EX-10.1 9 dex101.txt CREDIT FACILITY AGREEMENT Exhibit 10.1 $350,000,000 CREDIT AGREEMENT DATED AS OF JUNE 29, 2001 AMONG HARNISCHFEGER INDUSTRIES, INC. as Borrower, THE LENDERS LISTED HEREIN, as Lenders, BANKERS TRUST COMPANY, as Agent, HELLER FINANCIAL, INC. and FLEET CAPITAL CORPORATION, as Co-Syndication Agents, CIT GROUP/BUSINESS CREDIT, as Documentation Agent and DEUTSCHE BANC ALEX. BROWN INC., as Lead Arranger and Sole Book Running Manager TABLE OF CONTENTS

Page Section 1. DEFINITIONS.......................................................................... 2 1.1 Certain Defined Terms................................................................ 2 1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement............................................................................ 47 1.3 Other Definitional Provisions........................................................ 48 Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS........................................... 48 2.1 Commitments; Making of Loans; the Register; Notes.................................... 48 2.2 Interest on the Loans................................................................ 55 2.3 Fees................................................................................. 60 2.4 Repayments, Scheduled Reductions of Revolving Loan Commitments; Prepayments and Reductions in Revolving Loan Commitments; General Provisions Regarding Payments; Application of Proceeds of Collateral and Payments Under Guaranties........ 60 2.5 Use of Proceeds...................................................................... 70 2.6 Special Provisions Governing Eurodollar Rate Loans................................... 71 2.7 Increased Costs; Taxes; Capital Adequacy............................................. 73 2.8 Statement of Lenders; Obligation of Lenders and Issuing Lenders to Mitigate.......... 77 2.9 Replacement of a Lender.............................................................. 77 2.10 Collection, Deposit and Transfer of Payments in Respect of Accounts of Borrower and Domestic Subsidiaries; Other Matters Concerning Accounts................ 78 2.11 Collection, Deposit and Transfer of Payments in Respect of Accounts of Foreign Subsidiaries......................................................................... 80 Section 3. LETTERS OF CREDIT.................................................................... 81 3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations Therein........ 81 3.2 Letter of Credit Fees................................................................ 83 3.3 Drawings and Reimbursement of Amounts Drawn Under Letters of Credit.................. 84 3.4 Obligations Absolute................................................................. 87

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Page 3.5 Indemnification; Nature of Issuing Lenders' Duties.................................. 88 Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT........................................... 89 4.1 Conditions to Term Loans and Initial Revolving Loans................................ 89 4.2 Conditions to All Loans............................................................. 98 4.3 Conditions to Letters of Credit..................................................... 98 Section 5. BORROWER'S REPRESENTATIONS AND WARRANTIES........................................... 99 5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries....... 99 5.2 Authorization of Borrowing, etc..................................................... 100 5.3 Financial Condition................................................................. 101 5.4 No Material Adverse Change; No Restricted Junior Payments........................... 101 5.5 Title to Properties; Liens; Real Property........................................... 101 5.6 Litigation; Violation of Law........................................................ 102 5.7 Payment of Taxes.................................................................... 102 5.8 Performance of Agreements; Materially Adverse Agreements; Material Contracts........ 103 5.9 Governmental Regulation............................................................. 103 5.10 Securities Activities............................................................... 103 5.11 Employee Benefit Plans.............................................................. 104 5.12 Certain Fees........................................................................ 104 5.13 Environmental Protection............................................................ 104 5.14 Employee Matters.................................................................... 105 5.15 Solvency............................................................................ 105 5.16 Matters Relating to Collateral...................................................... 105 5.17 Disclosure.......................................................................... 106 5.18 Representations and Warranties in Related Agreements................................ 107 5.19 Permits............................................................................. 107 5.20 Matters Relating to Company Bankruptcy Proceedings.................................. 107

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Page Section 6. BORROWER'S AFFIRMATIVE COVENANTS.................................................... 108 6.1 Financial Statements and Other Reports.............................................. 108 6.2 Existence, etc...................................................................... 114 6.3 Payment of Taxes and Claims; Tax.................................................... 114 6.4 Maintenance of Properties; Insurance; Application of Net Insurance/ Condemnation Proceeds............................................................... 114 6.5 Inspection; Lender Meeting; UK Restructuring Presentation........................... 116 6.6 Compliance with Laws, etc........................................................... 117 6.7 Environmental Disclosure and Inspection............................................. 117 6.8 Borrower's Remedial Action Regarding Hazardous Materials............................ 118 6.9 Execution of Loan Documents and Personal Property Collateral Documents and Registration of Certain Collateral After the Closing Date........................... 119 6.10 Matters Relating to Additional Real Property Collateral; Headquarters Sale.......... 120 6.11 Revised UCC Article 9............................................................... 121 Section 7. BORROWER'S NEGATIVE COVENANTS....................................................... 122 7.1 Indebtedness........................................................................ 122 7.2 Liens and Related Matters........................................................... 124 7.3 Investments; Acquisitions........................................................... 125 7.4 Contingent Obligations.............................................................. 126 7.5 Restricted Junior Payments.......................................................... 127 7.6 Financial Covenants................................................................. 127 7.7 Restriction on Fundamental Changes; Asset Sales..................................... 129 7.8 Consolidated Capital Expenditures................................................... 130 7.9 Restriction on Leases............................................................... 131 7.10 Sales and Lease-Backs............................................................... 131 7.11 Sale or Discount of Receivables..................................................... 131 7.12 Transactions with Shareholders and Affiliates....................................... 131 7.13 Disposal of Subsidiary Stock........................................................ 132 7.14 Conduct of Business................................................................. 132

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Page 7.15 Amendments or Waivers of Certain Agreements; Amendments of Documents Relating to Subordinated Indebtedness........................................................ 132 7.16 Fiscal Year......................................................................... 133 7.17 Deposit Accounts.................................................................... 133 7.18 Restrictions on HULC................................................................ 133 Section 8. EVENTS OF DEFAULT................................................................... 133 8.1 Failure to Make Payments When Due................................................... 134 8.2 Default in Other Agreements......................................................... 134 8.3 Breach of Certain Covenants......................................................... 134 8.4 Breach of Warranty.................................................................. 134 8.5 Other Defaults Under Loan Documents................................................. 135 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc................................ 135 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.................................. 135 8.8 Judgments and Attachments........................................................... 136 8.9 Dissolution......................................................................... 136 8.10 Employee Benefit Plans.............................................................. 136 8.11 Change in Control................................................................... 136 8.12 Invalidity of Any Guaranty.......................................................... 136 8.13 Failure of Security................................................................. 137 8.14 Failure to Consummate Reorganization and Other Transactions......................... 137 Section 9. AGENT............................................................................... 138 9.1 Appointment......................................................................... 138 9.2 Powers and Duties; General Immunity................................................. 139 9.3 Independent Investigation by Lenders; No Responsibility For Appraisal of Creditworthiness.................................................................... 140 9.4 Right to Indemnity.................................................................. 141 9.5 Successor Agent..................................................................... 141 9.6 Collateral Documents and Guaranties................................................. 141 9.7 Agent May File Proofs of Claim...................................................... 142

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Page Section 10. MISCELLANEOUS........................................................................ 143 10.1 Successors and Assigns; Assignments and Participations in Loans and Letters of Credit............................................................................... 143 10.2 Expenses............................................................................. 146 10.3 Indemnity........................................................................... 147 10.4 Set-Off; Security Interest in Deposit Accounts...................................... 148 10.5 Ratable Sharing..................................................................... 148 10.6 Amendments and Waivers.............................................................. 149 10.7 Independence of Covenants........................................................... 150 10.8 Notices; Effectiveness of Signatures................................................ 150 10.9 Survival of Representations, Warranties and Agreements.............................. 151 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative............................... 151 10.11 Marshalling; Payments Set Aside..................................................... 151 10.12 Severability........................................................................ 152 10.13 Obligations Several; Independent Nature of Lenders' Rights.......................... 152 10.14 Headings............................................................................ 152 10.15 Applicable Law...................................................................... 152 10.16 Construction of Agreement; Nature of Relationship................................... 153 10.17 Consent to Jurisdiction and Service of Process...................................... 153 10.18 Waiver of Jury Trial................................................................ 154 10.19 Confidentiality..................................................................... 154 10.20 Counterparts; Effectiveness......................................................... 155 10.21 Judgment Currency................................................................... 155

-v- EXHIBITS I FORM OF NOTICE OF BORROWING II FORM OF NOTICE OF CONVERSION/CONTINUATION III FORM OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT IV-A FORM OF REVOLVING NOTE IV-B FORM OF TERM NOTE V FORM OF INTERCOMPANY NOTE VI FORM OF COMPLIANCE CERTIFICATE VII FORM OF BORROWING BASE CERTIFICATE VIII FORM OF OPINION OF COMPANY COUNSEL IX FORM OF OPINION OF O'MELVENY & MYERS X FORM OF ASSIGNMENT AGREEMENT XI FORM OF BLOCKED ACCOUNT AGREEMENT XII FORMS OF COLLATERAL ACCESS AGREEMENT XIII FORM OF LOCK BOX AGREEMENT XIV FORM OF SECURITY AGREEMENT XV FORM OF GUARANTY XVI FORM OF ENVIRONMENTAL INDEMNITY SCHEDULES 2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES 4.1M CLOSING DATE MORTGAGED PROPERTIES 5.1 SUBSIDIARIES OF BORROWER 5.5B REAL PROPERTY ASSETS 5.5C INTELLECTUAL PROPERTY 5.6 LITIGATION 5.8 MATERIAL CONTRACTS 5.13 ENVIRONMENTAL MATTERS 7.1 CERTAIN EXISTING INDEBTEDNESS 7.2 CERTAIN EXISTING LIENS 7.3 CERTAIN EXISTING INVESTMENTS 7.4 CERTAIN CONTINGENT OBLIGATIONS -vi- CREDIT AGREEMENT ---------------- This CREDIT AGREEMENT is dated as of June 29, 2001 and entered into by and among HARNISCHFEGER INDUSTRIES, INC., a Delaware corporation ("Borrower"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to herein as a "Lender" and collectively as "Lenders") and BANKERS TRUST COMPANY ("BTCo"), as administrative agent for Lenders (in such capacity, "Agent"). R E C I T A L S WHEREAS, pursuant to the Confirmation Order (this, and other initially capitalized terms used but not defined in these Recitals, being used as defined in Section 1.1 below), Borrower and Debtor Subsidiaries have been reorganized in and have emerged from the Company Bankruptcy Proceeding; and WHEREAS, upon this Agreement becoming effective in accordance with its terms, the Plan of Reorganization will become effective in accordance with its terms; and WHEREAS, Borrower desires that Lenders extend certain credit facilities to Borrower, the proceeds of which will be used, among other things, to make certain cash payments with respect to certain prepetition claims in the Company Bankruptcy Proceeding, to refinance the DIP Facility and to replace outstanding letters of credit thereunder and under other credit facilities, to refinance certain other Indebtedness, to make certain intercompany loans and loans to Beloit as described below, and for working capital and other general corporate purposes of Borrower and its Subsidiaries, all in accordance with the terms and provisions herein; and WHEREAS, Borrower has agreed to secure its Obligations hereunder and under the other Loan Documents by granting to Agent, on behalf of Lenders, among other things, a First Priority Lien on substantially all of its real, personal and mixed property located in any Approved Jurisdiction, including a pledge of all of the capital stock and other ownership interests of its Domestic Subsidiaries and 66% of the capital stock and other ownership interests of its first tier Foreign Subsidiaries; and WHEREAS, each Domestic Subsidiary (other than Immaterial Subsidiaries) has agreed to guarantee the Obligations hereunder and under the other Loan Documents and to secure its guaranty by granting to Agent, on behalf of Lenders, among other things, a First Priority Lien on substantially all of its real, personal and mixed property located in any Approved Jurisdiction, including a pledge of all of the capital stock and other ownership interests of its Domestic Subsidiaries and 66% of the capital stock and other ownership interests of its first tier Foreign Subsidiaries; and WHEREAS, the Australian Loan Parties, the Canadian Loan Parties and the UK Loan Parties have each requested Borrower to make available certain credit extensions to such Foreign Loan Parties, including the proceeds of the Loans made by the Lenders under this Agreement and Letters of Credit issued by Issuing Lenders under this Agreement for the account of such Foreign Loan Parties, and Borrower is prepared to make available such credit extensions to such Foreign Loan Parties provided that (i) such credit extensions do not exceed the Borrowing Base plus any Surplus Capacity applicable to such Foreign Loan Parties, (ii) all such credit extensions are evidenced by an Intercompany Note executed by such Foreign Loan Parties or guaranteed by such Foreign Loan Parties, in each case which Intercompany Note and Intercompany Guaranties are pledged and/or assigned by Borrower to Agent for the benefit of Lenders under this Agreement, and (iii) which Intercompany Note and Intercompany Guaranties are secured by a First Priority Lien on substantially all of such Foreign Loan Parties' real, personal and mixed property located in any Approved Jurisdiction, all of which security interests will be assigned by Borrower to Agent for the benefit of Lenders under this Agreement; and WHEREAS, Beloit has requested Borrower to advance the proceeds of certain Loans made by Lenders to Borrower under this Agreement to Beloit up to a maximum aggregate principal amount of $15,000,000, and Borrower is prepared to advance such proceeds to Beloit provided that (i) such loans, together with all -------- intercompany credit extensions made to Borrower for the benefit of Domestic Loan Parties, do not exceed the Domestic Borrowing Base, (ii) all such loans are evidenced by the Beloit Note executed by Beloit and guaranteed by certain Domestic Subsidiaries of Beloit Corporation (other than Immaterial Subsidiaries), which Beloit Note and guarantees are pledged and/or assigned by Borrower to Agent for the benefit of Lenders under this Agreement, and (iii) which Beloit Note and guarantees are secured by a First Priority Lien on substantially all of Beloit's and such Domestic Subsidiaries' personal and mixed property, all of which security interests will be assigned by Borrower to Agent for the benefit of Lenders under this Agreement; A G R E E M E N T NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, each of Borrower, Lenders and Agent agree as follows: SECTION 1. DEFINITIONS 1.1 Certain Defined Terms. --------------------- The following terms used in this Agreement shall have the following meanings: "Account" means, with respect to any Person, all present and future rights of such Person to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether now existing or hereafter arising and wherever arising, and whether or not they have been earned by performance. 2 "Additional Mortgage" has the meaning set forth in subsection 6.10B. "Additional Mortgaged Property" has the meaning set forth in subsection 6.10B. "Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum obtained by dividing (i) the offered quotation (rounded upward to the -------- nearest 1/16 of one percent) to first class banks in the interbank Eurodollar market by BTCo for U.S. dollar deposits of amounts in same day funds comparable to the principal amount of the Eurodollar Rate Loan of BTCo for which the Adjusted Eurodollar Rate is then being determined with maturities comparable to such Interest Period as of approximately 12:00 Noon (New York City time) on such Interest Rate Determination Date by (ii) a percentage equal to 100% minus the -- ----- stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable on such Interest Rate Determination Date to any member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" as defined in Regulation D (or any successor category of liabilities under Regulation D). "Adjusted Pro Rata Share" means, with respect to any Lender, the percentage obtained by dividing (i) the Revolving Loan Exposure of that Lender -------- by (ii) the aggregate Revolving Loan Exposure of all Lenders other than Daily -- Funding Lender. "Advance Payment Liability" means the liability of a Person upon the execution or effectiveness of an agreement as a result of an advance payment by the other party to such agreement for the goods or services to be produced or performed by such Person in accordance with such agreement. "Affected Lender" has the meaning assigned to that term in subsection 2.6C. "Affected Loans" has the meaning assigned to that term in subsection 2.6C. "Affiliate," as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. "Affiliated Fund" means, with respect to any Lender, a fund that invests in commercial loans and is managed by the same investment advisor as such Lender, an Affiliate of such Lender or by an Affiliate of the same investment advisor as such Lender. "Agent" has the meaning assigned to that term in the introduction to this Agreement, and, with respect to the issuance of any Letter of Credit and so long as BTCo serves as Agent hereunder, includes any Affiliates of BTCo (including, without limitation, Deutsche Bank AG) acting as an Issuing Lender, and also means and includes any successor Agent appointed pursuant to subsection 9.5. 3 "Agreement" means this Credit Agreement dated as of June 29, 2001, as it may be amended, supplemented or otherwise modified from time to time. "Appraised Fair Market Value of Eligible Intellectual Property" means, with respect to Intellectual Property of any Person, the fair market value of such Intellectual Property established in the appraisals delivered to Agent pursuant to subsection 4.1O and approved by Agent or any appraisal performed pursuant to subsection 6.5 and approved by Agent and Requisite Lenders, all in form, scope and substance reasonably satisfactory to Agent and satisfying the requirements of any applicable laws and regulations. "Appraised Fair Market Value of Eligible Real Estate" means, with respect to Real Property Assets of any Person, the fair market value of such Real Property Assets established in the appraisals delivered to Agent pursuant to subsection 4.1O and approved by Agent or any subsequent appraisal performed pursuant to subsections 6.5 and 6.10C and approved by Agent and Requisite Lenders, all in form, scope and substance reasonably satisfactory to Agent and satisfying the requirements of any applicable laws and regulations. "Approved Currency" means Australian Dollars, Canadian Dollars, Pound Sterling or US Dollars. "Approved Jurisdictions" means, individually and collectively, the countries of (a) the United States of America, (b) the United Kingdom, (c) Canada, and (d) Australia. "Approved Plan of Reorganization" means the Plan of Reorganization in the form, without material modification, amendment or revision, approved by Agent pursuant to Section 4.1P. "Arranger" means Deutsche Banc Alex. Brown Inc., as lead arranger and sole book running manager. "Asset Sale" means the sale by Borrower or any of its Subsidiaries to any Person other than Borrower or a Guarantor of (i) any of the stock of any of Borrower's Subsidiaries, (ii) substantially all of the assets of any division or line of business of Borrower or any of its Subsidiaries, or (iii) any other assets (whether tangible or intangible) of Borrower or any of its Subsidiaries (other than (a) inventory sold in the ordinary course of business, (b) the Headquarters Sale and (c) any such other assets to the extent that the aggregate value of such assets sold in any single transaction or related series of transactions is equal to $1,000,000 or less, up to a maximum aggregate amount of $5,000,000 for all such excluded assets). "Assignment Agreement" means an Assignment Agreement in substantially the form of Exhibit X annexed hereto. --------- "Australian Joy Subsidiary Borrowing Limit" means the lesser of (i) $75,000,000 or (ii) the amount of the Commitments. "Australian Joy Loan Parties" means, individually and collectively, each Subsidiary of Borrower which is organized under the laws of the Commonwealth of Australia or any state thereof and which has either executed the Australian Joy Subsidiary Note or an Intercompany Note Guaranty thereof, which Australian Joy Subsidiary Note or Intercompany Note Guaranty is secured by a security interest in substantially all of such Subsidiary's real, 4 personal and mixed property. The Australian Joy Loan Parties, as of the Closing Date, are so designated in Schedule 5.1. ------------ "Australian Joy Subsidiary Borrowing Base" means, as at any date of determination, an aggregate amount in Dollar Equivalents if denominated in an Approved Currency other than US Dollars, equal to: (i) eighty-five percent (85%) of Eligible Accounts Receivable of Australian Joy Loan Parties, plus (ii) thirty-five percent (35%) of Eligible Unbilled Accounts Receivable of Australian Joy Loan Parties, plus (iii) fifty percent (50%) of Eligible Raw Materials of Australian Joy Loan Parties, plus (iv) fifty percent (50%) of Eligible Finished Goods of Australian Joy Loan Parties, plus (v) fifty percent (50%) of Eligible CEP of Australian Joy Loan Parties, plus (vi) thirty-five percent (35%) of Eligible Work-in-Process of Australian Joy Loan Parties, plus (vii) the lesser of (x) ninety percent (90%) of the Orderly Liquidation Value of Eligible Machinery and Equipment of Australian Joy Loan Parties and (y) an amount equal to $1,700,000 on or prior to July 30, 2002, $1,000,000 during the period from July 31, 2002 through October 30, 2002 and zero thereafter, plus (viii) the lesser of (x) sixty percent (60%) of the Appraised Fair Market Value of Eligible Real Estate of Australian Joy Loan Parties and (y) an amount equal to $2,000,000 on or prior to January 30, 2002, $1,500,000 during the period from January 31, 2002 through April 29, 2002, $700,000 during the period form April 30, 2002 through July 30, 2002 and zero thereafter, plus (ix) fifty percent (50%) of Eligible Tools of Australian Joy Loan Parties, minus (x) the Swap Reserve applicable to the Australian Joy Loan Parties then in effect, minus (xi) the aggregate amount of Dilution Reserves and Required Reserves against Eligible Accounts Receivable, Eligible Unbilled Accounts Receivable, Eligible Inventory, Eligible Machinery and Equipment and Eligible Real Estate of Australian Joy Loan Parties; 5 provided that Agent, in the exercise of its Permitted Discretion, may -------- (a) increase or decrease such Required Reserves and (b) reduce the advance rates provided in this definition, or restore such advance rates to any level equal to or below the advance rates in effect as of the Closing Date. "Australian P&H Subsidiary Borrowing Limit" means the lesser of (i) $25,000,000 or (ii) the amount of the Commitments. "Australian Joy Subsidiary Note" means that certain Intercompany Note dated on or about the date hereof, executed by Australian Joy Loan Parties in favor of Borrower, as such promissory note may be amended from time to time thereafter to the extent permitted under subsection 7.15. "Australian Joy Utilization of Surplus Capacity" means, as of the date of determination, the portion, if any, of the Surplus Capacity then in effect allocated by Borrower to the Australian Joy Loan Parties. "Australian Loan Parties" means, individually and collectively, the Australian Joy Loan Parties and the Australian P&H Loan Parties. "Australian P&H Loan Parties" means, individually and collectively, each Subsidiary of Borrower which is organized under the laws of the Commonwealth of Australia or any state thereof and which has either executed the Australian P&H Subsidiary Note or an Intercompany Note Guaranty thereof, which Australian P&H Subsidiary Note or Intercompany Note Guaranty is secured by a security interest in substantially all of such Subsidiary's real, personal and mixed property. The Australian P&H Loan Parties, as of the Closing Date, are so designated in Schedule 5.1. ------------ "Australian P&H Subsidiary Borrowing Base" means, as at any date of determination, an aggregate amount in Dollar Equivalents if denominated in an Approved Currency other than US Dollars, equal to: (i) eighty-five percent (85%) of Eligible Accounts Receivable of Australian P&H Loan Parties, plus (ii) thirty-five percent (35%) of Eligible Unbilled Accounts Receivable of Australian P&H Loan Parties, plus (iii) fifty percent (50%) of Eligible Raw Materials of Australian P&H Loan Parties, plus (iv) fifty percent (50%) of Eligible Finished Goods of Australian P&H Loan Parties, plus (v) fifty percent (50%) of Eligible CEP of Australian P&H Loan Parties, plus (vi) thirty-five percent (35%) of Eligible Work-in-Process of Australian P&H Loan Parties, plus 6 (vii) the lesser of (x) ninety percent (90%) of the Orderly Liquidation Value of Eligible Machinery and Equipment of Australian P&H Loan Parties and (y) an amount equal to $1,800,000 on or prior to July 30, 2002, $1,000,000 during the period from July 31, 2002 through October 30, 2002 and zero thereafter, plus (viii) the lesser of (x) sixty percent (60%) of the Appraised Fair Market Value of Eligible Real Estate of Australian P&H Loan Parties and (y) an amount equal to $2,500,000 on or prior to January 30, 2002, $2,000,000 during the period from January 31, 2002 through April 29, 2002, $800,000 during the period form April 30, 2002 through July 30, 2002 and zero thereafter, plus (ix) fifty percent (50%) of Eligible Tools of Australian P&H Loan Parties, minus (x) the Swap Reserve applicable to the Australian P&H Loan Parties then in effect, minus (xi) the aggregate amount of Dilution Reserves and Required Reserves against Eligible Accounts Receivable, Eligible Unbilled Accounts Receivable, Eligible Inventory, Eligible Machinery and Equipment and Eligible Real Estate of Australian P&H Loan Parties; provided that Agent, in the exercise of its Permitted Discretion, may -------- (a) increase or decrease such Required Reserves and (b) reduce the advance rates provided in this definition, or restore such advance rates to any level equal to or below the advance rates in effect as of the Closing Date. "Australian P&H Subsidiary Note" means that certain Intercompany Note dated on or about the date hereof, executed by Australian P&H Loan Parties in favor of Borrower, as such promissory note may be amended from time to time thereafter to the extent permitted under subsection 7.15. "Australian P&H Utilization of Surplus Capacity" means, as of the date of determination, the portion, if any, of the Surplus Capacity then in effect allocated by Borrower to the Australian P&H Loan Parties. "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute, and any similar or comparable law of any other applicable Governmental Authority. "Bankruptcy Court" means the United States Bankruptcy Court for the District of Delaware having jurisdiction over the Company Bankruptcy Proceeding. "Base Rate" means, at any time, the higher of (x) the Prime Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. "Base Rate Loans" means Loans bearing interest at rates determined by reference to the Base Rate as provided in subsection 2.2A. 7 "Base Rate Margin" means the margin over the Base Rate used in determining the rate of interest of Base Rate Loans pursuant to subsection 2.2A. "Beloit" means Beloit Liquidating Trust, a grantor liquidating trust established by Borrower with David Boland as the Plan Administrator. "Beloit Collateral Documents" means all such agreements, documents and instruments that, in Agent's reasonable judgment, are required (a) to evidence a First Priority Lien in favor of Borrower in substantially all personal and mixed property of Beloit as security for Beloit's obligations under the Beloit Note, including without limitation a promissory note in the aggregate principal amount of $110,000,000, dated March 31, 2000, made by PT Indah Kiat Finance (IV) Mauritius Limited in favor of Beloit Corporation (the "APP Note"), and (b) to evidence a First Priority Lien in favor of Borrower in substantially all personal and mixed property of the guarantors under the Beloit Note Guaranty as security for such guarantors' obligations under the Beloit Note Guaranty, all in form and substance reasonably satisfactory to Agent, as may be amended from time to time thereafter to the extent permitted under subsection 7.15. "Beloit Note" means that certain Promissory Note in the original principal amount of $15,000,000, dated on or about the date hereof, executed by Beloit in favor of Borrower and evidencing Beloit's obligations to repay the credit extensions made by Borrower to Beloit pursuant to subsection 2.5A hereof, in the form approved by Agent prior to the Closing Date, as such promissory note may be amended from time to time thereafter to the extent permitted under subsection 7.15. "Beloit Note Guaranty" means that certain Beloit Note Guaranty or Beloit Note Guaranties executed and delivered by the Domestic Subsidiaries of Beloit (excluding any Immaterial Subsidiaries) in favor of Borrower and guarantying Beloit's obligations under the Beloit Note, in the form approved by Agent prior to the Closing Date, as such guaranty may be amended from time to time thereafter to the extent permitted under subsection 7.15. "Bill-and-Hold Agreement" means a letter or other writing from an account debtor setting forth the material terms of such account debtor's purchase of Inventory (including the price and terms of payment, other terms of sale, description of the applicable asset purchased and projected delivery date) and acknowledging that title to the applicable asset subject to such purchase transaction has been legally transferred to such account debtor and that such account debtor has assumed the legal risk of ownership of such asset, irrespective of whether such asset is held by such account debtor or any other Person, in form and substance acceptable to Agent in its reasonable discretion. "Blocked Account Agreement" means the Blocked Account Agreement executed and delivered by a Concentration Bank, Agent and the applicable Loan Party, substantially in the form of Exhibit XI annexed hereto, as such Blocked ---------- Account Agreement may be amended, supplemented or otherwise modified from time to time, and "Blocked Account Agreements" means all such Blocked Account Agreements, collectively. "Borrower" means Harnischfeger Industries, Inc., a Delaware corporation. 8 "Borrowing Base" means (i) with respect to all Loans and Letters of Credit, the Consolidated Borrowing Base, (ii) with respect to Loans and the Letters of Credit for the benefit of Domestic Loan Parties and Beloit, the Domestic Borrowing Base, (iii) with respect to Loans and Letters of Credit for the benefit of Australian Joy Loan Parties, the Australian Joy Subsidiary Borrowing Base, (iv) with respect to Loans and Letters of Credit for the benefit of Australian P&H Loan Parties, the Australian P&H Subsidiary Borrowing Base, (v) with respect to Loans and Letters of Credit for the benefit of Canadian Loan Parties, the Canadian Subsidiary Borrowing Base, and (vi) with respect to Loans and Letters of Credit for the benefit of UK Loan Parties, the UK Subsidiary Borrowing Base. "Borrowing Base Certificate" means a certificate in the form, in all material respects, of Exhibit VII annexed hereto delivered to Lenders by ----------- Borrower pursuant to subsection 4.1 or subsection 6.1(xviii). "Borrowing Limitations" means each of the following limitations on the borrowing of any Loan and the issuance of any Letter of Credit: (1) the Total Utilization of Loan Commitments shall not exceed the lesser of (A) the Total Loan Commitments or (B) the Consolidated Borrowing Base; (2) the Total Utilization of Revolving Loan Commitments shall not exceed the Revolving Loan Commitments; (3) the Total Utilization of Loan Commitments for the benefit of Domestic Loan Parties and Beloit shall not exceed the Domestic Borrowing Base minus the aggregate Surplus Capacity allocated to Foreign Loan Parties; (4) the Total Utilization of Loan Commitments for the benefit of Australian Joy Loan Parties shall not exceed the lesser of (A) the Australian Joy Subsidiary Borrowing Base plus the Australian Joy Utilization of Surplus Capacity or (B) the Australian Joy Subsidiary Borrowing Limit; (5) the Total Utilization of Loan Commitments for the benefit of Australian P&H Loan Parties shall not exceed the lesser of (A) the Australian P&H Subsidiary Borrowing Base plus the Australian P&H Utilization of Surplus Capacity or (B) the Australian P&H Subsidiary Borrowing Limit; (6) the Total Utilization of Loan Commitments for the benefit of Canadian Loan Parties shall not exceed the lesser of (A) the Canadian Subsidiary Borrowing Base plus the Canadian Utilization of Surplus Capacity or (B) the Canadian Subsidiary Borrowing Limit; and (7) the Total Utilization of Loan Commitments for the benefit of UK Loan Parties shall not exceed the lesser of (A) the UK Subsidiary Borrowing Base plus UK Utilization of Surplus Capacity or (B) the UK Subsidiary Borrowing Limit. "BTCo" has the meaning assigned to that term in the introduction to this Agreement. "BTCo Account" means an account maintained by Agent at BTCo into which the applicable Concentration Banks are instructed to automatically transfer funds on deposit in the applicable Concentration Accounts pursuant to the terms of the applicable Blocked Account Agreement, if any. "BT Concentration Account" means an account under the exclusive dominion and control of Agent that is maintained by any Loan Party with BTCo into which the applicable Lock Box Banks are instructed to transfer funds on deposit in the Lock Box Accounts pursuant to the terms of the Lock Box Agreements. "Business Day" means any day excluding Saturday, Sunday and any day which (a) with respect to credit extensions other than Letters of Credit, is a legal holiday under the laws of the States of New York or Wisconsin or is a day on which banking institutions located in 9 either such state are authorized or required by law or other governmental action to close, (b) with respect to any Letter of Credit, is a legal holiday or a day on which banking institutions are authorized or required by law or other governmental action under the laws of the state in which the applicable Issuing Lender is domiciled, and (c) with respect to Eurodollar Rate Loans, is a day on which dealings in United States Dollar deposits are not conducted by and between banks in the designated market for Eurodollar Rate Loans. "Canadian Subsidiary Borrowing Limit" means the lesser of (i) $25,000,000 or (ii) the amount of the Commitments. "Canadian Loan Parties" means, individually and collectively, each Subsidiary of Borrower which is organized under the laws of Canada or any province thereof and which has either executed the Canadian Subsidiary Note or an Intercompany Note Guaranty thereof, which Canadian Subsidiary Note or Intercompany Note Guaranty is secured by a security interest in substantially all of such Subsidiary's real, personal and mixed property. The Canadian Loan Parties, as of the Closing Date, are so designated on Schedule 5.1. ------------ "Canadian Subsidiary Borrowing Base" means, as at any date of determination, an aggregate amount, in Dollar Equivalents if denominated in an Approved Currency other than US Dollars, equal to: (i) eighty-five percent (85%) of Eligible Accounts Receivable of Canadian Loan Parties, plus (ii) thirty-five percent (35%) of Eligible Unbilled Accounts Receivable of Canadian Loan Parties, plus (iii) fifty percent (50%) of Eligible Raw Materials of Canadian Loan Parties, plus (iv) fifty percent (50%) of Eligible Finished Goods of Canadian Loan Parties, plus (v) fifty percent (50%) of Eligible CEP of Canadian Loan Parties, plus (vi) thirty-five percent (35%) of Eligible Work-in-Process of Canadian Loan Parties, plus (vii) fifty percent (50%) of Eligible Tools of Canadian Loan Parties, minus (viii) the Swap Reserve applicable to the Canadian Loan Parties then in effect, minus (ix) the aggregate amount of Dilution Reserves and Required Reserves against Eligible Accounts Receivable, Eligible Unbilled Accounts Receivable and Eligible Inventory of Canadian Loan Parties; provided that Agent, in the exercise of its Permitted Discretion, may -------- (a) increase or decrease such Required Reserves and (b) reduce the advance rates provided in this definition, 10 or restore such advance rates to any level equal to or below the advance rates in effect as of the Closing Date. "Canadian Subsidiary Note" means that certain Intercompany Note dated on or about the date hereof, executed by Canadian Loan Parties in favor of Borrower, as such promissory note may be amended from time to time thereafter to the extent permitted under subsection 7.15. "Canadian Utilization of Surplus Capacity" means, as of the date of determination, the portion, if any, of the Surplus Capacity then in effect allocated by Borrower to the Canadian Loan Parties. "Capital Lease", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Cash" means money, currency or a credit balance in a Deposit Account. "Cash Equivalents" means, as at any date of determination, (i)(a) marketable securities (1) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (2) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year after such date; (b) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, the highest rating obtainable from either Standard & Poor's Ratings Services ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (c) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (d) certificates of deposit or bankers' acceptances maturing within one year after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (1) is at least "adequately capitalized" (as defined in the regulations of its primary Federal banking regulator) and (2) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; and (e) shares of any money market mutual fund that (1) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (a) and (b) above, (2) has net assets of not less than $500,000,000, and (3) has the highest rating obtainable from either S&P or Moody's; (ii) with respect to any Foreign Loan Party, investments in the applicable Approved Jurisdiction that are comparable in term and credit quality to those described in the foregoing clauses (i)(a)-(e), as approved by Agent in the exercise of its reasonable judgment; (iii) with respect to Borrower, such other investments in accordance with Borrower's Domestic Short-Term Investment Policy dated as of June 20, 2001 in the form approved by Agent prior to the Closing Date, and such amendments and modifications thereof as may from time to time be approved by Agent; and (iv) with respect to Industries Insurance, Inc. such other investments in accordance with Industries Insurance Inc.'s Investment Policy dated as of May 4, 1992 in the form approved by Agent prior to the Closing Date, and such amendments and modifications thereof as may from time to time be approved by Agent. 11 "CEP" means all components, goods, merchandise or spare parts (but not including any Raw Materials or goods authorized for return) which are held for sale or lease by a Person in connection with the servicing, maintenance or repair of Finished Goods sold or leased by such Person under such Person's component exchange program or encore program, as applicable. "Change in Control" means any of the following: (i) any Person acting alone or in concert with one or more other Persons shall have acquired beneficial ownership, directly or indirectly, of Securities of Borrower (or other Securities convertible into such Securities) representing 50% or more of the combined voting power of all Securities of Borrower entitled to vote in the election of members of the Governing Body of Borrower, other than Securities having such power only by reason of the happening of a contingency; (ii) the occurrence of a change in the composition of the Governing Body of Borrower such that a majority of the members of any such Governing Body are not Continuing Members; and (iii) the occurrence of any "Change in Control" as defined in the New Senior Note Indenture. As used herein, the term "beneficially own" or "beneficial ownership" shall have the meaning set forth in the Exchange Act and the rules and regulations promulgated thereunder. "Closing Date" means July 10, 2001, on which the initial Loans are made. "Closing Date Mortgage Policies" has the meaning set forth in subsection 4.1M. "Closing Date Mortgaged Property" has the meaning set forth in subsection 4.1M. "Closing Date Mortgages" has the meaning set forth in subsection 4.1M. "Collateral" means, collectively, all of the real, personal and mixed property (including capital stock and other ownership interests) in which Liens are purported to be granted pursuant to the Collateral Documents as security for any or all of the Obligations. "Collateral Access Agreement" means any landlord waiver, mortgagee waiver, bailee letter or any similar acknowledgement agreement of any landlord, mortgagee or bailee in respect of any Real Property Asset where any Inventory or machinery and equipment is located or any warehouseman or processor in possession of Inventory or machinery and equipment, substantially in the form of Exhibit XII annexed hereto, with such changes thereto as may be agreed to by ----------- Agent. "Collateral Account" has the meaning assigned to that term in the Security Agreement. "Collateral Documents" means the Security Agreement, the Foreign Pledge Agreements, the Blocked Account Agreements, the Collateral Access Agreements, the Mortgages, the Lock Box Agreements and all other instruments or documents delivered by any Loan Party pursuant to this Agreement or any of the other Loan Documents in order to grant to Agent, on behalf of Lenders, a Lien on any real, personal or mixed property of that Loan Party, including without limitation Liens granted to Borrower (or to a security trustee in lieu of Borrower) under the Intercompany Notes, the Intercompany Collateral Documents, the 12 Intercompany Guaranties, the Beloit Collateral Documents, Beloit Note and Beloit Note Guaranty, which Liens have been assigned to Agent (or which security trustee agrees to act in accordance with Agent's instructions), as security for any or all of the Obligations. For purposes of this Agreement, references to "Liens in favor of Agent" shall mean and include Liens described in the preceding sentence, whether such Liens were granted by a Loan Party initially in favor of Agent or initially in favor of Borrower (or a security trustee in lieu of Borrower). "Commercial Letter of Credit" means any letter of credit or similar instrument issued for the purpose of providing the primary payment mechanism in connection with the purchase of materials, goods or services by Borrower or any of its Subsidiaries in the ordinary course of business of Borrower or such Subsidiary. "Commitments" means the commitments of Lenders to make Loans as set forth in subsection 2.1A. "Company Bankruptcy Proceeding" means the proceedings under Chapter 11 of the Bankruptcy Code with respect to Borrower and Debtor Subsidiaries initiated by Borrower and Debtor Subsidiaries on June 7, 1999 and June 28, 1999 in the Bankruptcy Court, Case No. 99-2171 (PJW) jointly administered. "Compliance Certificate" means a certificate substantially in the form of Exhibit VI annexed hereto delivered to Agent and Lenders by Borrower pursuant ---------- to subsection 6.1(iv). "Concentration Accounts" means, collectively, the BT Concentration Accounts and the Other Bank Concentration Accounts. "Concentration Bank" means BTCo or any commercial bank satisfactory to Agent at which any Loan Party maintains a Concentration Account. "Confirmation Order" means that certain Order Confirming Third Amended Joint Plan of Reorganization of the Debtors under Chapter 11 of the Bankruptcy Code and Approving Technical Modifications Thereof entered by the Bankruptcy Court on May 18, 2001 in the Company Bankruptcy Proceeding, without modification, revision or amendment. "Conforming Leasehold Interest" means any Recorded Leasehold Interest as to which the lessor has agreed in writing for the benefit of Agent (which writing has been delivered to Agent), whether under the terms of the applicable lease, under the terms of a Landlord Consent and Estoppel, or otherwise, to the matters described in the definition of "Landlord Consent and Estoppel," which interest, if a subleasehold or sub-subleasehold interest, is not subject to any contrary restrictions contained in a superior lease or sublease. "Consolidated Borrowing Base" means, as at any date of determination, an aggregate amount equal to the sum of (i) the Domestic Borrowing Base, (ii) the Australian Joy Subsidiary Borrowing Base, (iii) the Australian P&H Subsidiary Borrowing Base, (iv) the Canadian Subsidiary Borrowing Base, and (v) the UK Subsidiary Borrowing Base; provided that, irrespective of the aggregate amount of Unbilled Accounts Receivable contained in the Consolidated Borrowing Base, the aggregate amount of Loan proceeds advanced with respect to 13 aggregate Unbilled Accounts Receivable shall not at any time exceed $12,000,000; and provided further that the aggregate amounts of Eligible Intellectual Property, Eligible Machinery and Equipment and Eligible Real Estate contained in the Consolidated Borrowing Base shall not, as of the dates set forth below, exceed the correlative amount indicated:

------------------------------------------------------------------------------------------------------------ Dates Maximum Amount ------------------------------------------------------------------------------------------------------------ Eligible Intellectual Property ------------------------------------------------------------------------------------------------------------ Closing Date - July 30, 2001 $40,000,000 ------------------------------------------------------------------------------------------------------------ July 31, 2001 - October 30, 2001 $25,000,000 ------------------------------------------------------------------------------------------------------------ October 31, 2001 - January 30, 2002 $10,000,000 ------------------------------------------------------------------------------------------------------------ January 31, 2002 and thereafter $ 0 ------------------------------------------------------------------------------------------------------------ Eligible Real Estate ------------------------------------------------------------------------------------------------------------ Closing Date - January 30, 2002 $30,000,000 ------------------------------------------------------------------------------------------------------------ January 31, 2002 - April 29, 2002 $25,000,000 ------------------------------------------------------------------------------------------------------------ April 30, 2002 - July 30, 2002 $10,000,000 ------------------------------------------------------------------------------------------------------------ July 31, 2002 and thereafter $ 0 ------------------------------------------------------------------------------------------------------------ Eligible Machinery & Equipment ------------------------------------------------------------------------------------------------------------ Closing - July 30, 2002 $40,000,000 ------------------------------------------------------------------------------------------------------------ July 31, 2002 - October 30, 2002 $25,000,000 ------------------------------------------------------------------------------------------------------------ October 31, 2002 and thereafter $ 0 ------------------------------------------------------------------------------------------------------------

"Consolidated Capital Expenditures" means, for any period, the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases which is capitalized on the consolidated balance sheet of Borrower and its Subsidiaries) by Borrower and its Subsidiaries during that period that, in conformity with GAAP, are included in "additions to property, plant or equipment" or comparable items reflected in the consolidated statement of cash flows of Borrower and its Subsidiaries. "Consolidated Current Assets" means, as at any date of determination, the total assets of Borrower and its Subsidiaries on a consolidated basis which may properly be classified as current assets in conformity with GAAP, but excluding Cash and Cash Equivalents. 14 "Consolidated Current Liabilities" means, as at any date of determination, the total liabilities of Borrower and its Subsidiaries on a consolidated basis which may properly be classified as current liabilities in conformity with GAAP. "Consolidated EBITDA" means, for any period, the sum, without duplication, of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) provisions for taxes based on income, (iv) total depreciation expense, (v) total amortization expense, (vi)(a) pre- emergence reorganization expenses (as determined in conformity with GAAP) related to the Company Bankruptcy Proceeding, and (b) post-emergence reorganization expenses (in conformity with GAAP as it would apply if such expenses were incurred pre-emergence) related to the Company Bankruptcy Proceeding, up to a maximum aggregate amount under the foregoing clause (b) of $3,000,000, and (vii) other non-cash items deducted in the calculation of Consolidated Net Income (other than any such non-cash item to the extent that it represents an accrual of or reserve for cash expenditure in any future period) less other non-cash items added in the calculation of Consolidated Net Income (other than any such non-cash item to the extent that it will result in the receipt of cash payments in any future period), all of the foregoing as determined on a consolidated basis for Borrower and its Subsidiaries in conformity with GAAP. "Consolidated Excess Cash Flow" means, for any period, an amount (if positive) equal to (i) the sum, without duplication, of the amounts for such period of (a) Consolidated EBITDA and (b) the Consolidated Working Capital Adjustment minus (ii) the sum, without duplication, of the amounts for such period of (a) voluntary and scheduled repayments of Consolidated Total Debt (excluding repayments of Revolving Loans except to the extent the Revolving Loan Commitments are permanently reduced in connection with such repayments), (b) Consolidated Capital Expenditures (net of any proceeds of any related financings with respect to such expenditures), (c) Consolidated Interest Expense, (d) the provision for current taxes based on income of Borrower and its Subsidiaries and payable in cash with respect to such period, and (e)(i) pre-emergence reorganization expenses (as determined in conformity with GAAP) related to the Company Bankruptcy Proceeding, and (ii) post-emergence reorganization expenses (in conformity with GAAP as it would apply if such expenses were incurred pre- emergence) related to the Company Bankruptcy Proceeding, up to a maximum aggregate amount under the foregoing clause (ii) of $3,000,000; provided that for determining the Consolidated Excess Cash Flow with respect to Fiscal Year 2001, the applicable period shall be from the date of the emergence of Borrower and the Debtor Subsidiaries from the Company Bankruptcy Proceeding to the last day of such Fiscal Year. "Consolidated Interest Expense" means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Borrower and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Borrower and its Subsidiaries, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements of the type described in clause (i) of the definition of "Interest Rate Agreements" in this subsection 1.1. 15 "Consolidated Leverage Ratio" means, as at any date, the ratio of (a) Consolidated Total Debt as at such date to (b) Consolidated EBITDA for the consecutive four Fiscal Quarters ending on the last day of the most recently ended Fiscal Quarter. "Consolidated Net Income" means, for any period, the net income (or loss) of Borrower and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP; provided that there shall be excluded (i) the income (or loss) of any Person (other than a Subsidiary of Borrower) in which any other Person (other than Borrower or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Borrower or any of its Subsidiaries by such Person during such period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Borrower or is merged into or consolidated with Borrower or any of its Subsidiaries or that Person's assets are acquired by Borrower or any of its Subsidiaries, (iii) the income of any Subsidiary of Borrower to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary; provided that the income of Borrower's Subsidiaries in the United Kingdom which would otherwise be excluded hereunder as a result of statutes, rules or governmental regulations restricting the declaration or payment of dividends due to deficits in such Subsidiaries' capital accounts, to insufficient capital or surplus or similar restrictions shall nonetheless be includible for purposes of determining Consolidated Net Income to the extent that the aggregate intercompany loans owed by such UK Subsidiaries to Borrower and Guarantors are greater than such income, (iv) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of any Pension Plan, and (v) (to the extent not included in clauses (i) through (iv) above) any net extraordinary non-cash gains or net non-cash extraordinary losses. "Consolidated Rental Payments" means, for any period, the aggregate amount of all rents paid or payable by Borrower and its Subsidiaries on a consolidated basis during that period under all Capital Leases and Operating Leases to which Borrower or any of its Subsidiaries is a party as lessee. "Consolidated Total Debt" means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness of Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Consolidated Working Capital" means, as at any date of determination, the excess (or deficit) of Consolidated Current Assets over Consolidated Current Liabilities. "Consolidated Working Capital Adjustment" means, for any period on a consolidated basis, the amount (which may be a negative number) by which Consolidated Working Capital as of the beginning of such period exceeds (or is less than) Consolidated Working Capital as of the end of such period; provided that such amount shall be adjusted to eliminate the effect of non-cash adjustments as a result of fresh-start accounting in connection with, and to exclude any reclassification of debt resulting from, the emergence of Borrower and the Debtor Subsidiaries from the Company Bankruptcy Proceeding. 16 "Consolidating" means, with respect to the presentation of financial information, consolidating for Borrower's surface mining equipment and underground mining equipment businesses. "Contingent Obligation", as applied to any Person, means, without duplication, any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any Indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof, (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings, or (iii) under Hedge Agreements. Contingent Obligations shall include, without limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse (to the extent of such recourse) or sale with recourse (to the extent of such recourse) by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, and (c) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (Y) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence. Contingent Obligations shall not include product or performance warranties or other contractual obligations given by a Person in connection with the sale of such Person's products or services in the ordinary course of such Person's business. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited. "Continuing Member" means, as of any date of determination any member of the Governing Body of Borrower who (i) was a member of such Governing Body on the Closing Date or (ii) was nominated for election or elected to such Governing Body with the affirmative vote of a majority of the members who were either members of such Governing Body on the Closing Date or whose nomination or election was previously so approved. "Contractual Obligation", as applied to any Person, means any material provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "Daily Funding Lender" means Agent, in its individual capacity as a Lender hereunder. "Debtor Subsidiaries" means each of the Subsidiaries of Borrower that was a debtor in the Company Bankruptcy Proceeding. 17 "Deposit Account" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "Dilution" means, for any period with respect to all Loan Parties, the fraction, expressed as a percentage, the numerator of which is the aggregate amount of reductions in the Accounts of the Loan Parties for such period other than by reason of dollar-for-dollar cash payment, and the denominator of which is the aggregate dollar amount of the sales of the Loan Parties for such period. "Dilution Reserves" means, as of any date of determination, such reserves as Agent may from time to time establish and revise with respect to the Loan Parties in its Permitted Discretion in such amounts as Agent may determine in its Permitted Discretion to reflect the Dilution as of such date with respect to the Accounts of such Loan Parties for the immediately preceding three-month period to the extent such Dilution exceeds five percent (5%). "DIP Facility" means that certain Revolving Credit, Term Loan and Guaranty Agreement dated as of June 7, 1999, as amended through the Closing Date, entered into by and among Borrower and Debtor Subsidiaries, each as a Debtor and a Debtor-in-Possession under Chapter 11 of the Bankruptcy Code, Chase Manhattan Bank, the other Banks named therein, and Chase Securities, Inc. "Disclosure Statement" means that certain Third Amended Disclosure Statement for Joint Plan of Reorganization of Harnischfeger Industries, Inc., et al., under Chapter 11 of the Bankruptcy Code. "Dollar Equivalents" means Dollars or, on any date when an amount expressed in a currency other than Dollars is to be determined in Dollars, an equivalent amount of Dollars determined at the nominal rate of exchange quoted by Agent in New York City, not later than 9:00 A.M. (New York time) on the date of determination, to prime banks in New York City for the spot purchase in the New York foreign exchange market of Dollars with such other currency. "Dollars" and the sign "$" mean the lawful money of the United States of America. "Domestic Borrowing Base" means, as at any date of determination, an aggregate amount, in Dollar Equivalents if denominated in an Approved Currency other than US Dollars, equal to: (i) eighty-five percent (85%) of Eligible Accounts Receivable of Domestic Loan Parties, plus (ii) thirty-five percent (35%) of Eligible Unbilled Accounts Receivable of Domestic Loan Parties, plus (iii) fifty percent (50%) of Eligible Raw Materials of Domestic Loan Parties, plus 18 (iv) fifty percent (50%) of Eligible Finished Goods of Domestic Loan Parties, plus (v) fifty percent (50%) of Eligible CEP of Domestic Loan Parties, plus (vi) thirty-five percent (35%) of Eligible Work-in-Process of Domestic Loan Parties, plus (vii) fifty percent (50%) of Eligible Tools of Domestic Loan Parties, plus (viii) the lesser of (x) ninety percent (90%) of the Orderly Liquidation Value of Eligible Machinery and Equipment of Domestic Loan Parties and (y) an amount equal to $33,000,000 on or prior to July 30, 2002, $21,000,000 during the period from July 31, 2002 through October 30, 2002 and zero thereafter, plus (ix) the lesser of (x) sixty percent (60%) of the Appraised Fair Market Value of Eligible Real Estate of Domestic Loan Parties and (y) an amount equal to $21,000,000 on or prior to January 30, 2002, $18,000,000 during the period from January 31, 2002 through April 29, 2002, $7,000,000 during the period from April 30, 2002 through July 30, 2002 and zero thereafter, plus (x) the lesser of (x) thirty percent (30%) of the Appraised Fair Market Value of Eligible Intellectual Property of all Loan Parties and (y) an amount equal to $40,000,000 on or prior to July 30,2001, $25,000,000 during the period from July 31, 2001 through October 30, 2001, $10,000,000 during the period from October 31, 2001 through January 30, 2002 and zero thereafter, minus (xi) the Swap Reserve applicable to the Domestic Loan Parties then in effect; minus (xii) the aggregate amount of Dilution Reserves and Required Reserves against Eligible Accounts Receivable, Eligible Unbilled Accounts Receivable, Eligible Inventory, Eligible Machinery and Equipment and Eligible Real Estate of Domestic Loan Parties and Eligible Intellectual Property of all Loan Parties; provided that Agent, in the exercise of its Permitted Discretion, may -------- (a) increase or decrease such Required Reserves and (b) reduce the advance rates provided in this definition, or restore such advance rates to any level equal to or below the advance rates in effect as of the Closing Date. "Domestic Loan Parties" means Borrower and Guarantors. "Domestic Subsidiary" means any Subsidiary of any Person that is incorporated or organized under the laws of the United States of America, any state thereof or in the District of Columbia. 19 "ECU" means the European Currency Unit that is from time to time used as the unit of account of the EU and, in the event of any change to the ECU as may be made by the EU from time to time, the definition of "ECU" used herein shall be changed accordingly. "Eligible Accounts Receivable" means, with respect to any Person, Accounts of such Person deemed by Agent in the exercise of its Permitted Discretion to be eligible for inclusion in the calculation of the applicable Borrowing Base. In determining the amount to be so included, the face amount of such Accounts shall be reduced by the amount of the applicable portion of the Static Reserve then in effect. Unless otherwise approved in writing by all Lenders, an Account shall not be an Eligible Account Receivable if: (a) it arises out of a sale made by such Person to an Affiliate of such Person; or (b) (i) it is unpaid more than 60 days from the original payment due date, in the case of a due-dating aged Account on which the terms of payment do not exceed 30 days, (ii) it is unpaid more than 90 days from original invoice date, in the case of an invoice-dating aged Account on which the terms of payment do not exceed 30 days, and (iii) in the case of an Account with extended payment terms that exceed 30 days from the date of invoice, it is unpaid upon the earlier to occur of (x) more than 30 days after the original payment due date or (y) more than 120 days after the date of invoice; or (c) it is from the same account debtor or its Affiliate and fifty percent (50%) or more of all Accounts from that account debtor (and its Affiliates) are ineligible under (b) above; or (d) when aggregated with all other Accounts of an account debtor, such Account exceeds 10% in face value of all Accounts of such Person then outstanding, as determined on a consolidated basis for Borrower and all other Loan Parties, but only to the extent of such excess, unless such excess is supported by an irrevocable letter of credit satisfactory to Agent (as to form, substance and issuer) and assigned to and directly drawable by Agent; or (e) the account debtor for such Account is a creditor of such Loan Party, has or has asserted a right of setoff against such Person, or has disputed its liability or otherwise has made any claim with respect to such Account or any other Account which has not been resolved, in each case to the extent of the amount owed by such Person to such account debtor, the amount of such actual or asserted right of setoff, or the amount of such dispute or claim, as the case may be; or (f) the account debtor is (or its assets are) the subject of an Insolvency Event; or (g) (i) such Account is not payable in an Approved Currency or (ii) the account debtor for such Account is located outside of an Approved Jurisdiction; except in each case to the extent that such Account is supported by an irrevocable 20 letter of credit or insurance satisfactory to Agent (as to form, substance and issuer or insurer) and assigned to and, in the case of a letter of credit, directly drawable by Agent; or (h) the sale to the account debtor is on a bill-and-hold, guarantied sale, sale-and-return, sale on approval or consignment basis or made pursuant to any other written agreement providing for repurchase or return other than any transaction subject to a Bill-and- Hold Agreement; or (i) the account debtor is any federal, state, local, provincial or other comparable or similar Government Authority, provided that if such account debtor is the United States of America or any department, agency or instrumentality thereof, such Account shall not be ineligible solely as a result of this clause (i) if the applicable Person duly assigns its rights to payment of such Account to Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. (S)(S) 3727 et seq.); or (j) the goods giving rise to such Account have not been shipped and delivered to the account debtor (other than goods subject to a Bill-and-Hold Agreement), the services giving rise to such Account have not been performed, or such Account otherwise does not represent a final sale; or (k) such Account does not comply with all Requirements of Law, including without limitation the Federal Consumer Credit Protection Act, the Federal Truth in Lending Act and Regulation Z of the Board of Governors of the Federal Reserve System or any comparable or similar laws now or hereafter in effect in any other Approved Jurisdiction; or (l) such Account is subject to any adverse security deposit or other similar advance made by or for the benefit of the applicable account debtor but only to the extent of such adverse security deposit, progress payment or similar advance; or (m) it is not subject to a valid and perfected First Priority Lien in favor of Agent or does not otherwise conform to the representations and warranties contained in the Loan Documents; provided that Agent, in the exercise of its Permitted Discretion, may impose additional restrictions (or may, in the exercise of its reasonable discretion, eliminate the same) to the standards of eligibility set forth in this definition. For purposes of clause (b) above, whether an Account is "due-dated" or "invoice-dated" shall be determined based upon the classification of such Account on the Borrower's or its Subsidiaries' aged analysis reports as prepared in a manner consistent with historical practices and procedures. In determining the aggregate amount of Accounts from the same account debtor and Affiliates thereof that are unpaid more than 60 days from the due date pursuant to clause (c) above, there shall be excluded the amount of any net credit balances due and owing to the account debtor in respect of Account balances that are so unpaid. 21 "Eligible Assignee" means (A) (i) a commercial bank organized under the laws of the United States or any state thereof; (ii) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; (iii) a commercial bank organized under the laws of any other country or a political subdivision thereof; provided that (x) such bank is acting through a branch or agency located in the United States or (y) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (iv) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act) which regularly extends credit or buys loans of the general type made pursuant to this Agreement as one of its businesses including, but not limited to, insurance companies, mutual funds and lease financing companies, in each case (under clauses (i) through (iv) above) that is reasonably acceptable to Agent; and (B) any Lender, any Affiliate of any Lender and any Affiliated Fund of any Lender; provided that neither Borrower nor -------- any Affiliate of Borrower shall be an Eligible Assignee. "Eligible CEP" means CEP which constitute Eligible Inventory. "Eligible Finished Goods" means Finished Goods which constitute Eligible Inventory. "Eligible Intellectual Property" means, with respect to any Person, the aggregate amount of Intellectual Property of such Person, valued at the Appraised Fair Market Value of Eligible Intellectual Property; provided that, unless otherwise approved in writing by all Lenders, an item of Intellectual Property shall not be included in Eligible Intellectual Property if it is not subject to a valid and perfected First Priority Lien in favor of Agent or does not otherwise conform to the representations and warranties contained in the Loan Documents; provided further that Agent, in the exercise of its Permitted Discretion, may impose additional restrictions (or may, in the exercise of its reasonable discretion, eliminate the same) to the standards of eligibility set forth in this definition. "Eligible Inventory" means, with respect to any Person, the aggregate amount of Raw Materials, Finished Goods, CEP, Tools and Work-in-Process of such Person deemed by Agent in the exercise of its Permitted Discretion to be eligible for inclusion in the calculation of the Borrowing Base. In determining the amount to be so included, Raw Materials, Finished Goods, CEP, Tools and Work-in-Process shall be valued at the lower of cost or market on a first-in, first-out basis consistent with such Person's historical practices net of any shipping or freight allowances and net of any freight charges included in Raw Materials (capped at 2% of the Raw Materials cost), and such amounts shall be reduced by the applicable portion of the Static Reserve then in effect. Unless otherwise approved in writing by all Lenders, an item of Raw Materials, Finished Goods, CEP, Tools or Work-in-Process shall not be included in Eligible Inventory if: (a) it is not owned solely by such Person or such Person does not have good, valid and marketable title thereto; or (b) it is not located in an Approved Jurisdiction; or 22 (c) it is not located on property owned or leased by such Person or in a contract warehouse or property owned or leased by a customer of such Person, in each case subject to a Collateral Access Agreement executed by any applicable mortgagee, lessor or contract warehouseman or customer, as the case may be, and segregated or otherwise separately identifiable from goods of others, if any, stored on the premises (provided that the failure to deliver any Collateral Access Agreement required under this definition shall not render the applicable item ineligible (a) during the first thirty (30) days immediately following the Closing Date, or (b) with respect to items located in a leased warehouse or on leased property in or on which the aggregate amount of such items (valued in accordance with this definition) is less than $5,000,000, to the extent Agent establishes reserves in an amount at least equal to three (3) months' rent payable thereunder); or (d) it is not subject to a valid and perfected First Priority Lien in favor of Agent except, with respect to Raw Materials, Finished Goods, CEP, Tools and Work-in-Process stored at sites described in clause (c) above, for Liens for unpaid rent or normal and customary warehousing charges; or (e) except with respect to Work-in-Process, it consists of goods returned or rejected by such Person's customers or goods in transit to third parties (other than to sites covered by a Collateral Access Agreement); or (f) it does not otherwise conform to the representations and warranties contained in the Loan Documents; (g) except with respect to Work-in-Process, it consists of goods subject to a Bill-and-Hold Agreement; (h) it constitutes profit generated, consistent with such Person's historical accounting practices, as the result of the sale of Inventory to, from or between such Person or any Subsidiary of such Person and any of the Subsidiaries of such Person; or (i) it is obsolete or slow-moving (as determined in accordance with the historical practices of such Person and its Subsidiaries). provided that Agent, in the exercise of its Permitted Discretion, may impose additional restrictions (or may, in the exercise of its reasonable discretion, eliminate the same) to the standards of eligibility set forth in this definition. "Eligible Machinery and Equipment" means with respect to any Person, the aggregate amount of machinery and equipment of such Person, valued at the Orderly Liquidation Value of such machinery and equipment; provided that, unless otherwise approved in writing by all Lenders, an item of machinery and equipment shall not be included in Eligible Machinery and Equipment if it is not subject to a valid and perfected First Priority Lien in favor of Agent or does not otherwise conform to the representations and warranties contained in the Loan Documents; provided further that Agent, in the exercise of its Permitted Discretion, may impose 23 additional restrictions (or may in the exercise of its reasonable discretion eliminate the same) to the standards of eligibility set forth in this definition. "Eligible Raw Materials" means Raw Materials which constitute Eligible Inventory. "Eligible Real Estate" means , with respect to any Person, the aggregate amount of Real Property Assets of such Person, valued at the Appraised Fair Market Value of Eligible Real Estate; provided that, unless otherwise approved in writing by all Lenders, an item of Real Property Assets shall not be included in Eligible Real Estate if it is not subject to a valid and perfected First Priority Lien in favor of Agent or does not otherwise conform to the representations and warranties contained in the Loan Documents; provided further that (i) until such time as Agent receives a title report on the Bromyard Road, Worcester, United Kingdom, properties establishing to its satisfaction that there are no prior encumbrances on such properties other than any encumbrances approved by Agent in its discretion, such properties shall be excluded from the UK Subsidiary Borrowing Base, and (ii) Agent, in the exercise of its Permitted Discretion, may impose additional restrictions (or may in the exercise of its reasonable discretion eliminate the same) to the standards of eligibility set forth in this definition. "Eligible Tools" means Tools which constitute Eligible Inventory. "Eligible Unbilled Accounts Receivable" means with respect to any Person, the accumulated work in progress costs under percentage-of-completion contracts that have been recognized in accordance with GAAP as cost of sales that are not yet able to be billed to the customer under the terms of the applicable contract, as deemed by Agent in the exercise of its Permitted Discretion to be eligible for inclusion in the calculation of the Borrowing Base. Unless otherwise approved in writing by all Lenders, an item of unbilled accounts receivable shall not be included in Eligible Unbilled Accounts Receivable if it is not subject to a valid and perfected First Priority Lien in favor of Agent , does not otherwise conform to the representations and warranties contained in the Loan Documents or to the extent constituting an Advance Payment Liability; provided that Agent, in the exercise of its Permitted Discretion, may impose additional restrictions (or may in the exercise of its reasonable discretion eliminate the same) to the standards of eligibility set forth in this definition. In determining the amount to be so included, the face amount of such Accounts shall be reduced by the amount of the applicable portion of the Static Reserve then in effect. "Eligible Work-in-Process" means Work-in-Process which constitutes Eligible Inventory. "Employee Benefit Plan" means any "employee benefit plan" as defined in Section 3(3) of ERISA which is or was maintained or contributed to by Borrower, any of the Subsidiaries of Borrower or any of their respective ERISA Affiliates. "Environmental Claim" means any notice of violation, claim, action, suit, enforcement proceeding or directive, demand, abatement order or other order or directive (conditional or otherwise), by any Government Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, (ii) 24 in connection with any Hazardous Materials or any actual or alleged Hazardous Materials Activity, or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment. "Environmental Laws" means any and all current or future statutes, ordinances, orders, rules, regulations, judgments, Governmental Authorizations, or any other requirements of Government Authorities or common law duties or obligations relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene or the protection of human, plant or animal health or welfare, in any manner applicable to Borrower or any of its Subsidiaries or any Facility. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto and any similar or comparable law of any other applicable Governmental Authority. "ERISA Affiliate" means, as applied to any Person, (i) any corporation that is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) that is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of a Person or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of such Person or such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of such Person or such Subsidiary and with respect to liabilities arising after such period for which such Person or such Subsidiary could be liable under the Internal Revenue Code or ERISA. "ERISA Event" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Borrower, any of the Subsidiaries of Borrower or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Borrower, any of the Subsidiaries of Borrower or any of their 25 respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Borrower, any of the Subsidiaries of Borrower or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by Borrower, any of the Subsidiaries of Borrower or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Borrower, any of the Subsidiaries of Borrower or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (ix) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (x) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan. "Eurodollar Rate Loans" means Loans bearing interest at rates determined by reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A. "Eurodollar Rate Margin" means the margin over the Adjusted Eurodollar Rate used in determining the rate of interest of Eurodollar Rate Loans pursuant to subsection 2.2A. "Event of Default" means each of the events set forth in Section 8. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. "Exchange Rate" means, on any date when an amount expressed in a currency other than Dollars is to be determined with respect to any Letter of Credit, the nominal spot rate of exchange quoted by Agent in the New York foreign exchange market for the purchase of such currency in exchange for Dollars. "Facilities" means all real property (including, without limitation, all buildings, fixtures or other improvements located thereon) and related facilities now, hereafter or heretofore owned, leased, operated or used by Borrower or any of the Subsidiaries of Borrower or any of their respective predecessors or Affiliates. "Federal Funds Effective Rate" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Agent from three Federal funds brokers of recognized standing selected by Agent. 26 "Financial Plan" has the meaning assigned to that term in subsection 6.1(xii). "Finished Goods" means completed finished goods which are held for sale or lease by a Person, including those held for display or demonstration, but not including any Raw Materials, components, Work-in-Process, CEP or materials used or consumed or to be used or consumed in the business of such Person. "First Priority" means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that (i) such Lien has priority over any other Lien (other than Permitted Encumbrances) on such Collateral and (ii) such Lien is the only Lien (other than Permitted Encumbrances and Liens permitted pursuant to subsection 7.2) to which such Collateral is subject. "Fiscal Quarter" means a fiscal quarter of any Fiscal Year. "Fiscal Year" means the fiscal year of Borrower and its Subsidiaries ending on October 31 of each calendar year. "Flood Hazard Property" means a Closing Date Mortgaged Property or an Additional Mortgaged Property located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards. "Foreign Borrowing Sublimits" means, individually and collectively, the Australian Joy Subsidiary Borrowing Limit, the Australian PaH Subsidiary Borrowing Limit, the Canadian Subsidiary Borrowing Limit and the UK Subsidiary Borrowing Limit. "Foreign Loan Parties" means, individually and collectively, the Australian Loan Parties, the Canadian Loan Parties and the UK Loan Parties. "Foreign Pledge Agreement" means each pledge agreement or similar instrument governed by the laws of a country other than the United States, executed in accordance with subsection 6.9 by Borrower or any Guarantor that owns capital stock or other ownership interests of one or more Foreign Subsidiaries, in form and substance reasonably satisfactory to Agent, as such Foreign Pledge Agreement may be amended, supplemented or otherwise modified from time to time. "Foreign Subsidiary" means any Subsidiary of a Person that is not a Domestic Subsidiary of such Person. "Funding and Payment Office" means (i) the office of Agent located at 130 Liberty Street, New York, New York 10006, or (ii) such other office of Agent as may from time to time hereafter be designated as such in a written notice delivered by Agent to Borrower and each Lender. "Funding Date" means the date of the funding of a Loan. "GAAP" means, subject to the limitations on the application thereof set forth in subsection 1.2, generally accepted accounting principles set forth in 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 may be approved by a significant segment of 27 the accounting profession, in each case as the same are applicable to the circumstances as of the date of determination. "Governing Body" means the board of directors or other body having the power to direct or cause the direction of the management and policies of a Person that is a corporation, partnership, trust or limited liability company. "Government Authority" means any federal, state or local governmental or regulatory body, commission, central bank, board, bureau, organ or instrumentality or any political subdivision or department thereof, or any court, located in the United States or in any other applicable jurisdiction outside of the United States. "Governmental Authorization" means any permit, license, registration, authorization, plan, directive, consent order or consent decree of or from, or notice to, any Government Authority. "Guaranty" means the Guaranty or Guaranties executed and delivered on the Closing Date by the existing Domestic Subsidiaries of Borrower other than any Immaterial Subsidiary and other than Industries Insurance, Inc. and to be executed and delivered by each additional Domestic Subsidiary of Borrower other than any Immaterial Subsidiary from time to time thereafter in accordance with subsection 6.9A, substantially in the form of Exhibit XV annexed hereto, as such ---------- Guaranty may be amended, supplemented or otherwise modified from time to time. "Guarantors" means, at any time, individually and collectively, each of the Domestic Subsidiaries of Borrower that is then a party to the Guaranty, including such Subsidiaries that may become a party to the Guaranty pursuant to the provisions of subsection 6.9A hereof. "Hazardous Materials" means (i) any chemical, material or substance at any time defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," acutely hazardous waste," "radioactive waste," "biohazardous waste," "pollutant," "toxic pollutant," "contaminant," "restricted hazardous waste," "infectious waste," "toxic substances," or any other term or expression intended to define, list or classify substances by reason of properties harmful to health, safety or the indoor or outdoor environment (including harmful properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any applicable Environmental Laws); (ii) any oil, petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iv) any flammable substances or explosives; (v) any radioactive materials; (vi) any asbestos-containing materials; (vii) urea formaldehyde foam insulation; (viii) polychlorinated biphenyls; (ix) pesticides; and (x) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Government Authority. "Hazardous Materials Activity" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, 28 manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing. "Headquarters Sale" shall mean the sale by Borrower of its former corporate headquarters building located at 3600 South Lake Drive, St. Francis, Wisconsin. "Hedge Agreement" means an Interest Rate Agreement designed to hedge against fluctuations in, as applicable, interest rates or currency values. "HULC" means Harnischfeger ULC, an unlimited liability company organized under the laws of the United Kingdom. "Immaterial Subsidiary" means any Subsidiary of the Borrower identified as an Immaterial Domestic or Foreign Subsidiary on Schedule 5.1 and ------------ any Subsidiary of the Borrower formed or acquired after the Closing Date and designated as an Immaterial Subsidiary on Schedule 5.1, which Subsidiary, (a) ------------ does not own assets with an aggregate value of greater than $250,000 (except for American Longwall Face Conveyors, Inc. and American Longwall Roof Supports, Inc., provided that each of the foregoing transfers its respective assets to Joy Technologies, Inc. within 30 days after the Closing Date or such longer period of time as may be approved by Agent), (b) does not generate revenues of greater than $500,000 in any single Fiscal Year, and (c) is not actively engaged in any ongoing business or operations, the assets and revenues of which are not encumbered or otherwise subject to any claim in favor of any third party and which has no indebtedness or other liabilities, contingent or otherwise, other than any liabilities under any intercompany notes to Borrower and its Subsidiaries and tax liabilities to the extent permitted pursuant to subsections 5.7 and 6.3; provided that all Immaterial Subsidiaries in the aggregate do not -------- own assets with an aggregate value of greater than $5,000,000 or generate revenues of greater than $5,000,000 in any single Fiscal Year or such amount in excess of $5,000,000 as may be approved in writing by Agent. For purposes of calculating the aggregate value of the assets and revenues of any Immaterial Subsidiary under this definition, the value of any such intercompany promissory note held as of the Closing Date (but not the proceeds of any payments thereon other than regularly scheduled interest payments on intercompany promissory notes) may be excluded. "Indebtedness" as applied to any Person, means (i) all indebtedness for borrowed money, (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, including without limitation Contingent Obligations with respect to any letter of credit, (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument, and (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non- recourse to the credit of that Person (provided that if such Indebtedness is solely non-recourse, the amount of such Indebtedness shall be deemed not to exceed the value of the applicable property or asset). Obligations under 29 Interest Rate Agreements constitute (X) in the case of Hedge Agreements, Contingent Obligations, and (Y) in all other cases, Investments, and in neither case constitute Indebtedness. "Indemnitee" has the meaning assigned to that term in subsection 10.3. "Insolvency Event" means, with respect to any Person, the occurrence of any of the events described in subsection 8.6 or 8.7; provided that, solely -------- for purposes of this definition, any references to Borrower or any of its Subsidiaries in subsection 8.6 or 8.7 shall be deemed to be a reference to such Person. "Insolvency Laws" means the Bankruptcy Code or any other applicable bankruptcy, insolvency or similar law now or hereafter in effect in the United States of America or any state thereof or any comparable or similar laws now or hereafter in effect in any jurisdiction outside of the United States. "Intellectual Property" means all patents, trademarks, tradenames, copyrights, technology, software, know-how and processes used in or necessary for the conduct of the business of Borrower and its Subsidiaries as currently conducted that are material to the financial condition, business or operations of Borrower and its Subsidiaries, taken as a whole. "Intercompany Collateral Documents" means all such agreements, documents and instruments that, in Agent's reasonable judgment, are required (a) to evidence a First Priority Lien in favor of Borrower (or a security trustee in lieu of Borrower) in substantially all real, personal and mixed property of each of the Foreign Loan Parties as security for such Person's obligations under the Intercompany Notes and (b) to evidence a First Priority Lien in favor of Borrower (or a security trustee in lieu of Borrower) in substantially all real, personal and mixed property of each Intercompany Note Guarantor as security for such Intercompany Note Guarantor's obligations under the Intercompany Note Guaranties to which it is party, all in form and substance reasonably satisfactory to Agent, as such Intercompany Collateral Documents may be amended, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.15. "Intercompany Loans" means the proceeds of Loans advanced by Borrower to Beloit or a Foreign Loan Party under, as applicable, the Beloit Note or an Intercompany Note. "Intercompany Notes" means those certain promissory notes made by each of the Foreign Loan Parties to the order of Borrower, substantially in the form of Exhibit V annexed hereto or as otherwise approved by Agent, and evidencing --------- such Person's obligations to repay the credit extensions made by Borrower to such Person pursuant to subsection 2.5A hereof, as such Intercompany Notes may be amended, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.15. "Intercompany Note Guarantors" means, individually and collectively, each Subsidiary of each Foreign Loan Party that is a party to the Intercompany Note Guaranty. "Intercompany Note Guaranty" means that Intercompany Note Guaranty or Intercompany Note Guaranties executed and delivered on the Closing Date by the Intercompany Note Guarantors and to be executed and delivered by each additional Intercompany Note 30 Guarantor from time to time thereafter in accordance with subsection 6.9A, substantially in the form of Exhibit XV hereto (with such changes as may be ---------- be necessary or appropriate) or as otherwise approved by Agent, as such Intercompany Note Guaranty may be amended, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.15. "Interest Payment Date" means (i) with respect to any Base Rate Loan, the first Business Day of each calendar month, commencing on the first such date to occur after the Closing Date, and (ii) with respect to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided that in the case of each Interest Period of six months or more "Interest Payment Date" shall also include the date that is three months after the commencement of such Interest Period. "Interest Period" has the meaning assigned to that term in subsection 2.2B. "Interest Rate Agreement" means (i) any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement, or (ii) any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement, in each case to which Borrower or any of its Subsidiaries is a party. "Interest Rate Determination Date" means, with respect to any Interest Period, the second Business Day prior to the first day of such Interest Period. "Interest Rate Exchanger" means any Lender that has entered into a Lender Interest Rate Agreement pursuant to the terms of this Agreement. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute and any similar or comparable law of any other applicable Governmental Authority. "Inventory" means, with respect to any Person, all goods, merchandise and other personal property which are held by such Person for sale or lease, including those held for display or demonstration in the normal course of business, including without limitation, Raw Materials, Work-in-Process, Finished Goods, CEP and Tools. "Investment" means (i) any direct or indirect purchase or other acquisition by Borrower or any of its Subsidiaries of, or of a beneficial interest in, any Securities of any other Person (including any Subsidiary of Borrower), (ii) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of Borrower from any Person other than Borrower or any Guarantor that is a wholly-owned Subsidiary of Borrower, of any equity Securities of such Subsidiary, (iii) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by Borrower or any of its Subsidiaries to any other Person (other than a Guarantor), including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business, or (iv) Interest Rate Agreements not constituting Hedge Agreements. The amount of any Investment shall be the original cost of such 31 Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. "Issuing Lender" means, with respect to any Letter of Credit, the Lender that agrees or is otherwise obligated to issue such Letter of Credit, determined as provided in subsection 3.1B(ii); provided that any Issuing Lender -------- may be an Affiliate of BTCo (including, without limitation, Deutsche Bank AG) so long as (i) BTCo is a Lender under this Agreement and (ii) such Affiliate shall have executed a counterpart of this Agreement on or prior to the date of any issuance of any Letter of Credit by such Affiliate. "Joint Venture" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided that in no event shall any Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party. "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, reasonably satisfactory in form and substance to Agent, pursuant to which such lessor agrees, for the benefit of Agent, (i) that without any further consent of such lessor or any further action on the part of the Loan Party holding such Leasehold Property, such Leasehold Property may be encumbered pursuant to a Mortgage and may be assigned to the purchaser at a foreclosure sale or in a transfer in lieu of such a sale (and to a subsequent third party assignee if Agent, any Lender, or an Affiliate of either so acquires such Leasehold Property), (ii) that such lessor shall not terminate such lease as a result of a default by such Loan Party thereunder without first giving Agent notice of such default and at least 60 days (or, if such default cannot reasonably be cured by Agent within such period, such longer period as may reasonably be required) to cure such default, (iii) to the matters contained in a Collateral Access Agreement, and (iv) to such other matters relating to such Leasehold Property as Agent may reasonably request. "Leasehold Property" means any leasehold interest of any Loan Party as lessee under any lease of real property, other than any such leasehold interest designated from time to time by Agent in its reasonable discretion as not being required to be included in the Collateral. "Lender" and "Lenders" means the Persons identified as "Lenders" and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall include BTCo as an Issuing Lender unless the context otherwise requires; provided that the term "Lenders," when used in the context of a particular Commitment, shall mean Lenders having that Commitment. "Lender Interest Rate Agreement" means any Interest Rate Agreement with respect to the Loans entered into by Borrower and one or more Lenders pursuant to the terms of this Agreement. Any Lender may, from time to time, in its sole and absolute discretion, and as approved by Agent in its reasonable discretion, enter into one or more Lender Interest Rate Agreements. Each Lender Interest Rate Agreement shall constitute a Loan Document for purposes of this Agreement. 32 "Letter of Credit" or "Letters of Credit" means Commercial Letters of Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders for the account of Borrower pursuant to subsection 3.1. "Letter of Credit Usage" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may become available for drawing under all Letters of Credit then outstanding plus ---- (ii) the aggregate amount of all drawings under Letters of Credit honored by Issuing Lenders and not theretofore reimbursed out of the proceeds of Revolving Loans pursuant to subsection 3.3B or otherwise reimbursed by Borrower. "Lien" means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing. "Loan" or "Loans" means one or more of the Term Loans or Revolving Loans or any combination thereof. "Loan Documents" means this Agreement, the Notes, the Letters of Credit (and any applications for, or reimbursement agreements or other documents or certificates executed by Borrower in favor of an Issuing Lender relating to, the Letters of Credit), the Guaranties, the Intercompany Notes, Intercompany Note Guaranties, the Lender Interest Rate Agreements, the Collateral Documents, the Intercompany Collateral Documents, the Security Trust Deed, the Beloit Collateral Documents, Beloit Note and Beloit Note Guaranty. "Loan Parties" means any of the Borrower or any Subsidiary of Borrower executing a Loan Document but excluding any Immaterial Subsidiary and Industries Insurance, Inc. "Lock Box" means a lockbox maintained by any Loan Party pursuant to arrangements satisfactory to Agent. "Lock Box Account" means a Deposit Account under the exclusive dominion and control of Agent that is maintained by any Loan Party with a Lock Box Bank pursuant to a Lock Box Agreement. "Lock Box Agreement" means a Lock Box Agreement executed and delivered by a Lock Box Bank, Agent and the applicable Loan Party, substantially in the form of Exhibit XIII annexed hereto, as such Lock Box Agreement may be amended, ------------ supplemented or otherwise modified from time to time, and "Lock Box Agreements" means all such Lock Box Agreements, collectively. "Lock Box Bank" means Agent or an Affiliate thereof, or in Agent's sole and absolute discretion, another commercial bank satisfactory to Agent, at which any Loan Party maintains a Lock Box Account. 33 "Margin Stock" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Mark-to-Market Adjustment Amount" means the fluctuating credit exposure of an Interest Rate Exchanger under a Lender Interest Rate Agreement based upon increases or decreases in the interest rate or currency values, as applicable. Each Interest Rate Exchanger shall provide to the Agent a certificate containing the calculation of the Mark-to-Market Adjustment Amount under the related Lender Interest Rate Agreement in reasonable detail not less frequently than monthly. "Material Adverse Effect" means (i) a material adverse effect upon the business, operations, properties, assets, condition (financial or otherwise) or prospects of Borrower and its Subsidiaries, taken as a whole, or (ii) the impairment in any material respect of the ability of any Loan Party to perform, or of Agent or Lenders to enforce, the Obligations. "Material Contract" means any contract or other arrangement to which Borrower or any of its Subsidiaries is a party (other than the Loan Documents) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect. "Mortgage" means (i) a security instrument (whether designated as a deed of trus