Exhibit 10.1

 

August 9, 2005

 

 

Beacon Sales Acquisition, Inc.

Beacon Roofing Supply Canada Company

50 Webster Ave.

Somerville, MA 02143

 

Attention:  David Grace

 

Re:                               Commitment for Financing for a $310,000,000
Senior Secured US Credit Facility and a C$15,000,000 Senior Secured Canadian
Credit Facility

 

Ladies and Gentlemen:

 

General Electric Capital Corporation (“GE Capital” or “Agent”) has approved the
terms of a $310,000,000 US Senior Secured Credit Facility, and GE Canada Finance
Holding Company has approved the terms of a C$15,000,000 Canadian Senior Secured
Credit Facility (together with the US Senior Secured Credit Facility, the
“Credit Facility”), upon the general terms and conditions outlined in the
summary of terms attached to this commitment letter (the “Summary of Terms”). 
This commitment is based upon our understanding of the transactions described in
the Summary of Terms and upon the information that you have provided to us.  The
Credit Facility would be used to refinance existing senior indebtedness of
Beacon Sales Acquisition, Inc. (“Beacon”), provide financing for the acquisition
by Beacon of all of the issued and outstanding shares of capital stock and
outstanding warrants to purchase shares of capital stock of SDI Holding, Inc., a
Delaware corporation (“SDI Holding”), and, indirectly, all of the issued and
outstanding shares of capital stock of SDI Acquisition Guarantor, Inc., a
Delaware corporation (“SDI Acquisition”) and of Shelter Distribution, Inc., a
Delaware corporation (“Shelter”, together with SDI Holding and SDI Acquisition,
the “Target”), including the repayment of certain indebtedness of the Target,
and provide financing for future acquisitions, ongoing working capital needs and
expenses relating to the Credit Facility.  Unless otherwise indicated, dollar
amounts indicated herein mean lawful currency of the United States of America.

 

GE Capital’s affiliate, GE Capital Markets, Inc. (“GECM”), will seek to
syndicate a portion of the loans and loan commitments under the Credit Facility
to other financial institutions identified by GECM on the terms and conditions
more fully described in the fee letter dated as of the date hereof between you,
GE Capital and GE Canada (the “Fee Letter”).

 

By your acceptance of this Commitment Letter, you agree to pay all costs and
expenses incurred by GE Capital, GE Canada and GECM in connection with due
diligence and analysis, examination and appraisals, environmental analysis,
documentation, negotiation, syndication and closing of the Credit Facility
including, but not limited to, per diem charges of auditors, appraisers and
consultants, legal fees and other out-of-pocket expenses incurred by GE Capital,
GE Canada and GECM, whether or not GE Capital and GE Canada close the proposed
Credit Facility.

 

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The Summary of Terms is intended to be indicative of the principal terms of the
Credit Facility and does not purport to specify all of the terms, conditions,
representations and warranties, covenants and other provisions that will be
contained in the final loan documents for the Credit Facility.

 

GE Capital and GE Canada are delivering this Commitment Letter to you in
reliance upon the accuracy of all information furnished to GE Capital and GE
Canada by you or on your behalf and with the understanding that you will not
disclose the contents of this letter or GE Capital’s, GE Canada’s or GECM’s
involvement or interest in providing financing for the proposed transaction to
any third party (including, without limitation, any financial institution or
intermediary) without GE Capital’s or GE Canada’s prior written consent other
than to the board of directors of Target, governmental and regulatory
authorities and your advisors and officers on a need-to-know basis.  You agree
to inform all such persons who receive information concerning GE Capital, GE
Canada, GECM or this commitment that such information is confidential and may
not be disclosed to any other person.  GE Capital and GE Canada reserve the
right to review and approve, in advance, all materials, press releases,
advertisements and disclosures that you or your affiliates prepare that contain
GE Capital’s, GE Canada’s or any affiliate’s name or describe GE Capital’s or GE
Canada’s financing commitment.

 

By executing this Commitment Letter, you agree, whether or not GE Capital or GE
Canada closes the proposed Credit Facility, to indemnify GE Capital, GE Canada,
GECM, each other lender involved in the Credit Facility, and their respective
affiliates, and their respective directors, officers, employees, agents,
auditors, accountants, consultants and counsel (each, an “Indemnitee”) from, and
hold each of them harmless against, any and all losses, liabilities, claims,
actions, suits, proceedings, damages or expenses including amounts paid in
settlement, legal fees and defense costs, incurred by any of them arising out of
or by reason of any environmental matters, investigation, litigation or other
proceeding brought or threatened relating to any loan made or proposed to be
made hereunder or otherwise relating to any such loan made or proposed to be
made hereunder, provided, that you shall have no obligation to an Indemnitee
under this paragraph to the extent resulting from the gross negligence or
willful misconduct of that Indemnitee as determined by a court of competent
jurisdiction.  You agree that in any action arising in connection with this
letter or any transaction contemplated hereby the only damages that may be
sought from GE Capital, GE Canada, GECM, their affiliates, each other lender or
any Indemnitee are those which are direct and reasonably foreseeable as the
probable result of any breach hereof and any right to indirect, special,
exemplary, consequential, or punitive damages or lost anticipated profits is
hereby waived.

 

You, GE Capital and GE Canada hereby expressly waive any right to trial by jury
of any claim, demand, action or cause of action arising in connection with this
Commitment Letter, any transaction relating hereto, or any other instrument,
document or agreement executed or delivered in connection herewith, whether
sounding in contract, tort or otherwise.  You, GE Capital and GE Canada consent
and agree that the state or federal courts located in Cook County, State of
Illinois, shall have exclusive jurisdiction to hear and determine any claims or
disputes between or among any of the parties hereto pertaining to this
Commitment Letter, any transaction relating hereto, any other financing related
thereto, and any investigation, litigation, or proceeding related to or arising
out of any such matters, provided, that you, GE Capital and GE Canada
acknowledge that any

 

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appeals from those courts may have to be heard by a court located outside of
such jurisdiction.  You, GE Capital and GE Canada expressly submit and consent
in advance to such jurisdiction in any action or suit commenced in any such
court, and hereby waive any objection which either of them may have based upon
lack of personal jurisdiction, improper venue or inconvenient forum.

 

This Commitment Letter is governed by and shall be construed in accordance with
the laws of the State of Illinois applicable to contracts made and performed in
that State.

 

GE Capital, GE Canada and GECM shall have access to all relevant facilities,
personnel and accountants, and copies of all documents which GE Capital, GE
Canada or GECM may request, including business plans, financial statements
(actual and pro forma), books, records, and other documents.

 

This Commitment Letter and the Fee Letter supersede all prior discussions,
writings, indications of interest and proposals with respect to the Credit
Facility previously delivered to you or your affiliates by GE Capital or any of
its affiliates.  Unless extended in writing by GE Capital, in its discretion,
the commitment contained herein shall expire upon the first to occur of: 
(a) 5:00 p.m., Chicago time on August 10, 2005, unless you shall have executed
and delivered a copy of this letter and the Fee Letter to the attention of the
undersigned prior to that date and time; or (b) 5:00 p.m., Chicago time on
November 1, 2005, unless the transactions contemplated and described by this
Commitment Letter are consummated on or before that date pursuant to written
credit documentation signed by GE Capital and GE Canada.  Upon expiration of the
commitment contained herein, GE Capital, GE Canada GECM and their affiliates
shall have no liability or obligation hereunder.  Expiration of this commitment
shall not affect your obligations hereunder, including to pay any fees, costs or
expenses provided for herein or in any other agreements entered into between you
and GE Capital and GE Canada.

 

We appreciate the opportunity you have given us to deliver a financing
commitment and look forward to working with you.

 

 

 

Sincerely,

GENERAL ELECTRIC CAPITAL CORPORATION

 

 

 

 

 

By:

/s/ Jill K. Carabelli

 

 

Name:

  Jill K. Carabelli

 

 

 

  Its Duly Authorized Signatory

 

 

 

GE CANADA FINANCE HOLDING COMPANY

 

 

 

By:

/s/ Jack F. Morrone

 

 

Name:

  Jack F. Morrone

 

 

Its Duly Authorized Signatory

 

3

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Accepted and Agreed to

this 9th day of August, 2005:

 

 

 

 

 

 

Beacon Sales Acquisition, Inc.

 

 

By:

/s/   David R. Grace

 

Name:

David R. Grace

 

Title:

CFO

 

 

Accepted and Agreed to

this 9th day of August, 2005:

 

Beacon Roofing Supply Canada Company

 

 

By:

/s/   David R. Grace

 

Name:

David R. Grace

 

Title:

CFO

 

 

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August 9, 2005

 

Summary of Terms

$310,000,000 Senior Secured US Credit Facility

C$15,000,000 Senior Secured Canadian Credit Facility

in Support of Beacon Sales Acquisition, Inc.’s Acquisition of Target

 

US Borrower:

 

Beacon Sales Acquisition, Inc. (“US Borrower”), a company that will acquire all
of the equity interests of Target (as defined in the Commitment Letter).

 

 

 

Canadian Borrower:

 

Beacon Roofing Supply Canada Company (“Canadian Borrower”; and together with the
US Borrower “Borrowers”).

 

 

 

Guarantors:

 

Beacon Roofing Supply, Inc. and/or any other holding company formed to hold US
Borrower’s equity interests (“US Holdings”) and each of US Borrower’s
subsidiaries would be required to unconditionally guaranty Borrowers’
indebtedness to Agents and Lenders, and each Borrower would be required to
unconditionally guaranty the other Borrower’s indebtedness to Agents and
Lenders. US Holdings will be a single purpose entity whose sole business will be
to hold its equity position in US Borrower.

 

 

 

Sponsor:

 

Code, Hennessy & Simmons (“CHS”).

 

 

 

Administrative Agent:

 

General Electric Capital Corporation (“GE Capital”) would serve as agent
(“Agent”).

 

 

 

Canadian Agent:

 

GE Canada Finance Holding Company (“GE Canada”) or an affiliate thereof
designated by GE Canada would serve as Canadian agent (“Canadian Agent, together
with Agent, “Agents”)

 

 

 

Sole Lead Arranger and Sole Bookrunner:

 

GE Capital Markets, Inc. (“GECM”).

 

 

 

Lenders:

 

A syndicate of financial institutions (including GE Capital individually)
assembled by GECM to provide the Credit Facility.

 

 

 

Use of Proceeds:

 

i. Acquire the capital stock of Target and refinance existing indebtedness of
Target.

 

 

 

 

 

ii. Refinance and/or restate existing indebtedness under US Borrower’s existing
credit facilities agented by US Agent (the “Existing US Credit Facility”) and
under Canadian Borrower’s existing credit facilities agented by Canadian Agent
(the “Existing Canadian Credit Facility” and, together with the Existing US
Credit Facility, the “Existing Credit Facility”).

 

 

 

 

 

iii. Provide for Borrowers’ ongoing working capital requirements.

 

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iv. Provide for costs and expenses associated with the transaction.

 

 

 

Credit Facility:

 

A $310,000,000 US senior secured credit facility (the “US Credit Facility”)
provided by GE Capital and other Lenders to US Borrower consisting of a
revolving credit facility of $230,000,000 (the “US Revolving Credit Facility”),
which includes a subfacility for $10,000,000 of letters of credit issued by GE
Capital or an affiliate of GE Capital or by one or more banks or other legally
authorized persons acceptable to GE Capital and guaranteed or otherwise backed
by GE Capital and the other Lenders participating in the Revolving Credit
Facility (the “US LC Subfacility”), a $25,000,000 term loan A (“US Term Loan
A”), and a $55,000,000 term loan B (“US Term Loan B” and, together with US Term
Loan A, the “US Term Loans”).

 

 

 

 

 

A C$15,000,000 senior secured credit facility provided by GE Canada to the
Canadian Borrower consisting of a revolving credit facility of up to
C$15,000,000 (the “Canadian Revolving Credit Facility”; and together with the US
Credit Facility, the “Credit Facility”).

 

 

 

Revolving Credit Facility:

 

The US Revolving Credit Facility and Canadian Revolving Credit Facility are
referred to collectively as the “Revolving Credit Facility”. The Revolving
Credit Facility will be used to finance Borrowers’ working capital needs and to
finance future acquisitions of companies which are in the same line of business
of Borrowers and subject to the satisfaction of criteria to be specified in the
Credit Facility documentation. The Revolving Credit Facility would have a term
of five years.

 

 

 

 

 

Availability under the Revolving Credit Facility would be limited to a borrowing
base which, based upon GE Capital’s and GE Canada’s due diligence to date, is
expected to be up to 85% of the net amount of “eligible accounts receivable” and
up to the lesser of 64.5% of the net amount of “eligible inventory” (to be
defined in the Credit Facility documentation) or 85% of net orderly liquidation
value of eligible inventory and would be subject to discretionary reserves. A
seasonal advance rate of up to the lesser of 69.5% of eligible inventory or 95%
of net orderly liquidation value of eligible inventory would also be provided.
Agents will retain the right from time to time to establish or modify advance
rates, standards of eligibility and reserves against availability.

 

 

 

 

 

Availability under the US Credit Facility will be subject to a $5,000,000
minimum availability reserve at all times during the term of the US Credit
Facility.

 

 

 

LC Subfacility:

 

The US LC Subfacility would provide for the issuance of letters of credit for
the account of US Borrower or risk participation agreements or guaranties with
respect to US Borrower’s reimbursement obligations to other letter of credit
issuers. A reserve would be established against availability under the US
Revolving Credit Facility for the face amount of outstanding letters of credit,
risk participation agreements and guaranties.

 

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US Term Loan A:

 

US Term Loan A would have a term of five years and would be repayable in
quarterly principal installments commencing on the last day of the first quarter
ending after the closing in accordance with the following amortization schedule:

 

 

 

 

 

Quarter

 

Amount

 

 

 

 

1-19

 

$

750,000

 

 

 

 

20

 

$

10,750,000

 

 

 

 

 

 

 

 

 

 

Notwithstanding the foregoing, the outstanding principal balance of US Term Loan
A would always be repayable in full on the date on which the Revolving Credit
Facility terminates.

 

 

 

 

 

Amounts repaid on US Term Loan A may not be reborrowed.

 

 

 

US Term Loan B:

 

US Term Loan B would have a term of three years and would be repayable in
quarterly principal installments commencing on the last day of the first quarter
ending after the closing in accordance with the following amortization schedule:

 

 

 

 

 

Quarter

 

Amount

 

 

 

 

1-12

 

$

4,583,334

 

 

 

 

 

 

 

 

 

 

Amounts repaid on US Term Loan B may not be reborrowed.

 

 

 

Incremental Facility:

 

US Borrower shall have the right to increase the size of the US Revolving Credit
Facility at the Agent’s and the Borrower’s mutual agreement, in minimum
increments of $10,000,000 up to an aggregate amount of $50,000,000 (the
“Incremental Facility”) at any time on or before the date which is four years
after the closing date, from existing Lenders and/or new Lenders mutually
acceptable to Agent and Borrower; provided, that (i) no default or event of
default shall have occurred and be continuing and (ii) no commitment of any
Lender shall be increased without the consent of such Lender. The Incremental
Facility shall become part of the Revolving Credit Facility, subject to
appropriate mark to market pricing for the Incremental Facility as well as the
existing Revolving Credit Facility.

 

 

 

Interest:

 

Interest would be payable on the daily outstanding principal balance of all
loans under the US Credit Facility initially at a floating rate per annum equal
to the “Index Rate” plus the “Applicable Margin”. US Borrower would also be
entitled to request, upon three business days prior notice, that all or a
portion of the outstanding principal balance of the loans under the US Credit
Facility bear interest at a per annum rate equal to “LIBOR” plus the Applicable
Margin. The Applicable Margins may be increased by up to 2.0% and the LIBOR
option may be suspended after the occurrence of a default under the US Credit
Facility documentation.

 

 

 

 

 

US Borrower would be required to pay interest monthly in arrears on the daily
outstanding principal balance of the loans on which interest has been

 

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calculated using the Index Rate. When selecting the LIBOR option, US Borrower
would be entitled to choose one, two, three or six month interest periods,
provided that no more than eight interest periods may be in effect at any one
time. US Borrower would be required to pay interest on LIBOR loans in arrears on
the last day of the interest period and, in the case of interest periods of
longer than three months, on the last day of each three month period. In the
event US Borrower repays any LIBOR loan on a day other than the last day of an
interest period for such loan or fails to borrow a requested LIBOR loan on the
date funding was requested, US Borrower would be required to pay a LIBOR
breakage fee to Lenders.

 

 

 

 

 

All interest under the US Credit Facility on LIBOR loans and other obligations
(other than Index Rate loans) will be calculated based on a 360-day year and
actual days elapsed. Interest on Index Rate loans will be calculated based on a
365-day year or 366-day year, as applicable and actual days elapsed.

 

 

 

 

 

Interest would be payable on the daily outstanding principal balance of all
loans under the Canadian Credit Facility initially at a floating rate per annum
equal to the “C$ Index Rate” plus the Applicable Margin. Canadian Borrower would
also be entitled to require, upon three business days prior notice, that all or
a portion of the outstanding principal balance of the loans under the Canadian
Credit Facility bear interest at a per annum rate equal to the “BA Rate” plus
the Applicable Margin. The Applicable Margins under the Canadian Credit Facility
may be increased by up to 2.0% and the BA Rate options may be suspended after
the occurrence of an event of default under the Canadian Credit Facility
documentation.

 

 

 

 

 

Canadian Borrower would be required to pay interest monthly in arrears on the
daily outstanding principal balance of the loans under the Canadian Credit
Facility on which interest has been calculated using the C$ Index Rate. When
selecting a BA Rate option, Canadian Borrower would be entitled to choose a 30,
60 or 90 days BA Rate provided that no more than five BA periods may be in
effect at any one time. Canadian Borrower would be required to pay interest on
BA Rate loans in arrears on the last day of the applicable BA period. BA Rate
loan breakage fees will be set forth in the final Canadian Credit Facility
documentation. All interest under the Canadian Credit Facility will be
calculated based on a 365-day year and actual days elapsed.

 

 

 

 

 

“Index Rate” means a floating rate of interest per annum equal to the higher of
the rate publicly quoted from time to time by The Wall Street Journal as the
“base rate on corporate loans posted by at least 75% of the nation’s 30 largest
banks” or the Federal Funds Rate plus 50 basis points. “LIBOR” means, for each
interest period, the offered rate for deposits in U.S. dollars in the London
interbank market for the relevant interest period which is published by the
British Bankers’ Association, and currently appears on Telerate Page 3750, as of
11:00 a.m. (London time) on the day which is two business days prior to the
first day of such interest period adjusted for reserve requirements.

 

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“C$ Index Rate” means a floating rate of interest per annum equal to the higher
of (i) the annual rate of interest quoted from time to time in the “Report on
Business” section of The Globe and Mail as being “Canadian prime”, “chartered
bank prime rate” or words of similar description and (ii) the BA Rate in respect
of a BA period for 30 days, plus, 1.75%. “BA Rate” means a rate per annum
determined by Canadian Agent by reference to the average rate quoted on the
Reuters Monitor Screen Page CDOR (displaying Canadian interbank bid rates for
Canadian dollar bankers’ acceptances) applicable to bankers’ acceptances for the
applicable term as of 11:00 a.m. (Toronto time) two (2) business days prior the
beginning of such term.

 

 

 

 

 

The definitions of “Index Rate”, “LIBOR”, “C$ Index Rate” and “BA Rate” and used
in this summary have been abbreviated and the Credit Facility documentation
would set forth appropriate detail describing the exact method of calculation
and relevant reserve requirements. The Credit Facility documentation will
contain LIBOR and BA breakage provisions, LIBOR and BA borrowing mechanics and
other LIBOR and BA definitions.

 

 

 

 

 

Solely for purposes of calculating interest, good funds will be credited to the
outstanding principal balance of the Revolving Credit Facility one day after
receipt thereof.

 

 

 

Default Rate:

 

The Applicable Margins may be increased by up to 2.0% and the LIBOR option and
BA Rate option may be suspended after the occurrence of a default.

 

 

 

Applicable Margins:

 

The “Applicable Margin” (on a per annum basis) for each type of loan and for
purposes of calculating certain fees will be as specified and described below:

 

 

 

 

 

Applicable US Revolver Index Margin: 0.50%

 

 

 

 

 

Applicable US Revolver LIBOR Margin: 1.75%

 

 

 

 

 

Applicable Canadian Revolver C$ Index Margin: 0.50%

 

 

 

 

 

Applicable Canadian Revolver BA Margin: 1.75%

 

 

 

 

 

Applicable US Term Loan A Index Margin: 0.50%

 

 

 

 

 

Applicable US Term Loan A LIBOR Margin: 1.75%

 

 

 

 

 

Applicable US Term Loan B Index Margin: 1.50%

 

 

 

 

 

Applicable US Term Loan B LIBOR Margin: 2.75%

 

 

 

 

 

On March 1, 2006, and thereafter on the first day of each fiscal quarter
(commencing July 1, 2006) (each such date, an “adjustment date”), the Applicable
US Revolver Index Margin, the Applicable US Revolver LIBOR Margin, the
Applicable Canadian Revolver C$ Index Margin and

 

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the Applicable Canadian Revolver BA Margin would be percentages that are
determined on a prospective basis based on the Interest Rate Excess Availability
as set forth on Schedule I (Applicable Margins) attached hereto. “Interest Rate
Excess Availability” means, for any adjustment date, the average daily excess
availability (to be defined in the Credit Facility documentation) for the
three-month period preceding such date, as determined by the Agents.

 

 

 

 

 

The Credit Facility documentation will contain other provisions regarding the
timing and mechanics of subsequent prospective adjustments in Applicable
Margins. If a default is continuing at the time that a reduction in Applicable
Margins is to be implemented, the reduction will be deferred until the first
month commencing after the cure or waiver thereof.

 

 

 

Fees:

 

In addition to the fees payable to GE Capital and GE Canada as specified in the
fee letter between Borrowers, GE Capital and GE Canada dated on or about the
date hereof (the “Fee Letter”), the following fees would be payable by Borrowers
in connection with the Credit Facilities:

 

 

 

 

 

A fee (calculated on the basis of a 360 day year) of 0.375% per annum of the
average daily balance of the unused portion of the Revolving Credit Facility
would be payable monthly in arrears.

 

 

 

 

 

With respect to the US LC Subfacility, a fee equal to the product of the average
daily undrawn face amount of all letters of credit issued, guaranteed or
supported by risk participation agreements multiplied by a per annum rate equal
to the Applicable LIBOR Margin for the US Revolving Credit Facility would be due
and payable monthly in arrears, together with any bank fees and charges incurred
by Agent to a letter of credit issuer.

 

 

 

 

 

The out-of-pocket cost (including fees and expenses) paid to third party
auditors, or a fee of $800 per audit day per in-house auditor plus out-of-pocket
expenses, would be payable by Borrowers to Agents.

 

 

 

Prepayment Requirements/Commitment Reductions:

 

To be consistent with Existing Credit Facility documentation.

 

 

 

Collateral:

 

To be consistent with Existing Credit Facility documentation. In connection
therewith, Agent shall have received lien searches with respect to Target, with
results satisfactory to Agent.

 

 

 

Insurance:

 

Agent shall have received policies or binders for property and casualty,
liability, business interruption and other insurance satisfying the requirements
of the Credit Facility documentation with appropriate endorsements or
assignments naming Agent as loss payee, assignee, mortgagee and additional
insured, as appropriate, and non-renewal/cancellation/amendment riders to
provide 30 days advance notice to Agent.

 

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Cash Management:

 

Cash management system acceptable to Agent. Agent will require Borrower to use
commercially reasonable efforts to obtain springing blocked account agreements
for all deposit accounts of Borrower and its subsidiaries within 120 days
following the closing date, and if Borrower is unable to obtain such agreements
within such period (or such longer period as may be agreed to by Agent), Agent
may require that Borrower and its subsidiaries replace such deposit accounts
with deposit accounts at banks subject to such agreements with Agent.

 

 

 

Equity Structure:

 

The equity structure of Borrower and Holdings shall remain unchanged with
Holdings owning 100% of Borrower.

 

 

 

Documentation:

 

Documentation evidencing the Credit Facilities contemplated herein shall be
satisfactory to Agent and Lenders. Without limiting the generality of the
foregoing, payment of the “earn-out” under the SDI Acquisition (as defined in
the Commitment Letter) documentation shall be permitted only if before and after
giving effect to such payment (i) no Event of Default shall have occurred and be
continuing under the Credit Facility documentation, and (ii) Excess Availability
shall exceed $[TBD].

 

 

 

Conditions to Funding:

 

The Credit Facility documentation would contain such conditions to funding as
are described herein. All extensions of credit under the Credit Facility will be
subject to the continuing accuracy of representations and warranties and the
absence of defaults.

 

 

 

 

 

The conditions to the initial funding will include the following and those set
forth elsewhere herein and in the Commitment Letter and Fee Letter, each of
which must be satisfied to Agent’s satisfaction:

 

 

 

 

 

•                  Satisfactory inventory appraisals of Borrowers and their
subsidiaries, and Target, conducted by auditors and appraisers acceptable to
Agents, which appraisals are expected to be received by August 10, 2005.

 

•                  No material adverse change with respect to the financial
condition, collateral, operations, industry, business or prospects of Borrowers,
their subsidiaries and Target, taken as a whole; no litigation commenced which
could reasonably be expected to have a material adverse effect upon any of the
foregoing.

 

•                  The acquisition of Target shall have closed contemporaneously
with the Credit Facility on substantially the terms set forth in the draft
acquisition documents previously delivered to the Agents.

 

•                  No material adverse change with respect to the business plan,
including financial projections, previously provided to Agents and Lenders.

 

•                  Receipt by Agents of audited financial statements of Target
for the six-month period ending June 30, 2005.

 

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•                  Agents and Lenders shall be satisfied, based on financial
statements (actual and pro forma), projections and other evidence provided by
Borrowers, or requested by Agents, that Borrowers after incurring the
indebtedness contemplated by the Credit Facility, will be solvent, able to
satisfy their obligations as they mature and adequately capitalized.

 

•                  The ownership, capital, corporate, tax, organizational and
legal structure of Borrowers and their subsidiaries shall remain unchanged
except for Target becoming a Subsidiary of Borrower.

 

•                  Any third-party and regulatory approvals and consents
necessary to consummate the proposed transactions shall have been obtained and
shall be final and non-appealable.

 

•                  After giving effect to the payment of, or the creation of a
reserve for, all fees and expenses related to the closing, Borrowers shall have
unused availability of at least $35 million under the Revolving Credit Facility
for working capital needs on the closing date.

 

•                  Leverage (including all funded debt and letters of credit)
will be less than or equal to 3.6x. The foregoing numbers are based on a closing
date of not later than August 31, 2005 and, in the event of a later closing
date, such numbers shall be adjusted in a manner satisfactory to Agents and
consistent with the business plan previously provided to the Agents.

 

•                  Agent shall have received such resolutions, consents,
certificates, legal opinions and other documents as it shall have reasonably
requested with respect to the execution and delivery of the Credit Facility
documentation, the related transactions and performance of the obligations
created thereunder and which are customary for transactions of this type.

 

 

 

Permitted Acquisitions:

 

To be consistent with Existing Credit Facility documentation.

 

 

 

Third Party Assistance:

 

Borrower shall reimburse Agent for the fees and expenses of all accountants,
appraisers, industry consultants, environmental engineering firms and other
professionals that Agent has engaged to assist in conducting due diligence for
the transaction.

 

 

 

Assignments/Participations:

 

Lenders would have the right at any time to sell and assign interests and sell
participations under the Credit Facility to other financial institutions with
the consent of Agent in accordance with customary terms.

 

 

 

Requisite Lenders:

 

Lenders having more than 50% of the commitments of all Lenders, subject to
certain supermajority provisions as Agent may determine.

 

8

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Governing Law:

 

Illinois.

 

9

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SCHEDULE I (APPLICABLE MARGINS)

 

If Interest Rate Excess Availability is:

 

Level of Applicable Margins:

< $25,000,000

 

Level I

> $25,000,000, but < $50,000,000

 

Level II

> $50,000,000

 

Level III

 

 

 

Applicable Margins

 

 

 

Level I

 

Level II

 

Level III

 

Applicable Revolver Index Margin

 

0.50%

 

0.375%

 

0.25%

 

Applicable Revolver LIBOR Margin

 

1.75%

 

1.625%

 

1.50%

 

 

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