Exhibit 4.1
EXECUTION COPY
BANK OF AMERICA, N.A.
231 South LaSalle Street
Chicago, Illinois 60697
April 17, 2001
ABC NACO Inc.
2001 Butterfield Road
Suite 502
Downers Grove, Illinois 60515
Attn: Vaughn W. Makary
Re: Senior Debt Restructuring Amendment
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Ladies and Gentlemen:
ABC-NACO Inc., a Delaware corporation (the "Company" or "ABC"), ABC-NACO de
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Mexico, S.A. de C.V., a Mexican corporation (the "Mexican Borrower"), Dominion
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Castings Limited, an Ontario corporation (the "Canadian Borrower", together with
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the Company and the Mexican Borrower, the "Borrowers"), the financial
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institutions named as signatories hereto (collectively, the "Lenders") and Bank
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of America, N.A. in its capacities as "Agent" and "Collateral Agent" for the
Lenders (collectively, the "Agent") are parties to that certain Third Amended
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and Restated Credit Agreement dated as of October 30, 2000, as modified by that
certain letter agreement dated as of January 31, 2001 among such parties (the
"Credit Agreement"), pursuant to which the Lenders have agreed, subject to the
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terms and conditions set forth therein, to extend credit to the Borrowers.
Undefined capitalized terms which are used herein shall have the meanings
ascribed to such terms in the Credit Agreement.
The Company has requested that the Agent and the Lenders agree to a
restructuring (the "Restructuring") of its obligations under the Credit
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Agreement and related Loan Documents, and the Lenders hereby commit and agree to
enter into a definitive amendment to the Credit Agreement and certain other
related definitive agreements necessary or desirable to effect such
Restructuring, pursuant to the terms and conditions of this letter and the
attached term sheet (the "Term Sheet" and, collectively with this letter, the
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"Commitment Letter").
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The commitment of the Agent and the Lenders hereunder is subject to the
satisfaction of each of the following conditions precedent: (a) each of the
terms and conditions set forth herein and in the Term Sheet; (b) the
negotiation, execution and delivery of a definitive amendment to the Credit
Agreement and other definitive documentation for the Restructuring consistent
with the Term Sheet and otherwise satisfactory to the Agent and the Lenders,
including, without limitation, opinions, certificates, resolutions, lien
searches, title insurance and other customary documentation with respect to such
transactions; (c) no change, occurrence or development after
the date hereof that could reasonably be expected to have Material Adverse
Effect; (d) the Lenders and the Agent not becoming aware after the date hereof
of any information or other matter which in their judgment is inconsistent in a
material and adverse manner with any information or other matter disclosed to
them prior to the date hereof and (e) no "Default" or "Event of Default" (as
such terms are defined in the Credit Agreement), other than "Existing Defaults"
referred to and defined in the Term Sheet, shall have occurred and be
continuing.
Each of the Borrowers hereby represent, warrant and covenant that (a) all
information, other than the "Projections" (defined below), which has been or is
hereafter made available to the Agent or the Lenders by the Borrowers or any of
their advisors or representatives in connection with the Restructuring or any of
the transactions contemplated in connection therewith and described or referred
to in the Term Sheet (the "Information") is and will be complete and correct in
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all material respects and does not and will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements contained therein not misleading, and (b) all financial projections
concerning the Borrowers and their respective Subsidiaries that have been or are
hereafter made available to the Agent or the Lenders by the Borrowers or any of
their advisors or representatives (the "Projections") have been or will be
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prepared in good faith based upon assumptions the Borrowers believe to be
reasonable. The Borrowers agree to furnish the Agent and the Lenders with such
Information and Projections as the Agent or any Lender may reasonably request
and to supplement the Information and the Projections from time to time until
the closing date for the Restructuring so that the representation, warranty and
covenant in the preceding sentence is correct on such closing date.
Without limiting the obligations of the Borrowers under the Credit Agreement, by
acceptance of this Commitment Letter, the Borrowers jointly and severally agree
to pay all reasonable out-of-pocket fees and expenses (including reasonable
attorneys' and advisors' fees and expenses) incurred before or after the date
hereof by the Agent and each Lender in connection with the Restructuring and the
other transactions contemplated hereby.
Without limiting the obligations of the Borrowers under the Credit Agreement,
the Borrowers jointly and severally agree to indemnify and hold harmless the
Agent, each Lender and each of their affiliates, directors, officers, employees,
attorneys, advisors and agents (each, an "Indemnified Party") from and against
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(and will reimburse each Indemnified Party as the same are incurred) any and all
losses, claims, damages, liabilities, and expenses (including, without
limitation, the reasonable fees and expenses of counsel and the allocated cost
of internal counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of (including, without limitation, in connection with any investigation,
litigation or proceeding or preparation of a defense in connection therewith)
the Restructuring or any of the other transactions contemplated hereby, unless
and only to the extent that, as to any Indemnified Party, it shall be determined
in a final, non-appealable judgment by a court of competent jurisdiction that
such losses, claims, damages, liabilities or expenses resulted primarily from
the gross negligence or willful misconduct of such Indemnified Party. No
Indemnified Party shall be liable for any damages arising from the use by others
of Information or other materials obtained through the Internet or other similar
information transmission systems in connection with the Restructuring. In the
case of any investigation, litigation or proceeding to which the indemnity in
this paragraph applies, such
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indemnity shall be effective whether or not such investigation, litigation or
proceeding is brought by the Borrowers, their shareholders or creditors or an
Indemnified Party and whether or not the Restructuring is consummated. The
Borrowers jointly and severally agree that no Indemnified Party shall have any
liability to any Borrower, or any of their Subsidiaries, affiliates, security
holders or creditors, for any indirect or consequential damages arising out of,
related to or in connection with the Restructuring or any of the other
transactions contemplated hereby.
The terms of this Commitment Letter are confidential and, except for disclosure
on a confidential basis to your accountants, attorneys and other professional
advisors retained by you in connection with the Restructuring or as may be
required by law, may not be disclosed in whole or in part to any other person or
entity without our prior written consent. Without limiting the foregoing, in the
event that you disclose the contents of this Commitment Letter in contravention
of the preceding sentence, you shall be deemed to have accepted the terms of
this Commitment Letter.
The provisions of the immediately preceding three paragraphs shall remain in
full force and effect regardless of whether any definitive documentation for the
Restructuring shall be executed and notwithstanding the termination of this
Commitment Letter or any commitment or undertaking by the Agent or the Lenders
hereunder.
This Commitment Letter shall be governed by laws of the State of Illinois. Each
of the Agent, the Lenders and the Borrowers hereby irrevocably waives all right
to trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to this Commitment
Letter, the transactions contemplated hereby or the actions of the Agent or any
Lender in the negotiation, performance or enforcement hereof.
This Commitment Letter is the only agreement that have been entered into among
us with respect to the Restructuring and set forth the entire understanding of
the parties with respect thereto. This letter may be modified or amended only by
the written agreement of all of us. This letter is not assignable by you without
the prior written consent of the Agent and each Lender and is intended to be
solely for the benefit of the parties hereto and the Indemnified Parties. This
Commitment Letter shall constitute a "Loan Document" under and as defined in the
Credit Agreement. The Credit Agreement and other Loan Documents are hereby
ratified in all respect by all of the parties hereto.
This offer will expire, and the commitment contemplated hereby shall not become
effective, at 5:00 p.m. Central Standard Time on April 20, 2001, unless each
Borrower and Lender executes and delivers this Commitment Letter and return it
to the Agent prior to that time (which may be by facsimile transmission),
whereupon this Commitment Letter (which may be signed in one or more
counterparts) shall become binding upon each of the parties hereto. Thereafter,
the Commitment Letter and the Lenders' undertakings and commitments hereunder
will expire on the earliest to occur of (a) the closing of the Restructuring,
(b) May 1, 2001, unless definitive
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documentation for the Restructuring is executed and delivered prior to such date
and (c) and breach by any Borrower of any of its representations, warranties or
covenants set forth herein.
Very truly yours,
BANK OF AMERICA, N.A., as Agent
By: ___________________________
Name:
Title:
BANK OF AMERICA, N.A., as Lender and Issuing
Lender
By: ___________________________
Name:
Title:
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ABN AMRO BANK N.V., as Lender
By: ___________________________
Name:
Title:
By: ___________________________
Name:
Title:
5
FLEET NATIONAL BANK, as Lender
By: ___________________________
Name:
Title:
6
BANK ONE, NA (Main Chicago Office), as a Lender
By: ___________________________
Name:
Title:
7
FIRSTAR BANK, N.A., as Lender
By: ___________________________
Name:
Title:
8
HARRIS TRUST AND SAVINGS BANK, as Lender
By: ___________________________
Name:
Title:
9
LASALLE BANK NATIONAL ASSOCIATION, as Lender
By: ___________________________
Name:
Title:
10
THE NORTHERN TRUST COMPANY, as Lender
By: ___________________________
Name:
Title:
11
PNC BANK NATIONAL ASSOCIATION, as
Lender
By: ____________________________
Name:
Title:
12
US BANK NATIONAL ASSOCIATION, as
Lender
By: ___________________________
Name:
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Agreed and accepted as of this
__ day of April, 2001:
ABC-NACO INC.
ABC-NACO de MEXICO, S.A. de C.V.
DOMINION CASTINGS LIMITED
By: ___________________________
Name:
Title:
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FINAL
Restructuring Terms
for
ABC-NACO Inc.
Senior Secured Revolving Credit Facility
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The Credit Agreement will be modified pursuant to an amendment and waiver
agreement substantially on the terms and conditions described below (the
"Restructuring"); all references herein to the "closing" shall mean and refer to
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the consummation and effectiveness of the Restructuring. All other terms and
conditions of the Credit Agreement and related Loan Documents will remain
unchanged and shall be ratified and confirmed.
Maturity/Mandatory Commitment Reductions
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. The final maturity date and commitment termination date will be shortened
from 7/31/03 to 1/5/03.
. The interim, mandatory, scheduled commitment reductions and related
mandatory prepayments shall be modified so that the aggregate commitments
and outstandings shall be permanently reduced to $156.5MM as of the closing
date of the Restructuring, to $152MM as of 12/31/01, and to $150MM as of
4/15/02. Except as provided below, no other mandatory reductions shall be
required.
. All asset sales (other than with respect to the Flow Sale described below
which will occur concurrently with or prior to the closing) and proceeds of
all tax refunds will result in mandatory prepayments and permanent,
mandatory commitment reductions in amounts equal to 100% of the net cash
proceeds of such sales and refunds ("applied" toward and in the order of
the scheduled commitment reductions described in the immediately preceding
paragraph); provided, however, that (i) no prepayment or commitment
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reductions shall be required with respect to sales of inventory in the
ordinary course of business (other than bulks sales of inventory or sales
of scrap or obsolete inventory), (ii) no prepayment or commitment
reductions shall be required with respect to up to $1,500,000, in gross
consideration after the closing date, for sales and other dispositions of
obsolete equipment and scrap inventory and (iii) the Signal division
receivables collections, all proceeds from the Signal sale escrow, and any
other Signal proceeds, will result in prepayments and commitment reductions
in the manner and amounts currently provided in the Credit Agreement. The
Credit Agreement reporting covenants would be modified to provide the
Lenders with quarterly calculations by ABC as to the status of sales and
related amounts under clause (ii) above and collections under clause (iii).
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. All equity and funded debt issuances (excluding, the "ING Equity Issuance"
and "ING Bridge Notes" defined below, and other de minimus carve-outs to be
determined) will result in mandatory prepayments and permanent, mandatory
commitment reductions in amounts equal to 100% of the net cash proceeds of
such issuances; provided, however, that in the event that ABC is able to
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obtain the "Bancomer Financing" (as defined below), prepayment and
commitment reductions shall be required in an amount equal to the greater
of $7.5MM and 50% of the net cash proceeds of such financing (subject to
further due diligence by the Lenders).
. A mandatory prepayment and commitment reduction shall be required 105 days
following the close of ABC's fiscal year 2001, and mandatory prepayments
and commitment reductions shall occur on the forty-fifth (45th) day
following the close of ABC's first fiscal quarter during 2002 and following
each fiscal quarter thereafter, in each case in amounts equal to 70% of
"Excess Cash Flow" (as defined in Annex A hereto) for such fiscal period.
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Pricing
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. Interest rates on all outstanding loans will be increased to Prime + 2.75%.
Consistent pricing increases shall be made with respect to letters of
credit and other financial accommodations. All accrued interest and L/C
fees shall be payable monthly. The LIBOR pricing option will no longer be
available other than with respect to interest periods pending as of the
closing date.
. A restructuring fee of $1.5MM will be payable to the Lenders in cash, half
of which would be due at the closing of the Restructuring and half would be
due on the earlier of maturity or acceleration. All such fees shall be
deemed fully-earned and non-refundable at closing.
. ABC will issue a stock purchase warrant to the Lenders for 2% of the fully-
diluted equity of ABC (giving effect to the exercise of all warrants and
options and the conversion of all convertible securities, in each case
whether or not then presently exercisable, convertible, vested or "in-the-
money"). The warrant will have a nominal exercise price, contain
antidilution provisions, include put provisions (priced at the greater of
the enterprise value of ABC and an agreed upon fixed amount) demand and
piggy-back registration rights and tag along rights, and include other
customary provisions for senior secured lenders' warrants.
. Agent's fee to payable to the Agent, for its sole account, in the amount of
$150,000 in cash at closing and $200,000 in cash on 2/1/02, provided that
such fees shall be deemed fully-earned and non-refundable at closing.
Additional Collateral
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. Liens and mortgages will be granted in favor of the Agent, for the benefit
of the Lenders, on all existing unencumbered domestic real property owned
in fee simple, on 65% of the outstanding equity of all first tier foreign
subsidiaries, and, to the extent not in conflict with existing
organizational documents, on ABC's interest in foreign joint ventures. In
addition, ABC shall deliver, or cause to be delivered, any additional
documentation reasonably required by the Agent to perfect its lien and
security interest on the existing collateral, including, without
limitation, with respect
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to inventory on consignment, goods held by third parties, instruments and
securities, and intellectual property.
. ABC and its domestic subsidiaries shall maintain all of their deposit and
other bank accounts with institutions constituting Lenders (or affiliates
thereof) (except with respect to accounts with aggregate balances which do
not exceed a de minimus aggregate amount to be determined). With respect to
accounts at such Lender institutions or affiliates at which ABC and such
subsidiaries maintain significant balances (in excess of an amount to be
determined), ABC and such subsidiaries, as applicable, shall use their good
faith reasonable efforts, as a condition to the Restructuring and as an
ongoing covenant, to enter into blocked account agreements with such
institutions substantially in the form of the existing blocked account
agreements currently in place with LaSalle Bank, N.A.
Convertible Bridge Loan; Preferred Stock
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. At closing, ABC shall have received not less than $13MM of the net cash
proceeds of the sale to funds sponsored by ING Furman Selz Investments of
$15MM in aggregate initial principal amount of ABC's notes (the "ING Bridge
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Notes") due in full 11 1/2 months from closing. No other principal payments
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shall be required with respect to such notes (including, without
limitation, by right of setoff), and interest accrued thereon shall only be
payable at the earlier of 1/6/03 and the payment in full of the Credit
Agreement obligations. All of the indebtedness evidenced by such notes
shall constitute "Senior Indebtedness" under the terms of ABC's existing
subordinated debt indenture (the "SubDebt Indenture"), shall not be
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subordinated in right of payment to the Credit Agreement debt and shall be
in form and substance as described in the "ING Commitment" referred to
below and otherwise in form and substance acceptable to the Lenders. ABC
shall be permitted to retain the proceeds of the ING Bridge Notes for
working capital purposes.
. The ING Bridge Notes shall be secured by junior liens and security
interests on the same properties which secure the Credit Agreement and
related obligations, subject to an intercreditor agreement in form and
substance acceptable to the Lenders. Without limiting the foregoing, the
holders of the ING Bridge Notes shall agree, as a condition to the
Restructuring and pursuant to such intercreditor agreement: (i) to an
absolute standstill, prior to any insolvency proceeding of ABC or any of
its subsidiaries, with respect to remedies relating to the enforcement of
their liens and security interests for so long as any Credit Agreement and
related obligations remain outstanding, (ii) to release their liens and
security interests and subsidiary guaranties with respect to any and all
collateral or subsidiaries disposed by ABC and or its subsidiaries if such
disposition has been permitted by the Credit Agreement or the Majority
Lenders, (iii) to release their liens and security interests in the event
of any refinancing or recapitalization of the Credit Agreement and related
obligations, or the sale of all or substantially all of the assets or
equity of ABC and its subsidiaries and (iv) to permit the Agent, upon 30
days' prior written notice to a representative of such holders, to release
all such liens and security interests on behalf of such holders following
the commencement of an insolvency proceeding with respect to ABC or any of
its
subsidiaries unless such holders purchase all of the then outstanding
Credit Agreement and related obligations prior to the expiration of such
30-day period (and such holders shall provide the Agent, at the closing of
the Restructuring, with lien and security interest release instruments
sufficient to effect such release).
. The ING Bridge Notes shall have no financial covenants and minimal
restrictive covenants, and shall have defaults limited to payment, breach
of representation, breach of covenant (with customary grace periods),
insolvency, and a cross acceleration to each of the Credit Agreement debt
and the SubDebt Indenture notes. The ING Bridge Noes shall be subject to
the commitment letter and term sheet of even date herewith issued by
certain ING Furman Selz funds to ABC (the "ING Commitment") and otherwise
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subject to a definitive loan agreement and related documents in form and
substance acceptable to the Lenders.
. Upon the fulfillment of the following conditions (the "Conversion
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Condition"): (i) the successful completion of the "SubDebt Consent" (as
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defined below), (ii) ABC's common shareholders approving an increase in the
number of authorized shares of capital stock of ABC sufficient to permit
the issuance of ABC's Class C Convertible Preferred Stock and the maximum
number of shares necessary for the exercise of warrants with respect
thereto, and (iii) certain other conditions, in each case as provided in a
Series C Preferred Stock and Common Stock Warrant Purchase Agreement among
ABC and certain ING Furman Selz funds, in form and substance acceptable to
the Lenders (the "Equity Purchase Agreement"), all of the ING Bridge Notes
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shall be repaid from the proceeds of the sale to the ING Furman Selz funds
of ABC's Class C Convertible Preferred Stock and warrants pursuant to such
Equity Purchase Agreement (the "ING Equity Issuance"). No cash payments
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with respect to accrued interest on the ING Bridge Notes shall be required
of ABC at the time of such conversion. ABC's payment, in cash, of any
termination fees required by the Equity Purchase Agreement upon the
termination of such agreement shall be prohibited by the terms of the
Credit Agreement.
. It shall not be a condition precedent to the making of the loan to be
evidenced by the ING Bridge Notes, or to the ING Equity Issuance, that
ABC's auditors shall have issued an unqualified opinion with respect to
ABC's year 2000 financial statements.
. The resulting ownership of ABC's outstanding equity shall be consistent
with Annex B and the membership of ABC's resulting board of directors shall
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be acceptable to the Lenders, in each case both before and after giving
effect to the ING Equity Issuance.
. The Credit Agreement's cross default provision shall be modified to provide
specifically that it shall be an Event of Default under the Credit
Agreement if any default shall have occurred under or with respect to the
ING Bridge Notes. It shall be an additional Event of Default under the
Credit Agreement if the Conversion Condition shall not have been satisfied
on or before 7/15/01.
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Mexican Refinancing
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. ABC shall exert its good faith reasonable efforts to close, as soon as
practicable, the financing proposed by Bancomer, S.A. and described in its
January 30, 2001 proposal letter and term sheets (the "Bancomer
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Financing"), which financing shall be provided substantially on the terms
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described in such letter and shall be otherwise on terms and conditions
acceptable to the Lenders.
Flow Sale
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. As a condition precedent to the Restructuring, ABC shall have consummated a
sale of ABC's Locomotive, Flow and Specialty Products Group,
buymetalcastings.com, Baltimore Brake Shoe facility and Melrose Park mine
and mill operations (the "Flow Sale") pursuant to the terms of an Asset
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Purchase Agreement in form and substance acceptable to the Lenders among
ABC, certain of its subsidiaries and Matrix Metals LLC, and the Lenders
shall have received for application to the Credit Agreement obligations not
less than $15.5MM in net cash proceeds from such transaction. It shall be
an additional conditions precedent to the Restructuring that (i) the
Lenders shall have received a copy of favorable fairness opinion of Baird
with respect to such sale and (ii) ABC shall have pledged to the Agent, for
the benefit of the Lenders, and as additional security for the Credit
Agreement and related obligations any and all promissory notes issued to
ABC as part of the consideration payable to ABC for the Flow Sale.
Covenants; Disclosures
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. A quarterly rolling minimum EBITDA covenant will be added to the Credit
Agreement (which will build into a cumulative 12-month roll commencing May
1, 2001), as set forth in Annex C hereto. "EBITDA" shall be defined as
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currently provided in the Credit Agreement, provided, that the exclusion
for "above-the-line" non-cash, non-recurring losses or special charges set
forth shall be limited to only those charges and losses which are caused by
the impairment of long term assets of ABC's Calera, Permatrack, Cicero and
Deco operations.
. A loan-to-value covenant will be added to the Credit Agreement testing, on
a monthly basis, the ratio of outstanding loans and letters of credit to
values of categories of collateral, as set forth in Annex C hereto.
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Collateral values for these purposes will be based upon receivables and
inventory determined in accordance with GAAP, and appraised fair market
values of real property and orderly liquidation values of machinery and
equipment existing at closing (as recently appraised in early 2001).
Maximum ratios and/or asset and loan amounts shall be adjusted to reflect
the impairment of long term assets with respect to Calera and the Bancomer
Financing.
. A new covenant will be added to the Credit Agreement and tested quarterly,
as set forth in Annex C hereto, which will limit the aggregate amount of
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net losses related to irregular items (i.e., after EBITDA) to the maximum
cumulative amounts indicated in such annex for each period beginning 4/1/01
and ending as of the dates set forth therein.
. The capital expenditure covenant of the Credit Agreement will be modified
as set forth in Annex C hereto to limit the incurrence or payment of
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capital expenditures.
. All other financial covenants (i.e., leverage ratios, interest coverage
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ratio, minimum net worth and operating coverage ratio tests) will be
eliminated.
. The restrictive covenant regarding asset dispositions shall be revised to
prohibit all dispositions (other than sales of inventory and equipment
described in clauses (i) and (ii) of the proviso contained in the asset
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sale mandatory commitment reduction provision set forth above) without the
prior written consent of the Majority Lenders.
. Disclosure schedules of the Credit Agreement will be updated as of the
closing of the Restructuring.
. Reporting covenants will be expanded to require (i) monthly historical
income statements, balance sheets (including divisional inventory levels),
cash flow statements, and divisional accounts receivable and accounts
payable agings and (ii) monthly projected 13-week cash flows.
Majority Lenders
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. The definition of "Majority Lenders" shall be revised to mean Lenders
holding at least 66-2/3% of outstandings. The mandatory, scheduled
prepayment and commitment reduction schedule described above, and the asset
sale mandatory prepayment and commitment reduction provision described
above, may not be waived or modified without the approval of all of the
Lenders, and the other mandatory prepayment and commitment reductions
relating to equity and debt issuances and excess cash flow may not be
modified or waived without the approval of the Majority Lenders.
Consultants
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. ABC shall continue to employ the services of DSI (or another comparable
consultant acceptable to the Lenders) in a manner and scope acceptable to
the Agent.
. E&Y Capital Advisors, LLC, the Lenders' consultants (engaged by Sidley &
Austin), shall continue to be provided access to such financial and
operation information of ABC as the Lenders deem reasonably necessary.
Subordinated Notes
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. It shall be a condition to the Restructuring that, as of 12/31/00, no
"Event of Default" or unmatured "Event of Default" shall have occurred or
be continuing under the SubDebt Indenture, no noncompliance with any
provision thereof shall have occurred and be continuing; and, as of the
closing date, no notice of any such noncompliance shall have been given by
the trustee or any noteholder thereunder to ABC, and no enforcement action
shall have been taken by such trustee or noteholders. It shall be an
additional condition precedent that the Lenders have received a copy of
ABC's certificate to the trustee with respect to its compliance with such
indenture as of 12/31/00.
. It shall be a condition to the Restructuring that ABC shall have commenced
material actions and good faith reasonable efforts to commence (and shall
covenant to exert such efforts to successfully complete thereafter) a
consent solicitation, in form and substance acceptable to the Agent (the
"SubDebt Consent"), to the holders of notes issued pursuant to the SubDebt
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Indenture requesting a waiver of any noncompliance by ABC of the financial
covenants under the SubDebt Indenture with respect to the period ending
3/31/01, and an amendment with respect thereto for the remaining quarters
of 2001 and for 2002 to extent ABC's existing projections indicate that a
material risk of noncompliance with any such financial covenants during any
such remaining periods may occur. It shall be an additional condition that
the Lenders receive a copy of any comfort letters provided by Baird to
ABC's auditors with respect to Baird's confidence of the success of such
SubDebt Consent.
. The Credit Agreement's existing cross-default provision shall be modified,
to the extent pertaining to the SubDebt Indenture and related notes, such
that during the period commencing with the Restructuring closing and ending
on the earlier of 7/15/01 and the successful completion of the SubDebt
Consent, it shall only be a cross default if the trustee or noteholders
thereunder shall have taken any action to accelerate or otherwise commence
any enforcement action or remedy provided for in the SubDebt Indenture
(other than the delivery of a notice of such noncompliance by the trustee
to ABC), or commence a legal proceeding to enforce any of ABC's obligations
thereunder, in any case with respect to any non-compliance or alleged non-
compliance by ABC under the SubDebt Indenture. It shall be a condition to
the Restructuring that the Lenders receive a copy of any letter prepared by
ABC for its auditors summarizing the comments of the trustee during the
4/12/01 conference call with such auditors regarding the remote likelihood
of enforcement actions being commenced or recommended by the trustee in the
event of a financial covenant default so long as interest payments under
the SubDebt Indenture are being paid currently.
2000 Audit; Projections
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. As a condition precedent to the Restructuring, ABC's independent auditor
shall have completed its audit of ABC's year 2000 financial statements. It
shall not be a condition precedent that such auditors shall have issued an
unqualified opinion with respect thereto (as to going concern).
. At closing, the Lenders shall receive a 13-week rolling cash flow forecast,
and quarterly projected cash flow statements, income statements, balance
sheets (including inventory levels by division), loan outstandings,
accounts receivable and accounts payables agings, in each case through
2002, in form and scope, and based upon assumptions, acceptable to the
Lenders.
Assignments
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. The assignment provision of the Credit Agreement shall be modified to
remove any requirement that ABC's consent would be necessary for any
assignments by the Lenders of their interests in the Credit Agreement and
related obligations.
No Additional Defaults or MAC
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. As a condition precedent to the Restructuring, (i) except with respect to
the existing defaults described in Annex D (collectively, the "Existing
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Defaults"), no Event of Default or Default shall have occurred and be
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continuing, and no event or condition shall exist or occur and be
continuing which could reasonably result in Material Adverse Effect since
12/31/00 (including, without limitation, any materially adverse change in
ABC's trade credit support or customer support) and (ii) no litigation or
governmental proceedings shall have been commenced or threatened with
respect to any of the transactions contemplated by this term sheet.
Waivers
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. Upon the effectiveness of the Restructuring, the Existing Defaults will be
waived by the Lenders.
Release
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. As a condition precedent to the Restructuring, ABC and its subsidiaries
party to any loan document shall release, hold harmless and indemnify the
Agent, the Lenders and their respective agents, advisors and employees with
respect to any and all claims and causes of actions arising prior to the
closing date with respect to all actions, omissions and alleged actions and
omissions, by any such parties with respect to, or in any way related to,
the Credit Agreement, this term sheet, or the transactions contemplated
thereby or hereby.
Professional Expenses
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. Agent's out-of-pocket expenses incurred in connection with the
Restructuring, including professional fees, shall be paid at closing.
* * * *
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ANNEX A
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A. Excess Cash Flow Definitions
"Excess Cash Flow" means, with respect to any fiscal period of the
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Company: (a) the Company's Adjusted Net Earnings from Operations for such
period; minus (b) the sum of (i) all regularly scheduled installments of
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Indebtedness (and, without duplication, mandatory reductions to the Lender's
Commitments) which were actually paid in cash (or made effective, in the case of
commitment reductions) by the Company during such fiscal period; (ii) bank
charges and deferred financing fees and bank agency fees paid in cash during
such period, (iii) Capital Expenditures which were actually paid in cash by the
Company and its Subsidiaries during such fiscal period to the extent permitted
hereunder, other than any such payments already deducted in the computation of
the Company's Adjusted Net Earnings from Operations or pursuant to clause (i)
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above; plus (c) the sum of (i) any depreciation and amortization expense
----
deducted in determining net income for such fiscal period; (ii) other non-cash
charges deducted in computing such net income; (iii) any decrease in the
Company's current assets other than cash during such period; and (iv) any
increase in the Company's current liabilities during such period; minus (d) the
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sum of (i) any increase in such Company's current assets other than cash during
such period; and (ii) any decrease in such Company's current liabilities during
such period.
"Adjusted Net Earnings from Operations" means, with respect to any
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fiscal period of the Company, the net income of such Company and its
Subsidiaries on a consolidated basis after provision for income taxes for such
fiscal period, as determined in accordance with GAAP and reported on its
financial statements for such fiscal period, less any and all of the following
----
included in such net income: (a) gain or loss arising from the sale of any
capital asset; (b) gain arising from any write-up in the book value of any
asset; (c) earnings of any business entity, substantially all the assets of
which have been acquired in any manner, or which has merged or otherwise
consolidated with and into the Company or any Subsidiary to the extent realized
by such other business entity prior to the date of such acquisition, merger or
consolidation; (d) earnings of any business entity (other than a Subsidiary) in
which the Company or any Subsidiary has an ownership interest unless (and only
to the extent) such earnings shall actually have been received by the Company or
such Subsidiary in the form of cash distributions; (e) earnings of any Person to
which assets of the Company or any Subsidiary shall have been sold, transferred
or disposed of, or into which the Company or any Subsidiary shall have been
merged, or which has been a party with the Company or any Subsidiary to any
consolidation or other form of reorganization in which the Company or such
Subsidiary is not the surviving entity, after the date of such transaction; (f)
gain arising from the acquisition of debt or equity securities of the Company or
any Subsidiary or from cancellation or forgiveness of Indebtedness; and (g) gain
arising from extraordinary items including restructuring charges, as determined
in accordance with GAAP, or from any other non-recurring transaction.
23