Amended And Restated Credit Facility Agreement

AMENDED AND RESTATED CREDIT FACILITY AGREEMENT


THIS AMENDED AND RESTATED CREDIT FACILITY AGREEMENT is made as of the 3rd day of November, 1999 by and between GRAHAM CORPORATION, a corporation formed under the laws of the State of Delaware with offices at 20 Florence Avenue, Batavia, New York and FLEET NATIONAL BANK, a national banking association formed under the laws of the United States of America with offices at One East Avenue, Rochester, New York 14638.


This Agreement amends, restates, clarifies and supersedes in its entirety the Restated Credit Facility Agreement between Graham Corporation (as successor by merger to Graham Manufacturing Co., Inc.) and Fleet National Bank (as successor to Fleet Bank) dated as of October 31, 1996, as amended by the First Amendment to the Credit Agreement dated September 28, 1998.


The parties hereby agree as follows:


ARTICLE 1. - DEFINITIONS


1.1 The following terms shall have the following meanings unless otherwise expressly stated herein:


"Affiliate" shall mean any entity which directly or indirectly, or
through one or more intermediaries, Controls or is Controlled By or is
Under Common Control with the Borrower.


"Bank" shall mean Fleet National Bank and its successors, legal
representatives, and assigns.


"Borrower" shall mean Graham Corporation and its successors, legal
representatives, and assigns.


"Break Costs" shall mean an amount equal to the amount (if any)
required to compensate the Bank for any additional losses (including
without limitation any loss, cost, or expense incurred by reason of the
liquidation or reemployment of deposits or funds acquired by the Bank to
fund or maintain the Obligations), costs, and expenses (including without
limitation penalties) it may reasonably incur as a result of or in
connection with a prepayment of an Obligation bearing interest at a
LIBOR-based rate. If by reason of an Event of Default the Bank elects to
declare the Obligations to be immediately due and payable, then any Break
Costs with respect to the Obligations shall become due and payable in the
same manner as though Borrower had exercised a right of prepayment.


"Business Day" shall mean, in respect of any date that is specified
in this Agreement to be subject to adjustment in accordance with
applicable Business Day Convention, a day on which commercial banks settle
payments in (i) London, if the payment obligation is calculated by
reference to any LIBOR Rate, or (ii) New York, if the payment obligation
is calculated by reference to any Prime Rate.


"Cash Flow" shall mean net income plus depreciation and amortization
less Unfunded Capital Expenditures less distributions, dividends, and
stock repurchases.


"Controls" (including the terms "Controlled By" or "Under Common
Control") shall mean but not be limited to the ownership of ten percent
(10%) or more of the outstanding shares of capital stock of any
corporation having voting power for the election of directors, whether or
not at the same time stock of any other class or classes has or might have
voting power by reason of the happening of any contingency, or ownership
of ten percent (10%) or more of any interest in any partnership, or any
other interest by reason of which a controlling influence over the affairs
of the entity may be exercised.


"Current Ratio" shall mean current assets compared to current
liabilities, as determined by GAAP.


"Debt Service Coverage Ratio" shall mean the ratio of (a) earnings
before interest, taxes and depreciation to (b) interest expense and
current maturities of long term debt.


"Debt To Worth Ratio" shall mean Total Liabilities compared to
Tangible Net Worth, as determined by GAAP.


"Environment" means any water including but not limited to surface
water and ground water or water vapor; any land including land surface or
subsurface; stream sediments; air; fish; wildlife; plants; and all other
natural resources or environmental media.


"Environmental Laws" means all federal, state and local
environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances, regulations, codes and rules
relating to the protection of the Environment and/or governing the use,
storage, treatment, generation, transportation, processing, handling,
production or disposal of Hazardous Substances and the regulations, rules,
ordinances, bylaws, policies, guidelines, procedures, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.


"Environmental Permits" means all licenses, permits, approvals,
authorizations, consents or registrations required by any applicable
Environmental Laws and all applicable judicial and administrative orders
in connection with ownership, lease, purchase, transfer, closure, use
and/or operation of the Improvements and/or as may be required for the
storage, treatment, generation, transportation, processing, handling,
production or disposal of Hazardous Substances.


"Environmental Report" means written reports, if any, prepared for
the Bank by an environmental consulting or environmental engineering firm.


"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.


"Event of Default" shall mean the occurrence of any event described
in Article 14 hereof.


"GAAP" shall mean generally accepted accounting principles as in
effect from time to time.


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"Hazardous Substances" means, without limitation, any explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, and
any other material defined as a hazardous material, hazardous waste, toxic
substance or hazardous substance in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Sections 9601, et. seq.; the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Sections 1801, et. seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Sections 6901, et. seq.; Articles 17
and 27 of the New York State Environmental Conservation Law or any other
federal, state, or local law, regulation, rule, ordinance, bylaw, policy,
guideline, procedure, interpretation, decision, order, or directive,
whether existing as of the date hereof, previously enforced or
subsequently enacted.


"Improvements" shall mean any Property.


"Increased Cost" means, in the event the Borrower elects the LIBOR
Rate with respect to any of the Obligations, any additional amounts
sufficient to compensate the Bank for any increased costs of funding or
maintaining the Obligations as a result of any law or guideline adopted
pursuant to or arising out of the July 1988 report of the Basle Committee
on Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards", or the adoption
after the date of this Agreement of' any law or guideline regarding
capital adequacy, or any change in any of the foregoing or in the
interpretation or administration of any of the foregoing by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank or the
Bank's holding company, if any, with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, which has or would have the
effect of reducing the rate of return on the Bank's capital or on the
capital of the Bank's holding company, if any, as a consequence of the
transactions contemplated by this Agreement and all related documents and
agreements, the existence of the Bank's commitment, or the note(s) bearing
interest at a rate based on the LIBOR Rate, to a level below that which
the Bank or the Bank's holding company could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's
policies on capital adequacy).


"Letter of Credit" shall mean one or more Letters of Credit
described in Article 3 of this Agreement.


"LIBOR" shall mean, as applicable with respect to principal amounts
on which a LIBOR Rate is in effect (a "LIBOR Advance"), the rate per annum
(rounded upward, if necessary, to the nearest 1/32 of one percent) as
determined on the basis of the offered rates for deposits in U.S. dollars,
for a period of time comparable to such LIBOR Advance which appears on the
Telerate page 3750 as of 11:00 a.m. London time on the day that is two
London Business Days preceding the first day of such LIBOR Advance;
provided, however, if the rate described above does not appear on the
Telerate System on any applicable interest determination date, the LIBOR
rate shall be the rate (rounded upwards as described above, if necessary)
for deposits in dollars for a period substantially equal to the interest
period on the Reuters Page "LIBO" (or such other page as may replace the
LIBO Page on that service for


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the purpose of displaying such rates), as of 11:00 a.m. (London Time), on
the day that is two (2) London Business Days prior to the beginning of
such interest period.


If both the Telerate and Reuters system are unavailable, then the
rate for that date will be determined on the basis of the offered rates
for deposits in U.S. dollars for a period of time comparable to such LIBOR
Advance which are offered by four major banks in the London interbank
market at approximately 11:00 a.m. London time, on the day that is two (2)
London Business Days preceding the first day of such LIBOR Advance as
selected by the Bank. The principal London office of each of the four
major London banks will be requested to provide a quotation of its U.S.
dollar deposit offered rate. If at least two such quotations are provided,
the rate for that date will be the arithmetic mean of the quotations. If
fewer than two quotations are provided as requested, the rate for that
date will be determined on the basis of the rates for loans quoted in U.S.
dollars to leading European banks for a period of time comparable to such
LIBOR Advance offered by major banks in New York City at approximately
11:00 a.m. New York City time, on the day that is two London Business Days
preceding the first day of such LIBOR Advance. In the event that the Bank
is unable to obtain any such quotation as provided above, it will be
deemed that LIBOR pursuant to a LIBOR Advance cannot be determined. In the
event that the Board of Governors of the Federal Reserve System shall
impose a Reserve Percentage with respect to LIBOR deposits of the Bank,
then for any period during which such Reserve Percentage shall apply,
LIBOR shall be equal to the amount determined above divided by an amount
equal to 1 minus the Reserve Percentage. "Reserve Percentage" shall mean
the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed on member
banks of the Federal Reserve System against "Euro-currency Liabilities" as
defined in Regulation D.


"LIBOR Interest Period" shall mean any particular one-, two- or
three-month period during which an applicable LIBOR Rate shall be in
effect.


"LIBOR Rate" shall mean, with respect to any interest rate period,
the rate per annum equal to LIBOR, further adjusted to reflect any
Increased Cost.


"Obligations" shall include all of the Borrower's obligations to the
Bank of any kind or nature, arising in the past, now or in the future,
including without limitation obligations related to this Agreement and
under the Revolving Line Note, any Reimbursement Agreement, and the Term
Loan Note.


"Prime Rate" means the variable per annum rate of interest so
designated from time to time by Fleet National Bank as its prime rate. The
Prime Rate is a reference rate and does not necessarily represent the
lowest or best rate being charged to any customer.


"Property" shall mean any real property or improvements owned,
occupied or operated by the Borrower.


"Rate Change Date" shall mean the first day of the first month of
each one-, two- or three-month period, depending on the rate(s) selected
by the Borrower.


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"Reimbursement Agreement" shall mean a Reimbursement Agreement
substantially in the form of the Bank's standard letter of credit
reimbursement agreement, or otherwise acceptable to the Bank in its sole
discretion.


"Release" has the same meaning as given to that term in Section
101(22) of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601(22), and the
regulations promulgated thereunder.


"Revolving Line" shall mean the revolving line of credit established
pursuant to Section 2.1 of this Agreement.


"Revolving Line Note" shall mean the note evidencing Obligations
related to the Revolving Line as described in Section 2.2 of this
Agreement.


"Revolving Line Termination Date" shall mean the date on which the
Revolving Line terminates as described in Section 2.5 of this Agreement.


"Tangible Net Worth" shall mean total tangible assets (excluding all
intercompany assets and accounts from officers and Affiliates) less Total
Liabilities as determined by GAAP.


"Term Loan" shall mean a term loan made pursuant to Article 4 of
this Agreement, or all such Term Loans, collectively, as the context may
indicate.


"Term Loan Note" shall mean the note(s) evidencing Obligations
related to the Term Loan as described in Section 4.2 of this Agreement.


"Total Liabilities" shall mean the sum of all liabilities shown on
the Borrower's balance sheet as of the applicable date of determination,
determined in accordance with GAAP.


"Unfunded Capital Expenditures" shall mean capital expenditures,
determined according to GAAP, not paid for with borrowing, lease
financing, or other similar indebtedness.


ARTICLE 2. - REVOLVING LINE


2.1 Revolving Line. Subject to the terms and conditions of this Agreement, the Bank hereby establishes for the benefit of the Borrower a revolving line of credit in the maximum principal amount of Thirteen Million Dollars ($13,000,000) outstanding at any one time. The proceeds of the Revolving Line shall be used to meet the Borrower's letter of credit, foreign exchange and working capital requirements. A portion of the Revolving Line may be used by the Borrower to fund, with the prior approval of the Bank's portfolio manager responsible for the Borrower, a foreign exchange guidance line of credit not to exceed (a) $500,000 for foreign exchange contracts maturing on any one day; and (b) $3,333,333.00 for total foreign exchange contracts (with respect to forward contracts, not to exceed one year from the date of contract) outstanding at any one time. With respect to advances other than for foreign exchange under the Revolving Line, the entire $500,000 foreign exchange sublimit will be reserved for purposes of


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determining availability under the Revolving Line, irrespective of the amounts actually advanced under the foreign exchange guidance line. Subject to the terms of this Agreement, the Borrower may borrow, repay, and reborrow under the Revolving Line so long as the aggregate principal amount outstanding at any time (plus (a) the aggregate face amount of letters of credit issued pursuant to Article 4 hereof and (b) the outstanding principal amount of the Term Loan, if applicable) does not exceed $13,000,000.


2.2 Revolving Line Note. The Borrower shall execute, together with this Agreement, a note evidencing Obligations related to the Revolving Line in the form of Exhibit A attached hereto and made a part hereof.


2.3 Interest Rate and Payments. Outstanding amounts under the Revolving Line, except as specifically provided herein, shall bear interest until paid in full at the Prime-based rate determined with reference to Table 2.3, below. Each of the two financial triggers applicable to a given rate in Table 2.3 must be satisfied for that rate to apply. If the Debt Service Coverage Ratio financial trigger in respect of a particular rate is satisfied but the Debt To Worth Ratio financial trigger is not satisfied, the applicable rate shall be twenty-five (25) basis points higher than the rate indicated based upon the Debt Service Coverage Ratio financial trigger. The financial performance triggers shall be measured quarterly and on a consolidated basis for the Borrower (with a rolling twelve-month period for the Debt Service Coverage Ratio) as of the end of each of the Borrower's fiscal quarters.


TABLE 2.3


Debt to Worth Ratio Debt Service Coverage Ratio LIBOR - Based Rate Prime-Based Rate - ---------------------------- ------------------------------ ------------------ ------------------ < or = 1.75 (< or = 1.50 to <1.5 to 1.0 LIBOR + 275 bp Prime Rate 1 at 3/31/00 and thereafter)


or = 1.5 to 1.0, < 2.00 to 1 LIBOR + 225 bp Prime Rate - 0.50%


or = 2.00 to 1.0, < 2.5 to 1 LIBOR + 175 bp Prime Rate - 1.00%


or = 2.5 to 1.0 < 3.0 to 1.0 LIBOR + 150 bp Prime Rate - 1.25%


or = 3.00 to 1.0 LIBOR + 125 bp Prime Rate - 1.50%


The Borrower, however, may from time to time elect to have the one-, two- or three-month LIBOR Rate determined in accordance with Table 2.3 apply to some or all of the amounts outstanding under the Revolving Line by giving at least two (2) business days' prior notice in writing or by telecopy to the Bank, provided, that after the first such election, any subsequent election may only be made at least two (2) business days' prior to, and to become effective on, a Rate Change Date. The notice shall specify the outstanding principal amount to bear interest at the LIBOR-based rate or rates (with any outstanding amounts from time to time under the Revolving Line, in excess of such specified amount, to bear interest at the applicable Prime-based rate). The rate(s) of interest so elected shall be in effect (as adjusted on each applicable Rate Change Date or


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with each change in the Prime Rate, as applicable), until the effective date of any subsequent election notice received by the Bank. During any period in which a LIBOR-based rate is in effect, if the principal amount outstanding under the Revolving Line bearing interest at such rate is ever less than the principal amount stated in the related election notice, the Borrower shall pay Break Costs, if any. Interest shall be calculated based on actual days elapsed divided by a year of 360 days. Changes in the rate of interest applicable to the Revolving Line Note shall become effective automatically, immediately, and without notice or demand of any kind at the time of changes in the Prime Rate, as applicable.


2.4 Payments. Payments of all accrued interest under the Revolving Line Note shall be made on the first day of each month.


All remaining outstanding principal and accrued interest shall be due and payable in full upon the earlier of (a) at the option of the Bank, upon written notice to Borrower, an Event of Default, or (b) the Revolving Line Termination Date, provided that under certain circumstances, some or all of the principal amounts outstanding under the Revolving Line may be converted to a Term Loan in accordance with the terms of Article 4 hereof.


The Revolving Line shall be freely prepayable in whole or in part at the option of Borrower, provided, however, that prepayment due to a refinancing of the Revolving Line in whole or in part by another financial institution (i) one year or less after the date hereof must be accompanied by an additional $100,000 premium payment, (ii) more than one year but less than two years after the date hereof must be accompanied by an additional $50,000 premium payment, and (iii) thereafter prior to the Revolving Line Termination Date must be accompanied by an additional $10,000 premium payment.


In addition, with respect to any LIBOR Advance, Borrower may prepay only upon at least three (3) Business Days prior written notice to Bank (which notice shall be irrevocable), and any such prepayment shall occur only on the last day of the LIBOR Interest Period with respect to any LIBOR Advance. Borrower shall pay to Bank, upon request of Bank, such amount or amounts as shall be sufficient (in the reasonable opinion of the Bank) to compensate it for any loss, cost, or expense incurred as a result of : (i) any payment of a LIBOR Advance on a date other than the day of a LIBOR Interest Period for such Loan; (ii) any failure by Borrower to borrower a LIBOR Advance on the date specified by Borrower's written notice; (iii) any failure by Borrower to pay a LIBOR Advance on the date for payment specified in Borrower's written notice. Without limiting the foregoing, Borrower shall pay to Bank a "yield maintenance fee" in an amount computed as follows: The current rate for United States Treasury securities (bills on a discounted basis shall be converted to a bond equivalent) with a maturity date closest to the term chosen pursuant to the Fixed Rate Election as to which the prepayment is made, shall be subtracted from the LIBOR in effect at the time of prepayment. If the result is zero or a negative number, there shall be no yield maintenance fee. If the result is a positive number, then the resulting percentage shall be multiplied by the amount of the principal balance being prepaid. The resulting amount shall be divided by 360 and multiplied by the number of days remaining in the term chosen pursuant to the Fixed Rate Election as to which the prepayment is made. Said amount shall be reduced to present value calculated by using the above referenced United States Treasury securities rate and the number of days remaining in the term chosen pursuant to the Fixed Rate Election as to which prepayment is made. The resulting amount shall be the yield maintenance fee due to the Bank upon the payment of a LIBOR Advance. Each


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reference in this paragraph to "Fixed Rate Election" shall mean the election by Borrower of the LIBOR Rate. If by reason of an Event of Default, Bank elects to declare any principal amounts to be immediately due and payable, then any yield maintenance fee with respect to a LIBOR Advance shall become due and payable in the same manner as though the Borrower had exercised such right of prepayment.


In the event that principal amounts outstanding under the Revolving Line exceed the maximum available amount described herein at any time, Borrower, after receiving written notice from the Bank, promptly shall make a principal payment to the Bank without penalty sufficient to reduce outstanding principal amounts to the maximum amount available hereunder.


2.5 Revolving Line Termination. Unless extended in writing by the Bank on terms and conditions then acceptable to the Bank, the Revolving Line will terminate on the earlier of (i) October 31, 2002, or (ii) at the Bank's option upon written notice to Borrower upon an Event of Default.


2.6 Audits. Borrower agrees to allow the Bank complete access to all books and records of the Borrower at reasonable intervals and at reasonable times upon reasonable request and upon the Bank's execution of a confidentiality agreement with the Borrower in form satisfactory to Borrower in its reasonable judgment. Borrower agrees to submit information which the Bank may reasonably request from time to time in connection with the Revolving Line.


2.7 Unused Fee. The Borrower shall pay the Bank a quarterly fee of one-quarter percent (0.25%) per annum times the average unused availability under the Revolving Line during the preceding quarter. For purposes of calculating such average unused availability, the face amounts of outstanding Letters of Credit and foreign exchange transactions shall be aggregated with amounts borrowed under the Revolving Line in determining what portion of the Revolving Line has been used. At the end of each fiscal quarter, the Bank will bill the Borrower for the unused fee.


2.8 Facility Fee. The Borrower shall pay the Bank on or before the date of the first advance hereunder a facility fee of one-half percent (0.50%) of the maximum amount available under the Revolving Line (i.e., $65,000).


ARTICLE 3. - LETTERS OF CREDIT


3.1 Letters of Credit. Subject to the terms and conditions of this Agreement, the Bank will make letters of credit available for the account of the Borrower in an aggregate stated face amount not exceeding the lesser of (a) Four Million Dollars ($4,000,000), and (b) the remaining availability under the Revolving Line. Letters of credit will be made promptly available for the Borrower's work in process (to support customer progress payments) or as otherwise reasonably requested by Borrower with respect to customer contracts, for warranty work on completed products, and, subject to a sublimit of $500,000, to fund the Borrower's workers compensation program. The stated amount outstanding under all Letters of Credit at all times shall reduce, dollar for dollar, the amount available for advances under the Revolving Line. The Letters of Credit shall be in form satisfactory to the Bank. Subject to all of the foregoing, the Bank will collectively issue up to a maximum of $2,000,000 in letters of credit with maturities of up to three (3) years from the date of


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issuance or, with the prior written consent of the Bank, for a longer period of time on an as needed basis.


3.2 Commissions; Fees. The Borrower will pay letter of credit commissions to the Bank on the date of issuance of each Letter of Credit and on each anniversary date thereafter if a Letter of Credit is renewed or has a maturity in excess of one year from the date of issuance, equal to one and one-quarter percent (1.25 ...