PPE
Obligations in accordance with the PPE Documents until the Discharge of PPE
Obligations shall have occurred,
third, to the payment, discharge or cash
collateralization of the ABL Obligations in accordance with the ABL Documents;
and
fourth, the balance, if any, to the Credit
Parties or as a court of competent jurisdiction may direct.
(d)
Limited Obligation or Liability
. In
exercising remedies, whether as a secured creditor or otherwise, the ABL Agent
shall have no obligation or liability to the collateral agent or to any PPE
Secured Party, and the collateral agent shall have no obligation or liability to
the ABL Agent or any ABL Secured Party, regarding the adequacy of any proceeds
or for any action or omission, except solely for an action or omission that
breaches the express obligations undertaken by each Agent under the terms of the
Intercreditor Agreement. Notwithstanding anything to the contrary in the
Intercreditor Agreement, none of the Agents waives any claim that it may have
against a Secured Party on the grounds that any sale, transfer or other
disposition by the Secured Party was not commercially reasonable in every
respect as required by the Uniform Commercial Code.
(e)
Turnover of Collateral After
Discharge
. Upon the Discharge of ABL Obligations, the ABL Agent shall deliver to
the collateral agent or shall execute such documents as the collateral agent may
reasonably request (at the expense of Xerium) to enable the collateral agent to
have control over any Control Collateral still in the ABL Agents possession,
custody, or control in the same form as received with any necessary endorsements
(in each case, subject to the reinstatement provisions of Intercreditor
Acknowledgements and Waivers Reinstatement and Continuation of Agreement), or
as a court of competent jurisdiction may otherwise direct. Upon the Discharge of
PPE Obligations, the collateral agent shall deliver to the ABL Agent or shall
execute such documents as the ABL Agent may reasonably request (at the expense
of the Credit Parties) to enable the ABL Agent to have control over any Control
Collateral still in the collateral agents possession, custody or control in the
same form as received with any necessary endorsements (in each case, subject to
the reinstatement provisions of Intercreditor Acknowledgements and Waivers
Reinstatement and Continuation of Agreement), or as a court of competent
jurisdiction may otherwise direct.
36
Specific Performance
Each of the ABL Agent and the collateral
agent is authorized to demand specific performance of the Intercreditor
Agreement, whether or not Xerium or any Guarantor shall have complied with any
of the provisions of any of the Credit Documents, at any time when the other
Agent shall have failed to comply with any of the provisions of the
Intercreditor Agreement applicable to it. Each of the ABL Agent, for and on
behalf of itself and the ABL Secured Parties, and the collateral agent, for and
on behalf of itself and the PPE Secured Parties, irrevocably waives any defense
based on the adequacy of a remedy at law that might be asserted as a bar to such
remedy of specific performance.
Intercreditor Acknowledgements and
Waivers
Notice of Acceptance and Other
Waivers
(a) All ABL Obligations at any time made
or incurred by Xerium or any Guarantor shall be deemed to have been made or
incurred in reliance upon the Intercreditor Agreement, and the collateral agent,
on behalf of itself and the PPE Secured Parties, waives notice of acceptance, or
proof of reliance by the ABL Agent or any ABL Secured Party of the Intercreditor
Agreement, and notice of the existence, increase, renewal, extension, accrual,
creation, or non-payment of all or any part of the ABL Obligations. All PPE
Obligations at any time made or incurred by Xerium or any Guarantor shall be
deemed to have been made or incurred in reliance upon the Intercreditor
Agreement, and the ABL Agent, on behalf of itself and the ABL Secured Parties,
waives notice of acceptance, or proof of reliance, by the collateral agent or
any PPE Secured Party of the Intercreditor Agreement, and notice of the
existence, increase, renewal, extension, accrual, creation, or nonpayment of all
or any part of the PPE Obligations.
(b) None of the ABL Agent, any ABL Secured
Party, or any of their respective Affiliates, directors, officers, employees, or
agents shall be liable for failure to demand, collect, or realize upon any of
the Collateral or any proceeds, or for any delay in doing so, or shall be under
any obligation to sell or otherwise dispose of any Collateral or proceeds
thereof or to take any other action whatsoever with regard to the Collateral or
any part or proceeds thereof, except as specifically provided in the
Intercreditor Agreement. If the ABL Agent or any ABL Secured Party honors (or
fails to honor) a request by the Credit Parties for an extension of credit
pursuant to the ABL Credit Agreement, any of the other ABL Documents, ABL Bank
Product Documents or ABL Cash Management Documents, whether the ABL Agent or any
ABL Secured Party has knowledge that the honoring of (or failure to honor) any
such request would constitute a default under the terms of the PPE Documents or
an act, condition, or event that, with the giving of notice or the passage of
time, or both, would constitute such a default, or if the ABL Agent or any ABL
Secured Party otherwise should exercise any of its contractual rights or
remedies under any ABL Documents (subject to the express terms and conditions of
the Intercreditor Agreement), neither the ABL Agent nor any ABL Secured Party
shall have any liability whatsoever to the collateral agent or any PPE Secured
Party as a result of such action, omission, or exercise (so long as any such
exercise does not breach the express terms and provisions of the Intercreditor
Agreement). The ABL Agent and the ABL Secured Parties shall be entitled to
manage and supervise their loans and extensions of credit under the ABL Credit
Agreement and any of the other ABL Documents, ABL Bank Product Documents or ABL
Cash Management Documents, as they may, in their sole discretion, deem
appropriate, and may manage their loans and extensions of credit without regard
to any rights or interests that the collateral agent or any of the PPE Secured
Parties have in the Collateral, except as otherwise expressly set forth in the
Intercreditor Agreement. The collateral agent, on behalf of itself and the PPE
Secured Parties, agrees that neither the ABL Agent nor any ABL Secured Party
shall incur any liability as a result of a sale, lease, license, application, or
other disposition of all or any portion of the Collateral or proceeds thereof,
pursuant to the ABL Documents, so long as such disposition is conducted in
accordance with mandatory provisions of applicable law and does not breach the
provisions of the Intercreditor Agreement.
(c) None of the collateral agent, any PPE
Secured Party or any of their respective Affiliates, directors, officers,
employees, or agents shall be liable for failure to demand, collect, or realize
upon any of the Collateral or any proceeds, or for any delay in doing so, or
shall be under any obligation to sell or otherwise dispose of any Collateral or
proceeds thereof or to take any other action whatsoever with regard to the
Collateral or any part or proceeds thereof, except as specifically provided in
the Intercreditor Agreement. If the collateral agent or any PPE Secured Party
honors (or fails to honor) a request by Xerium for an extension of credit
pursuant to any of the PPE Documents, whether the collateral agent or any PPE
Secured Party has knowledge that the honoring of (or failure to honor) any such
request would constitute a default under the terms of the ABL Credit Agreement
or any other ABL Document or an act, condition, or event that, with the giving
of notice or the passage of time, or both, would constitute such a default, or
if the collateral agent or any PPE Secured Party otherwise should exercise any
of its contractual rights or remedies under the PPE Documents (subject to the
express terms and conditions of the Intercreditor Agreement), neither the
collateral agent nor any PPE Secured Party shall have any liability whatsoever
to the ABL Agent or any ABL Secured Party as a result of such action, omission,
or exercise (so long as any such exercise does not breach the express terms and
provisions of the Intercreditor Agreement). The collateral agent and the PPE
Secured Parties shall be entitled to manage and supervise their loans and
extensions of credit under the PPE Documents, as they may, in their sole
discretion, deem appropriate, and may manage their loans and extensions of
credit without regard to any rights or interests that the ABL Agent or any ABL Secured Party has in the
Collateral, except as otherwise expressly set forth in the Intercreditor
Agreement. The ABL Agent, on behalf of itself and the ABL Secured Parties,
agrees that none of the collateral agent or the PPE Secured Parties shall incur
any liability as a result of a sale, lease, license, application, or other
disposition of the Collateral or any part or proceeds thereof, pursuant to the
PPE Documents, so long as such disposition is conducted in accordance with
mandatory provisions of applicable law and does not breach the provisions of the
Intercreditor Agreement.
37
Reinstatement and Continuation of
Agreement
(a) If the ABL Agent or any ABL Secured
Party is required in any Insolvency Proceeding or otherwise to turn over or
otherwise pay to the estate of any Credit Party, any Guarantor, or any other
Person any payment made in satisfaction of all or any portion of the ABL
Obligations (an
ABL Recovery
), then the ABL Obligations shall be reinstated to the extent
of such ABL Recovery. If the Intercreditor Agreement shall have been terminated
prior to such ABL Recovery, the Intercreditor Agreement shall be reinstated in
full force and effect in the event of such ABL Recovery, and such prior
termination shall not diminish, release, discharge, impair, or otherwise affect
the obligations of the Agents and the other Secured Parties from such date of
reinstatement. All rights, interests, agreements, and obligations of the ABL
Agent, the collateral agent, the ABL Secured Parties, and the PPE Secured
Parties under the Intercreditor Agreement shall remain in full force and effect
and shall continue irrespective of the commencement of, or any discharge,
confirmation, conversion, or dismissal of, any Insolvency Proceeding by or
against any Credit Party or any Guarantor or any other circumstance which
otherwise might constitute a defense available to, or a discharge of any Credit
Party or any Guarantor in respect of the ABL Obligations or the PPE Obligations.
No priority or right of the ABL Agent or any ABL Secured Party shall at any time
be prejudiced or impaired in any way by any act or failure to act on the part of
any Credit Party or any Guarantor or by the noncompliance by any Person with the
terms, provisions, or covenants of any of the ABL Documents, regardless of any
knowledge thereof which the ABL Agent or any ABL Secured Party may
have.
(b) If the collateral agent or any PPE
Secured Party is required in any Insolvency Proceeding or otherwise to turn over
or otherwise pay to the estate of Xerium, any Guarantor, or any other Person any
payment made in satisfaction of all or any portion of the PPE Obligations (a
PPE Recovery
), then the PPE Obligations shall be reinstated to the extent of such
PPE Recovery. If the Intercreditor Agreement shall have been terminated prior to
such PPE Recovery, the Intercreditor Agreement shall be reinstated in full force
and effect in the event of such PPE Recovery, and such prior termination shall
not diminish, release, discharge, impair, or otherwise affect the obligations of
the Agents and the other Secured Parties from such date of reinstatement. All
rights, interests, agreements, and obligations of the ABL Agent, the collateral
agent, the ABL Secured Parties, and the PPE Secured Parties under the
Intercreditor Agreement shall remain in full force and effect and shall continue
irrespective of the commencement of, or any discharge, confirmation, conversion,
or dismissal of, any Insolvency Proceeding by or against Xerium or any Guarantor
or any other circumstance which otherwise might constitute a defense available
to, or a discharge of Xerium or any Guarantor in respect of the ABL Obligations
or the PPE Obligations. No priority or right of the collateral agent or any PPE
Secured Party shall at any time be prejudiced or impaired in any way by any act
or failure to act on the part of Xerium or any Guarantor or by the noncompliance
by any Person with the terms, provisions, or covenants of any of the PPE
Documents, regardless of any knowledge thereof which the collateral agent or any
PPE Secured Party may have.
Insolvency Proceedings
DIP Financing
(a) If any Credit Party or any Guarantor
shall be subject to any Insolvency Proceeding at any time prior to the Discharge
of ABL Obligations, and if the ABL Agent or the ABL Secured Parties shall seek
to provide any Credit Party or any Guarantor with, or consent to a third party
providing, any financing under Section 364 of the Bankruptcy Code or consent to
any order for the use of cash collateral constituting ABL Priority Collateral
(
ABL Cash Collateral
) under Section 363 of the Bankruptcy Code (or any similar
provision of any foreign Bankruptcy Laws or under a court order in respect of
measures granted with similar effect under any foreign Bankruptcy Laws) (each,
an
ABL Secured Party DIP
Financing
), with such ABL Secured Party DIP
Financing to be secured by all or any portion of the Collateral (including ABL
Cash Collateral and assets that, but for the application of Section 552 of the
Bankruptcy Code (or any similar provision of any foreign Bankruptcy Laws) would
be Collateral), then the collateral agent, on behalf of itself and the PPE
Secured Parties, agrees that it (i) will raise no objection and will not support
any objection to such ABL Secured Party DIP Financing or use of ABL Cash
Collateral or to the Liens securing the same on the grounds of a failure to
provide adequate protection for the Liens of the collateral agent securing the
PPE Obligations or on any other grounds; (ii) will not request any adequate
protection as a result of such ABL Secured Party DIP Financing or use of ABL
Cash Collateral; and (iii) will not propose any DIP Financing secured by a Lien
on any ABL Priority Collateral senior to or on parity with the Liens of the ABL
Agent on such ABL Priority Collateral so long as (x) the collateral agent
retains its Lien on the Collateral to secure the PPE Obligations (in each case,
including proceeds thereof arising after the commencement of the case under any
Bankruptcy Laws) and, as to the Notes Priority Collateral only, such Lien has
the same priority as existed prior to the commencement of the case under the
subject Bankruptcy Laws and any Lien on the Notes Priority Collateral securing
such ABL Secured Party DIP Financing or ABL Cash Collateral is junior and
subordinate to the Lien of the collateral agent on the Notes Priority Collateral, (y) all
Liens on ABL Priority Collateral securing any such ABL Secured Party DIP
Financing or ABL Cash Collateral shall be senior to or on a parity with the
Liens of the ABL Agent and the ABL Secured Parties securing the ABL Obligations
on ABL Priority Collateral, and (z) the foregoing provisions of this paragraph
(a) shall not prevent the collateral agent and the PPE Secured Parties from
objecting to any provision in any ABL Secured Party DIP Financing or ABL Cash
Collateral relating to any provision or content of a plan of reorganization or
other plan of similar effect under any Bankruptcy Laws.
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(b) If Xerium or any Guarantor shall be
subject to any Insolvency Proceeding at any time prior to the Discharge of PPE
Obligations, and if the collateral agent or the PPE Secured Parties shall seek
to provide Xerium or any Guarantor with, or shall consent to a third party
providing, any financing under Section 364 of the Bankruptcy Code or consent to
any order for the use of cash collateral constituting Notes Priority Collateral
(
PPE Cash Collateral
) under Section 363 of the Bankruptcy Code (or any similar
provision of any foreign Bankruptcy Laws or under a court order in respect of
measures granted with similar effect under any foreign Bankruptcy Laws) (each, a
PPE Secured Party DIP
Financing
), with such PPE Secured Party DIP
Financing to be secured by all or any portion of the Collateral (including PPE
Cash Collateral and assets that, but for the application of Section 552 of the
Bankruptcy Code (or any similar provision of any foreign Bankruptcy Laws) would
be Collateral), then the ABL Agent, on behalf of itself and the ABL Secured
Parties, agrees that it (i) will raise no objection and will not support any
objection to such PPE Secured Party DIP Financing or use of PPE Cash Collateral
or to the Liens securing the same on the grounds of a failure to provide
adequate protection for the Liens of the ABL Agent securing the ABL
Obligations or on any other grounds; (ii) will not request any adequate
protection as a result of such PPE Secured Party DIP Financing or use of PPE
Cash Collateral; and (iii) will not propose any PPE Secured Party DIP Financing
secured by a Lien senior to or on parity with the Lien of the collateral agent
on the Notes Priority Collateral so long as (x) the ABL Agent retains its Lien
on the Collateral to secure the ABL Obligations (in each case, including
proceeds thereof arising after the commencement of the case under any Bankruptcy
Law) and, as to the ABL Priority Collateral only, such Lien has the same
priority as existed prior to the commencement of the case under the subject
Bankruptcy Laws and any Lien on ABL Priority Collateral securing such PPE
Secured Party DIP Financing or PPE Cash Collateral is junior and subordinate to
the Lien of the ABL Agent on the ABL Priority Collateral, (y) all Liens on Notes
Priority Collateral securing any such PPE Secured Party DIP Financing or PPE
Cash Collateral shall be senior to or on a parity with the Liens of the
collateral agent and the PPE Secured Parties securing the PPE Obligations on
Notes Priority Collateral, and (z) the foregoing provisions of this paragraph
(b) shall not prevent the ABL Agent and the ABL Secured Parties from objecting
to any provision in any PPE Secured Party DIP Financing or PPE Cash Collateral
relating to any provision or content of a plan of reorganization or other plan
of similar effect under any Bankruptcy Laws.
(c) All Liens granted to the ABL Agent or
the collateral agent in any Insolvency Proceeding, whether as adequate
protection or otherwise, are intended by the Agents to be and shall be deemed to
be subject to the Lien Priority and the other terms and conditions of the
Intercreditor Agreement. For clarity, the collateral agent and the PPE Secured
Parties shall not seek to prime the Lien of the ABL Agent and the ABL Secured
Parties on the ABL Priority Collateral or request, seek or receive a Lien on the
ABL Priority Collateral pursuant to Section 364(d) or 363(c)(4) of the
Bankruptcy Code on the ABL Priority Collateral. For clarity, the ABL Agent and
the ABL Secured Parties shall not seek to prime the Lien of the collateral
agent and the PPE Secured Parties on the Notes Priority Collateral or request,
seek or receive a Lien on the Notes Priority Collateral pursuant to Section
364(d) or 363(c)(4) of the Bankruptcy Code on the Notes Priority
Collateral.
Relief From Stay
Until the Discharge of ABL Obligations has
occurred, the collateral agent, on behalf of itself and the PPE Secured Parties,
will agree not to seek relief from the automatic stay or any other stay in any
Insolvency Proceeding in respect of any portion of the ABL Priority Collateral
without the ABL Agents express written consent. Until the Discharge of PPE
Obligations has occurred, the ABL Agent, on behalf of itself and the ABL Secured
Parties, will agree not to seek relief from the automatic stay or any other stay
in any Insolvency Proceeding in respect of any portion of the Notes Priority
Collateral without the collateral agents express written consent. In addition,
neither the collateral agent nor the ABL Agent shall seek any relief from the
automatic stay with respect to any Collateral without providing three (3) days
prior written notice to the other, unless such period is agreed by both the ABL
Agent and the collateral agent to be modified or unless the ABL Agent or the
collateral agent, as applicable, makes a good faith determination that either
(A) the ABL Priority Collateral or the Notes Priority Collateral, as applicable,
will decline speedily in value or (B) the failure to take any action will have a
reasonable likelihood of endangering the ABL Agents or the collateral agents
ability to realize upon its Collateral.
No Contest; Adequate
Protection
(a) The collateral agent, on behalf of
itself and the PPE Secured Parties, agrees that, prior to the Discharge of ABL
Obligations, none of them shall seek or accept any form of adequate protection
under any or all of §361, §362, §363 or §364 of the Bankruptcy Code with respect
to the ABL Priority Collateral, except as set forth in this No Contest;
Adequate Protection or as may otherwise be consented to in writing by the ABL
Agent in its sole and absolute discretion. The collateral agent, on behalf of itself and the PPE
Secured Parties, agrees that, prior to the Discharge of ABL Obligations, subject
to paragraph (c) of this No Contest; Adequate Protection, none of them shall
contest (or support any other Person contesting) (i) any request by the ABL
Agent or any ABL Secured Party for adequate protection of its interest in the
Collateral (unless in contravention paragraph (b) of DIP Financing), (ii) any
proposed provision of DIP Financing by the ABL Agent and the ABL Secured Parties
(or any other Person proposing to provide DIP Financing with the consent of the
ABL Agent) (unless in contravention of paragraph (a) of DIP Financing) or
(iii) any objection by the ABL Agent or any ABL Secured Party to any motion,
relief, action, or proceeding based on a claim by the ABL Agent or any ABL
Secured Party that its interests in the Collateral (unless in contravention of
paragraph (b) of DIP Financing) are not adequately protected (or any other
similar request under any law applicable to an Insolvency Proceeding), so long
as any Liens granted to the ABL Agent as adequate protection of its interests
are subject to the Intercreditor Agreement.
39
(b) The ABL Agent, on behalf of itself and
the ABL Secured Parties, agrees that, prior to the Discharge of PPE Obligations,
none of them shall seek or accept any form of adequate protection under any or
all of §361, §362, §363 or §364 of the Bankruptcy Code with respect to the Notes
Priority Collateral, except as set forth in this No Contest; Adequate
Protection or as may otherwise be consented to in writing by the collateral
agent in its sole and absolute discretion. The ABL Agent, on behalf of itself
and the ABL Secured Parties, agrees that, prior to the Discharge of PPE
Obligations, subject to subparagraph (c)(iii) of No Contest; Adequate
Protection below none of them shall contest (or support any other Person
contesting) (i) any request by the collateral agent or any PPE Secured Party for
adequate protection of its interest in the Collateral (unless in contravention
of paragraph (a) of DIP Financing), (ii) any proposed provision of DIP
Financing by the collateral agent and the PPE Secured Parties (or any other
Person proposing to provide DIP Financing with the consent of the collateral
agent) (unless in contravention of paragraph (b) of DIP Financing) or (iii)
any objection by the collateral agent or any PPE Secured Party to any motion,
relief, action or proceeding based on a claim by the collateral agent or any PPE
Secured Party that its interests in the Collateral (unless in contravention of
paragraph (a) of DIP Financing) are not adequately protected (or any other
similar request under any law applicable to an Insolvency Proceeding), so long
as any Liens granted to the collateral agent as adequate protection of its
interests are subject to the Intercreditor Agreement.
(c)
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Notwithstanding the foregoing
provisions in this No Contest; Adequate Protection, in any Insolvency
Proceeding:
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(i)
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if the ABL Secured Parties (or
any subset thereof) are granted adequate protection with respect to the
ABL Priority Collateral in the form of additional collateral (even if such
collateral is not of a type which would otherwise have constituted ABL
Priority Collateral), then the ABL Agent, on behalf of itself and the ABL
Secured Parties, will agree that the collateral agent, on behalf of itself
or any of the PPE Secured Parties, may seek or request (and the ABL
Secured Parties will not oppose such request unless in contravention of
paragraph (a) of DIP Financing) adequate protection with respect to its
interests in such Collateral in the form of a Lien on the same additional
collateral, which Lien will be subordinated to the Liens securing the ABL
Obligations on the same basis as the other Liens of the collateral agent
on ABL Priority Collateral; and
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(ii)
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in the event the PPE Secured
Parties (or any subset thereof) are granted adequate protection in respect
of Notes Priority Collateral in the form of additional collateral (even if
such collateral is not of a type which would otherwise have constituted
Notes Priority Collateral), then the collateral agent, on behalf of itself
and any of the PPE Secured Parties, will agree that the ABL Agent on
behalf of itself or any of the ABL Secured Parties, may seek or request
(and the PPE Secured Parties will not oppose such request) adequate
protection with respect to its interests in such Collateral in the form of
a Lien on the same additional collateral, which Lien will be subordinated
to the Liens securing the PPE Obligations on the same basis as the other
Liens of the ABL Agent on Notes Priority
Collateral.
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(d) Except as otherwise expressly set
forth in paragraph (a) of DIP Financing or in connection with the Exercise of
Secured Creditor Remedies with respect to the ABL Priority Collateral, nothing
in the Intercreditor Agreement shall limit the rights of the collateral agent or
the PPE Secured Parties from seeking adequate protection with respect to their
rights in the Notes Priority Collateral in any Insolvency Proceeding, other than
adequate protection in the form of cash payments except from proceeds of Notes
Priority Collateral. Except as otherwise expressly set forth in paragraph (b) of
DIP Financing or in connection with the Exercise of Secured Creditor Remedies
with respect to the Notes Priority Collateral, nothing in the Intercreditor
Agreement shall limit the rights of the ABL Agent or the ABL Secured Parties
from seeking adequate protection with respect to their rights in the ABL
Priority Collateral in any Insolvency Proceeding, other than adequate protection
in the form of cash payments, except proceeds of ABL Priority
Collateral.
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Asset Sales
The collateral agent agrees, on behalf of
itself and the PPE Secured Parties, that it will not oppose and shall be deemed
to have consented to any sale consented to by the ABL Agent of any ABL Priority
Collateral pursuant to Section 363(f) of the Bankruptcy Code (or any similar
provision under the law applicable to any Insolvency Proceeding or under a court
order in respect of measures granted with similar effect under any foreign
Bankruptcy Laws) so long as the collateral agent, for the benefit of the PPE
Secured Parties, shall retain a Lien on the proceeds of such sale (to the extent
such proceeds are not applied to the ABL Obligations in accordance with
paragraph (b) of Application of ProceedsApplication of Proceeds). The ABL
Agent agrees, on behalf of itself and the ABL Secured Parties, that it will not
oppose and shall be deemed to have consented to any sale consented to by the
collateral agent of any Notes Priority Collateral pursuant to Section 363(f) of
the Bankruptcy Code (or any similar provision under the law applicable to any
Insolvency Proceeding or under a court order in respect of measures granted with
similar effect under any foreign Bankruptcy Laws) so long as (i) any such sale
is made in accordance with Actions of the PartiesInspection and Access
Rights above and (ii) the ABL Agent, for the benefit of the ABL Secured
Parties, shall retain a Lien on the proceeds of such sale (to the extent such
proceeds are not applied to the PPE Obligations in accordance with paragraph (c)
of Application of ProceedsApplication of Proceeds). If such sale of
Collateral includes both ABL Priority Collateral and Notes Priority Collateral
and the Agents are unable after negotiating in good faith to agree on the
allocation of the purchase price between the ABL Priority Collateral and Notes
Priority Collateral, either Agent may apply to the court in such Insolvency
Proceeding to make a determination of such allocation, and the courts
determination shall be binding upon the Agents.
Enforceability
The provisions of the Intercreditor
Agreement are intended to be and shall be enforceable under Section 510(a) of
the Bankruptcy Code.
Rights of Subrogation
The collateral agent, for and on behalf of
itself and the PPE Secured Parties, agrees that no payment to the ABL Agent or
any ABL Secured Party pursuant to the provisions of the Intercreditor Agreement
shall entitle the collateral agent or any PPE Secured Party to exercise any
rights of subrogation in respect thereof until the Discharge of ABL Obligations
shall have occurred. Following the Discharge of ABL Obligations, the ABL Agent
agrees to execute such documents, agreements, and instruments as the collateral
agent or any PPE Secured Party may reasonably request to evidence the transfer
by subrogation to any such Person of an interest in the ABL Obligations
resulting from payments to the ABL Agent by such Person, so long as all costs
and expenses (including all reasonable legal fees and disbursements) incurred in
connection therewith by the ABL Agent are paid by such Person upon request for
payment thereof. The ABL Agent, for and on behalf of itself and the ABL Secured
Parties, agrees that no payment to the collateral agent or any PPE Secured Party
pursuant to the provisions of the Intercreditor Agreement shall entitle the ABL
Agent or any ABL Secured Party to exercise any rights of subrogation in respect
thereof until the Discharge of PPE Obligations shall have occurred. Following
the Discharge of PPE Obligations, the collateral agent agrees to execute such
documents, agreements, and instruments as the ABL Agent or any ABL Secured Party
may reasonably request to evidence the transfer by subrogation to any such
Person of an interest in the PPE Obligations resulting from payments to the
collateral agent by such Person, so long as all costs and expenses (including
all reasonable legal fees and disbursements) incurred in connection therewith by
the collateral agent are paid by such Person upon request for payment
thereof.
Further Assurances
The Agents will, at their own expense and
at any time and from time to time, promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that either Agent may reasonably request, in order to protect any
right or interest granted or purported to be granted by the Intercreditor
Agreement or to enable the ABL Agent or the collateral agent to exercise and
enforce its rights and remedies under the Intercreditor Agreement;
provided, however,
that neither Agent shall be required to pay over any payment or
distribution, execute any instruments or documents, or take any other action
referred to in this Further Assurances, to the extent that such action would
contravene any law, order or other legal requirement or any of the terms or
provisions of the Intercreditor Agreement, and in the event of a controversy or
dispute, such Agent may interplead any payment or distribution in any court of
competent jurisdiction, without further responsibility in respect of such
payment or distribution under this Further Assurances.
41
Pari Passu Payment Lien
Obligations
If Xerium or any Guarantor incurs any Pari
Passu Indebtedness, the agent, trustee or other representative of the holders of
such Pari Passu Payment Lien Obligations shall enter into a supplement to the
Intercreditor Agreement and an Accession Agreement, and thereafter the
relationship between the holders of the Notes and holders of the Pari Passu
Payment Lien Obligations will be governed by the Collateral Documents as
described below.
The Collateral Documents provide for the
priorities and other relative rights among the holders of the Notes and the
holders of the Pari Passu Indebtedness, including, among other things,
that:
(1)
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notwithstanding the date, time, method, manner or order
of grant, attachment or perfection of any Liens on the Collateral securing
the Notes or any Note Guarantee and the Pari Passu Indebtedness, the Liens
securing all such Indebtedness shall be of equal priority;
and
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(2)
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the obligations in respect of the Notes and the Pari
Passu Indebtedness may be increased, extended, renewed, replaced,
restated, supplemented, restructured, refunded, refinanced or otherwise
amended from time to time, in each case, to the extent permitted by the
Indenture and the Pari Passu Payment Lien
Documents.
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The Collateral Documents contain
procedures with respect to the coordination of instructions from the holders of
the Notes and holders of the Pari Passu Indebtedness with respect to the Liens
in the Collateral. The collateral agent shall (subject to its rights and
protections under the Indenture Documents, including its right to seek
satisfactory indemnity or security) act in relation to the Collateral in
accordance with the direction of the majority in aggregate principal amount of
the then outstanding Indenture Obligations and Pari Passu Payment Lien
Obligations, if any (the
Instructing
Group
);
provided, however,
that any Notes held
by Xerium or an Affiliate of Xerium and any Pari Passu Indebtedness held by
Xerium or an Affiliate of Xerium shall be deemed not to be outstanding for
purposes of determining the Instructing Group, except that in determining
whether the collateral agent shall be protected in relying upon such direction,
only those Notes and Pari Passu Indebtedness that the collateral agent actually
knows to be so held shall be so disregarded.
The Collateral Documents also provide
that, as between the holders of the Notes and the holders of Pari Passu
Indebtedness, only the Instructing Group shall have the right to direct the
collateral agent in conducting foreclosures and in taking other actions with
respect to the Collateral, and the authorized agents, trustees or other
representatives of other Indebtedness shall not have any right to take any
actions with respect to the Collateral. The Instructing Group will have the sole
right to instruct the collateral agent to act or refrain from acting with
respect to the Collateral, and the collateral agent shall not follow any
instructions with respect to such Collateral from any other Person. No
authorized representative of any Indebtedness (other than the Instructing Group)
will instruct the collateral agent to commence any judicial or non-judicial
foreclosure proceedings with respect to, seek to have a trustee, receiver,
liquidator or similar official appointed for or over, attempt any action to take
possession of, exercise any right, remedy or power with respect to, or otherwise
take any action to enforce its interests in or realize upon, or take any other
action available to it in respect of, the Collateral.
Optional Redemption
Except as otherwise described in the next
three paragraphs below, the Notes will not be redeemable at Xeriums option
prior to August 15, 2018. Xerium is not, however, prohibited from acquiring the
Notes by means other than a redemption, whether pursuant to a tender offer, open
market purchase or otherwise, so long as the acquisition does not violate the
terms of the Indenture.
At any time prior to August 15, 2018,
Xerium may on any one or more occasions redeem up to 35% of the aggregate
principal amount of Notes issued under the Indenture at a redemption price of
109.500% of the principal amount, plus accrued and unpaid interest to the
redemption date (subject to the rights of holders of Notes on the relevant
record date to receive interest on the relevant interest payment date), with the
net cash proceeds of a sale of Capital Stock (other than Disqualified Stock or
any Preferred Stock) of Xerium;
provided
that:
(1)
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at least 65% of the aggregate principal amount of Notes
originally issued under the Indenture (calculated after giving effect to
the original issuance of any additional notes) (excluding Notes held by
Xerium and its Subsidiaries) remains outstanding immediately after the
occurrence of such redemption; and
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(2)
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the redemption occurs within 90 days of the date of the
closing of such sale of Equity Interests.
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42
At any time prior to August 15, 2018,
Xerium may on any one or more occasions redeem all or a part of the Notes, upon
not less than 30 nor more than 60 days notice to holders (with a copy to the
trustee), at a redemption price equal to 100% of the principal amount of the
Notes redeemed, plus the Applicable Premium as of, plus accrued and unpaid
interest to the date of redemption, subject to the rights of holders of Notes on
the relevant record date to receive interest on the relevant interest payment
date.
On or after August 15, 2018, Xerium may
redeem all or a part of the Notes upon not less than 30 nor more than 60 days
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest on the Notes redeemed, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on August 15 of the years indicated below, subject to the rights of holders of
Notes on the relevant record date to receive interest on the relevant interest
payment date:
Year
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Percentage
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2018
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104.750%
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2019
|
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102.375%
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2020 and
thereafter
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100.000%
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Unless Xerium defaults in the payment of
the redemption price, interest will cease to accrue on the Notes or portions
thereof called for redemption on the applicable redemption date.
Mandatory Redemption
Xerium is not required to make mandatory
redemption or sinking fund payments with respect to the Notes or to repurchase
the Notes at the option of the holders. However, under certain circumstances,
Xerium may be required to offer to purchase Notes as described under
Repurchase at the Option of Holders.
Selection and Notice
If less than all of the Notes are to be
redeemed at any time, the trustee will select Notes for redemption on a pro rata
basis to the extent practicable, by lot or such other method as the trustee
shall deem fair and appropriate, unless otherwise required by law or applicable
stock exchange or depositary requirements.
No Notes of $2,000 or less can be redeemed
in part. Notices of redemption will be mailed (with a copy to the trustee) by
first class mail at least 30 but not more than 60 days before the redemption
date to each holder of Notes to be redeemed at its registered address, except
that redemption notices may be mailed more than 60 days prior to a redemption
date if the notice is issued in connection with a defeasance of the Notes or a
satisfaction and discharge of the Indenture.
If any Note is to be redeemed in part
only, the notice of redemption that relates to that Note will state the portion
of the principal amount of that Note that is to be redeemed. A new Note in
principal amount equal to the unredeemed portion of the original note will be
issued in the name of the holder of Notes upon cancellation of the original
note. Notes called for redemption become due on the date fixed for redemption.
On and after the redemption date, interest ceases to accrue on Notes or portions
of Notes called for redemption.
Any redemption may, at Xeriums
discretion, be subject to one or more conditions precedent, including, but not
limited to, completion of an offering of Capital Stock, other offering or other
corporate transaction or event. In addition, if such redemption or notice is
subject to satisfaction of one or more conditions precedent, such notice shall
state that, in Xeriums discretion, the redemption date may be delayed until
such time as any or all such conditions shall be satisfied, or such redemption
may not occur and such notice may be rescinded in the event that any or all such
conditions shall not have been satisfied by the redemption date, or by the
redemption date so delayed. If any such condition precedent has not been
satisfied, Xerium shall provide written notice to the trustee and each holder of
the Notes in the same manner in which the notice of redemption was given prior
to noon New York City time one Business Day prior to the redemption date. Upon
receipt of such notice, the notice of redemption shall be rescinded or delayed
as provided in such notice.
Repurchase at the Option of
Holders
Change of Control Triggering
Event
If a Change of Control Triggering Event
occurs, each holder of Notes will have the right to require Xerium to repurchase
all or any part (equal to $2,000 or an integral multiple of $1,000 in excess
thereof) of that holders Notes pursuant to an offer on the terms set forth in
the Indenture (the
Change of Control
Offer
). In the Change of Control Offer,
Xerium will offer a payment in cash (the
Change of Control Payment
) equal to
101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest on the Notes
repurchased to the date of purchase, subject to the rights of holders of Notes
on the relevant record date to receive interest due on the relevant interest
payment date. Within 30 days following any Change of Control Triggering Event,
Xerium will mail a notice to each holder describing the transaction or
transactions and identifying the ratings decline that together constitute the
Change of Control Triggering Event and offering to repurchase Notes on the date
specified in the notice (the
Change of
Control Payment Date
), which date will be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed, pursuant to the procedures required by the Indenture and described in
such notice. Xerium will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control Triggering Event. To
the extent that the provisions of any securities laws or regulations conflict
with the Change of Control provisions of the Indenture, Xerium will comply with
the applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Change of Control provisions of the Indenture
by virtue of such compliance.
43
On the Change of Control Payment Date,
Xerium will, to the extent lawful:
(1)
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accept for payment all Notes or
portions of Notes properly tendered pursuant to the Change of Control
Offer;
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(2)
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deposit with the paying agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions of Notes properly tendered; and
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(3)
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deliver or cause to be delivered
to the trustee the Notes properly accepted together with an officers
certificate stating the aggregate principal amount of Notes or portions of
Notes being purchased by Xerium.
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The paying agent will promptly mail to
each holder of Notes properly tendered the Change of Control Payment for such
Notes, and the trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any;
provided
that each such new
Note will be in a principal amount of $2,000 or an integral multiple of $1,000
in excess thereof. Xerium will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date. The provisions described above that require Xerium to make a Change of
Control Offer following a Change of Control Triggering Event will be applicable
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control Triggering Event, the
Indenture does not contain provisions that permit the holders of the Notes to
require that Xerium repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
Xerium will not be required to make a
Change of Control Offer upon a Change of Control Triggering Event if (1) a third
party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by Xerium and purchases all Notes
properly tendered and not withdrawn under the Change of Control Offer, or (2)
notice of redemption has been given for all of the outstanding Notes pursuant to
the Indenture as described above under the caption Optional Redemption,
unless and until there is a default in payment of the applicable redemption
price.
Xeriums ability to repurchase Notes
pursuant to a Change of Control Offer may be restricted by the terms of any
Credit Facility, and may be prohibited or otherwise limited by the terms of any
then existing borrowing arrangements and Xeriums financial resources. The
exercise by the holders of Notes of their right to require Xerium to repurchase
the Notes upon a Change of Control Offer could cause a default under these other
agreements, even if the Change of Control Triggering Event itself does not, due
to the financial effect of such repurchases on Xerium or otherwise. The ABL
Credit Agreement provides that certain change of control events with respect to
Xerium would constitute an event of default thereunder, entitling the lenders,
among other things, to accelerate the maturity of all senior debt outstanding
thereunder. Any future credit agreements or other agreements relating to senior
debt to which Xerium becomes a party may contain similar restrictions and
provisions. In addition, Xeriums ability to pay cash to holders of Notes
following the occurrence of a Change of Control Triggering Event may be limited
by its then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
purchases.
Notwithstanding anything to the contrary
herein, a Change of Control Offer may be made in advance of a Change of Control
Triggering Event, conditional upon such Change of Control Triggering Event, if a
definitive agreement is in place for the Change of Control at the time of making
of the Change of Control Offer.
In the event that holders of not less than
90% in aggregate principal amount of the then outstanding Notes accept a Change
of Control Offer and Xerium (or any third party making such Change of Control
Offer in lieu of Xerium as described above) purchase all of the Notes held by
such holders, Xerium will have the right, upon not less than 30 nor more than 60
days prior notice, given not more than 30 days following the purchase pursuant
to the Change of Control Offer described above, to redeem all of the Notes that remain
outstanding following such purchase at a redemption price equal to the Change of
Control Payment plus accrued and unpaid interest on the Notes that remain
outstanding, to the date of redemption, subject to the rights of holders of the
Notes on the relevant regular record date to receive interest due on the
relevant interest payment date that is on or prior to the applicable redemption
date.
44
The definition of Change of Control
includes a phrase relating to the direct or indirect sale, lease, transfer,
conveyance or other disposition of all or substantially all of the properties
or assets of Xerium and its Subsidiaries taken as a whole. Although there is a
limited body of case law interpreting the phrase substantially all, there is
no precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of Notes to require Xerium to repurchase
its Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of Xerium and its Subsidiaries taken
as a whole to another Person or group may be uncertain.
Asset Sales
Xerium will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless:
(1)
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Xerium (or the
Restricted Subsidiary, as the case may be) receives consideration at the
time of the Asset Sale at least equal to the Fair Market Value of the
assets or Equity Interests issued or sold or otherwise disposed of
(
provided
that Fair Market Value shall be determined on the date of
contractually agreeing to such Asset Sale); and
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(2)
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except in the case of a
Permitted Asset Swap, at least 75% of the consideration received in the
Asset Sale by Xerium or such Restricted Subsidiary is in the form of cash.
For purposes of this clause (2), each of the following will be deemed to
be cash:
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(a)
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Cash Equivalents;
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(b)
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any liabilities, as shown on
Xeriums most recent consolidated balance sheet, of Xerium or any
Restricted Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the Notes) that are assumed by the
transferee of any such assets pursuant to an agreement that releases
Xerium or such Restricted Subsidiary from, or indemnifies Xerium or such
Restricted Subsidiary against, further liability;
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(c)
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any securities, notes or other
obligations received by Xerium or any such Restricted Subsidiary from such
transferee that are converted within 180 days by Xerium or such Restricted
Subsidiary into cash or Cash Equivalents, to the extent of the cash or
Cash Equivalents received in that conversion;
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(d)
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any stock or assets of the kind
referred to in clauses (2) or (4) of the next paragraph of this covenant;
and
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(e)
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any Designated Non-cash
Consideration received by Xerium or any of its Restricted Subsidiaries in
such Asset Sale having an aggregate Fair Market Value, taken together with
all other Designated Non-cash Consideration received pursuant to this
clause (e) that is at that time outstanding, not to exceed the greater of
(x) $20.0 million and (y) 3.5% of Total Assets.
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Within 365 days after the receipt of any
Net Proceeds from an Asset Sale, Xerium (or the applicable Restricted
Subsidiary, as the case may be) may apply such Net Proceeds:
(1)
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to permanently repay or prepay
(x) to the extent such Net Proceeds are attributable to an Asset Sale of
assets that constitute ABL Priority Collateral, Indebtedness and other
Obligations (or cash collateralize outstanding letters of credit with a
corresponding reduction of commitments with respect thereto) under a
Credit Facility that is incurred in compliance with clause (1) of the
second paragraph of the covenant set forth under Incurrence of
Indebtedness and Issuance of Preferred Stock and secured by a Permitted
Lien described in clause (1) of the definition thereof and, if the
Indebtedness repaid is revolving credit Indebtedness, to correspondingly
permanently reduce commitments with respect thereto or (y) to the extent
such Net Proceeds are attributable to an Asset Sale of assets of a
Restricted Subsidiary that is not a Guarantor, Indebtedness of a
Restricted Subsidiary that is not a Guarantor;
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(2)
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to acquire (including by way of a
purchase of assets or stock, merger, consolidation or otherwise) all or
substantially all of the assets of, or any Capital Stock of, another
Permitted Business, if, after giving effect to any such acquisition of
Capital Stock, the Permitted Business is or becomes a Restricted
Subsidiary of Xerium;
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(3)
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to make a capital expenditure;
or
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(4)
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to acquire other assets that are
not classified as current assets under GAAP and that are used or useful in
a Permitted Business;
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45
provided
that in the case of clauses (2), (3) and (4) above, a legally binding
commitment shall be treated as a permitted application of the Net Proceeds from
the date of such commitment so long as Xerium or such other Restricted
Subsidiary applies such Net Proceeds within 180 days of entering into such
commitment (an
Acceptable
Commitment
);
provided, further
, that if any
Acceptable Commitment is cancelled or terminated for any reason more than 365
days after the receipt of such Net Proceeds, then such Net Proceeds shall
constitute Excess Proceeds.
Pending the final application of any Net
Proceeds, Xerium or a Restricted Subsidiary may temporarily reduce revolving
credit borrowings (under the Credit Facilities or otherwise) or otherwise invest
the Net Proceeds in any manner that is not otherwise prohibited by the
Indenture.
Any Net Proceeds from Asset Sales that are
not applied or invested as provided in the second paragraph of this covenant
will constitute Excess Proceeds. When the aggregate amount of Excess Proceeds
exceeds $15.0 million, within 30 days thereof, Xerium will make an Asset Sale
Offer to all holders of Notes and all holders of Pari Passu Indebtedness
evidenced or governed by Pari Passu Payment Lien Documents containing provisions
similar to those set forth in the Indenture with respect to mandatory
prepayments and offers to purchase or redeem with the proceeds of sales of
assets to purchase the maximum principal amount of Notes and such Pari Passu
Indebtedness that may be purchased out of the Excess Proceeds. The offer price
in any Asset Sale Offer will be equal to 100% of the principal amount plus
accrued and unpaid interest to the date of purchase, and will be payable in
cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer,
Xerium may use those Excess Proceeds for any purpose not otherwise prohibited by
the Indenture. If the aggregate principal amount of Notes and such Pari Passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the trustee will select the Notes, and Xerium (or the applicable agent
for such Pari Passu Indebtedness will select) such Pari Passu Indebtedness to be
purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds will be reset at zero.
Xerium will comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent those laws and regulations are applicable
in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To
the extent that the provisions of any securities laws or regulations conflict
with the Asset Sale provisions of the Indenture, Xerium will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Asset Sale provisions of the Indenture by
virtue of such compliance.
Excess Cash Flow
If Xerium and its Restricted Subsidiaries
have Excess Cash Flow for any fiscal year commencing with the fiscal year ending
December 31, 2017, Xerium will be required to make an offer (an Excess Cash
Flow Offer) to all holders of Notes to purchase the maximum principal amount of
Notes that may be purchased with 75% of such Excess Cash Flow for such fiscal
year (the
Excess Cash Flow Offer
Amount
);
provided
that for the fiscal year
ending December 31, 2017, Excess Cash Flow will be calculated for the five
consecutive fiscal quarters ended December 31, 2017. The offer price for such
Excess Cash Flow Offer shall be an amount in cash equal to 101.5% of the
principal amount thereof, plus accrued and unpaid interest on the Notes
repurchased to the date of purchase, subject to the rights of holders of Notes
on the relevant record date to receive interest due on the relevant interest
payment date, in accordance with the procedures set forth in the
Indenture.
Within 95 days after the end of any fiscal
year for which an Excess Cash Flow Offer is required to be made, the Issuer will
send a notice (or otherwise transmit in accordance with DTCs applicable
policies and procedures) to each Holder of Notes and the Trustee describing the
Excess Cash Flow Offer and offering to purchase the Notes on the date specified
in the notice (which shall be a Business Day not earlier than 30 days nor later
than 60 days from the date the notice is sent). The notice will comply with the
notice requirements under the Indenture for an optional repurchase of Notes. To
the extent that the aggregate amount of Notes tendered pursuant to an Excess
Cash Flow Offer is less than the Excess Cash Flow Offer Amount, the Issuer and
its Restricted Subsidiaries may use any remaining Excess Cash Flow Offer Amount
for any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes surrendered by holders thereof exceeds the Excess Cash
Flow Offer Amount, Notes to be purchased shall be selected on a pro rata basis
based upon principal balance.
With respect to each Excess Cash Flow
Offer, Xerium shall be entitled to reduce the applicable Excess Cash Flow Offer
Amount with respect thereto by an amount equal to the sum of (x) the aggregate
repurchase price paid for any Notes theretofore repurchased by Xerium in the
open market or pursuant to tender offers (and cancelled by Xerium) and (y) the
aggregate redemption price paid for any Notes theretofore redeemed pursuant to
one or more optional redemptions (other than (1) repurchases made pursuant to
any Change of Control Offers, Asset Sale Offers, Excess Cash Flow Offers or
required to be made pursuant to clause (D)(iii) of the definition of the term
Excess Cash Flow or (2) any redemptions described in the second paragraph
under Optional Redemption above), in each case, during the period with
respect to which such Excess Cash Flow was being computed.
46
Notwithstanding the foregoing provisions
of this covenant, Xerium will not be required (but may elect to do so) to make
an Excess Cash Flow Offer in accordance with this covenant unless the Excess
Cash Flow Offer Amount with respect to the applicable period in respect of which
such Excess Cash Flow Offer is to be made exceeds $1.0 million (with lesser
amounts being carried forward for purposes of determining whether the $1.0
million threshold has been met for any future period). Upon completion of each
Excess Cash Flow Offer, the Excess Cash Flow Offer Amount will be reset at
zero.
Xerium will comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent those laws and regulations are applicable
in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To
the extent that the provisions of any securities laws or regulations conflict
with the Asset Sale provisions of the Indenture, Xerium will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Asset Sale provisions of the Indenture by
virtue of such compliance.
To the extent that, in connection with the
preparation of Xeriums financial statements or otherwise, it is determined that
there was an error in good faith in the calculation by Xerium of the Excess Cash
Flow that resulted in less than the full Excess Cash Flow Offer Amount being
used in an Excess Cash Flow Offer, no such shortfall will result in a Default or
Event of Default;
provided
that within 30 calendar days of Xeriums confirmation of the
error, Xerium initiates an additional Excess Cash Flow Offer of such additional
amount.
If Xerium fails to meet certain
conditions, the Credit Agreement may prohibit Xerium from purchasing any Notes,
subject to certain exceptions. Any future credit agreements or other agreement
to which Xerium becomes a party may contain similar or other restrictions. In
the event Xerium must make an Excess Cash Flow Offer at a time when Xerium is
prohibited from purchasing Notes, Xerium could seek the consent from the lenders
under the Credit Agreement to the purchase of Notes or could attempt to
refinance the borrowings that contain the prohibition. If Xerium does not obtain
a consent or repay the borrowings, Xerium will remain prohibited from purchasing
Notes. In that case, the failure of Xerium to purchase tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the Credit Agreement.
Certain Covenants
Restricted
Payments
Xerium will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly:
(a)
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declare or pay any dividend or
make any other payment or distribution on account of Xeriums or any of
its Restricted Subsidiaries Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving Xerium or any of its Restricted Subsidiaries) or to the direct
or indirect holders of Xeriums or any of its Restricted Subsidiaries
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock)
of Xerium and other than dividends or distributions payable to Xerium or a
Restricted Subsidiary of Xerium);
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(b)
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purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection
with any merger or consolidation involving Xerium) any Equity Interests of
Xerium or any direct or indirect parent of Xerium;
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(c)
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make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire
for value any Indebtedness of Xerium that is contractually subordinated to
the Notes or any Note Guarantee (excluding any intercompany Indebtedness
between or among Xerium and any of its Restricted Subsidiaries), except a
payment of interest or principal at the Stated Maturity thereof (other
than the redemption, purchase, repurchase or other acquisition for value
of Subordinated Indebtedness purchased in anticipation of satisfying a
sinking fund obligation, principal installment or final Stated Maturity,
in each case due within one year of the date of such redemption, purchase,
repurchase or other acquisition); or
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(d)
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make any Restricted
Investment;
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(all such payments and other actions set
forth in these clauses (a) through (d) above being collectively referred to as
Restricted Payments
), unless, at the time of and after giving effect to such
Restricted Payment:
(1)
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no Default or Event of Default has occurred and is
continuing or would occur as a consequence of such Restricted
Payment;
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47
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(2)
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Xerium would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four fiscal quarter reference
period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described below under the caption
Incurrence of Indebtedness and Issuance of Preferred Stock;
and
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(3)
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such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by Xerium and its Restricted
Subsidiaries since the Issue Date (excluding Restricted Payments permitted
by clauses (2), (3), (4), (5), (6) and (12) of the next succeeding
paragraph), is less than the sum, without duplication, of:
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(a)
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50% of the Consolidated Net
Income of Xerium for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after the Issue Date to
the end of Xeriums most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit); plus
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(b)
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100% of the aggregate net cash
proceeds received by Xerium since the Issue Date (i) as a contribution to
its common equity capital or from the issue or sale of Equity Interests of
Xerium including upon exercise of stock options whether issued before or
after the Issue Date (other than Disqualified Stock or Excluded
Contributions) or (ii) from the issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt
securities of Xerium that have been converted into or exchanged for such
Equity Interests (other than Equity Interests (or Disqualified Stock or
debt securities) sold to a Subsidiary of Xerium); plus
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(c)
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100% of the aggregate amount
received in cash and the Fair Market Value of property and marketable
securities received by means of (i) the sale or other disposition (other
than to Xerium or a Restricted Subsidiary) of Restricted Investments made
by Xerium or its Restricted Subsidiaries after the Issue Date and
repurchases and redemptions of such Restricted Investments from Xerium or
its Restricted Subsidiaries and repayments of loans or advances which
constitute Restricted Investments by Xerium or its Restricted Subsidiaries
or (ii) the sale (other than to Xerium or a Restricted Subsidiary) of the
Capital Stock of an Unrestricted Subsidiary or a distribution from an
Unrestricted Subsidiary or a dividend from an Unrestricted Subsidiary, in
each case of (i) and (ii) not to exceed the lesser of (x) the initial
amount treated as a Restricted Investment and (y) the cash return of
capital with respect to such Restricted Investment; plus
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(d)
|
to the extent that any
Unrestricted Subsidiary of Xerium is redesignated as a Restricted
Subsidiary, or merged or consolidated into Xerium or a Restricted
Subsidiary, or assets of an Unrestricted Subsidiary are transferred to
Xerium or a Restricted Subsidiary, after the Issue Date, the lesser of (i)
the Fair Market Value of Xeriums Investment in such Subsidiary as of the
date of such redesignation or (ii) such Fair Market Value as of the date
on which such Subsidiary was originally designated as an Unrestricted
Subsidiary after the Issue Date; plus
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(e)
|
an amount equal to the sum of the
net reduction in the Investments (other than Permitted Investments) made
by Xerium or any Restricted Subsidiary in any Person resulting from
repurchases, repayments or redemptions of such Investments by such Person,
proceeds realized on the sale of such Investment and proceeds representing
the return of capital (excluding dividends and distributions), in each
case received by Xerium or any Restricted Subsidiary subsequent to the
Issue Date.
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The preceding provisions will not prohibit
(
provided
that with respect to clauses (5), (7), (9), (10) and (12) below, no Default has
occurred and is continuing or would be caused thereby):
(1)
|
the payment of any dividend or
the consummation of any irrevocable redemption within 60 days after the
date of declaration of the dividend or giving of the redemption notice, as
the case may be, if at the date of declaration or notice, the dividend or
redemption payment would have complied with the provisions of the
Indenture;
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(2)
|
the making of any Restricted
Payment in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of Xerium) of,
Equity Interests of Xerium (other than Disqualified Stock) or from the
substantially concurrent contribution of common equity capital to Xerium;
provided
that the amount of any such net cash proceeds that are utilized for
any such Restricted Payment will be excluded from clause (3)(b) of the
preceding paragraph;
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48
(3)
|
the repurchase, redemption,
defeasance or other acquisition or retirement for value of Subordinated
Indebtedness of Xerium with the net cash proceeds from a substantially
concurrent incurrence of Permitted Refinancing Indebtedness;
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(4)
|
the payment of any dividend (or,
in the case of any partnership or limited liability company, any similar
distribution) by a Restricted Subsidiary of Xerium to the holders of its
Equity Interests who are not Affiliates of Xerium on a pro rata
basis;
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(5)
|
the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of
Xerium or any Restricted Subsidiary of Xerium held by any current or
former officer, director or employee of Xerium or any of its Restricted
Subsidiaries pursuant to any employment agreement, equity subscription
agreement, stock option agreement, shareholders agreement, stock option
plan, other benefit plan or similar agreement or arrangement;
provided
that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests may not exceed $7.0 million in any
calendar year (with unused amounts in any calendar year being carried over
to succeeding calendar years subject to a maximum of $10.0 million in any
such calendar year);
provided further
that such amount in any calendar year
may be increased by an amount not to exceed the net cash proceeds of
key-man life insurance policies received by Xerium or its Restricted
Subsidiaries after the Issue Date;
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(6)
|
the repurchase of Equity
Interests deemed to occur upon the exercise of stock options or stock
appreciation rights to the extent such Equity Interests represent a
portion of the exercise price of those stock options or stock appreciation
rights;
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(7)
|
the declaration and payment of
regularly scheduled or accrued dividends to holders of any class or series
of Disqualified Stock of Xerium issued on or after the Issue Date in
accordance with the Fixed Charge Coverage Ratio test described below under
the caption Incurrence of Indebtedness and Issuance of Preferred
Stock;
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(8)
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payments or distributions to
shareholders exercising appraisal or discount rights pursuant to
applicable law pursuant to or in connection with a merger, consolidation
or transfer of all or substantially all of Xerium and its Restricted
Subsidiary assets that complies with the provisions of the
Indenture;
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(9)
|
in the event of a Change of
Control Triggering Event, and if no Default or Event of Default shall have
occurred and be continuing, the payment, purchase, redemption, defeasance
or other acquisition or retirement of Indebtedness of Xerium or any
Guarantor that is subordinated or junior in right of payment to the Notes
or the Note Guarantee of such Guarantor, in each case, at a purchase price
not greater than 101% of the principal amount of such Indebtedness, plus
any accrued and unpaid interest thereon;
provided
that prior to or
contemporaneously with such payment, purchase, redemption or defeasance or
other acquisition or retirement, Xerium (or a third party to the extent
permitted by the Indenture) has made the Change of Control Offer with
respect to the Notes and has repurchased all Notes validly tendered and
not withdrawn in connection with such Change of Control
Offer;
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(10)
|
in the event of an Asset Sale
which requires Xerium to make an Asset Sale Offer, and if no Default or
Event of Default shall have occurred and be continuing, the payment,
purchase, redemption, defeasance or other acquisition or retirement of
Indebtedness of Xerium or any Guarantor that is subordinated or junior in
right of payment to the Notes or the Note Guarantee of such Guarantor, in
each case, at a purchase price not greater than 100% of the principal
amount of such Indebtedness, plus any accrued and unpaid interest thereon;
provided
that prior or contemporaneously with such payment, purchase,
redemption or defeasance or other acquisition or retirement, Xerium has
made an Asset Sale Offer with respect to the Notes and has repurchased all
Notes validly tendered and not withdrawn in connection with such Asset
Sale Offer;
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(11)
|
the purchase, redemption,
acquisition, cancellation or other retirement for a nominal value per
right of any rights granted to all the holders of Capital Stock of Xerium
pursuant to any shareholders rights plan adopted for the purpose of
protecting shareholders from unfair takeover practices;
provided
that any
such purchase, redemption, acquisition, cancellation or other retirement
of such rights shall not be for the purpose of evading the limitations of
this covenant (as determined in good faith by the Board of Directors of
Xerium);
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(12)
|
other Restricted Payments in an
aggregate amount not to exceed $25.0 million since the Issue Date;
and
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(13)
|
Restricted Payments made with
Excluded Contributions.
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49
The amount of all Restricted Payments
(other than cash) will be the Fair Market Value on the date of the Restricted
Payment of the asset(s) or securities proposed to be transferred or issued by
Xerium or such Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. If the Fair Market Value of any assets or securities that
are required to be valued by this covenant exceeds $25.0 million, the Board of
Directors determination of Fair Market Value must be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing in the United States.
Incurrence of Indebtedness and
Issuance of Preferred Stock
Xerium will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively,
incur
) any Indebtedness
(including Acquired Debt), and Xerium will not issue any Disqualified Stock and
will not permit any of its Restricted Subsidiaries to issue any shares of
Preferred Stock;
provided,
however
, that Xerium may incur Indebtedness
(including Acquired Debt) or issue Disqualified Stock and any Restricted
Subsidiary may incur Indebtedness (including Acquired Debt) or issue
Disqualified Stock or Preferred Stock if the Fixed Charge Coverage Ratio for
Xeriums most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or such Preferred
Stock is issued, as the case may be, would have been at least 2.0 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred or the
Disqualified Stock or the Preferred Stock had been issued, as the case may be,
at the beginning of such four fiscal quarter reference period;
provided
that Restricted
Subsidiaries that are not Guarantors may not incur Indebtedness or issue
Disqualified Stock or Preferred Stock pursuant to the Fixed Charge Coverage
Ratio test under this paragraph, if after giving pro forma effect to such
incurrence or issuance (including a pro forma application of the net proceeds
therefrom), Indebtedness or Disqualified Stock or Preferred Stock of Restricted
Subsidiaries that are not Guarantors would be outstanding pursuant to the Fixed
Charge Coverage Ratio test under this paragraph in an aggregate amount of more
than the greater of (x) $20.0 million and (y) 3.50% of Total Assets.
The first paragraph of this covenant will
not prohibit the incurrence of any of the following items of Indebtedness
(collectively,
Permitted Debt
):
(1)
|
the incurrence by Xerium and its
Restricted Subsidiaries of Indebtedness and letters of credit under Credit
Facilities (and guarantees thereof) in an aggregate principal amount at
any one time outstanding under this clause (1) (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of Xerium and its Restricted Subsidiaries thereunder) not to
exceed the excess of (x) the greater of (A) $55.0 million (or the foreign
currency equivalent) denominated in U.S. dollars and (B) 9.50% of Total
Assets over (y) the aggregate amount of permanent repayments of principal
made under the Credit Facilities on or before such date with Excess Cash
Flow (which, for the avoidance of doubt, shall be calculated and applied
for purposes of this clause (y) at the time of determination of Excess
Cash Flow in connection with any Excess Cash Flow Offer) and to the extent
(A) such repayments resulted in a concurrent corresponding reduction in
the lenders revolving commitments then outstanding under the Credit
Facilities, (B) such repayments are deducted in the calculation of Excess
Cash Flow used in determining the Excess Cash Flow Amount for such Excess
Cash Flow Offer and (C) such repayments have not previously reduced the
amount of this exception (
provided
that, for the avoidance of doubt, no
repayments made as part of a refinancing in full of the Credit Facilities
shall result in a deduction herefrom);
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(2)
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the incurrence by Xerium and its
Restricted Subsidiaries of the Existing Indebtedness;
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(3)
|
the incurrence by Xerium and the
Guarantors of Indebtedness represented by the Notes and Note Guarantees
thereof;
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(4)
|
the incurrence by Xerium or any
of its Restricted Subsidiaries of Indebtedness represented by Attributable
Debt, Capital Lease Obligations, mortgage financings, project financing,
or purchase money obligations, in each case (other than Attributable
Debt), incurred for the purpose of financing all or any part of the
purchase price or cost of design, construction, installation or
improvement of property, plant or equipment used in the business of Xerium
or any of its Restricted Subsidiaries, in an aggregate principal amount,
including all Permitted Refinancing Indebtedness incurred to renew,
refund, refinance, replace, defease or discharge any Indebtedness incurred
pursuant to this clause (4), not to exceed at any time outstanding the
greater of (x) $45.0 million and (y) 7.75% of Total Assets;
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(5)
|
the incurrence by Xerium or any
of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in
exchange for, or the net proceeds of which are used to renew, refund,
refinance, replace, defease or discharge any Indebtedness that was
permitted by the Indenture to be incurred under the first paragraph of
this covenant or clauses (2), (3), (5) or (12) of this
paragraph;
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50
(6)
|
the incurrence by Xerium
or any of its Restricted Subsidiaries of intercompany Indebtedness between
or among Xerium and any of its Restricted Subsidiaries;
provided,
however
,
that:
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(a)
|
if Xerium or a Restricted Subsidiary
that is a Guarantor is the obligor on such Indebtedness and the payee
thereof is a Restricted Subsidiary that is not a Guarantor, such
Indebtedness must be expressly subordinated to the prior payment in full
in cash of all Obligations then due with respect to the Notes or the Note
Guarantee of such Restricted Subsidiary that is a Guarantor, as the case
may be; and
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(b)
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(i) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than Xerium or a Restricted Subsidiary of Xerium
and (ii) any sale or other transfer of any such Indebtedness to a Person
that is not either Xerium or a Restricted Subsidiary of Xerium, will be
deemed, in each case, to constitute an incurrence of such Indebtedness by
Xerium or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (6);
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(7)
|
the issuance by any of
Xeriums Restricted Subsidiaries to Xerium or to any of its Restricted
Subsidiaries of shares of Preferred Stock;
provided,
however
,
that:
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(a)
|
any subsequent
issuance or transfer of Equity Interests that results in any such
Preferred Stock being held by a Person other than Xerium or a Restricted
Subsidiary of Xerium; and
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(b)
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any sale or other
transfer of any such Preferred Stock to a Person that is not either Xerium
or a Restricted Subsidiary of Xerium, will be deemed, in each case, to
constitute an issuance of such Preferred Stock by such Restricted
Subsidiary that was not permitted by this clause (7);
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(8)
|
the
incurrence by Xerium or any of its Restricted Subsidiaries of Hedging
Obligations (which may, but need not be, under Credit Facilities) for the
purpose of hedging risks associated with the operations of Xerium and its
Subsidiaries;
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(9)
|
the
guarantee by Xerium or any of its Restricted Subsidiaries that is a
Guarantor or a Restricted Subsidiary of Xerium that was permitted to be
incurred by another provision of this covenant;
provided
that if the
Indebtedness being guaranteed is subordinated to or
pari passu
with the
Notes, then the guarantee shall be subordinated or
pari passu
, as
applicable, to the same extent as the Indebtedness
guaranteed;
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(10)
|
the
incurrence by Xerium or any of its Restricted Subsidiaries of Indebtedness
in respect of workers compensation claims, self-insurance obligations,
bankers acceptances, performance, surety, statutory, or appeal bonds in
the ordinary course of business;
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(11)
|
the
incurrence by Xerium or any of its Restricted Subsidiaries of Indebtedness
arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently drawn against
insufficient funds, so long as such Indebtedness is covered within five
Business Days;
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(12)
|
Indebtedness
of a Restricted Subsidiary incurred and outstanding on or prior to the
date on which such Restricted Subsidiary was acquired by Xerium (other
than Indebtedness incurred in contemplation of, or in connection with, the
transaction or series of related transactions pursuant to which such
Restricted Subsidiary became a Restricted Subsidiary of or was otherwise
acquired by Xerium);
provided,
however
, that for any such Indebtedness
outstanding at any time under this clause (12), on the date that such
Subsidiary is acquired by Xerium, Xerium would either (a) have been able
to incur $1.00 of additional Indebtedness pursuant to the first paragraph
of this covenant or (b) have a Fixed Charge Coverage Ratio for the
four-quarter period most recently ended on or prior to the date on which
such acquisition had occurred after giving pro forma effect to such
acquisition and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period greater
than the Fixed Charge Coverage Ratio that Xerium would have had for the
same four-quarter period if such transaction had not
occurred;
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(13)
|
Indebtedness
arising from agreements of Xerium or a Restricted Subsidiary providing for
indemnification, adjustment of purchase price or similar obligations, in
each case incurred or assumed in connection with the acquisition or
disposition of any assets or property or Capital Stock of a Restricted
Subsidiary;
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(14)
|
Indebtedness
in respect of (a) netting services, overdraft protections and otherwise in
connection with deposit accounts and (b) US Cash Management Products and
Services, Canadian Cash Management Products and Services and European
Cash Management Products and Services (each as defined in the ABL Credit
Agreement (as in effect on the Issue Date));
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51
(15)
|
the incurrence by (i) any Securitization Subsidiary of
Indebtedness pursuant to a Qualified Securitization Financing or (ii)
Xerium or any of its Restricted Subsidiaries of Indebtedness under
factoring agreements providing for Xerium or any of its Subsidiaries to
sell or otherwise dispose of any receivable on arms length terms for cash
payable at the time of disposal, in an aggregate principal amount,
including all Permitted Refinancing Indebtedness incurred to renew,
refund, refinance, replace, defease or discharge any Indebtedness incurred
pursuant to this clause (15), not to exceed at any time outstanding the
greater of (x) $50.0 million and (y) 8.50% of Total Assets;
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(16)
|
the incurrence by Xerium or any of its Restricted
Subsidiaries of additional Indebtedness (which may, but need not, be
pursuant to Credit Facilities) in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to renew, refund, refinance,
replace, defease or discharge any Indebtedness incurred pursuant to this
clause (16), not to exceed the greater of (x) $40.0 million and (y) 7.0%
of Total Assets;
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(17)
|
Indebtedness of Xerium or any Restricted Subsidiary of
Xerium supported by a letter of credit issued pursuant to a Credit
Facility incurred under clause (1) above in a principal amount not in
excess of the stated amount of such letter of credit; and
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(18)
|
Indebtedness of Foreign Subsidiaries;
provided, however
,
that the aggregate principal amount of Indebtedness incurred under this
clause (18) which, when aggregated with the principal amount of all other
Indebtedness then outstanding and incurred pursuant to this clause (18),
does not exceed the greater of (x) $20.0 million and (y) 3.50% of Total
Assets.
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Neither Xerium nor any Guarantor will
incur any Indebtedness (including Permitted Debt) that is contractually
subordinated in right of payment to any other Indebtedness of Xerium or such
Guarantor unless such Indebtedness is also contractually subordinated in right
of payment to the Notes or Note Guarantees on substantially identical terms;
provided, however
, that no Indebtedness will be deemed to be contractually subordinated in
right of payment to any other Indebtedness of Xerium or any Guarantor solely by
virtue of being unsecured or by virtue of being secured on a first or junior
Lien basis.
For purposes of determining compliance
with this Incurrence of Indebtedness and Issuance of Preferred Stock covenant,
in the event that an item of proposed Indebtedness meets the criteria of more
than one of the categories of Permitted Debt described in clauses (1) through
(18) above, or is entitled to be incurred pursuant to the first paragraph of
this covenant, Xerium will be permitted to classify such item of Indebtedness on
the date of its incurrence, or later reclassify all or a portion of such item of
Indebtedness, in any manner that complies with this covenant. Indebtedness under
Credit Facilities outstanding on the date on which Notes are first issued and
authenticated under the Indenture will initially be deemed to have been incurred
on such date in reliance on the exception provided by clause (1) of the
definition of Permitted Debt. Indebtedness permitted by this covenant need not
be permitted solely by reference to one provision permitting such Indebtedness
but may be permitted in part by one such provision and in part by one or more
other provisions of this covenant permitting such Indebtedness. The accrual of
interest, the accretion or amortization of original issue discount, the payment
of interest on any Indebtedness in the form of additional Indebtedness with the
same terms, the reclassification of Preferred Stock as Indebtedness due to a
change in accounting principles, and the payment of dividends on Disqualified
Stock or Preferred Stock in the form of additional shares of the same class of
Disqualified Stock or Preferred Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock or Preferred Stock for
purposes of this covenant;
provided
, in each such case, that the
amount of any such accrual, accretion or payment is included in Fixed Charges of
Xerium as accrued.
For purposes of determining compliance
with any U.S. dollar-denominated or euro-denominated restriction on the
incurrence of Indebtedness, the U.S. dollar-equivalent or euro-denominated, as
the case may be, principal amount of Indebtedness denominated in a foreign
currency shall be calculated based on the relevant currency exchange rate in
effect on the date such Indebtedness was incurred, in the case of term
Indebtedness, or first committed, in the case of revolving credit Indebtedness;
provided
that if such Indebtedness is incurred to refinance other Indebtedness
denominated in a foreign currency, and such refinancing would cause the
applicable U.S. dollar-denominated or euro-denominated, as the case may be,
restriction to be exceeded if calculated at the relevant currency exchange rate
in effect on the date of such refinancing, such U.S. dollar-denominated or
euro-denominated, as the case may be, restriction shall be deemed not to have
been exceeded so long as the principal amount of such refinancing Indebtedness
does not exceed the principal amount of such Indebtedness being refinanced.
Notwithstanding any other provision of the Indenture, the maximum amount of
Indebtedness that Xerium or any Restricted Subsidiary may incur pursuant to this
covenant shall not be or be deemed to be exceeded as a result of fluctuations in
exchange rates or currency values.
52
The amount of any Indebtedness outstanding
as of any date will be:
(1)
|
the accreted
value of the Indebtedness, in the case of any Indebtedness issued with
original issue discount;
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(2)
|
the
principal amount of the Indebtedness, in the case of any other
Indebtedness; and
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(3)
|
in respect
of Indebtedness of another Person secured by a Lien on the assets of the
specified Person, the lesser of:
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(a)
|
the Fair Market Value
of such assets at the date of determination; and
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(b)
|
the amount of the
Indebtedness of the other Person.
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Liens
Xerium will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien of any kind on any asset now owned or hereafter
acquired, except Permitted Liens.
Limitation on Sale and Leaseback
Transactions
Xerium will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction;
provided
that Xerium or any Restricted Subsidiary may enter into a
sale and leaseback transaction if:
(1)
|
Xerium or that Restricted Subsidiary, as applicable,
could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction under
the covenant described above under the caption Incurrence of
Indebtedness and Issuance of Preferred Stock and (b) incurred a Lien to
secure such Indebtedness pursuant to the covenant described above under
the caption Liens;
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(2)
|
the gross cash proceeds of that sale and leaseback
transaction are at least equal to the Fair Market Value of the property
that is the subject of that sale and leaseback transaction;
and
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(3)
|
the transfer of assets in that sale and leaseback
transaction is permitted by, and Xerium applies the proceeds of such
transaction in compliance with, the covenant described above under the
caption Repurchase at the Option of Holders Asset
Sales.
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Dividend and Other Payment
Restrictions Affecting Subsidiaries
Xerium will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or permit to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to:
(1)
|
pay dividends or make any other
distributions on its Capital Stock to Xerium or any of its Restricted
Subsidiaries, or with respect to any other interest or participation in,
or measured by, its profits, or pay any indebtedness owed to Xerium or any
of its Restricted Subsidiaries;
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(2)
|
make loans or advances to Xerium
or any of its Restricted Subsidiaries; or
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(3)
|
sell, lease or transfer any of
its properties or assets to Xerium or any of its Restricted
Subsidiaries.
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However, the preceding restrictions will
not apply to encumbrances or restrictions existing under or by reason
of:
(1)
|
agreements governing Existing
Indebtedness and Credit Facilities as in effect on the Issue Date and any
amendments, restatements, modifications, renewals, supplements,
refundings, replacements or refinancings of those agreements;
provided
that such amendments, restatements, modifications, renewals,
supplements, refundings, replacements or refinancings are either (i) not
materially less favorable, taken as a whole, to the holders of the Notes
than such encumbrances or restrictions contained in those agreements on
the Issue Date or (ii) not materially more disadvantageous to the holders
of the Notes than in comparable financings (as determined in good faith by
Xerium) and either (x) Xerium determines in good faith that such
encumbrance or restriction will not materially affect Xeriums ability to
make principal or interest payments on the Notes or (y) such encumbrance
or restriction applies only if a default occurs in respect of a payment or
financial covenant relating to such Indebtedness;
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53
(2)
|
the Indenture
Documents;
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(3)
|
applicable law, rule,
regulation or order;
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(4)
|
any instrument
governing Indebtedness or Capital Stock of a Person acquired by Xerium or
any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness or Capital Stock was
incurred in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired;
provided
that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred;
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(5)
|
customary
non-assignment provisions in contracts, leases, joint venture agreements,
licenses and similar agreements entered into in the ordinary course of
business;
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(6)
|
purchase money
obligations for property acquired in the ordinary course of business and
Capital Lease Obligations that impose restrictions on the property
purchased or leased of the nature described in clause (3) of the preceding
paragraph;
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(7)
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any agreement for the
sale or other disposition of a Restricted Subsidiary or assets that
restricts distributions by that Restricted Subsidiary or the transfer of
the assets pending the sale or other disposition;
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(8)
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Permitted Refinancing
Indebtedness;
provided
that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are not materially more
restrictive, taken as a whole, than those contained in the agreements
governing the Indebtedness being refinanced;
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(9)
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Liens permitted to be
incurred under the provisions of the covenant described above under the
caption Liens that limit the right of the debtor to dispose of the
assets subject to such Liens;
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(10)
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provisions limiting
the disposition or distribution of assets or property in joint venture
agreements, asset sale agreements, sale-leaseback agreements, Capital
Stock sale agreements and other similar agreements entered into with the
approval of Xeriums Board of Directors, which limitation is applicable
only to the assets, or (in the case of Capital Stock sales) entities, that
are the subject of such agreements;
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(11)
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agreements governing
Indebtedness permitted to be incurred by Restricted Subsidiaries of Xerium
under the provisions of the covenant described above under the caption
Incurrence of Indebtedness and Issuance of Preferred Stock;
provided
that such agreements (except those agreements entered into pursuant
to clauses (16) or (18) of the definition of Permitted Debt) are not
materially more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in the
agreements governing Credit Facilities as in effect on the Issue Date;
and
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(12)
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encumbrances and
restrictions applicable to a Securitization Subsidiary that in the good
faith judgment of Xerium are necessary or advisable to effect the
transactions contemplated under a Qualified Securitization
Financing.
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Merger, Consolidation or Sale of
Assets
Xerium will not, directly or indirectly:
(1) consolidate or merge with or into another Person (whether or not Xerium is
the surviving corporation); or (2) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of Xerium and
its Restricted Subsidiaries taken as a whole, in one or more related
transactions, to another Person, unless:
(1)
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either: (a) Xerium is
the surviving corporation; or (b) the Person formed by or surviving any
such consolidation or merger (if other than Xerium) or to which such sale,
assignment, transfer, conveyance or other disposition has been made is a
corporation organized or existing under the laws of the United States, any
state of the United States or the District of Columbia (such Person, as
the case may be, being herein called the
Successor Company
);
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54
(2)
|
the Successor Company (if other
than Xerium) or the Person to which such sale, assignment, transfer,
conveyance or other disposition has been made assumes in writing all the
obligations of Xerium under the Notes, the Indenture, the applicable
Collateral Documents, the Intercreditor Agreement and the Registration
Rights Agreement and causes such instruments to be filed and recorded in
such jurisdictions and takes such other actions as may be reasonably
necessary to perfect or continue the perfection of the Lien created under
the Collateral Documents on the Collateral owned by or transferred to the
Successor Company;
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(3)
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immediately after such
transaction, no Default or Event of Default exists;
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(4)
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Xerium or the Successor Company
(if other than Xerium), or to which such sale, assignment, transfer,
conveyance or other disposition has been made would, on the date of such
transaction after giving pro forma effect thereto and any related
financing transactions as if the same had occurred at the beginning of the
applicable four fiscal quarter reference period, either (a) be permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption Incurrence of Indebtedness
and Issuance of Preferred Stock or (b) have a Fixed Charge Coverage Ratio
greater than the Fixed Charge Coverage Ratio that Xerium would have had
for the same four-quarter period if such transaction had not
occurred;
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(5)
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each Guarantor, unless it is the
other party to the transactions described above, in which case clause
(1)(b) of the third succeeding paragraph shall apply, shall have by
supplemental indenture confirmed that its Note Guarantee shall apply to
such Persons obligations under the Indenture, the Notes and the
Registration Rights Agreement, if applicable at such time;
and
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(6)
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Xerium shall have delivered to
the trustee and collateral agent an officers certificate and an opinion
of counsel, each stating that such consolidation, merger or transfer and
such supplemental indentures, if any, comply with the Indenture and that
such supplemental indenture and any other documents required to be
delivered, in each case, pursuant to clause (2) above have been duly
authorized, executed and delivered by the Successor Company (if other than
Xerium) and constitute legally valid and binding and enforceable
obligations of the Successor Company (if other than Xerium) and regarding
the perfection of such Liens in the Collateral of the Successor Company
(if other than Xerium) as provided for in the Indenture or the Collateral
Documents (in form and substance substantially consistent with the form of
opinion of counsel delivered on the Issue Date(subject to customary
qualifications, exceptions and assumptions)).
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In addition, Xerium will not, directly or
indirectly, lease all or substantially all of the properties and assets of it
and its Restricted Subsidiaries taken as a whole, in one or more related
transactions, to any other Person.
This Merger, Consolidation or Sale of
Assets covenant will not apply:
(1)
|
in the case of clauses (3) and
(4) of the first paragraph of this covenant, to a merger of Xerium with an
Affiliate solely for the purpose of reincorporating Xerium in another
jurisdiction; or
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(2)
|
in the case of clauses (3), (4)
and (5) of the first paragraph of this covenant with respect to which
Xerium is not the Successor Company of any such consolidation or merger,
to any consolidation or merger, or any sale, assignment, transfer,
conveyance, lease or other disposition of assets between or among Xerium
and its Restricted Subsidiaries.
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Subject to certain limitations described
in the Indenture governing release of a Note Guarantee upon the sale,
disposition or transfer of a Guarantor, no Guarantor will, and Xerium will not
permit any Guarantor to, consolidate or merge with or into or wind up into
(whether or not such Guarantor is the surviving Person), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets, in one or more related transactions, to any Person
unless:
(1)
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(a)
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such Guarantor is the
surviving Person or the Person formed by or surviving any such
consolidation, amalgamation or merger (if other than such Guarantor) or to
which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made is a Person organized or existing under
the laws of the jurisdiction of organization of such Guarantor, as
applicable, or the laws of the United States, any state thereof, the
District of Columbia, or any territory thereof (such surviving Guarantor
or such Person, as the case may be, being herein called the
Successor Person
);
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55
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(b)
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the Successor Person, if other than such Guarantor,
expressly assumes all the obligations of such Guarantor under the
Indenture, the applicable Collateral Documents, the Intercreditor
Agreement and such Guarantors related Note Guarantee pursuant to
supplemental indentures or other agreements in form satisfactory to the
trustee and if applicable, the collateral agent and causes such
instruments to be filed and recorded in such jurisdictions and takes such
other actions as may be reasonably necessary to perfect or continue the
perfection of the Lien created under the Collateral Documents on the
Collateral owned by or transferred to the Successor Person;
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(c)
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immediately after such transaction, no Default or Event
of Default exists; and
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(d)
|
Xerium shall have delivered to the trustee and the
collateral agent an officers certificate and an opinion of counsel, each
stating that such consolidation, merger or transfer and such supplemental
indentures, if any, comply with the Indenture and that such supplemental
indenture and any other documents required to be delivered, in each case,
pursuant to clause (1)(b) above have been duly authorized, executed and
delivered by the Successor Person (if other than such Guarantor) and
constitute legally valid and binding and enforceable obligations of the
Successor Person (if other than such Guarantor) and regarding the
perfection of such Liens in the Collateral of the Successor Person (if
other than such Guarantor) as provided for in the Indenture or the
Collateral Documents (in form and substance substantially consistent with
the form of opinion of counsel delivered on the Issue Date (subject to
customary qualifications, exceptions and assumptions));
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(2)
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the transaction is made in
compliance with the first paragraph of the covenant described under
Repurchase at the Option of Holders Asset Sales; or
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(3)
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such property or assets constitute
Equity Interests of Restricted Subsidiaries that are not Guarantors, which
Equity Interests are sold, assigned, transferred, leased, conveyed or
otherwise disposed to Restricted Subsidiaries that are not
Guarantors.
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Subject to certain limitations described
in the Indenture, the Successor Person will succeed to, and be substituted for,
such Guarantor under the Indenture and such Guarantors Note Guarantee.
Notwithstanding the foregoing, any Guarantor may (1) merge, amalgamate or
consolidate with or into, wind up into or transfer all or part of its properties
and assets to another Guarantor or Xerium, (2) merge with an Affiliate of Xerium
solely for the purpose of reincorporating the Guarantor in the United States,
any state thereof, the District of Columbia or any territory thereof, (3)
convert into a corporation, partnership, limited partnership, limited liability
corporation or trust organized or existing under the laws of the jurisdiction of
organization of such Guarantor or (4) liquidate or dissolve or change its legal
form if Xerium determines in good faith that such action is in the best
interests of Xerium.
Although there is a limited body of case
law interpreting the phrase substantially all, there is no precise established
definition of the phrase under applicable law. Accordingly, in certain
circumstances there may be a degree of uncertainty as to whether a particular
transaction would involve all or substantially all of the properties or assets
of a Person.
Transactions with
Affiliates
Xerium will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate of Xerium (each, an
Affiliate Transaction
), involving
aggregate consideration in excess of $5.0 million, unless:
(1)
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the Affiliate
Transaction is on terms that are no less favorable to Xerium or the
relevant Restricted Subsidiary than those that would have reasonably been
obtained in a comparable transaction by Xerium or such Restricted
Subsidiary with an unrelated Person; and
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(2)
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Xerium delivers to the
trustee:
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(a)
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with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, a resolution of the
Board of Directors of Xerium set forth in an officers certificate
certifying that such Affiliate Transaction complies with this covenant and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of Xerium;
and
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56
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(b)
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with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $25.0 million, an opinion as to the
fairness to Xerium or such Restricted Subsidiary of such Affiliate
Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing in the United
States.
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The following items will not be deemed
to be Affiliate Transactions and, therefore, will not be subject to the
provisions of the prior paragraph:
(1)
|
any employment agreement,
employee benefit plan, officer, trustee or director indemnification
agreement or any similar arrangement entered into by Xerium or any of its
Restricted Subsidiaries in the ordinary course of business and payments
pursuant thereto;
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(2)
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transactions between or among
Xerium and/or its Restricted Subsidiaries;
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(3)
|
transactions with a Person (other
than an Unrestricted Subsidiary of Xerium) that is an Affiliate of Xerium
solely because Xerium owns, directly or through a Restricted Subsidiary,
an Equity Interest in, or controls, such Person;
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(4)
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payment of reasonable
compensation or fees to directors, officers, employees, managers or
consultants of Xerium and its Restricted Subsidiaries;
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(5)
|
payments or loans (or
cancellation of loans) to employees or consultants of Xerium, or any of
its Restricted Subsidiaries and employment agreements, stock option plans
and other similar arrangements with such employees or consultants which,
in each case of a payment, loan or cancellation exceeding $2.0 million,
are approved by a majority of the disinterested members of the Board of
Directors of Xerium;
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(6)
|
any issuance of Equity Interests
(other than Disqualified Stock) of Xerium to Affiliates of
Xerium;
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(7)
|
Restricted Payments that do not
violate the provisions of the Indenture described above under the caption
Restricted Payments;
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(8)
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Permitted Investments that are
permitted by the provisions of the Indenture;
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(9)
|
provision of corporate-level
administrative, marketing, tax, accounting, budgeting, treasury, finance,
employee benefits, legal, risk management and other similar services for
the benefit of Unrestricted Subsidiaries of Xerium on substantially the
same terms provided to Restricted Subsidiaries of Xerium;
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(10)
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payment of consolidated taxes on
behalf of Restricted Subsidiaries and Unrestricted Subsidiaries;
provided, however
, that any payment pursuant to this clause (10) with
respect to the income of any Unrestricted Subsidiary for any taxable
period shall be limited to the amount actually paid with respect to such
period by such Unrestricted Subsidiary to Xerium or its Restricted
Subsidiaries;
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(11)
|
payment of sales agency,
administration, management, license and other fees, reimbursement of
expenses, and payment of interest, principal, dividends or other
distributions, in each case from an Unrestricted Subsidiary to Xerium or a
Restricted Subsidiary to Xerium;
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(12)
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sales or other dispositions of
receivables in connection with any factoring agreements providing for
Xerium or any of its Subsidiaries to sell or otherwise dispose of any
receivable on arms length terms for cash payable at the time of
disposal;
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(13)
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any agreement in effect as of the
issue date of the old notes, or any amendment thereto (so long as any such
amendment is not disadvantageous in any material respect to the holders of
the Notes when taken as a whole as compared to the applicable agreement as
in effect on the Issue Date); and
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(14)
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any transaction effected as part
of a Qualified Securitization Financing.
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57
Business
Activities
Xerium will not, and will not permit any
of its Restricted Subsidiaries to, engage in any business other than Permitted
Businesses, except to such extent as would not be material to Xerium and its
Restricted Subsidiaries taken as a whole.
Note Guarantees
If Xerium or any of its Restricted
Subsidiaries acquires or creates a Domestic Subsidiary that is a Wholly Owned
Subsidiary after the Issue Date, then that newly acquired or created Domestic
Subsidiary (other than a Securitization Subsidiary or an Immaterial Subsidiary)
will become a Guarantor and (i) execute a supplemental Indenture and joinder
agreements or similar agreements with respect to the applicable Collateral
Documents necessary in order to grant to the collateral agent for the benefit of
the holders of the Notes a security interest, subject to the Intercreditor
Agreement and Permitted Liens, in substantially all of the assets (other than
Excluded Assets) of such Domestic Subsidiary; (ii) take such actions necessary
to perfect such security interest as may be required by the Collateral Documents
(including the filing of a UCC financing statement), as and when required
thereby; (iii) cause the delivery to the collateral agent of the certificates,
if any, representing all of the Equity Interests of such Domestic Subsidiary,
together with undated stock powers or other appropriate instruments of transfer
executed and delivered in blank by a duly authorized officer of the holder(s) of
such Equity Interests; and (iv) deliver an opinion of counsel reasonably
satisfactory to the trustee and collateral agent that such supplemental
indenture and any other documents required to be delivered, in each case, have
been duly authorized, executed and delivered by such Domestic Subsidiary and
constitute legally valid and binding and enforceable obligations of such
Domestic Subsidiary and regarding the perfection of such Liens in the Collateral
and Equity Interests of such Domestic Subsidiary as provided for in the
Indenture or the Collateral Documents (in form and substance substantially
consistent with the form of opinion of counsel delivered on the Issue Date
(subject to customary qualifications, exceptions and assumptions)) within 20
Business Days of the date on which it was acquired or created. Xerium may
designate any Restricted Subsidiary as a Guarantor at any time.
The Note Guarantee of a Guarantor will
automatically and unconditionally be released:
(1)
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in connection with any sale or
other disposition of all or substantially all of the assets of that
Guarantor (including by way of merger or consolidation) to a Person that
is not (either before or after giving effect to such transaction) Xerium
or a Restricted Subsidiary of Xerium, if the sale or other disposition
does not violate the Asset Sale provisions of the
Indenture;
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(2)
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in connection with any sale or
other disposition of all of the Capital Stock of that Guarantor to a
Person that is not (either before or after giving effect to such
transaction) Xerium or a Restricted Subsidiary of Xerium, if the sale or
other disposition does not violate the Asset Sale provisions of the
Indenture;
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(3)
|
if Xerium designates any
Restricted Subsidiary that is a Guarantor to be an Unrestricted Subsidiary
in accordance with the applicable provisions of the Indenture;
or
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(4)
|
upon legal defeasance or
satisfaction and discharge of the Indenture as provided below under the
captions Legal Defeasance and Covenant Defeasance and Satisfaction
and Discharge.
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Limitation on Issuances of
Guarantees of Indebtedness
Xerium will not permit any of its Domestic
Subsidiaries, directly or indirectly, to guarantee or pledge any assets to
secure the payment of any other Indebtedness of Xerium (except Permitted Liens)
unless such Domestic Subsidiary simultaneously executes and delivers a
supplemental indenture providing for the guarantee of the payment of the Notes
by such Domestic Subsidiary, which guarantee will be senior to or
pari passu
with such Domestic Subsidiarys guarantee of or pledge to secure such other
Indebtedness.
Designation of Restricted and
Unrestricted Subsidiaries
The Board of Directors of Xerium may
designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that
designation would not cause a Default. If a Restricted Subsidiary is designated
as an Unrestricted Subsidiary, the aggregate Fair Market Value of all
outstanding Investments owned by Xerium and its Restricted Subsidiaries in the
Subsidiary designated as Unrestricted will be deemed to be an Investment made as
of the time of the designation and will reduce the amount available for
Restricted Payments under the covenant described above under the caption
Restricted Payments or under one or more clauses of the definition of Permitted
Investments, as determined by Xerium. That designation will only be permitted if
the Investment would be permitted at that time and if the Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary. Any designation of
a Restricted Subsidiary of Xerium as an Unrestricted Subsidiary will be
evidenced to the trustee by filing with the trustee a certified copy of a
resolution of the Board of Directors giving effect to such designation and an
officers certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described above under the
caption Restricted Payments.
58
If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary will be deemed
to be incurred by a Restricted Subsidiary of Xerium as of such date and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption Incurrence of Indebtedness and Issuance of
Preferred Stock, Xerium will be in default of such covenant. The Board of
Directors of Xerium may at any time designate any Unrestricted Subsidiary to be
a Restricted Subsidiary of Xerium;
provided
that such designation will be
deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of Xerium
of any outstanding Indebtedness of such Unrestricted Subsidiary, and such
designation will only be permitted if (1) such Indebtedness is permitted under
the covenant described under the caption Incurrence of Indebtedness and
Issuance of Preferred Stock, calculated on a pro forma basis as if such
designation had occurred at the beginning of the four fiscal quarter reference
period; and (2) no Default or Event of Default would be in existence following
such designation.
Real Estate Mortgages and
Filings
With respect to any Material Real Estate
Asset or any Real Estate Asset owned, leased or subleased on the Issue Date
becomes a Material Real Estate Asset and such interest has not otherwise been
made subject to the Lien of the Collateral Documents in favor of the collateral
agent, for the benefit of the Notes Secured Parties, Xerium or the applicable
Guarantor, as the case may be, shall use its commercially reasonable efforts to,
within 120 days of the latest of (x) the Issue Date, (y) the date of the
acquisition, leasing or subleasing thereof or (z) the date on which such Real
Estate Asset became a Material Real Estate Asset, deliver to the collateral
agent:
(1)
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fully executed counterparts of
Mortgages duly executed by Xerium or such Guarantor, as the case may be,
together with evidence of the completion (or satisfactory arrangements for
the completion), of all recordings and filings of such Mortgage as may be
necessary to create a valid, perfected Lien, subject to Permitted Liens,
against such Material Real Estate Asset purported to be covered
thereby;
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(2)
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title insurance policies in favor
of the collateral agent, for the ratable benefit of the collateral agent,
the trustee and the holders of the Notes in an amount equal to 100% of the
Fair Market Value of the Premises purported to be covered by the related
Mortgage, insuring that title to such property is marketable and that the
interests created by the Mortgage constitute valid Liens thereon free and
clear of all Liens, defects and encumbrances other than Permitted
Liens;
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(3)
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with respect to each of the
covered Material Real Estate Asset, the most recent survey of such
Material Real Estate Asset, together with either (i) an updated survey
certification in favor of the trustee and the collateral agent from the
applicable surveyor stating that, based on a visual inspection of the
property and the knowledge of the surveyor, there has been no change in
the facts depicted in the survey or (ii) an affidavit from Xerium or such
Guarantor, as the case may be, stating that there has been no change,
other than, in each case, changes that do not materially adversely affect
the use by Xerium or such Guarantor, as the case may be, of such Material
Real Estate Asset for the business of Xerium or such Guarantor, as the
case may be, as so conducted, or intended to be conducted, at such
Material Real Estate Asset;
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(4)
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legal opinions addressed to the
collateral agent and the trustee from local counsel in the jurisdictions
where such Material Real Estate Asset is located and the jurisdictions of
formation of Xerium or such Guarantor, as the case may be, entering into
the relevant Mortgages, in each case, in form and substance reasonably
satisfactory to the collateral agent;
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(5)
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such other information,
documentation, and certifications as may be reasonably required by the
collateral agent or necessary in order to create valid, perfected and
subsisting first priority Liens against such Material Real Estate Asset
covered by the relevant Mortgages; and
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(6)
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an officers certificate stating
that Xerium or such Guarantor, as the case may be, has complied with the
foregoing.
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With respect to any Leasehold Property
that is Material Real Estate Asset or any Leasehold Property leased or subleased
on the Issue Date that becomes a Material Real Estate Asset and such interest
has not otherwise been made subject to the Lien of the Collateral Documents in
favor of the collateral agent, for the benefit of the Notes Secured Parties,
Xerium or the applicable Guarantor, as the case may be, shall use its
commercially reasonable efforts to, within 120 days of the latest of (x) the
Issue Date, (y) the date of the leasing or subleasing thereof or (z) the date on
which such Leasehold Property became a Material Real Estate Asset, cause a
Landlord Personal Property Collateral Access Agreement and a Landlord Consent
and Estoppel to be executed by the applicable landlord and delivered to the
collateral agent.
59
Further
Assurances
Xerium and the Guarantors, at their sole
cost and expense and subject to the Intercreditor Agreement, will execute,
acknowledge, deliver, record, re-record, file, re-file, register and
re-register, as applicable, any and all such further acts, deeds, conveyances,
security agreements, account control agreements, assignments, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments
(including, without limitation, landlord-lender agreements, bailee letters and
appraisals in respect of any real property), consents, authorizations, approvals
and orders, and shall take all further action, as may be required pursuant to
the Collateral Documents from time to time in order to:
(1)
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subject to the Liens, subject to
Permitted Liens, created by any of the Collateral Documents any of the
properties, rights or interests required to be encumbered thereby;
and
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(2)
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perfect and maintain the
validity, enforceability and effectiveness of any of the Collateral
Documents and the Liens, subject to Permitted Liens, intended to be
created thereby.
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Upon the exercise by the trustee, the
collateral agent or any holder of the Notes of any power, right, privilege or
remedy under the Indenture or any of the Collateral Documents which requires any
consent, approval, recording, qualification or authorization of any governmental
authority, Xerium and the Guarantors will execute and deliver all applications,
certifications, instruments and other documents and papers that may be required
pursuant to the Collateral Documents from Xerium or any Guarantor for such
governmental consent, approval, recording, qualification or
authorization.
Payments for
Consent
Xerium will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be
paid any consideration to or for the benefit of any holder of Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid
and is paid to all holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
Reports
Whether or not required by the rules and
regulations of the SEC, so long as any Notes are outstanding, Xerium will make
available to the holders of Notes, to any Beneficial Owner of the Notes,
prospective investors, securities analysts and market makers in the Notes and
the trustee (which requirement may be satisfied by filing with the SEC for
public availability or posting on Xeriums website if the SEC will not accept
such filings), within the time periods specified in the SECs rules and
regulations:
(1)
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all quarterly and annual reports
that would be required to be filed with the SEC on Forms 10-Q and 10-K if
Xerium were required to file such reports; and
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(2)
|
all current reports that would be
required to be filed with the SEC on Form 8-K if Xerium were required to
file such reports.
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All such reports will be prepared in all
material respects in accordance with all of the rules and regulations applicable
to such reports. Each annual report on Form 10-K will include a report on
Xeriums consolidated financial statements by Xeriums certified independent
accountants.
If Xerium has designated any of its
Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual
financial information required by the preceding paragraphs will be accompanied
by a reasonably detailed presentation, either on the face of the financial
statements or in the notes thereto, and in Managements Discussion and Analysis
of Financial Condition and Results of Operations, of the financial condition and
results of operations of Xerium and its Restricted Subsidiaries separate from
the consolidated financial condition and results of operations of the
Unrestricted Subsidiaries of Xerium, or Xerium will make such presentation
available to the holders of the Notes and the trustee by posting such
information to its website.
60
Within 10 Business Days after the dates
that the reports described in clause (a) above are required to be delivered,
Xerium shall participate in quarterly conference calls to discuss operating
results and related matters, which conference calls shall be open to all holders
of Notes, Beneficial Owners of the Notes, prospective investors, securities
analysts and market makers in the Notes to discuss such financial information.
Xerium will make available the details regarding such conference calls to the
trustee, the holders of the Notes, the Beneficial Owners of the Notes,
prospective investors, securities analysts and market makers in the Notes by
posting such information on Xeriums website.
In addition, Xerium agrees that, for so
long as any Notes remain outstanding, if at any time it is not required to file
with the SEC the reports required by the preceding paragraphs, it will furnish
to the holders of Notes and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act. Xerium will be deemed to have provided such
information to the holders, securities analysts and prospective investors if it
has filed reports containing such information with the SEC via the EDGAR filing
system and such reports are publicly available.
To the extent any such information is not
so filed or furnished, as applicable, within the time periods specified above
and such information is subsequently filed or furnished, as applicable, Xerium
shall be deemed to have satisfied its obligations with respect thereto at such
time and any default with respect thereto shall be deemed to have been cured;
provided
that such cure shall not otherwise affect the rights of holders of the Notes if
holders of at least 25% in principal amount of the then total outstanding Notes
have declared the principal, premium, if any, interest and any other monetary
obligations on all the then outstanding Notes to be due and payable immediately
and such declaration shall not have been rescinded or cancelled prior to such
cure.
Events of Default and
Remedies
Each of the following is an
Event of Default
:
(1)
|
default for
30 days in the payment when due of interest on the Notes;
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|
|
(2)
|
default in
the payment when due (at maturity, upon redemption or otherwise) of the
principal of, or premium, if any, on, the Notes;
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(3)
|
failure by
Xerium or any of its Restricted Subsidiaries to comply with the provisions
described under the captions Repurchase at the Option of Holders
Change of Control Triggering Event, Repurchase at the Option of
Holders Asset Sales, Repurchase at the Option of Holders Excess
Cash Flow, or Certain Covenants Merger, Consolidation or Sale of
Assets;
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(4)
|
failure by
Xerium or any of its Restricted Subsidiaries for 60 days after notice to
Xerium by the trustee or the holders of at least 25% in aggregate
principal amount of the Notes then outstanding voting as a single class to
comply with any of the other agreements in the Indenture
Documents;
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(5)
|
default
under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by Xerium or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by Xerium or any of its Restricted
Subsidiaries), whether such Indebtedness or guarantee now exists, or is
created after the Issue Date, if that default:
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(a)
|
is caused by a failure
to pay principal of, or interest or premium, if any, on, Indebtedness
aggregating $20.0 million or more prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
Payment Default
); or
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(b)
|
results in the
acceleration of such Indebtedness prior to its express maturity, and, in
each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has
been a Payment Default or the maturity of which has been so accelerated,
aggregates $20.0 million or more;
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61
(6)
|
failure by Xerium or any of its
Restricted Subsidiaries to pay final judgments entered by a court or
courts of competent jurisdiction aggregating in excess of $20.0 million to
the extent not covered by insurance from an unaffiliated reputable and
creditworthy insurance company (it being understood that even if such
amounts are covered by insurance from such an insurance company, such
amounts shall not be excluded in determining whether an Event of Default
has occurred under this clause (6) if responsibility for such amounts has
been denied by such insurance company or such insurance company has not
been promptly notified of such amounts), which judgments are not paid,
discharged or stayed for a period of 60 days;
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(7)
|
certain events of bankruptcy or
insolvency described in the Indenture with respect to Xerium or any of its
Restricted Subsidiaries that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary;
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(8)
|
except as permitted by the
Indenture, any Note Guarantee of a Guarantor is held in any judicial
proceeding to be unenforceable or invalid or ceases for any reason to be
in full force and effect, or any Guarantor, or any Person acting on behalf
of any Guarantor, denies or disaffirms its obligations under its Note
Guarantee; and
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(9)
|
except as expressly permitted by the Indenture, the Collateral Documents or the Intercreditor Agreement, with respect
to any assets or property (other than any Relocated Asset, the relocation of which outside of the United States
to a foreign jurisdiction was permitted under the Indenture) having a Fair Market Value in excess of $5.0 million,
individually or in the aggregate, that constitutes, or under the Indenture or any Collateral Document is required to
constitute, Collateral, (a) any of the Collateral Documents shall for any reason cease to be in full force and effect,
or Xerium or any Guarantor shall so assert, or (b) any security interest created, or purported to be created, by any of
the Collateral Documents shall cease to be enforceable and of the same effect and priority purported to be created
thereby, except solely as a result of the collateral agent taking any action in its sole control, except to the extent
that any such loss of perfection or priority results from the failure of the trustee or the collateral agent to maintain
possession of certificates actually delivered to it representing securities pledged under the Collateral Documents or to
file UCC continuation statements.
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In the case of an Event of Default arising
from certain events of bankruptcy or insolvency, with respect to Xerium, any
Restricted Subsidiary of Xerium that is a Significant Subsidiary or any group of
Restricted Subsidiaries of Xerium that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
immediately without further action or notice. If any other Event of Default
occurs and is continuing, the trustee or the holders of at least 25% in
aggregate principal amount of the then outstanding Notes may declare all the
Notes to be due and payable immediately.
Subject to certain limitations, holders of
a majority in aggregate principal amount of the then outstanding Notes may
direct the trustee in its exercise of any trust or power. The trustee may
withhold from holders of the Notes notice of any continuing Default or Event of
Default if it determines that withholding notice is in their interest, except a
Default or Event of Default relating to the payment of principal, interest or
premium.
Subject to the provisions of the Indenture
relating to the duties of the trustee and the collateral agent, in case an Event
of Default occurs and is continuing, neither the trustee nor the collateral
agent will be under any obligation to exercise any of the rights or powers under
the Indenture Documents at the request or direction of any holders of Notes
unless such holders have offered to the trustee indemnity or security
satisfactory to it against any loss, liability or expense. Except to enforce the
right to receive payment of principal, premium or interest when due, no holder
of a note may pursue any remedy with respect to the Indenture or the Notes
unless:
(1)
|
such holder has previously given the trustee notice that
an Event of Default is continuing;
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(2)
|
holders of at least 25% in aggregate principal amount of
the then outstanding Notes have requested the trustee to pursue the
remedy;
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(3)
|
such holders have offered the trustee reasonable
security or indemnity against any loss, liability or expense;
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(4)
|
the trustee has not complied with such request within 60
days after the receipt of the request and the offer of security or
indemnity; and
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(5)
|
holders of a majority in aggregate principal amount of
the then outstanding Notes have not given the trustee a direction
inconsistent with such request within such 60-day
period.
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62
The holders of a majority in aggregate
principal amount of the then outstanding Notes by notice to the trustee may, on
behalf of the holders of all of the Notes, rescind an acceleration or waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest or
premium, if any, on, or the principal of, the Notes.
Xerium is required to deliver annually to
the trustee a statement regarding compliance with the Indenture and the
Collateral Documents. Furthermore, Xerium is required to cause the delivery of
an annual perfection opinion to the collateral agent. Upon becoming aware of any
Default or Event of Default, Xerium is required to deliver to the trustee a
statement specifying such Default or Event of Default and the status
thereof.
No Personal Liability of Directors,
Officers, Employees and Stockholders
No director, officer, employee,
incorporator or stockholder of Xerium or any Guarantor, as such, will have any
liability for any obligations of Xerium or the Guarantors under the Notes, the
Note Guarantees, the Indenture, the Collateral Documents, the Intercreditor
Agreement, or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of Notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. The waiver and release may not be
effective to waive or release liabilities under the federal securities
laws.
Legal Defeasance and Covenant
Defeasance
Xerium may at any time, at its option,
elect to have all of its obligations discharged with respect to the outstanding
Notes and all obligations of the Guarantors discharged with respect to their
Note Guarantees (
Legal
Defeasance
) except for:
(1)
|
the rights of holders of
outstanding Notes to receive payments in respect of the principal of, or
interest or premium if any, on, such Notes when such payments are due from
the trust referred to below;
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(2)
|
Xeriums obligations with respect
to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an
office or agency for payment and money for security payments held in
trust;
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(3)
|
the rights, powers, trusts,
duties and immunities of the trustee under the Indenture, and Xeriums
obligations in connection therewith; and
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(4)
|
the Legal Defeasance and Covenant
Defeasance provisions of the Indenture.
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In addition, Xerium may, at its option and
at any time, elect to have the obligations of Xerium released with respect to
certain covenants (including its obligation to make Change of Control Offers,
Asset Sale Offers and Excess Cash Flow Offers) that are described in the
Indenture (
Covenant
Defeasance
) and all obligations of the
Guarantors discharged with respect to their Note Guarantees and thereafter any
omission to comply with those covenants will not constitute a Default or Event
of Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under Events of Default and
Remedies will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal
Defeasance or Covenant Defeasance:
(1)
|
Xerium must irrevocably
deposit with the trustee, in trust, for the benefit of the holders of the
Notes, cash in U.S. dollars, non-callable U.S. government securities, or a
combination of cash in U.S. dollars and non-callable U.S. government
securities, in amounts as will be sufficient, in the opinion of a
nationally recognized investment bank, appraisal firm or firm of
independent public accountants, to pay the principal of, or interest and
premium, if any, on, the outstanding Notes on the stated date for payment
thereof or on the applicable redemption date, as the case may be, and
Xerium must specify whether the Notes are being defeased to such stated
date for payment or to a particular redemption date;
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(2)
|
in the case of Legal
Defeasance, Xerium must deliver to the trustee an opinion of counsel
reasonably acceptable to the trustee confirming that:
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(a)
|
Xerium has received
from, or there has been published by, the Internal Revenue Service a
ruling; or
|
63
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(b)
|
since the Issue Date, there has
been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel will confirm
that, the holders of the outstanding Notes will not recognize income, gain
or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
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(3)
|
in the case of Covenant
Defeasance, Xerium must deliver to the trustee an opinion of counsel
reasonably acceptable to the trustee confirming that the holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred;
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(4)
|
no Default or Event of
Default has occurred and is continuing on the date of such deposit (other
than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit or the granting of any Lien to secure such
borrowing) and the deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which Xerium is a
party or by which Xerium is bound;
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(5)
|
such Legal Defeasance
or Covenant Defeasance will not result in a breach or violation of, or
constitute a default under, any material agreement or instrument (other
than the Indenture) to which Xerium or any of its Restricted Subsidiaries
is a party or by which Xerium or any of its Restricted Subsidiaries is
bound;
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(6)
|
Xerium must deliver to
the trustee an officers certificate stating that the deposit was not made
by Xerium with the intent of preferring the holders of Notes over the
other creditors of Xerium with the intent of defeating, hindering,
delaying or defrauding any creditors of Xerium or others; and
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(7)
|
Xerium must deliver to
the trustee an officers certificate and an opinion of counsel, each
stating that all conditions precedent relating to the Legal Defeasance or
the Covenant Defeasance have been complied
with.
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The Collateral will be released from the
Lien securing the Notes as provided under SecurityGeneral upon a Legal
Defeasance or Covenant Defeasance in accordance with the provisions described
above.
Amendment, Supplement and
Waiver
Except as provided in the next three
succeeding paragraphs, the Indenture, the Notes, the Note Guarantees, the
Collateral Documents and with the consent of the ABL Agent, the Intercreditor
Agreement may be amended or supplemented with the consent of the holders of at
least a majority in aggregate principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing Default or
Event of Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the holders of a majority in aggregate
principal amount of the then outstanding Notes (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes).
Without the consent of each holder of
Notes affected, an amendment, supplement or waiver may not (with respect to any
Notes held by a non-consenting holder):
(1)
|
reduce the principal amount of
Notes whose holders must consent to an amendment, supplement or
waiver;
|
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(2)
|
reduce the principal of or change
the fixed maturity of any Note;
|
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(3)
|
reduce the premium payable upon
the redemption of any Note or change the date on which any Note may be
redeemed as described above under the caption Optional
Redemption;
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(4)
|
reduce the rate of or change the
time for payment of interest on any Note;
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(5)
|
waive a Default or Event of
Default in the payment of principal of, or interest or premium, if any,
on, the Notes (except a rescission of acceleration of the Notes by the
holders of at least a majority in aggregate principal amount of the then
outstanding Notes and a waiver of the payment default that resulted from
such acceleration);
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64
(6)
|
make any Note payable in money
other than that stated in the Notes;
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(7)
|
make any change in the provisions
of the Indenture relating to waivers of past Defaults or the rights of
holders of Notes to receive payments of principal of, or interest or
premium, if any, on, the Notes; or
|
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(8)
|
make any change in the preceding
amendment and waiver provisions.
|
In addition, any amendment to or waiver
of, the provisions of the Indenture relating to the Collateral or the Collateral
Documents that has the effect of releasing all or substantially all of the
Collateral from the Liens securing the Notes and the Note Guarantees will
require the consent of the holders of at least 66-2/3% in aggregate principal
amount of the Notes then outstanding.
Notwithstanding the preceding, without the
consent of any holder of Notes, Xerium, the trustee and the collateral agent, as
applicable, may amend or supplement the Indenture Documents:
(1)
|
to cure any ambiguity, omission,
defect or inconsistency;
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(2)
|
to provide for uncertificated
Notes in addition to or in place of certificated notes in order to comply
with any applicable procedures, or otherwise alter the provisions of
Article 2 of the Indenture in a manner that does not materially adversely
affect any holder of Notes;
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(3)
|
to provide for the assumption of
Xeriums or any Guarantors obligations to holders of Notes in the case of
a merger or consolidation or sale of all or substantially all of Xeriums
assets;
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(4)
|
to make any change that would
provide any additional rights or benefits to the holders of Notes or that
does not, in the good faith opinion of the Board of Directors of Xerium,
adversely affect the legal rights under the Indenture of any such holder
in any material respect;
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(5)
|
to comply with requirements of
the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act;
|
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(6)
|
to conform the text of the
Indenture Documents to any provision of this Description of Exchange
Notes to the extent that such provision in this Description of Exchange
Notes was intended to be a verbatim recitation of a provision thereof, as
evidenced by an officers certificate;
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(7)
|
to provide for the issuance of
additional Notes in accordance with the limitations set forth in the
Indenture as of the Issue Date;
|
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(8)
|
to allow any Restricted
Subsidiary to execute a supplemental indenture providing for a Note
Guarantee with respect to the Notes;
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(9)
|
to mortgage, pledge, hypothecate
or grant any Lien in favor of the trustee or collateral agent for the
benefit of the holders of the Notes as security for the payment and
performance of all or any portion of the obligations under the Notes and
the other Indenture Documents in any property or assets, including any
which are required to be mortgaged, pledged or hypothecated, or in which a
Lien is required to be granted to or for the benefit of the trustee or
collateral agent pursuant to the Indenture or otherwise;
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(10)
|
in order to subject the security
interests in the Collateral in respect of Pari Passu Payment Lien
Obligations to the terms of the Collateral Documents and Intercreditor
Agreement, to the extent the incurrence of such Pari Passu Indebtedness
and the grant of all Liens on Collateral held for the benefit of such Pari
Passu Indebtedness was permitted under the Indenture; or
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(11)
|
to enter into additional or
supplemental Collateral Documents or to release Collateral from the Lien
of the Indenture or the Collateral Documents in accordance with the terms
of the Indenture and the Intercreditor
Agreement.
|
65
Satisfaction and
Discharge
The Indenture will be discharged and will
cease to be of further effect as to all Notes issued thereunder and all
obligations of the Guarantors discharged with respect to their Note Guarantees,
when either:
(1)
|
all Notes that have been authenticated, except lost,
stolen or destroyed Notes that have been replaced or paid and Notes for
whose payment money has been deposited in trust and thereafter repaid to
Xerium, have been delivered to the trustee for cancellation;
or
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(2)
|
all Notes that have not been delivered to the trustee
for cancellation have become due and payable by reason of the mailing of a
notice of redemption or otherwise or will become due and payable within
one year, including by being called for redemption under arrangements
satisfactory to the trustee for the giving of notice of redemption by the
trustee in the name, and at the expense, of Xerium, and Xerium has
irrevocably deposited or caused to be deposited with the trustee as trust
funds in trust solely for the benefit of the holders, cash in U.S.
dollars, non-callable U.S. government securities, or a combination of cash
in U.S. dollars and non-callable U.S. government securities, in amounts as
will be sufficient, without consideration of any reinvestment of interest,
to pay and discharge the entire Indebtedness on the Notes not delivered to
the trustee for cancellation for principal, premium and accrued interest
to the date of maturity or redemption; and
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(a)
|
no Default or Event of Default
has occurred and is continuing on the date of the deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be
applied to such deposit or the granting of any Lien to secure such
borrowing) and the deposit will not result in a breach or violation of, or
constitute a default under, any other material agreement or instrument to
which Xerium or any of its Restricted Subsidiaries is a party or by which
Xerium or any of its Restricted Subsidiaries is bound;
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(b)
|
Xerium or any Guarantor has paid
or caused to be paid all sums payable by it under the Indenture;
and
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(c)
|
Xerium has delivered irrevocable
instructions to the trustee under the Indenture to apply the deposited
money toward the payment of the Notes at maturity or on the redemption
date, as the case may be. In addition, Xerium must deliver an officers
certificate and an opinion of counsel to the trustee stating that all
conditions precedent to satisfaction and discharge have been
satisfied.
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The Collateral will be released from the
Lien securing the Notes as provided under SecurityGeneral upon a
satisfaction and discharge in accordance with the provisions described
above.
Concerning the Trustee
If the trustee or collateral agent becomes
a creditor of Xerium, the Indenture limits the right of the trustee or
collateral agent, as the case may be, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The trustee and the collateral agent will be permitted
to engage in other transactions; however, if either the trustee or collateral
agent, as the case may be, acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
trustee or collateral agent, as the case may be (if the Indenture has been
qualified under the Trust Indenture Act), or resign.
The holders of a majority in aggregate
principal amount of the then outstanding Notes will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the trustee or collateral agent, as the case may be, subject to
certain exceptions. The Indenture provides that in case an Event of Default
occurs and is continuing, each of the trustee and the collateral agent, as the
case may be, will be required, in the exercise of its power, to use the degree
of care of a prudent man in the conduct of his own affairs. Neither the trustee
nor collateral agent, as the case may be, will be under any obligation to
exercise any of its rights or powers under the Indenture Documents at the
request of any holder of Notes, unless such holder has offered to the trustee or
collateral agent, as the case may be, security and indemnity satisfactory to it
against any loss, liability or expense.
The trustee and the collateral agent shall
have no responsibility for monitoring Xeriums or the Guarantors compliance
with any of their covenants under the Indenture or Collateral Documents, nor
shall the trustee or collateral agent be responsible for the existence,
genuineness, or value of the Collateral under the Indenture or the Collateral
Documents or for the validity, priority or enforceability of liens on such
Collateral, whether impaired by operation of law or by reason of any action or
omission to act on its part.
66
Governing Law
The Indenture, the Notes, the Note
Guarantees, the Pledge and Security Agreement and the Intercreditor Agreement
provide that they will be governed by, and construed in accordance with, the
laws of the State of New York.
Additional Information
Anyone who receives this prospectus may
obtain a copy of the Indenture, the Collateral Documents and the Intercreditor
Agreement without charge by writing to Xerium Technologies Inc., 14101 Capital
Boulevard, Youngsville, North Carolina 27596, Attention: Investor
Relations.
Book Entry, Delivery and
Form
Except as set forth below, the exchange
notes will be issued in registered, global form in minimum denominations of
$2,000 and integral multiples of $1,000 in excess thereof (collectively, the
Global Notes
and each individually, a
Global
Note
). The Global Notes will be deposited
upon issuance with the trustee as custodian for The Depository Trust Company
(
DTC
) and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described
below.
Except as set forth below, the Global
Notes may be transferred, in whole and not in part, only to another nominee of
DTC or to a successor of DTC or its nominee. Beneficial interests in the Global
Notes may not be exchanged for Notes in certificated form except in limited
circumstances described below. See Exchange of Global Notes for Certificated
Notes. In addition, transfers of beneficial interests in the Global Notes will
be subject to the applicable rules and procedures of DTC and its direct or
indirect participants (including, if applicable, those of Euroclear and
Clearstream), which may change from time to time.
Except as described below, owners of an
interest in the Global Notes will not have Notes registered in their names, will
not receive physical delivery of Notes in certificated form and will not be
considered the registered owners or holders thereof under the Indenture for
any purpose.
Depository Procedures
The following description of the
operations and procedures of DTC, Euroclear and Clearstream is provided solely
as a matter of convenience. These operations and procedures are solely within
the control of the respective settlement systems and are subject to changes by
them. Xerium takes no responsibility for these operations and procedures and
urges investors to contact the system or their participants directly to discuss
these matters.
DTC has advised Xerium that DTC is a
limited-purpose trust company created to hold securities for its participating
organizations (collectively, the
Participants
) and to facilitate the
clearance and settlement of transactions in those securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers (including
the initial purchasers), banks, trust companies, clearing corporations and
certain other organizations. Access to DTCs system is also available to other
entities such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly (collectively, the
Indirect
Participants
). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interests
in, and transfers of ownership interests in, each security held by or on behalf
of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised Xerium that, pursuant
to procedures established by it:
(1)
|
upon deposit of the Global Notes,
DTC will credit the accounts of Participants designated by the initial
purchasers with portions of the principal amount of the Global Notes;
and
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(2)
|
ownership of these interests in
the Global Notes will be shown on, and the transfer of ownership thereof
will be effected only through, records maintained by DTC (with respect to
the Participants) or by the Participants and the Indirect Participants
(with respect to other owners of beneficial interest in the Global
Notes).
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All interests in a Global Note, including
those held through Euroclear or Clearstream, may be subject to the procedures
and requirements of DTC. Those interests held through Euroclear or Clearstream
may also be subject to the procedures and requirements of such
systems.
67
The laws of some states require that
certain Persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer beneficial interests in a Global
Note to such Persons will be limited to that extent. Because DTC can act only on
behalf of Participants, which in turn act on behalf of Indirect Participants,
the ability of a Person having beneficial interests in a Global Note to pledge
such interests to Persons that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests.
Except as described below, owners of
interests in the Global Notes will not have Notes registered in their names,
will not receive physical delivery of Notes in certificated form and will not be
considered the registered owners or Holders thereof under the Indenture for
any purpose.
Payments in respect of the principal of,
and interest and premium, if any, on a Global Note registered in the name of DTC
or its nominee will be payable to DTC in its capacity as the registered holder
under the Indenture. Under the terms of the Indenture, Xerium and the trustee
will treat the Persons in whose names the Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving payments and for
all other purposes. Consequently, neither Xerium, the trustee nor any agent of
Xerium or the trustee has or will have any responsibility or liability
for:
(1)
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any aspect of DTCs records or
any Participants or Indirect Participants records relating to or
payments made on account of beneficial ownership interest in the Global
Notes or for maintaining, supervising or reviewing any of DTCs records or
any Participants or Indirect Participants records relating to the
beneficial ownership interests in the Global Notes; or
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(2)
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any other matter relating to the
actions and practices of DTC or any of its Participants or Indirect
Participants.
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DTC has advised Xerium that its current
practice, upon receipt of any payment in respect of securities such as the Notes
(including principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date unless DTC has reason to
believe it will not receive payment on such payment date. Each relevant
Participant is credited with an amount proportionate to its beneficial ownership
of an interest in the principal amount of the relevant security as shown on the
records of DTC. Payments by the Participants and the Indirect Participants to
the beneficial owners of Notes will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the trustee or
Xerium. Neither Xerium nor the trustee will be liable for any delay by DTC or
any of its Participants in identifying the beneficial owners of the Notes, and
Xerium and the trustee may conclusively rely on and will be protected in relying
on instructions from DTC or its nominee for all purposes.
Transfers between the Participants will be
effected in accordance with DTCs procedures, and will be settled in same-day
funds, and transfers between participants in Euroclear and Clearstream will be
effected in accordance with their respective rules and operating
procedures.
Cross-market transfers between the
Participants, on the one hand, and Euroclear or Clearstream participants, on the
other hand, will be effected through DTC in accordance with DTCs rules on
behalf of Euroclear or Clearstream, as the case may be, by its respective
depositary; however, such cross-market transactions will require delivery of
instructions to Euroclear or Clearstream, as the case may be, by the
counterparty in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
Clearstream, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Note in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Euroclear participants and Clearstream participants may not deliver instructions
directly to the depositories for Euroclear or Clearstream.
DTC has advised Xerium that it will take
any action permitted to be taken by a holder of Notes only at the direction of
one or more Participants to whose account DTC has credited the interests in the
Global Notes and only in respect of such portion of the aggregate principal
amount of the Notes as to which such Participant or Participants has or have
given such direction. However, if there is an Event of Default under the Notes,
DTC reserves the right to exchange the Global Notes for Notes in certificated
form, and to distribute such Notes to its Participants.
Although DTC, Euroclear and Clearstream
have agreed to the foregoing procedures to facilitate transfers of interests in
the Global Notes among participants in DTC, Euroclear and Clearstream, they are
under no obligation to perform or to continue to perform such procedures, and
may discontinue such procedures at any time. Neither Xerium nor the trustee nor
any of their respective agents will have any responsibility for the performance
by DTC, Euroclear or Clearstream or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
68
Exchange of Global Notes for
Certificated Notes
A Global Note is exchangeable for
definitive Notes in registered certificated form (
Certificated Notes
) in minimum
denominations of $2,000 and in integral multiples of $1,000 in excess thereof,
if:
(1)
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DTC: (a) notifies Xerium that it
is unwilling or unable to continue as depositary for the Global Notes; or
(b) has ceased to be a clearing agency registered under the Exchange Act,
and in each case Xerium fails to appoint a successor depositary within 120
days;
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(2)
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Xerium, at its option, notifies
the trustee in writing that it elects to cause the issuance of
Certificated Notes (DTC has advised Xerium that, in such event, under its
current practices, DTC would notify its participants of Xeriums request,
but will only withdraw beneficial interests from a Global Note at the
request of each DTC participant); or
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(3)
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there will have occurred and be
continuing a Default or Event of Default with respect to the
Notes.
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In addition, beneficial interests in a
Global Note may be exchanged for Certificated Notes upon prior written notice
given to the trustee by or on behalf of DTC in accordance with the Indenture. In
all cases, Certificated Notes delivered in exchange for any Global Note or
beneficial interests in Global Notes will be registered in the names, and issued
in any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures).
Same Day Settlement and
Payment
Xerium will make payments in respect of
the Notes represented by the Global Notes (including principal, premium, if any,
and interest) by wire transfer of immediately available funds to the accounts
specified by the Global Note holder. Xerium will make all payments of principal,
interest and premium, if any, with respect to Certificated Notes by wire
transfer of immediately available funds to the accounts specified by the holders
thereof or, if no such account is specified, by mailing a check to each such
holders registered address. The Notes represented by the Global Notes are
expected to trade in DTCs Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such Notes will, therefore, be required by
DTC to be settled in immediately available funds. Xerium expects that secondary
trading in any Certificated Notes will also be settled in immediately available
funds.
Because of time zone differences, the
securities account of a Euroclear or Clearstream participant purchasing an
interest in a Global Note from a Participant in DTC will be credited, and any
such crediting will be reported to the relevant Euroclear or Clearstream
participant, during the securities settlement processing day (which must be a
Business Day for Euroclear and Clearstream) immediately following the settlement
date of DTC. DTC has advised Xerium that cash received in Euroclear or
Clearstream as a result of sales of interests in a Global Note by or through a
Euroclear or Clearstream participant to a Participant in DTC will be received
with value on the settlement date of DTC but will be available in the relevant
Euroclear or Clearstream cash account only as of the Business Day for Euroclear
or Clearstream following DTCs settlement date.
Certain Definitions
Set forth below are certain defined terms
used in the Indenture. Reference is made to the Indenture for a full disclosure
of all defined terms used therein, as well as any other capitalized terms used
herein for which no definition is provided.
ABL
Bank Product Documents
mean the agreements
or other documents evidencing or governing ABL Bank Product
Obligations.
ABL
Cash Management Documents
means the
agreements or other documents evidencing or governing ABL Cash Management
Obligations.
ABL
Collateral Documents
means all Collateral
Documents or any similar terms as defined in the ABL Credit Agreement, and all
other security agreements, mortgages, deeds of trust, account control
agreements, customs brokers agreements, collateral access agreements, and other
collateral documents executed and delivered in connection with the ABL Credit
Agreement, in each case as the same may be amended, amended and restated,
supplemented, restated or otherwise modified from time to time.
69
ABL
Credit Agreement
means the Revolving Credit
and Guaranty Agreement, dated November 3, 2015 (as amended, restated,
supplemented or otherwise modified through the date hereof), among Xerium,
Xerium Canada Inc., Huyck.Wangner Germany GmbH, Robec Walzen GmbH and Stowe
Woodward Aktiengesellschaft, as borrowers, the other borrowers party thereto,
the various banks and other financial institutions from time to time party
thereto (the
ABL Lenders
), and JPMorgan Chase Bank, N.A., as administrative agent and
as collateral agent and J.P. Morgan Europe Limited, as European administrative
agent and as European collateral agent (in such capacities, the
ABL Agent
) as the same may
be amended, amended and restated, supplemented, restated or otherwise modified
from time to time.
ABL
Deposit and Securities Accounts
means all
deposit accounts, securities accounts, collection accounts and lockbox accounts
(and all related lockboxes) of the Credit Parties (other than the PPE Priority
Accounts).
ABL
Documents
means the ABL Credit Agreement,
any guaranty in respect thereof, any ABL Collateral Document and any other
ancillary agreement, instruments, documents, notes and certificates, from time
to time executed by or on behalf of any Credit Party or any of its respective
Subsidiaries or Affiliates, and delivered to the ABL Agent or any other ABL
Secured Party, in connection with any of the foregoing, in each case as the same
may be amended, amended and restated, supplemented, restated, replaced or
otherwise modified from time to time.
ABL
Obligations
means any and all ABL Bank
Product Obligations, ABL Cash Management Obligations and obligations of every
nature of each Credit Party from time to time owed to the ABL Secured Parties,
or any of them, under, in connection with, or evidenced or secured by any ABL
Document, including, without limitation, all Obligations or similar term as
defined in the ABL Credit Agreement and whether for principal, interest,
reimbursement of amounts drawn under letters of credit, fees, expenses,
indemnification or otherwise, and all other amounts owing or due under the terms
of any ABL Document, ABL Bank Product Document and ABL Cash Management Document
(including Post-Petition Interest), as amended, restated, amended and restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time. For clarity, the term ABL Obligations shall include, without
limitation, all obligations on account of any ABL Secured Party DIP Financing
provided by any ABL Secured Party to any of the Credit Parties.
ABL
Secured Parties
means, collectively, the ABL
Agent, the ABL Lenders, the other secured parties under the ABL Credit
Agreement, the counterparties to Hedging Obligations described in clause (8) of
the definition of the term Permitted Debt which are ABL Lenders (or Affiliates
thereof) or at the time of the incurrence thereof were ABL Lenders (or
Affiliates thereof) (such Hedging Obligations are referred to herein as
ABL Bank Product Obligations
), and the providers of cash management services described in
clause (14)(b) of the definition of Permitted Debt which are ABL Lenders (or
Affiliates thereof) or at the time of such cash management services were
provided were ABL Lenders (or Affiliates thereof) (the Obligations in respect of
such cash management services are referred to herein as
ABL Cash Management Obligations
).
Accession Agreement
means an
accession agreement, if any, to the Collateral Documents, in substantially the
form provided therein, entered into by Xerium, the Guarantors, the agent,
trustee or other representative for the holders of any Pari Passu Indebtedness
and the collateral agent.
Acquired Debt
means, with respect to
any specified Person:
(1)
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Indebtedness of any other Person
existing at the time such other Person is merged with or into or becomes a
Subsidiary of such specified Person (or that is otherwise assumed in
connection with an acquisition), whether or not such Indebtedness is
incurred in connection with, or in contemplation of, such other Person
being acquired, merging with or into, or becoming a Restricted Subsidiary
of, such specified Person; and
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(2)
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Indebtedness of another Person
secured by a Lien encumbering any asset acquired by such specified
Person.
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Affiliate
of any specified Person
means any other Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified Person. For purposes
of this definition,
control
, as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise. For purposes of this definition, the
terms controlling, controlled by and under common control with have
correlative meanings.
Agent(s)
means individually the ABL
Agent or the collateral agent and collectively means both the ABL Agent and the
collateral agent.
70
Applicable Premium
means, with
respect to any Note on any redemption date, the greater of:
(1)
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1.0% of the principal
amount of the Note; or
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(2)
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the excess
of:
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(a)
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the present value at such
redemption date of (i) the redemption price of the Note at August 15, 2018
(such redemption price being set forth in the table appearing above under
the caption Optional Redemption) plus (ii) all required payments of
interest due on the Note through August 15, 2018 (excluding accrued but
unpaid interest to such redemption date), computed using a discount rate
equal to the Treasury Rate as of such redemption date plus 50 basis
points; over
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(b)
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the principal amount of the
Note.
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Asset
Sale Proceeds Pledged Account
mean an
account, if any, held at, and subject to the sole dominion and control of, the
collateral agent in which solely the proceeds from any disposition of Notes
Priority Collateral is held pending reinvestment pursuant to the PPE Documents.
For clarity, the amounts on deposit in such Asset Sale Proceeds Pledged Account
shall constitute Collateral and Notes Priority Collateral.
Asset
Sale
means:
(1)
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the sale, conveyance or other
disposition of any assets or rights (including by means of a sale and
leaseback transaction);
provided
that the sale, conveyance or other
disposition of all or substantially all of the assets of Xerium and its
Restricted Subsidiaries taken as a whole will be governed by the
provisions of the Indenture described above under the caption
Repurchase at the Option of Holders Change of Control Triggering Event
and/or the provisions described above under the caption Certain
Covenants Merger, Consolidation or Sale of Assets and not by the
provisions of the Asset Sale covenant; and
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(2)
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the issuance of Equity Interests
in any of Xeriums Restricted Subsidiaries or the sale of Equity Interests
in any of its Subsidiaries (other than directors qualifying shares and
shares issued to foreign nationals as required under applicable
law).
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Notwithstanding the preceding, none of the
following items will be deemed to be an Asset Sale:
(1)
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any single transaction (including
the issuance of Equity Interests of any Restricted Subsidiary or the sale
of Equity Interests of any Subsidiary) or series of related transactions
that involves assets having a Fair Market Value of less than $5.0
million;
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(2)
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a transfer of assets between or
among Xerium and its Restricted Subsidiaries;
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(3)
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an issuance of Equity Interests
by a Restricted Subsidiary of Xerium to Xerium or to a Restricted
Subsidiary of Xerium;
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(4)
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the sale, lease, assignment,
license or sublicense of inventory or other assets in the ordinary course
of business and any sale or other disposition of damaged, worn-out or
obsolete assets in the ordinary course of business;
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(5)
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the sale or other disposition of
cash or Cash Equivalents;
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(6)
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any release of intangible claims
or rights in connection with the loss or settlement of a bona fide
lawsuit, dispute or other controversy, and the disposition of accounts
receivable in connection with the collection or compromise thereof in the
ordinary course of business;
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(7)
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leases or subleases to third
persons not interfering in any material respect with the business of
Xerium or any of its Restricted Subsidiaries;
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(8)
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licenses or sublicenses of
patents, trademarks copyrights or other intellectual property in the
ordinary course of business;
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(9)
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a Restricted Payment that does
not violate the covenant described above under the caption Certain
Covenants Restricted Payments or a Permitted
Investment;
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71
(10)
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to the extent allowable under
Section 1031 of the Internal Revenue Code of 1986, as amended, any
exchange of like property (excluding any boot thereon) for use in a
Permitted Business;
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(11)
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any disposition of assets
received by Xerium or any Restricted Subsidiaries upon foreclosure on a
Lien or receivables owing to Xerium or any Restricted Subsidiaries for the
purpose of collection of outstanding balances in the ordinary course
consistent with past practice;
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(12)
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(i) sales and other dispositions
of accounts receivable and related assets (or an undivided interest
therein) pursuant to a Qualified Securitization Financing and (ii) sales
or other dispositions in connection with any factoring agreements
providing for Xerium or any of its Subsidiaries to sell or otherwise
dispose of any receivable on arms length terms for cash payable at the
time of disposal;
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(13)
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the issuance by a Restricted
Subsidiary of Preferred Stock or Disqualified Stock that is permitted
under the caption Certain Covenants Incurrence of Indebtedness and
Issuance of Preferred Stock;
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(14)
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any financing transaction with
respect to property built or acquired by Xerium or any of its Restricted
Subsidiaries after the Issue Date, including sale and lease back
transactions permitted by the Indenture;
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(15)
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sales, transfers and other
dispositions of Investments in joint ventures to the extent required by,
or made pursuant to, customary buy/sell arrangements between the joint
venture parties set forth in joint venture arrangements and similar
binding arrangements; and
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(16)
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any sale of Equity Interests in,
or Indebtedness or other securities of, an Unrestricted
Subsidiary.
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Asset
Sale Offer
has the meaning assigned to that
term in the Indenture governing the Notes.
Attributable Debt
in respect of a
sale and leaseback transaction means, at the time of determination, the present
value of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
including any period for which such lease has been extended or may, at the
option of the lessor, be extended. Such present value shall be calculated using
a discount rate equal to the rate of interest implicit in such transaction,
determined in accordance with GAAP;
provided,
however
, that if such sale and leaseback
transaction results in a Capital Lease Obligation, the amount of Indebtedness
represented thereby will be determined in accordance with the definition of
Capital Lease Obligation.
Bankruptcy Code
means Title 11 of the
United States Code, as now or hereafter in effect or any successor
thereto.
Bankruptcy Law
means the Bankruptcy
Code and all other insolvency, bankruptcy, receivership, liquidation,
conservatorship, assignment for the benefit of creditors, moratorium,
rearrangement, reorganization, or similar legal requirements of the United
States or other applicable jurisdictions from time to time in effect and
affecting the rights of creditors generally.
Beneficial Owner
has the meaning
assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act,
except that in calculating the beneficial ownership of any particular person
(as that term is used in Section 13(d)(3) of the Exchange Act), such person
will be deemed to have beneficial ownership of all securities that such person
has the right to acquire by conversion or exercise of other securities, whether
such right is currently exercisable or is exercisable only after the passage of
time. The terms Beneficially Owns and Beneficially Owned have a
corresponding meaning.
Board
of Directors
means:
(1)
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with respect to a corporation,
the board of directors of the corporation or any committee thereof duly
authorized to act on behalf of such board;
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(2)
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with respect to a partnership,
the Board of Directors of the general partner of the
partnership;
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(3)
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with respect to a limited
liability company, the managing member or members or any controlling
committee of managing members thereof; and
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(4)
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with respect to any other Person
(including a business trust), the board of trustees or committee of such
Person serving a similar function.
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72
Business Day
means each day which is
not a Legal Holiday.
Capital
Lease Obligation
means, at the time any
determination is to be made, the amount of the liability in respect of a capital
lease that would at that time be required to be capitalized on a balance sheet
prepared in accordance with GAAP.
Capital
Stock
means:
(1)
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in the case of a corporation,
corporate stock;
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(2)
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in the case of an association or
business entity or trust, any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock,
including shares of beneficial interest;
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(3)
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in the case of a partnership or
limited liability company, partnership interests (whether general or
limited) or membership interests; and
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(4)
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any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person,
but excluding from all of the foregoing any debt securities convertible
into Capital Stock, whether or not such debt securities include any right
of participation with Capital Stock.
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Cash
Equivalents
means:
(1)
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United States dollars and any
foreign currency freely exchangeable into United States dollars and, in
the case of any Foreign Subsidiary, such local currencies held by it from
time to time in the ordinary course of its business;
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(2)
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securities issued or directly and
fully guaranteed or insured by the United States government or any agency
or instrumentality thereof with maturities of one year or less from the
date of acquisition;
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(3)
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certificates of deposit, time
deposits and Eurodollar time deposits with maturities of one year or less
from the date of acquisition, bankers acceptances with maturities not
exceeding one year and overnight bank deposits, in each case with any
commercial bank having capital and surplus in excess of $250.0 million and
whose long-term debt is rated at least A-1 or the equivalent thereof by
Moodys or S&P;
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(4)
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repurchase obligations for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified clause (3) above;
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(5)
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commercial paper issued by a
corporation (other than an Affiliate of Xerium) rated at least A-2 or
the equivalent thereof by Moodys or S&P and in each case maturing
within one year after the date of acquisition;
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(6)
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investment funds investing
substantially all of their assets in securities of the types described in
clauses (1) through (5) above;
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(7)
|
readily marketable direct
obligations issued by any state of the United States or any political
subdivision thereof having one of the two highest rating categories
obtainable from either Moodys or S&P with maturities of one year or
less from the date of acquisition;
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(8)
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instruments equivalent to those
referred to above denominated in Euros or any other foreign currency that
are comparable in credit quality and tenor to those referred to above and
customarily used by corporations for cash management purposes in any
jurisdiction outside the United States; and
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(9)
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money market funds as defined in
Rule 2a-7 of the General Rules and Regulations as promulgated under the
Investment Company Act of 1940.
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Change
of Control
means the occurrence of any of
the following:
(1)
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the direct or indirect sale, lease, transfer, conveyance
or other disposition (other than by way of merger or consolidation), in
one or a series of related transactions, of all or substantially all of
the properties or assets of Xerium and its Subsidiaries taken as a whole
to any person (as that term is used in Section 13(d) of the Exchange
Act), other than to a Subsidiary of Xerium;
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73
(2)
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the adoption of a plan relating
to the liquidation or dissolution of Xerium;
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(3)
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the consummation of any
transaction (including, without limitation, any merger or consolidation),
the result of which is that any person (as defined above) becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the then
outstanding shares of Voting Stock of Xerium, measured by voting power
rather than number of shares,
provided
that, however, it is not a Change of
Control if, pursuant to such transaction, all of the Voting Stock of
Xerium is changed into or exchanged for securities of a direct or indirect
parent corporation that after such transaction owns all of the Capital
Stock of Xerium and no person is the Beneficial Owner, directly or
indirectly, of more than 50% of the Voting Stock of such parent
corporation; or
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(4)
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Xerium consolidates with, or
merges with or into, any Person, or any Person consolidates with, or
merges with or into, Xerium, in any such event pursuant to a transaction
in which any of the outstanding Voting Stock of Xerium or such other
Person is converted into or exchanged for cash, securities or other
property, other than any such transaction where the Voting Stock of Xerium
outstanding immediately prior to such transaction remains outstanding and
constitutes more than 50% of the then outstanding Voting Stock of Xerium
or is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person constituting
more than 50% of the then outstanding shares of Voting Stock of such
surviving or transferee Person (immediately after giving effect to such
issuance).
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Change
of Control Triggering Event
means (i) a
Change of Control has occurred and (ii) the notes are downgraded by either
S&P or Moodys on any date during the period commencing 60 days prior to the
consummation of such Change of Control and ending 60 days following consummation
of such Change of Control.
Collateral
has the meaning assigned
to it in the Collateral Documents; it being understood and agreed, however that,
for purposes of the Intercreditor Agreement (including, without limitation,
Articles 2 and 4 thereof), (i) the term Collateral shall not include the assets
or property of any foreign subsidiary of Xerium that is a borrower or guarantor
under (or in respect of) the ABL Credit Agreement unless such foreign subsidiary
is a Guarantor, (ii) any such foreign subsidiary shall not be considered a
Credit Party under the Intercreditor Agreement, (iii) as of the Issue Date, no
foreign subsidiary of Xerium is a Guarantor and (iv) the ABL Agent and the other
ABL Secured Parties shall be free to deal with the assets and properties of any
such foreign subsidiary (including the exercise of any remedies with respect
thereto) and retain and/or apply proceeds thereof without regard to any of the
provisions or restrictions set forth in the Intercreditor Agreement.
Collateral Documents
means the Pledge
and Security Agreement, Mortgages, the Landlord Consent and Estoppels, if any,
the Landlord Personal Property Collateral Access Agreements, if any, collateral
assignments, control agreements and related agreements executed and delivered by
Xerium or Guarantor (including financing statements under the UCC of the
relevant states), if any, each as amended, supplemented, restated, renewed,
replaced or otherwise modified from time to time, to secure any Indenture
Obligations and any Pari Passu Payment Lien Obligations or under which rights or
remedies with respect to any such Lien are governed.
Consolidated EBITDA
means, with
respect to any specified Person for any period, the Consolidated Net Income of
such Person for such period plus, without duplication:
(1)
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an amount equal to any
extraordinary loss plus any net loss realized by such Person or any of its
Restricted Subsidiaries in connection with an Asset Sale, to the extent
such losses were deducted in computing such Consolidated Net Income;
plus
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(2)
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provision for taxes based on
income or profits of such Person and its Restricted Subsidiaries for such
period, to the extent that such provision for taxes was deducted in
computing such Consolidated Net Income; plus
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(3)
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the Fixed Charges of such Person
and its Restricted Subsidiaries for such period, to the extent that such
Fixed Charges were deducted in computing such Consolidated Net Income;
plus
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(4)
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(i) depreciation and amortization
(including amortization of intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and (ii) other
non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future
period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Restricted Subsidiaries for such periods,
to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income;
plus
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74
(5)
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any cash expenses or charges
(other than depreciation or amortization expenses) related to the offering
of these Notes, any offering of Xeriums capital stock, any Permitted
Investment, acquisition, disposition, recapitalization or the incurrence
of Indebtedness permitted to be incurred by the Indenture (including a
refinancing thereof) (whether or not successful), including (i) such fees,
expenses or charges relating to the offering of the Notes and the
amendment of the ABL Credit Agreement and (ii) any amendment or other
modification of the Notes or any Credit Facility, in each case, to the
extent such amount was deducted in computing such Consolidated Net Income;
plus
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(6)
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expenses incurred as a result of
the repurchase, redemption or retention by Xerium of its common stock
earned under equity compensation programs solely in order to make
withholding tax payments; plus
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(7)
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to the extent such amounts were
included in the computation of Consolidated Net Income, extraordinary,
non- recurring or unusual losses or expenses, including, without
limitation, recruiting, severance and restructuring costs or gains during
such period, as determined in good faith by the Board of Directors of
Xerium, in each case, without regard to any limitations of Item 10(e) of
Regulation S-K; minus
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(8)
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non-cash items increasing such
Consolidated Net Income for such period, other than the accrual of revenue
in the ordinary course of business, including, but not limited to, (i)
non-cash charges or gains resulting from the application of purchase
accounting, including push-down accounting, (ii) non-cash expenses
resulting from the granting of common stock, stock options, restricted
stock or restricted stock unit awards under equity compensation programs
solely with respect to common stock of the Xerium, and cash expenses for
compensation mandatorily applied to purchase common stock of Xerium and
(iii) non-cash items related to a change in or adoption of accounting
policies,
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in each case, on a consolidated basis for
such Person and its Restricted Subsidiaries and determined in accordance with
GAAP.
Notwithstanding the preceding, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Restricted Subsidiary of Xerium
will be added to Consolidated Net Income to compute Consolidated EBITDA of
Xerium only to the extent that a corresponding amount would be permitted at the
date of determination to be dividended or distributed, directly or indirectly,
to Xerium by such Restricted Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.
Consolidated Net Income
means, with
respect to any specified Person for any period, the aggregate of the Net Income
of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP;
provided
that:
(1)
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the Net Income of any Person that
is not a Restricted Subsidiary or that is accounted for by the equity
method of accounting will be included only to the extent of the amount of
dividends or distributions or other payments paid in cash (or to the
extent converted into cash) to the specified Person or a Restricted
Subsidiary of the Person (and if such Net Income is a loss it will be
included only to the extent such loss has been funded with cash by such
Person or a wholly-owned Subsidiary thereof in respect of such
period);
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(2)
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solely for the purpose of
determining the amount available for Restricted Payments pursuant to
clause (3)(a) under the caption Certain Covenants Restricted
Payments, the Net Income of any Restricted Subsidiary will be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of its Net Income is not at
the date of determination permitted without any prior governmental
approval (which has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders (other than
any loan agreement or similar agreement which restricts the payment of
dividends or similar distributions upon the occurrence of or during the
existence or continuance of a Default or Event of Default), unless such
restrictions with respect to the payment of dividends or in similar
distributions have been legally waived;
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(3)
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the cumulative effect of a change
in accounting principles will be excluded;
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(4)
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any goodwill impairment charges
pursuant to Financial Accounting Standards Board Statement No. 142 or any
asset impairment charges pursuant to Financial Accounting Standards Board
Statement No. 144 will be excluded; and
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(5)
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notwithstanding clause (1) above,
the Net Income of any Unrestricted Subsidiary (including, without
limitation, the impact of any Hedging Obligations) will be excluded,
whether or not distributed to the specified Person or one of
its Subsidiaries.
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75
Consolidated Working Capital
means,
with respect to any Person, at any date of determination, the excess of (a) the
sum of all amounts (other than cash and cash equivalents) that would, in
conformity with GAAP, be set forth opposite the caption total current assets
(or any like caption) on a consolidated balance sheet of such Person and its
Restricted Subsidiaries at such date over (b) the sum of all amounts that would,
in conformity with GAAP, be set forth opposite the caption total current
liabilities (or any like caption) on a consolidated balance sheet of such
Person and its Restricted Subsidiaries on such date other than the current
portion of any long-term Indebtedness.
Control
Collateral
means any Collateral consisting
of any certificated security (as defined in Section 8-102 of the UCC),
investment property, deposit account, instruments and any other Collateral as to
which a Lien may be perfected through possession or control by the secured
party, or any agent therefor.
Credit
Documents
means, collectively, the ABL
Documents, the ABL Bank Product Documents, the ABL Cash Management Documents and
the PPE Documents.
Credit
Facilities
means one or more debt
facilities, indentures or other arrangements (including the ABL Credit
Agreement) designated by Xerium, in each case with one or more banks, other
lenders or other financial institutions or investors providing for revolving
credit loans, term loans, notes, receivables financings (including without
limitation through the sale of receivables to such institutions or to special
purpose entities formed to borrow from such institutions against such
receivables or the creation of any Liens in respect of such receivables in favor
of such institutions), letters of credit or other Indebtedness, in each case,
including all agreements, instruments and documents executed and delivered
pursuant to or in connection with any of the foregoing, including but not
limited to any notes and letters of credit issued pursuant thereto and any
guarantee and collateral agreement, patent and trademark security agreement,
mortgages or letter of credit applications and other guarantees, pledge
agreements, security agreements and collateral documents, in each case as the
same may be amended, supplemented, waived or otherwise modified from time to
time, or refunded, refinanced, restructured, replaced, renewed, repaid,
increased or extended from time to time (whether in whole or in part, whether
with the original banks, lenders or institutions or other banks, lenders or
institutions or otherwise, and whether provided under any original Credit
Facility or one or more other credit agreements, indentures, financing
agreements or other Credit Facilities or otherwise). Without limiting the
generality of the foregoing, the term Credit Facility shall include any
agreement (i) changing the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding Subsidiaries as additional borrowers or
guarantors thereunder, (iii) increasing the amount of Indebtedness incurred
thereunder or available to be borrowed thereunder or (iv) otherwise altering the
terms and conditions thereof.
Credit
Party PPE Proceeds Notice
means a written
notice delivered by a Credit Party to the ABL Agent stating that certain
identifiable cash proceeds which may be deposited in an ABL Deposit and
Securities Account constitute Notes Priority Collateral and reasonably
identifying the amount of such proceeds and specifying the origin
thereof.
Default
means any event that is, or
with the passage of time or the giving of notice or both would be, an Event of
Default.
Designated Non-cash Consideration
means the non-cash consideration received by Xerium or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Non-cash Consideration pursuant to an officers certificate executed
by the Chief Financial Officer, Controller or Treasurer of Xerium setting forth
the basis of such valuation, less the amount of cash or Cash Equivalents
received in connection with a subsequent sale of such Designated Non-cash
Consideration.
DIP
Financing
means any ABL Secured Party DIP
Financing or any PPE Secured Party DIP Financing, as applicable.
Discharge of ABL Obligations
means
(a)(i) the payment in full in cash of all outstanding ABL Obligations (excluding
(w) contingent indemnity obligations with respect to then unknown claims, (x)
contingent indemnification obligations with respect to known claims (which are
provided for in clause (ii) below), (y) LC Obligations (as defined below) (which
are provided for in clause (iii) below), and (z) obligations with respect to ABL Bank Product Obligations and ABL Cash Management Obligations
(which are provided for in clause (iv) below)), (ii) with respect to contingent
indemnification obligations with respect to known or anticipated claims,
provisions of cash collateral in an amount reasonably determined by the ABL
Agent, (iii) with respect to amounts available to be drawn under outstanding
letters of credit issued under the ABL Credit Agreement (or indemnities or other
undertakings issued pursuant thereto in respect of outstanding letters of
credit) (collectively, the
LC
Obligations
), the cancellation of such
letters of credit or the delivery or provision of cash collateral in respect
thereof in compliance with the terms of the ABL Credit Agreement (which shall
not exceed an amount equal to 105% of the aggregate undrawn amount of such
letters of credit) and (iv) with respect to ABL Bank Product Obligations and ABL
Cash Management Obligations (or indemnities or other undertakings issued
pursuant thereto in respect of outstanding ABL Bank Product Obligations and ABL
Cash Management Obligations), the termination thereof and payment in full in
cash of all ABL Obligations (other than contingent
indemnity obligations with respect to then unknown claims) with respect thereto
or the delivery or provision of cash collateral in an amount reasonably
determined by the ABL Agent, and (b) the termination of all commitments to
extend credit under the ABL Documents, the ABL Bank Product Documents and the
ABL Cash Management Documents.
76
Discharge of PPE Obligations
means
the payment in full in cash of all outstanding PPE Obligations (other than
contingent indemnity obligations with respect to then unknown
claims).
Disqualified Stock
means, with
respect to any Person, any Capital Stock that, by its terms (or by the terms of
any security into which it is convertible, or for which it is exchangeable, in
each case, at the option of the holder of the Capital Stock), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
of the Capital Stock, in whole or in part, on or prior to the date that is 91
days after the date on which the Notes mature. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders of the Capital Stock have the right to require Xerium to
repurchase such Capital Stock upon the occurrence of a Change of Control or an
Asset Sale will not constitute Disqualified Stock if the terms of such Capital
Stock provide that Xerium may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption Certain Covenants Restricted
Payments. The amount of Disqualified Stock deemed to be outstanding at any time
for purposes of the Indenture will be the maximum amount that Xerium and its
Restricted Subsidiaries may become obligated to pay upon the maturity of, or
pursuant to any mandatory redemption provisions of, such Disqualified Stock,
exclusive of accrued dividends.
Domestic Subsidiary
means any
Restricted Subsidiary of Xerium that is not a Foreign Subsidiary.
Enforcement Notice
means a written
notice delivered by either the ABL Agent or the collateral agent to the other
announcing that an Enforcement Period has commenced.
Enforcement Period
means the period
of time following the receipt by either the ABL Agent or the collateral agent of
an Enforcement Notice from the other and continuing until the earliest of (a) in
the case of an Enforcement Period commenced by the collateral agent, the
Discharge of PPE Obligations, (b) in the case of an Enforcement Period commenced
by the ABL Agent, the Discharge of ABL Obligations, or (c) the ABL Agent or the
collateral agent (as applicable) terminates, or agrees in writing to terminate,
the Enforcement Period.
Equity
Interests
means Capital Stock and all
warrants, options or other rights to acquire Capital Stock (but excluding any
debt security that is convertible into, or exchangeable for, Capital
Stock).
Exchange Act
means the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the SEC
promulgated thereunder.
Excess
Cash Flow
means, for any period, the excess
of Consolidated EBITDA for such period adjusted as follows: (i) plus or minus,
respectively, any net decrease or increase in the Consolidated Working Capital
of Xerium for such period; and (ii) minus the sum, without duplication, of (A)
the aggregate amount of capital expenditures made in cash by Xerium and its
Restricted Subsidiaries during such period (other than any such capital
expenditures made with proceeds of any Asset Sale (without giving effect to the
threshold set forth in the definition thereof) pursuant to clause (2), (3) or
(4) of the second paragraph under Repurchase at the Option of HoldersAsset
Sales), (B) the aggregate amount of Fixed Charges expensed by Xerium and its
Restricted Subsidiaries during such period, (C) the aggregate amount (without
duplication) of all income and franchise taxes expensed by Xerium and its
Restricted Subsidiaries during such period, (D) the aggregate amount of all
permanent repayments in cash of principal obligations during such period under
(i) Credit Facilities that are incurred pursuant to clause (1) of the second
paragraph under Certain CovenantsIncurrence of Indebtedness and Issuance of
Preferred Stock, and in the case of any such payment under any revolving credit
facility, effect a concurrent corresponding permanent reduction in the
availability under such revolving credit facility (other than repayments in cash
of the principal amount of ABL Obligations that were outstanding on the Issue
Date in an aggregate principal amount not exceeding $15.0 million), (ii)
Existing Indebtedness that was incurred pursuant to clause (2) of the second
paragraph under Certain CovenantsIncurrence of Indebtedness and Issuance of
Preferred Stock, and (iii) Pari Passu Indebtedness at a price equal to or
higher than 101.5% of the principal amount thereof (
provided
, that if Xerium or any
Restricted Subsidiary shall so repay Pari Passu Indebtedness, Xerium will reduce
principal obligations under the Notes on a pro rata basis by, at its option, (X)
redeeming Notes as described under Optional Redemption (other than any
redemptions described in the second paragraph under Optional Redemption
above) or (Y)(I) purchasing Notes through open market purchases or tender offers
(other than (1) repurchases made pursuant to any Change of Control Offers, Asset
Sale Offers or Excess Cash Flow Offers), at a price as a percentage of the
principal amount thereof equal to or higher than the price paid for such Pari
Passu Indebtedness, plus accrued and unpaid interest to the date of redemption
or purchase and cancelling all such Notes so repurchased), (E) the aggregate
amount of expenses described in clause (7) of the definition of the
term Consolidated EBITDA that are expensed by Xerium and its Restricted
Subsidiaries during such period and (F) without duplication of other open market
repurchases, tender offers or redemptions, the aggregate amount of all purchases
of Notes required to be made during such period under clause (D)(iii) above. For
purposes of calculating Excess Cash Flow, amounts denominated in currencies
other than U.S. dollars shall be converted to the U.S. dollar equivalent thereof
using the applicable exchange rate in effect on the Business Day of the actual
conversion of such currency.
77
Excluded Contribution
means net cash
proceeds, marketable securities or the Fair Market Value of Qualified Proceeds,
in each case received by Xerium and its Restricted Subsidiaries from:
(1)
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contributions to Xeriums common
equity capital; and
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(2)
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the sale (other than to a
Subsidiary of Xerium or to any management equity plan or stock option plan
or any other management or employee benefit plan or agreement of Xerium or
any Subsidiary) of Capital Stock (other than Disqualified Stock) of
Xerium,
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in each case designated as Excluded
Contributions pursuant to an officers certificate on the date such capital
contributions are made or the date such Equity Interests are sold, as the case
may be, which are excluded from the calculation set forth in clause (3) of the
first paragraph of the covenant contained under the caption Certain Covenants
Restricted Payments.
Exercise of Any Secured Creditor Remedies
or
Exercise of Secured Creditor
Remedies
means, except as otherwise provided
in the final sentence of this definition:
(a)
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the taking by any Secured Party
of any action to enforce or realize upon any Lien, including the
institution of any foreclosure proceedings or the noticing of any public
or private sale pursuant to Article 9 of the UCC or other applicable
law;
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(b)
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the exercise by any Secured Party
of any right or remedy provided to a secured creditor on account of a Lien
under any of the Credit Documents, under applicable law, in an Insolvency
Proceeding or otherwise, including the election to retain any of the
Collateral in satisfaction of a Lien;
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(c)
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the taking of any action by any
Secured Party or the exercise of any right or remedy by any Secured Party
in respect of the collection on, set off against, marshaling of,
injunction respecting or foreclosure on the Collateral or the proceeds
thereof;
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(d)
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the appointment on the
application of a Secured Party, of a receiver, receiver and manager or
interim receiver of all or part of the Collateral;
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(e)
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the sale, lease, license or other
disposition of all or any portion of the Collateral by private or public
sale conducted by any Secured Party or any other means at the direction or
with the consent of any Secured Party permissible under applicable
law;
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(f)
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the exercise of any other right
of a secured creditor under Part 6 of Article 9 of the UCC or under
provisions of similar effect under other applicable law; and
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(g)
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the exercise by any Secured Party
of any voting rights relating to any Equity Interest included in the
Collateral.
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For the avoidance of doubt, none of the
following shall be deemed to constitute an Exercise of Any Secured Creditor
Remedies or Exercise of Secured Creditor Remedies: (i) the filing of a proof of
claim in any Insolvency Proceeding or the seeking of adequate protection in
accordance with and subject to the provisions of SecurityIntercreditor
AgreementInsolvency Proceedings, (ii) the exercise of rights by the ABL Agent
upon the occurrence of a Cash Dominion Period or any similar defined term (as
defined in the ABL Credit Agreement), including, without limitation, the
notification of account debtors, depository institutions or any other Person to
deliver proceeds of ABL Priority Collateral to the ABL Agent, (iii) the consent
by the ABL Agent or the requisite ABL Lenders to a disposition by any Credit
Party of any of the ABL Priority Collateral, (iv) the reduction of advance rates
or sub-limits or change in borrowing base components or eligibility criteria by
the ABL Agent and the requisite ABL Lenders, or (v) the imposition of Reserves
(as defined in the ABL Credit Agreement) by the ABL Agent.
Existing Indebtedness
means the
Indebtedness of Xerium and its Restricted Subsidiaries (other than Indebtedness
under the ABL Credit Agreement) in existence on the Issue Date, until such
amounts are repaid.
78
Fair
Market Value
means the value that would be
paid by a willing buyer to an unaffiliated willing seller in a transaction not
involving distress or necessity of either party. In the case of a transaction
not exceeding $25.0 million, Fair Market Value may be determined in good faith
by the Chief Financial Officer, Controller or Treasurer of Xerium, and in the
case of a transaction exceeding $25.0 million, Fair Market Value shall be
determined in good faith by the Board of Directors of Xerium (unless otherwise
provided in the Indenture).
Fixed
Charge Coverage Ratio
means with respect to
any specified Person for any period, the ratio of the Consolidated EBITDA of
such Person for such period to the Fixed Charges of such Person for such period.
In the event that the specified Person or any of its Restricted Subsidiaries
incurs, assumes, guarantees, repays, repurchases, redeems, defeases or otherwise
discharges any Indebtedness (other than ordinary working capital borrowings,
including working capital borrowings under Credit Facilities) or issues,
repurchases or redeems Preferred Stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated and on or
prior to the date of the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the
Calculation
Date
), then the Fixed Charge Coverage Ratio
will be calculated giving pro forma effect to such incurrence, assumption,
guarantee, repayment, repurchase, redemption, defeasance or other discharge of
Indebtedness, or such issuance, repurchase or redemption of Preferred Stock, and
the use of the proceeds therefrom, as if the same had occurred at the beginning
of the applicable four fiscal quarter reference period.
In addition, for purposes of calculating
the Fixed Charge Coverage Ratio:
(1)
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acquisitions that have been made
by the specified Person or any of its Restricted Subsidiaries, including
through mergers or consolidations, or any Person or any of its Restricted
Subsidiaries acquired by the specified Person or any of its Restricted
Subsidiaries, and including any related financing transactions and
including increases in ownership of Restricted Subsidiaries, during the
four fiscal quarter reference period or subsequent to such reference
period and on or prior to the Calculation Date, or that are to be made on
the Calculation Date, will be given pro forma effect (either (a) in
accordance with Regulation S-X under the Securities Act or, (b) if not in
accordance with Regulation S-X, constituting Pro Forma Cost Savings not to
exceed $10.0 million in any four fiscal quarter reference period) as if
they had occurred on the first day of the four fiscal quarter reference
period;
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(2)
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the Consolidated EBITDA which is
attributable to discontinued operations (as determined in accordance with
GAAP), and operations or businesses (and ownership interests therein)
disposed of prior to the Calculation Date, will be excluded;
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(3)
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the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and
operations or businesses (and ownership interests therein) disposed of
prior to the Calculation Date, will be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Restricted Subsidiaries
following the Calculation Date;
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(4)
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any Person that is a Restricted
Subsidiary on the Calculation Date will be deemed to have been a
Restricted Subsidiary at all times during such four fiscal quarter
reference period;
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(5)
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any Person that is not a
Restricted Subsidiary on the Calculation Date will be deemed not to have
been a Restricted Subsidiary at any time during such four fiscal quarter
reference period; and
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(6)
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if any Indebtedness bears a
floating rate of interest, the interest expense on such Indebtedness will
be calculated as if the rate in effect on the Calculation Date had been
the applicable rate for the entire period (but taking into account any
Hedging Obligation applicable to such Indebtedness if such Hedging
Obligation has a remaining term as at the Calculation Date in excess of
six months).
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Fixed
Charges
means, with respect to any specified
Person for any period, the sum, without duplication, of:
(1)
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the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued, including, without limitation, original issue discount,
non-cash interest payments (but excluding any non-cash interest expense
attributable to the movement in the mark to market valuation of Hedging
Obligations in accordance with GAAP and excluding amortization and
write-offs of debt issuance costs), the interest component of any deferred
payment obligations, the interest component of all payments associated
with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers acceptance financings,
and net of the effect of all payments made or received pursuant to Hedging
Obligations in respect of interest rates (excluding, for the avoidance of
doubt, amounts due upon settlement of any such Hedging Obligations);
plus
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(2)
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the consolidated interest expense
of such Person and its Restricted Subsidiaries that was expensed or
capitalized during such period; plus
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(3)
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all cash dividends paid, accrued
and/or scheduled to be paid or accrued during such period (excluding items
eliminated in consolidation) on any series of Preferred Stock of such
Person; plus
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(4)
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all cash dividends paid, accrued
and/or scheduled to be paid or accrued during such period (excluding items
eliminated in consolidation) of any series of Disqualified
Stock.
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foreign subsidiary
means any Subsidiary of Xerium that is not organized or
created under the laws of the United States of America, any state thereof or the
District of Columbia.
Foreign
Subsidiary
means any Restricted Subsidiary
of Xerium that is a foreign subsidiary.
GAAP
means generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, in each case
which were in effect on the Issue Date.
guarantee
means a guarantee other
than by endorsement of negotiable instruments for collection in the ordinary
course of business, direct or indirect, in any manner including, without
limitation, by way of a pledge of assets or through letters of credit or
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services, to
take or pay or to maintain financial statement conditions or otherwise). The
term guarantee used as a verb has a corresponding meaning.
Guarantor
means each Subsidiary of
Xerium that executes the Indenture as a guarantor in accordance with the
provisions of the Indenture and each other Subsidiary of Xerium that thereafter
guarantees the Notes pursuant to the terms of the Indenture and the successors
and assigns thereof, in each case, until the Note Guarantee of such Person has
been released in accordance with the provisions of the Indenture.
Hedging
Obligations
means, with respect to any
specified Person, the obligations of such Person under:
(1)
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interest rate swap agreements
(whether from fixed to floating or from floating to fixed), interest rate
cap agreements and interest rate collar agreements;
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(2)
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other agreements or arrangements
designed to manage interest rates or interest rate risk; and
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(3)
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other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange
rates (including, without limitation, foreign currency futures and
options, currency swaps, currency forwards and related interest rate swaps
and/or forwards) or commodity prices (including, without limitation,
commodity futures, swaps or options) or energy prices (including forwards
and swaps).
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Immaterial Subsidiary
means each
Subsidiary of Xerium so designated by Xerium;
provided, however
, that (i) each such
Subsidiary has operations that generated Consolidated EBITDA not exceeding $1.0
million for the most recently completed fiscal year and (ii) each such
Subsidiary had total assets as of the end of the most recently completed fiscal
year the aggregate value of which was equal to or less than 1.0% of the Total
Assets of Xerium;
provided further,
however
, that at no time shall (x) the
aggregate total amount of Consolidated EBITDA generated by all Immaterial
Subsidiaries for the most recently completed fiscal year exceed $5.0 million or
(y) the aggregate value of the total assets of all Immaterial Subsidiaries as of
the end of the most recently completed fiscal year exceed 5.0% of the Total
Assets of Xerium; in each case, calculated on a consolidated basis in accordance
with GAAP;
provided
that a Restricted Subsidiary will not be considered to be an Immaterial
Subsidiary if it (i) directly or indirectly, guarantees or otherwise provides
direct credit support for any Obligations of Xerium or any Guarantor or (ii) is
a borrower or a guarantor under any Credit Facility or any Pari Passu Payment
Lien Document.
Indebtedness
means, with respect to
any specified Person, any indebtedness of such Person (excluding accrued
expenses and trade payables), whether or not contingent:
(1)
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in respect of borrowed
money;
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(2)
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evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof);
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80
(3)
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in respect of bankers
acceptances;
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(4)
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representing Capital Lease
Obligations or Attributable Debt in respect of sale and leaseback
transactions;
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(5)
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representing the balance deferred
and unpaid of the purchase price of any property or services due more than
six months after such property is acquired or such services are completed,
except any balance that constitutes an accrual of expenses or trade
payable; or
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(6)
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re
presenting any
Hedging Obligations (the amount of any such Hedging Obligations to be
equal at any time to the termination value of the agreement or arrangement
giving rise to such Hedging Obligations that would be payable by such
Person at such time);
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if and to the extent any of the preceding
items (other than letters of credit, Attributable Debt and Hedging Obligations)
would appear as a liability upon a balance sheet (excluding the footnotes
thereto) of such Person prepared in accordance with GAAP.
In addition, the term Indebtedness
includes (i) all Indebtedness of others secured by a Lien on any asset of the
specified Person (whether or not such Indebtedness is assumed by the specified
Person),
provided, however
, that the amount of Indebtedness attributable to such Person
shall be the lesser of (a) the Fair Market Value of such asset at such date of
determination and (b) the amount of such Indebtedness of such other Person and
(ii) to the extent not otherwise included, the guarantee by the specified Person
of any Indebtedness of any other Person.
The amount of any Indebtedness outstanding
as of any date shall be:
(1)
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the accreted value thereof, in
the case of any Indebtedness issued with original discount;
and
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(2)
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the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in
the case of any other Indebtedness.
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Indenture Documents
means the
Indenture, the Notes, the Note Guarantees, the Collateral Documents and the
Intercreditor Agreement.
Insolvency Proceeding
means (a) any
case, action or proceeding before any court or other governmental authority
relating to bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general assignment for
the benefit of creditors, composition, marshalling of assets for creditors or
other similar arrangement in respect of a Persons creditors generally or any
substantial portion of a Persons creditors; in each case covered by clauses (a)
and (b) undertaken under any Bankruptcy Laws.
Investments
means, with respect to
any Person, all direct or indirect investments by such Person in other Persons
(including Affiliates) in the forms of loans (including guarantees), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If Xerium or
any Restricted Subsidiary of Xerium sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of Xerium such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of Xerium, Xerium will be deemed to have made an Investment on the
date of any such sale or disposition equal to the Fair Market Value of Xeriums
Investments in such Restricted Subsidiary that were not sold or disposed of in
an amount determined as provided in the final paragraph of the covenant
described above under the caption Certain Covenants Restricted Payments.
The acquisition by Xerium or any Restricted Subsidiary of Xerium of a Person
that holds an Investment in a third Person will be deemed to be an Investment by
Xerium or such Subsidiary in such third Person in an amount equal to the Fair
Market Value of the Investments held by the acquired Person in such third
Person. Notwithstanding anything to the contrary in the Indenture, the Fair
Market Value of any tangible asset or property of Xerium or any Guarantor that
constitutes, or under the Indenture or any Collateral Document is required to
constitute, Collateral that is relocated outside of the United States to a
foreign jurisdiction (each such asset, a
Relocated Asset
) shall be deemed to
be an Investment by Xerium or such Guarantor, as the case may be, in a Foreign
Subsidiary that is not a Guarantor. Except as otherwise provided in the
Indenture, the amount of an Investment will be determined at the time the
Investment is made and without giving effect to subsequent changes in
value.
Issue
Date
means the date on which the old notes
were originally issued.
81
Landlord Consent and Estoppel
means,
with respect to any Leasehold Property, a letter, certificate or other
instrument in writing from the lessor under the related lease, pursuant to
which, among other things, the landlord consents to the granting of a Mortgage
on such Leasehold Property by Xerium or the Guarantor that is the tenant
thereof, such Landlord Consent and Estoppel to be in form and substance
acceptable to the collateral agent in its reasonable discretion, but in any
event sufficient for the collateral agent to obtain a title policy with respect
to such Mortgage as contemplated under clause (2) of the covenant described
under the covenant Certain CovenantsReal Estate Mortgages and
Filings.
Landlord Personal Property Collateral Access Agreement
means a Landlord Waiver and Consent Agreement substantially
in the form of exhibit form thereof attached to the Indenture with such
amendments or modifications thereto (or such other form) as may be approved by
the collateral agent.
Leasehold Property
means any
leasehold or subleasehold interest of Xerium or any Guarantor as lessee or
sublessee, respectively, under any lease or sublease of real property.
Legal
Holiday
means a Saturday, a Sunday or any
day on which commercial banking institutions are not required to be open in the
State of New York or the location of the corporate trust office. If a payment
date is a Legal Holiday at a place of payment, payment may be made on the next
succeeding day that is not a Legal Holiday.
Lien
means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset, whether or not filed, recorded or otherwise
perfected under applicable law, including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction;
provided,
however
, that in no event shall an operating
lease be deemed a lien.
Lien
Priority
means with respect to any Lien of
the ABL Secured Parties or the PPE Secured Parties in the Collateral, the order
of priority of such Lien as specified in SecurityIntercreditor AgreementLien
PrioritiesLien Priority.
Material Real Estate Asset
means (a)
any fee-owned Real Estate Asset having a fair market value in excess of
$1,000,000 and (b) all Leasehold Properties other than those with respect to
which the aggregate payments under the terms of the lease or sublease are less
than $500,000 per annum (unless such lease or sublease is a ground lease), in
each case, located in the United States.
Mortgage
means a Mortgage
substantially in the form of the exhibit form thereof attached to the Indenture,
with such changes thereto (or such other form) as may be acceptable to the
collateral agent in its reasonable discretion.
Moodys
means Moodys Investors
Service, Inc. and any successor to its rating agency business.
Net
Income
means, with respect to any specified
Person, the net income (loss) of such Person, determined in accordance with GAAP
and before any reduction in respect of Preferred Stock dividends, excluding,
however:
(1)
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any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with:
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(a)
|
any Asset Sale; or
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(b)
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the disposition of any securities
by such Person or any of its Restricted Subsidiaries or the extinguishment
of any Indebtedness of such Person or any of its Restricted
Subsidiaries;
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(2)
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any extraordina
ry gain, together with any related provision for taxes on such
extraordinary gain;
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(3)
|
any foreign exchange
gain (loss) on Indebtedness; and
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(4)
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any marked to market
gain (loss) whether realized or accrued, without duplication, on Hedging
Obligations.
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Net
Proceeds
means the aggregate cash proceeds
received by Xerium or any of its Restricted Subsidiaries in respect of any Asset
Sale (including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales
commissions, and any relocation expenses incurred as a result of the Asset Sale,
taxes paid or payable as a result of the Asset Sale, in each case, after taking
into account any available tax credits or deductions and any tax sharing
arrangements, and amounts required to be applied to the repayment of
Indebtedness, other than Indebtedness under a Credit Facility or Pari Passu
Payment Lien Document, secured by a Permitted Lien on the asset or assets that
were the subject of such Asset Sale and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with
GAAP.
82
Non-Recourse Debt
means Indebtedness
as to which neither Xerium nor any of its Restricted Subsidiaries:
(1)
|
provides credit support of any
kind (including any undertaking, agreement or instrument that would
constitute Indebtedness);
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(2)
|
is directly or indirectly liable
as a guarantor or otherwise; or
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(3)
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constitutes the
lender.
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Note
Guarantee
means the guarantee by each
Guarantor of Xeriums obligations under the Notes and the other Indenture
Documents, executed pursuant to the provisions of the Indenture.
Notes
Obligations
means all Obligations (including
Post-Petition Interest) outstanding under the Indenture Documents.
Notes
Secured Parties
means, collectively, the
collateral agent, the trustee and the holders of the Notes.
Obligations
means any principal,
interest (including Post-Petition Interest), penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation
governing any Indebtedness.
Pari
Passu Indebtedness
means any Indebtedness
(other than any Indebtedness evidenced by an additional Note or related Note
Guarantee) (1) that is permitted to be incurred under the covenant described
above under Certain Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock, (2) that is secured on a
pari passu
basis with the Notes and
the Note Guarantees, as applicable, by a Permitted Lien described in clause (25)
of the definition thereof, and (3) the aggregate principal amount of which does
not at any time exceed the Pari Passu Indebtedness Cap Amount;
provided
that (i) such
Indebtedness is so designated as Pari Passu Indebtedness in an officers
certificate delivered to the collateral agent and (ii) an authorized
representative of the holders of such Indebtedness shall have executed and
delivered a supplement to the Intercreditor Agreement and an Accession
Agreement.
Pari
Passu Indebtedness Cap Amount
means the sum
of the aggregate principal amount of Pari Passu Indebtedness incurred after the
Issue Date that are expressly permitted to be incurred and secured under the ABL
Credit Agreement and the Indenture.
Pari
Passu Indebtedness Secured Parties
means,
collectively, the agent, the trustee or other representative, if any, and the
holders of Pari Passu Indebtedness identified in a supplement to the
Intercreditor Agreement and an Accession Agreement.
Pari
Passu Payment Lien Documents
means any loan
agreement, indenture or other instrument that evidences or governs any Pari
Passu Indebtedness and all other related documents identified in a supplement to
the Intercreditor Agreement.
Pari
Passu Payment Lien Obligations
means:
(1)
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all Obligations (including
Post-Petition Interest) outstanding under the Pari Passu Payment Lien
Documents; and
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(2)
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notwithstanding the foregoing, if
Indebtedness for borrowed money constituting principal outstanding under
the Pari Passu Payment Lien Documents is in excess of the Pari Passu
Indebtedness Cap Amount, then only that portion of such Indebtedness equal
to the Pari Passu Indebtedness Cap Amount shall be included in Pari Passu
Payment Lien Obligations and interest with respect to such Indebtedness
shall only constitute Pari Passu Payment Lien Obligations to the extent
related to such Indebtedness included in the Pari Passu Payment Lien
Obligations.
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83
Permitted Asset Swap
means the
concurrent purchase and sale or exchange of assets used or useful in a Permitted
Business or a combination of such assets and cash or Cash Equivalents between
Xerium or any of its Restricted Subsidiaries and another Person;
provided
that any cash or
Cash Equivalents constituting Net Proceeds received must be applied in
accordance with the covenant described under Repurchase at the Option of
Holders Asset Sales.
Permitted Business
means any business
conducted (as described in the prospectus) by Xerium and its Restricted
Subsidiaries on the Issue Date and any business (whether conducted by Xerium, a
Restricted Subsidiary or an Unrestricted Subsidiary) reasonably related thereto,
ancillary or complementary to reasonable extensions thereof.
Permitted Investments
means:
(1)
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(a) any
Investment in Xerium or in a Restricted Subsidiary of Xerium that is a
Guarantor and (b) any Investment by a Restricted Subsidiary of Xerium that
is not a Guarantor in another Restricted Subsidiary of Xerium that is not
a Guarantor;
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(2)
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any
Investment in Cash Equivalents;
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(3)
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any
Investment by Xerium or any Restricted Subsidiary of Xerium in a Person,
if as a result of such Investment:
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(a)
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such Person becomes a Restricted
Subsidiary of Xerium and a Guarantor; or
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(b)
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such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, Xerium or a
Restricted Subsidiary of Xerium that is a Guarantor;
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(4)
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any
Investment made as a result of the receipt of non-cash consideration from
an Asset Sale that was made pursuant to and in compliance with the
covenant described above under the caption Repurchase at the Option of
Holders Asset Sales;
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(5)
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any
acquisition of assets or Capital Stock solely in exchange for the issuance
of Equity Interests (other than Disqualified Stock) of Xerium or out of
the net proceeds of an issue or sale of Equity Interests of Xerium (other
than Disqualified Stock) so long as such acquisition occurs within 60 days
thereafter;
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(6)
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any
Investments received in compromise or resolution of:
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(a)
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obligations of trade creditors or
customers that were incurred in the ordinary course of business of Xerium
or any of its Restricted Subsidiaries, including pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of
any trade creditor or customer; or
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(b)
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litigation, arbitration or other
disputes;
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(7)
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Investments represented by Hedging Obligations;
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(8)
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loans or
advances to employees made in the ordinary course of business of Xerium or
any Restricted Subsidiary of Xerium in an aggregate principal amount not
to exceed $2.0 million at any one time outstanding;
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(9)
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extensions of trade credit or advances to customers and/or
suppliers on commercially reasonable terms in the ordinary course of
business;
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(10)
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guarantees of Indebtedness of Xerium or any of its Restricted
Subsidiaries issued in accordance with the covenant entitled Incurrence
of Indebtedness and Issuance of Preferred Stock;
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(11)
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Investments resulting from payment of consolidated taxes that
include Unrestricted Subsidiaries;
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(12)
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other
Investments in any Person (other than an Affiliate of Xerium that is not a
Subsidiary of Xerium) having an aggregate Fair Market Value (measured on
the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (12) that are at the time
outstanding not to exceed the greater of (x) $30.0 million and (y) 5.25%
of Total Assets;
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(13)
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any Investment by Xerium or a
Restricted Subsidiary in a Permitted Business having an aggregate fair
market value, taken together with all other Investments made pursuant to
this clause (13) that are at that time outstanding (without giving effect
to the sale of an Investment to the extent the proceeds of such sale do
not consist of cash and/or marketable securities), not to exceed the
greater of (x) $15.0 million and (y) 2.50% of Total Assets (with the fair
market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value);
provided, however
,
that if any Investment pursuant to this clause (13) is made in any Person
that is not a Restricted Subsidiary of Xerium at the date of the making of
such Investment and such Person becomes a Restricted Subsidiary of Xerium
after such date, such Investment shall thereafter be deemed to have been
made pursuant to clause (1) above and shall cease to have been made
pursuant to this clause (13) for so long as such Person continues to be a
Restricted Subsidiary;
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(14)
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Investments in or by a Subsidiary
(including a Securitization Subsidiary) that, in the good faith
determination of a majority of the members of the Board of Directors of
Xerium are necessary or advisable to effect (i) a Qualified Securitization
Financing or (ii) any factoring agreement providing for Xerium or any of
its Subsidiaries to sell or otherwise dispose of any receivable on arms
length terms for cash payable at the time of disposal;
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(15)
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Investments consisting of
licensing of intellectual property pursuant to joint marketing
arrangements with other Persons;
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(16)
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Investments in any Restricted
Subsidiary of Xerium that is a Foreign Subsidiary having an aggregate Fair
Market Value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (16) that are at
the time outstanding not to exceed the greater of (x) $30.0 million and
(y) 5.25% of Total Assets (it being understood and agreed for the
avoidance of doubt that for purposes of this clause (16), at any given
time the amount of cash distributions, principal repayments and cash
dividends received in respect of such Investment up to the value of such
Investment used to calculate the aggregate amount of such Investments made
pursuant to this clause (16), shall be netted against the outstanding
aggregate amount of Investments made pursuant to this clause (16));
and
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(17)
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for the avoidance of doubt, any
Investments existing on the Issue Date and any extension, modification,
replacement or renewal of any such Investments existing on the Issue Date,
but only to the extent not involving additional advances, contributions or
other Investments of cash or other assets or other increases thereof other
than as a result of the accrual or accretion of interest or original issue
discount or the issuance of pay-in-kind securities, in each case, pursuant
to the terms of such Investment as in effect on the Issue Date (or as
subsequently amended or otherwise modified in a manner not disadvantageous
to the holders of the Notes in any material
respect).
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Permitted Liens
means:
(1)
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Liens on assets of Xerium or any
of its Restricted Subsidiaries securing (a) Indebtedness and other
Obligations under Credit Facilities described in clause (1) of the
definition of the term Permitted Debt; (b) Hedging Obligations described
in clause (8) of the definition of the term Permitted Debt, the
counterparty of which is an ABL Lender (or an Affiliate thereof) or at the
time of the incurrence thereof was an ABL Lender (or an Affiliate
thereof), and (c) Indebtedness in respect of cash management services
described in clause (14)(b) of the definition of Permitted Debt owing to
an ABL Lender (or an Affiliate thereof) or at the time of the incurrence
thereof was an ABL Lender (or an Affiliate thereof);
provided,
that such
Liens are subject to the terms of the Intercreditor
Agreement.
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(2)
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Liens in favor of Xerium or any
of its Restricted Subsidiaries;
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(3)
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Liens on property of a Person
existing at the time such Person is merged with or into or consolidated
with (or at the time the Capital Stock of such Person is acquired by)
Xerium or any Subsidiary of Xerium;
provided
that such Liens were in
existence prior to the contemplation of such merger, consolidation or
acquisition and do not extend to any assets other than those of the Person
merged into, consolidated with or acquired by Xerium or the
Subsidiary;
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(4)
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Liens on property (including
Capital Stock) existing at the time of acquisition of the property by
Xerium or any Subsidiary of Xerium;
provided
that such Liens were in
existence prior to, such acquisition, and not incurred in contemplation
of, such acquisition;
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(5)
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Liens to secure the performance
of statutory obligations, surety or appeal bonds, performance bonds,
letters of credit or other obligations of a like nature incurred in the
ordinary course of business;
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(6)
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Liens to secure Indebtedness
(including Capital Lease Obligations and Attributable Debt) permitted by
clause (4) of the second paragraph of the covenant entitled Certain
Covenants Incurrence of Indebtedness and Issuance of Preferred Stock
covering only the assets acquired with or financed by such
Indebtedness;
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(7)
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Liens existing on the Issue Date
or from contractual commitments existing on the Issue Date and
replacements thereof, so long as the replacement Liens encumber only the
assets subject to the Liens being replaced and the replacement Liens
secure obligations in an amount no greater than the obligations secured by
the Liens being replaced;
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(8)
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Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded;
provided
that any reserve or
other appropriate provision as is required in conformity with GAAP has
been made therefor;
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(9)
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Liens imposed by law, such as
carriers, warehousemens, landlords, banks and mechanics Liens, in
each case, incurred in the ordinary course of business;
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(10)
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Liens incurred in the ordinary
course of business in connection with workers compensation, unemployment
insurance and other types of social security, or to secure the performance
of tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return of money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money or other Indebtedness);
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(11)
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easements, rights of way,
restrictions, encroachments, and other minor defects or irregularities in
title, in each case which do not and will not interfere in any material
respect with the ordinary conduct of the business of Xerium or any of its
Subsidiaries;
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(12)
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any (i) interest or title of a
lessor or sublessor under any lease of real estate permitted under the
Indenture,
(ii) restriction or encumbrance that the interest or title
of such lessor or sublessor may be subject to, or
(iii) subordination
of the interest of the lessee or sublessee under such lease to any
restriction or encumbrance referred to in the preceding clause (ii), so
long as the holder of such restriction or encumbrance agrees to recognize
the rights of such lessee or sublessee under such lease;
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(13)
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Liens solely on any cash earnest
money deposits made by Xerium or any of its Subsidiaries in connection
with any letter of intent or purchase agreement permitted under the
Indenture;
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(14)
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purported Liens evidenced by the
filing of precautionary UCC financing statements or, for property located
in foreign jurisdictions, the preparation and/or filing of functionally
similar documents, relating solely to operating leases of personal
property entered into in the ordinary course of business;
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(15)
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Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods;
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(16)
|
any zoning or similar law or
right reserved to or vested in any governmental office or agency to
control or regulate the use of any real property;
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(17)
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(i) licenses of patents,
trademarks and other intellectual property rights granted by Xerium or any
of its Subsidiaries in the ordinary course of business and not interfering
in any material respect with the ordinary conduct of the business of
Xerium or such Subsidiary and (ii) leases or subleases granted by Xerium
of any of its Subsidiaries to third parties in respect of surplus property
which is not fundamental to the operation of the business in the ordinary
course;
provided
that such leases and subleases are on arms-length
commercial terms;
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(18)
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any Liens arising by operation of
law and any lien arising under customary retention of title arrangements
(Eigentumsvorbehalt) in the ordinary course of business;
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(19)
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any Lien arising under the
general terms and conditions of banks or Sparkassen (Allgemeine
Geschäftsbedingungen der Banken oder Sparkassen) with whom Xerium or any
of its Subsidiaries maintains a banking relationship with a financial
institution in Germany;
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86
(20)
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Liens created for the benefit of
(or to secure) the Notes and the Note Guarantees in respect
thereof;
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(21)
|
Liens to secure any Permitted
Refinancing Indebtedness permitted to be incurred under the Indenture;
provided, however
, that:
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(a)
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the new Lien shall be limited to all or part of the same
property and assets that secured or, under the written agreements pursuant
to which the original Lien arose, could secure the original Lien (plus
improvements and accessions to, such property or proceeds or distributions
thereof); and
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(b)
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the Indebtedness secured by the new Lien is not
increased to any amount greater than the sum of (x) the outstanding
principal amount, or, if greater, committed amount, of the Permitted
Refinancing Indebtedness and (y) an amount necessary to pay any fees and
expenses, including premiums, related to such renewal, refunding,
refinancing, replacement, defeasance or discharge;
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(22)
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Liens securing Hedging
Obligations made in the ordinary course of business and not for
speculation;
provided
that such Hedging Obligations constitute Permitted Debt
described under clause (8) of the definition thereof and the
counterparties of which are not ABL Lenders (or Affiliates thereof) or at
the time of the incurrence thereof were not ABL Lenders (or Affiliates
thereof);
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(23)
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Liens with respect to obligations
at any one time outstanding that do not exceed the greater of (x) $40.0
million and (y) 7.0% of Total Assets;
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(24)
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Liens on accounts receivable and
related assets incurred pursuant to a Qualified Securitization
Financing;
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(25)
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Liens securing (a) Indebtedness
that is evidenced by additional Notes and related Note Guarantees or (b)
any other Indebtedness that was permitted by the terms of the Indenture to
be incurred pursuant to the covenant described above under the caption
Certain Covenants Incurrence of Indebtedness and Issuance of Preferred
Stock;
provided
that (i) the Total Leverage Ratio would have been no
greater than 4.70 to 1.00, as determined on a pro forma basis after giving
pro forma effect to the incurrence and application of the proceeds of such
Indebtedness, and (ii) in the case of any such Indebtedness described
under subclause (b) of this clause (25), the holders of such Indebtedness
(or their designated representative or agent) shall have executed and
delivered a supplement to the Intercreditor Agreement and an Accession
Agreement to the Collateral Documents and (iii) such Liens shall be
governed by, and subject to, the terms of each of the Intercreditor
Agreement and the Collateral Documents; and
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(26)
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Liens to secure Permitted Debt
described in clause (18) of the definition thereof;
provided
that any
Lien securing such Permitted Debt may only attach to, be granted in
respect of, or exist on, assets of Foreign Restricted
Subsidiaries.
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Permitted Refinancing Indebtedness
means any Indebtedness of Xerium or any of its Restricted Subsidiaries issued in
exchange for, or the net proceeds of which are used to renew, refund, refinance,
replace, defease or discharge other Indebtedness of Xerium or any of its
Restricted Subsidiaries (other than intercompany Indebtedness);
provided
that:
(1)
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the principal amount (or accreted value, if applicable)
of such Permitted Refinancing Indebtedness does not exceed the principal
amount (or accreted value, if applicable) of the Indebtedness renewed,
refunded, refinanced, replaced, defeased or discharged (plus all accrued
interest on the Indebtedness and the amount of all fees and expenses,
including premiums, incurred in connection therewith);
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(2)
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such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being renewed, refunded, refinanced,
replaced, defeased or discharged;
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(3)
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if the Indebtedness being renewed, refunded, refinanced,
replaced, defeased or discharged is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and is subordinated in right
of payment to, the Notes on terms at least as favorable to the holders of
Notes as those contained in the documentation governing the Indebtedness
being renewed, refunded, refinanced, replaced, defeased or discharged;
and
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(4)
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such Indebtedness is incurred either by Xerium or by a
Restricted Subsidiary;
provided,
however
, that Permitted Refinancing
Indebtedness shall not include Indebtedness of a Restricted Subsidiary of
Xerium that is not a Guarantor that renews, refunds, refinances, replaces,
defeases or discharges Indebtedness of either Xerium or a
Guarantor.
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87
Person
means any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company or government or
other entity.
Pledge
and Security Agreement
means the Pledge and
Security Agreement, dated as of the Issue Date, made by Xerium and the
Guarantors in favor of the collateral agent for the benefit of the Notes Secured
Parties, as may be amended, supplemented or otherwise modified from time to
time.
Post-Petition Interest
means
interest, fees, expenses and other charges that, pursuant to the Indenture
Documents or any other Credit Document, continue to accrue after the
commencement of any Insolvency Proceeding, whether or not such interest, fees,
expenses and other charges are allowed or allowable under any Bankruptcy Law or
in any such Insolvency Proceeding.
PPE
Cash Proceeds Notice
means a written notice
delivered by the collateral agent to the ABL Agent (a) stating that an Event of
Default has occurred and is continuing under any PPE Document and specifying
the relevant Event of Default and (b) stating that certain identifiable cash
proceeds which may be deposited in an ABL Deposit and Securities Account
constitute Notes Priority Collateral, and reasonably identifying the amount of
such proceeds and specifying the origin thereof.
PPE
Documents
means, collectively, the Indenture
Documents and the Pari Passu Payment Lien Documents.
PPE
Obligations
means, collectively, the Notes
Obligations and the PPE Obligations. For clarity, the term PPE Obligations
shall include, without limitation, all obligations on account of any PPE Secured
Party DIP Financing provided by any PPE Secured Party to any of the Credit
Parties.
PPE
Priority Accounts
means the Asset Sale
Proceeds Pledged Account and any deposit accounts, securities accounts or
commodity accounts, if any, in each case that are intended to solely contain
Notes Priority Collateral or identifiable proceeds of the Notes Priority
Collateral (it being understood that any property in such deposit accounts,
securities accounts or commodities accounts which is not Notes Priority
Collateral or identifiable proceeds of Notes Priority Collateral shall not be
Notes Priority Collateral solely by virtue of being on deposit in the Asset Sale
Proceeds Pledged Account or, any such deposit account, securities account or
commodity account).
PPE
Secured Parties
means, collectively, the
collateral agent, the Notes Secured Parties and the Pari Passu Indebtedness
Secured Parties, if any.
Preferred Stock
means as applied to
the Equity Interests of any Person, means Equity Interests of any class or
classes (however designated) which is preferred as to the payment of dividends
or distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over Equity Interests of
any other class of such Person.
Priority Collateral
means the ABL
Priority Collateral or the Notes Priority Collateral, as applicable.
Pro
Forma Cost Savings
means, with respect to
any four fiscal quarter reference period, the reduction in net costs and
expenses that:
(1)
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were actually implemented prior
to the Calculation Date in connection with or as a result of an
acquisition, Investment, disposition, merger, consolidation or
discontinued operation or other specified action and that are supportable
and quantifiable by the underlying accounting records; or
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(2)
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relate to an acquisition,
Investment, disposition, merger, consolidation or discontinued operation
or other specified action and that Xerium reasonably determines will
actually be realized within 12 months of the date of the closing of the
acquisition, Investment, disposition, merger, consolidation or
discontinued operation or specified action.
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Qualified Proceeds
means assets that
are used or useful in, or Capital Stock of any Person engaged in, a Permitted
Business.
Qualified Securitization Financing
means a financing transaction or series of financing transactions pursuant to
which Xerium or any of its Subsidiaries may sell, convey or otherwise transfer
to (a) a Securitization Subsidiary (in the case of a transfer by Xerium or any
of its Subsidiaries) or (b) any other Person (in the case of a transfer by a
Securitization Subsidiary), and may grant a security interest in, accounts
receivable of Xerium or any of its Subsidiaries, and any assets related thereto
(including without limitation collateral
securing such accounts receivable, contracts and guarantees or other supporting
obligations in respect of such accounts receivable, proceeds of such accounts
receivable, and other assets which are customarily transferred or in respect of
which security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable),
provided
that the Board of
Directors of Xerium shall have determined in good faith that (i) the terms and
conditions thereof, taken as a whole, are market terms and are economically fair
and reasonable to Xerium and the Securitization Subsidiary, and (ii) all sales
and dispositions of accounts receivable and related assets to the Securitization
Subsidiary pursuant thereto are to be made at fair market value.
88
Real
Estate Asset
means, at any time of
determination, any right, title and interest (fee, leasehold or otherwise) then
owned in fee, leasehold or otherwise held by Xerium or any Guarantor in any real
property.
Restricted Investment
means an
Investment other than a Permitted Investment.
Restricted Subsidiary
of a Person
means any Subsidiary of the referent Person that is not an Unrestricted
Subsidiary.
SEC
means the Securities and Exchange
Commission.
Secured
Obligations
means, collectively, the ABL
Obligations and the PPE Obligations.
Secured
Parties
means, collectively, the PPE Secured
Parties and the ABL Secured Parties, if any.
Securities Act
means the Securities
Act of 1933, as amended, and the rules and regulations of the SEC
thereunder.
Securitization Subsidiary
means a
wholly-owned Subsidiary of Xerium (or another Person formed for the purpose of
engaging in a Qualified Securitization Financing, in which Xerium or any of its
Subsidiaries makes an Investment and to which Xerium or any of its Subsidiaries
transfers accounts receivable and related assets), (i) which engages in no
activities other than in connection with the financing of accounts receivable
and related assets, and any business or activities incidental or related to such
business, (ii) no portion of the Indebtedness or any other obligations
(contingent or otherwise) of which are guaranteed by Xerium or any of its
Subsidiaries, (iii) with which neither Xerium nor any of its other Subsidiaries
has any material agreement, arrangement or understanding other than on terms
which Xerium reasonably believes to be no less favorable to Xerium or such other
Subsidiary than those that might be obtained at the time from Persons that are
not Affiliates of Xerium, (iv) as to which neither Xerium nor any of its other
Subsidiaries has any obligation to maintain or preserve such entitys financial
condition or to cause such entity to achieve operating results, and (v) which is
designated as a Securitization Subsidiary by the Board of Directors of Xerium or
such other Person. Any such designation by the Board of Directors of Xerium or
such other Person shall be evidenced by filing with the trustee a certified copy
of the resolutions of such Board of Directors giving effect to such designation
and an officers certificate certifying that such designation complies with the
foregoing conditions.
S&P
means Standard & Poors,
a division of The McGraw-Hill Companies, Inc., and any successor to its ratings
agency business.
Significant Subsidiary
means any
Subsidiary that would be a significant subsidiary as defined in Article 1,
Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such
Regulation was in effect on the Issue Date.
Stated
Maturity
means, with respect to any
installment of interest or principal on any series of Indebtedness, the date on
which the payment of interest or principal is scheduled to be paid in the
documentation governing such Indebtedness as of the Issue Date (or if such
Indebtedness is incurred after the Issue Date, as of the date of such
incurrence), and does not include any contingent obligations to repay, redeem or
repurchase any such interest or principal prior to the date originally scheduled
for the payment thereof.
Subordinated Indebtedness
means, with
respect to the Notes,
(1)
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any Indebtedness of Xerium which
is by its terms subordinated in right of payment to the Notes;
and
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(2)
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any Indebtedness of any Guarantor
which is by its terms subordinated in right of payment to the Note
Guarantee of such entity.
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89
Subsidiary
means, with respect to any
specified Person:
(1)
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any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency and after giving effect to any voting
agreement or stockholders agreement that effectively transfers voting
power) to vote in the election of directors, managers or trustees thereof
the corporation, association or other business entity is at the time of
determination owned or controlled, directly or indirectly, by that Person
or one or more of the other Subsidiaries of that Person (or a combination
thereof); and
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(2)
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any
partnership:
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(a)
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the sole general partner or the
managing general partner of which is such Person or a Subsidiary of such
Person; or
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(b)
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the only general partners of
which are that Person or one or more Subsidiaries of that Person (or any
combination thereof).
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Total
Assets
means the total consolidated assets
of Xerium and its Restricted Subsidiaries, as shown on the most recent balance
sheet of Xerium.
Total
Debt
means, with respect to Xerium, on a
consolidated basis on any date, the aggregate outstanding principal amount of
Indebtedness of Xerium and its Restricted Subsidiaries as of such
date.
Total
Leverage Ratio
means, with respect to Xerium
on any date, the ratio of (A) the excess of (I) Total Debt of Xerium and its
Restricted Subsidiaries as of such date over (II) the aggregate amount of
unrestricted cash and Cash Equivalents held by Xerium and its Restricted
Subsidiaries on such date to (B) the Consolidated EBITDA of Xerium for the four
consecutive fiscal quarters ending on such date (or if such date is not the last
day of a fiscal quarter of Xerium, for the four consecutive fiscal quarters most
recently ended);
provided
that Consolidated EBITDA of Xerium will be calculated in the
manner contemplated by, and subject to the pro forma and other adjustments
provided in, the definition of the term Fixed Charge Coverage
Ratio.
Treasury Rate
means, as of any
redemption date, the yield to maturity as of such redemption date of United
States Treasury securities with a constant maturity (as compiled and published
in the most recent Federal Reserve Statistical Release H.15 (519) that has
become publicly available at least two business days prior to the redemption
date (or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to the period from
the redemption date to August 15, 2018;
provided, however
, that if the period
from the redemption date to August 15, 2018, is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year will be used.
Unrestricted Subsidiary
means any
Subsidiary of Xerium that is designated by the Board of Directors of Xerium as
an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors,
but only to the extent that such Subsidiary:
(1)
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has no Indebtedness
other than Non-Recourse Debt;
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(2)
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except as permitted by
the covenant described above under the caption Certain Covenants
Transactions with Affiliates, is not party to any agreement, contract,
arrangement or understanding with Xerium or any Restricted Subsidiary of
Xerium unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to Xerium or such Restricted
Subsidiary, as the case may be, than those that might reasonably be
obtained at the time from Persons who are not Affiliates of
Xerium;
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(3)
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is a Person with
respect to which neither Xerium nor any of its Restricted Subsidiaries has
any direct or indirect obligation:
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(a)
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to subscribe for additional
Equity Interests; or
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(b)
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to maintain or preserve such
Persons financial condition or to cause such Person to achieve any
specified levels of operating results; and
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90
(4)
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has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of
Xerium or any of its Restricted Subsidiaries, unless such guarantee or
credit support is released upon such
designation.
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Use
Period
means the period commencing on the
date that the ABL Agent or an agent acting on its behalf (or a Credit Party
acting with the consent of the ABL Agent) commences the liquidation and sale of
the ABL Priority Collateral in a manner as provided in SecurityIntercreditor
AgreementActions of the PartiesInspection and Access Rights (having
theretofore furnished the collateral agent with an Enforcement Notice) and
ending 180 days thereafter. If any stay or other order that prohibits any of the
ABL Agent, the other ABL Secured Parties or any Credit Party (with the consent
of the ABL Agent) from commencing and continuing to Exercise Any Secured
Creditor Remedies or from liquidating and selling the ABL Priority Collateral
has been entered by a court of competent jurisdiction, such 180-day period shall
be tolled during the pendency of any such stay or other order and the Use Period
shall be so extended.
Voting
Stock
of any specified Person as of any date
means the Capital Stock of such Person that is at the time entitled to vote in
the election of the Board of Directors of such Person.
Weighted Average Life to Maturity
means, when applied to any Indebtedness at any date, the number of years
obtained by dividing:
(1)
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the sum of the products
obtained by multiplying:
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(a)
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the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect of the
Indebtedness; by
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(b)
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the number of years (calculated
to the nearest one-twelfth) that will elapse between such date and the
making of such payment; by
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(2)
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the then outstanding
principal amount of such Indebtedness.
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Wholly
Owned Subsidiary
means, with respect to any
Person, a direct or indirect Subsidiary of such Person, 100% of the outstanding
Capital Stock or other ownership interest of which (other than directors
qualifying shares or shares or interests required to be held by foreign
nationals or other third parties to the extent required by applicable law) shall
at the time be owned by such Person or by one or more other Wholly Owned
Subsidiaries of such Person.
91