exv10w1






Exhibit 10.1




ABLECO FINANCE LLC

299 Park Avenue

New York, New York 10171




August 4, 2008




Wellman, Inc.

c/o Lazard Freres & Co., LLC

30 Rockefeller Plaza, 60th Floor

New York, NY 10020




Attention: Mr. Andrew Yearly, Managing Director



Re:     Financing Commitment




Dear Mr. Yearly:




     Wellman, Inc., a Delaware corporation (the “Company”), has advised Ableco Finance LLC
(“Ableco”) that the Company and certain of its domestic subsidiaries (the Company, together
with certain subsidiaries of the Company designated by Ableco, each a “Borrower” and
collectively, the “Borrowers”), require revolving loan financing (i) to fund a portion of
the payments to be made under the Borrowers’ joint plan of reorganization (the “Plan”)
solicited pursuant to the Disclosure Statement dated June 25, 2008 (as amended from time to time,
the “Disclosure Statement”) relating to the Borrowers’ Plan under Chapter 11 of The
Bankruptcy Code in their Chapter 11 bankruptcy case (the “Case”) commenced in the United
States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”),
(ii) to fund general corporate needs including working capital needs after consummation of the
Plan, and (iii) to pay fees and expenses related to the Case and the financing contemplated by this
commitment letter. Ableco (in such capacity, the “Lender”) is pleased to advise you that
Ableco hereby commits to provide the Borrowers with a senior secured financing facility in the
maximum aggregate amount of $175,000,000 (the “Financing Facility”) substantially on the
terms and conditions set forth in the Outline of Terms and Conditions attached hereto as
Exhibits A (the “Term Sheet”). The Financing Facility will consist of (a) a
revolving credit facility of $125,000,000 outstanding at any time, including a $40,000,000
subfacility for the issuance of letters of credit and (b) a term loan facility of up to
$50,000,000. All obligations of the Borrowers under the Financing Facility will be guaranteed by
each domestic subsidiary of the Company that is not a Borrower (each a “Guarantor” and
collectively, the “Guarantors”) and secured by a first priority lien on, and security
interest in, all assets of the Borrowers and the Guarantors, except that such lien on and security
interest in the collateral (the “PP&E”) securing the New First Lien Note (as defined in the
Plan) shall be junior in priority to the lien thereon securing obligations under the PP&E Term Loan
Facility (as defined in the Term Sheet). Ableco’s commitment to provide the Financing Facility is
subject in all respects to the



 









 





Wellman Inc.

August 4, 2008

Page 2



satisfaction of the terms and conditions contained in this commitment letter and in the Term Sheet.




     The Company, on behalf of itself and the other Borrowers and Guarantors, acknowledges that
this commitment letter and the Term Sheet are intended as an outline only and, unless otherwise
indicated, do not purport to summarize all the conditions, covenants, representations, warranties
and other provisions which would be contained in definitive legal documentation for the Financing
Facility. The loan documentation for the Financing Facility will include, in addition to the
provisions that are summarized in this commitment letter and the Term Sheet, provisions that are
customary or typical for this type of financing transaction.



     By its execution hereof and its acceptance of the commitment contained herein, the Company, on
behalf of itself, the other Borrowers and the Guarantors, agrees to indemnify and hold harmless the
Lender, any other entity that becomes a Lender as contemplated by the Term Sheet and each of their
respective assignees and affiliates and their respective directors, partners, members, officers,
employees and agents (each an “Indemnified Party”) from and against any and all documented
losses, claims, damages, liabilities or other expenses to which such Indemnified Party may become
subject, insofar as such losses, claims, damages, liabilities (or actions or other proceedings
commenced or threatened in respect thereof) or other expenses arise out of or in any way relate to
or result from, this commitment letter or the extension of the Financing Facility contemplated by
this commitment letter, or in any way arise from any use or intended use of this commitment letter
or the proceeds of the Financing Facility contemplated by this commitment letter, and the Company
agrees to reimburse each Indemnified Party for any reasonable, documented, out-of-pocket legal or
other expenses incurred in connection with investigating, defending or participating in any such
loss, claim, damage, liability or action or other proceeding (whether or not such Indemnified Party
is a party to any action or proceeding out of which indemnified expenses arise), but excluding
therefrom all expenses, losses, claims, damages and liabilities which are finally determined in a
non-appealable decision of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Indemnified Party or as a result of disputes solely among
Indemnified Parties. In the event of any litigation or dispute involving this commitment letter or
the Financing Facility, the Lender shall not be responsible or liable to any Borrower, any
Guarantor or any other person for any special, indirect, consequential, incidental or punitive
damages. In addition, the Company agrees to reimburse the Lender for all reasonable fees and
expenses (the “Expenses”) incurred by or on behalf of the Lender in connection with the
negotiation, preparation, execution and delivery of this commitment letter, the Term Sheet and any
and all definitive documentation relating hereto and thereto, including, but not limited to, the
reasonable fees and expenses of counsel to the Lender and the fees and expenses incurred by the
Lender in connection with any due diligence,
collateral reviews, appraisals, valuations and field examinations and syndication of the
Financing Facility. The obligations of the Company under this paragraph shall remain effective to
the extent definitive documentation is not executed and notwithstanding any termination of this
commitment letter, except as otherwise provided in this commitment letter.



 









 





Wellman Inc.

August 4, 2008

Page 3




     On the date of execution hereof, the Company shall pay to the Lender in immediately available
funds, subject to the approval of the Bankruptcy Court (to the extent required), a non-refundable
commitment fee equal to $1,000,000 (the “Commitment Fee”), which fee (i) shall be earned in
full on the date the Company accepts this commitment letter and the Term Sheet and obtains
necessary Bankruptcy Court approval and (ii) is in addition to the initial expense deposit of
$150,000 paid by the Company to the Lender prior to the date hereof (the “Initial
Deposit”). The unused portion of the Initial Deposit will be returned to the Company. The
Lender may request, and the Company shall forthwith pay to the Lender, in immediately available
funds, an additional expense deposit if the amount of Expenses incurred or to be incurred by the
Lender in connection with the Financing Facility exceeds or will exceed the amount of the Initial
Deposit. The Initial Deposit will not be segregated and may be commingled with other funds and the
Company will not be entitled to receive interest on the Initial Deposit.



     The Company agrees to use its reasonable efforts to obtain the approval of the Bankruptcy
Court, to the extent necessary, to authorize the actions contemplated by the immediately preceding
two paragraphs by the date set forth below.



     The Lender’s commitment to provide the Financing Facility is subject to (i) the negotiation,
execution and delivery of definitive loan documentation in form and substance satisfactory to the
Lender and its counsel (including, but not limited to, the form and substance of the portions of
any order of the Bankruptcy Court approving the Financing Facility), (ii) the satisfaction of the
Lender that since the date hereof there has not occurred or become known to the Lender any material
adverse change with respect to the condition, financial or otherwise, business, operations, assets,
liabilities or prospects of the Borrowers and their subsidiaries taken as a whole (a “Material
Adverse Change”), provided, however, that, for the purposes of determining whether a Material
Adverse Change has occurred, any change with respect to the condition, financial or otherwise,
business, operations, assets, liabilities or prospects relating to the filing of the Case, the
events typically resulting from the filing of the Case (as determined by the Lender in its
reasonable business judgment) or the process relating to the Borrowers’ implementation of the Plan,
shall be disregarded, and (iii) the satisfaction of the conditions set
forth in the Term Sheet, as determined by the Lender in its reasonable business judgment. If
at any time the Lender shall determine that either (A) the Borrowers have been unable to fulfill
any condition set forth in this commitment letter or in the Term Sheet or (B)  any Material Adverse
Change has occurred and is continuing, the Lender may terminate this letter by giving notice
thereof to the Company (subject to the obligation of the Company to pay all fees, costs, expenses
and other payment obligations expressly assumed by the Company hereunder, which shall survive the
termination of this commitment letter).



     The Company, on behalf of itself and the other Borrowers and Guarantors, acknowledges and
agrees that the Lender intends to syndicate a portion of the Financing Facility to one or more
other lenders. The Lender will manage all aspects of the syndication in consultation with the
Borrowers, including determining the timing of all offers to potential lenders, any title of agent
or similar designations awarded to any lender and the acceptance of



 









 





Wellman Inc.

August 4, 2008

Page 4



commitments, the amounts
offered and the compensation provided to each lender from the amounts to be paid to the Arrangers
pursuant to the terms of this commitment letter and Term Sheet. By its execution hereof and its
acceptance of the commitment contained herein, the Company agrees to take all reasonable action as
the Lender may reasonably request, from time to time, to assist the Lender reasonably in forming a
syndicate acceptable to the Lender, including, without limitation, (i) making senior management,
representatives and advisors of the Borrowers reasonably available to participate in rating agency
meetings, lender meetings and other communications with potential lenders at such times and places
as the Lender may reasonably request, (ii) assisting in the preparation of an information
memorandum for the financing and other marketing materials to be used in connection with the
syndication thereof, and (iii) promptly providing the Lender with all reasonable non-privileged
information in possession of the Borrowers that is deemed reasonably necessary by the Lender to
successfully complete the syndication of the financing; provided that syndication is not a
condition to close or the commitments of Ableco hereunder.




     The Company agrees that information regarding the Financing Facility and information provided
by the Company or its representatives to the Lender in connection with the Financing Facility
(including, without limitation, draft and execution versions of the Loan Documents, publicly filed
financial statements, and draft or final offering materials relating to contemporaneous or prior
securities issuances by the Company) may be disseminated to potential lenders and other persons, in
each case who have agreed to be bound by the confidentiality provisions contained herein, through
one or more internet sites (including an IntraLinks, SyndTrak or other electronic workspace (the
“Platform”)) created for purposes of syndicating the
Financing Facility or otherwise, in accordance with the Lender’s standard syndication
practices (including hard copy and via electronic transmissions), and you acknowledge that neither
the Lender nor any of their respective affiliates will be responsible or liable to you or any other
person or entity for damages arising from the use by others of the information or other materials
obtained from the Platform, except to the extent any such damages have been found by a final,
non-appealable judgment of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Lender or any of its officers, directors, employees,
affiliates and controlling persons.



     The Company, on behalf of itself, the Borrowers and the Guarantors, represents and warrants
that, to the best of its knowledge, (i) all written information and other materials concerning the
Company, any other Borrower or any Guarantor (collectively, the “Information”), (other than
business plans, projections, budgets, estimates, forward looking statements and general market data
(collectively, the “Projections”)), which Information has been, or is hereafter, made
available by, or on behalf of the Company, any other Borrower or any Guarantor, when considered as
a whole, does not, or will not when delivered, contain any untrue statement of material fact or
omit to state a material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances under which such statement has been made and (ii) to the
extent that any such Information contains Projections, such Projections were prepared in good faith
on the basis of (A) assumptions, methods and tests stated therein which are believed by each
Borrower and each Guarantor to be reasonable and



 









 





Wellman Inc.

August 4, 2008

Page 5



(B) information believed by each Borrower and each Guarantor to have been accurate based upon the
information available to the Company at the time when such Projections were made, any other
Borrower or any Guarantor at the time such Projections were furnished to the Lender; it being
understood that (i) Projections are by their nature uncertain and are not a guarantee of financial
performance and (ii) actual results may differ materially from the Projections and such variations
may be material. The Company agrees that if at any time prior to the Closing Date, any of the
representations in the preceding sentence would be incorrect in any material respect if the
information and projections were being furnished, and such representations were being made, at such
time, then the Company will promptly supplement, or cause to be supplemented, the information and
projections so that such representations will be correct in all material respects under those
circumstances.




     This commitment letter is delivered to the Company upon the condition that, neither the
existence of this commitment letter or the Term Sheet, nor any of their contents, shall
be disclosed by the Company, any other Borrower or any Guarantor, except (i) after acceptance
by the Company as provided below (A) disclosure of the commitment letter and the Term Sheet as may
be compelled in a judicial or administrative proceeding, as otherwise required by law or as may be
necessary or advisable (in the Borrowers’ opinion) to comply with applicable securities law and (B)
disclosure of the terms of the commitment letter and the Term Sheet to the Bankruptcy Court and the
filing of the commitment letter and the Term Sheet on the Bankruptcy Court’s docket and service of
same to those required to be notified, the Company’s existing lenders and the official committee of
unsecured creditors appointed in the Case, and (ii) disclosure of the commitment letter or the Term
Sheet on a confidential and “need to know” basis, solely to the directors, officers, employees,
advisors and agents of the Company. In addition, the Company agrees, on behalf of itself, the
other Borrowers and the Guarantors, that, except as permitted in the immediately preceding
sentence, it will (i) notify the Lender prior to the making of any filing in which reference is
made to the Lender or the commitment contained herein, and (ii) obtain the prior approval of the
Lender before releasing any public announcement in which reference is made to the Lender or to the
commitment contained herein. The Company acknowledges that the Lender and its affiliates may now
or hereafter provide financing or obtain other interests in other companies in respect of which any
Borrower or its affiliates may be business competitors, and that the Lender and its affiliates will
have no obligation to provide to any Borrower or any of its affiliates any confidential information
obtained from or in respect of such other companies.



     The offer made by the Lender in this commitment letter shall expire, unless otherwise agreed
by the Lender in writing, upon the earlier of (i) termination of the Plan submitted by the Company
to, or rejection of the Plan by, the Bankruptcy Court and (ii) 5:00 p.m. (New York City time) on
August 29, 2008, unless prior thereto the Lender has received (A) a copy of this commitment letter,
signed by the Company accepting the terms and conditions of this commitment letter and the Term
Sheet, (B) the Commitment Fee, in immediately available funds and (C) the approval of the
Bankruptcy Court if required for the Company to deliver a signed copy of the commitment letter to
the Lender and to pay the Commitment Fee. Once accepted as provided above, the commitment by the
Lender to provide



 









 





Wellman Inc.

August 4, 2008

Page 6



the Financing Facility shall expire at 5:00 p.m. (New York City time) on October 15, 2008, unless
prior thereto, definitive loan documentation shall have been agreed to in writing by all parties
and the conditions set forth therein shall have been satisfied (it being understood that the
Company’s obligation to pay all amounts in respect of indemnification and Expenses shall survive
termination of this commitment letter).




     The Lender hereby notifies the Company that pursuant to the requirements of the USA PATRIOT
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) and other
applicable law relating to money laundering and terrorist financing, certain lenders may be
required to obtain, verify and record information that identifies the Borrowers and Guarantors,
which information includes the name and address of such company and other information that will
allow such lender to identify such company in accordance with the Act and such other applicable
law. This notice is given in accordance with the requirements of the Act and is effective for each
Lender.



     This commitment letter, including the attached Term Sheet (i) supersedes all prior
discussions, agreements, commitments, arrangements, negotiations or understandings, whether oral or
written, of the parties with respect thereto, (ii) shall be governed by the law of the State of New
York, without giving effect to the conflict of laws provisions thereof, (iii) shall be binding upon
the parties and their respective successors and assigns, (iv) may not be relied upon or enforced by
any other person or entity, and (v) may be signed in multiple counterparts and delivered by
facsimile or other electronic transmission, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument. If this commitment letter becomes the
subject of a dispute, each of the parties hereto hereby waives trial by jury. This commitment
letter may be amended, modified or waived only in a writing signed by each of the parties hereto.



[Remainder of Page Intentionally Left Blank.]




 









 








     Should the terms and conditions of the offer contained herein meet with your approval, please
indicate your acceptance by signing and returning a copy of this letter to the Lender and wiring
the Commitment Fee, in immediately available funds, to an account designated by the Lender.



	 	 	 	 	 
	 	Very truly yours,



ABLECO FINANCE LLC

 	 
	 	By:  	/s/ Kevin Genda
 	 
	 	 	Name:  	Kevin Genda 	 
	 	 	Title:  	Vice Chairman 	 
	 



Agreed and accepted on this

4 day of August 2008:




	 	 	 	 	 
	WELLMAN, INC.

	 	 
	 
	 	 	 	 
	By:

	 	/s/ Keith R. Phillips
 

Name: Keith R. Phillips
	 	 
	 

	 	Title: Chief Financial Officer	 	 







 












 





Exhibit A




Wellman, Inc.




Outline of Terms and Conditions for Financing Facility



This Outline of Terms and Conditions is part of the commitment letter, dated August 4, 2008
(the “Commitment Letter”), addressed to Wellman, Inc. (the “Company”) by Ableco
Finance LLC (“Ableco”) and is subject to the terms and conditions of the Commitment Letter.
Capitalized terms used herein shall have the meanings set forth in the Commitment Letter unless
otherwise defined herein.




	 	 	 
	BORROWERS:

	 	The Company and its domestic subsidiaries.
	 
	 	 
	GUARANTORS:

	 	All domestic subsidiaries of the Company that
are not Borrowers (together with the Borrowers,
each a “Loan Party” and collectively, the “Loan
Parties”).
	 
	 	 
	LENDER:

	 	Ableco and such other lenders designated by
Ableco. One or more of such Lenders may act as
administrative and/or collateral agent for such
Lenders.
	 
	 	 
	FINANCING FACILITY:

	 	A $175,000,000 credit facility consisting of
(i) a revolving credit facility in an amount of
$125,000,000 (the “Revolving Credit Facility”),
and (ii) a term loan facility in an amount of
$50,000,000 (the “Term Loan Facility” and,
together with the Revolving Credit Facility,
the “Financing Facility”).
	 
	 	 
	 

	 	Revolving Credit Facility:
	 
	 	 
	 

	 	A Revolving Credit Facility of $125,000,000,
with a $40,000,000 subfacility for the issuance
of letters of credit. Aggregate revolving
credit loans (the “Revolving Loans”) and
letters of credit (“Letters of Credit”) under
the Revolving Credit Facility shall be limited
to an amount at any time outstanding not to
exceed the lesser of (i) $125,000,000 and
(ii) the Borrowing Base.
	 
	 	 
	 

	 	Borrowing Base:
	 
	 	 
	 

	 	The Borrowing Base (to be defined in a manner
substantially the same as such term is defined
in the Borrowers’ existing revolving credit
facility) shall be equal to the result of (1)
the sum of (a) eighty-five percent (85%) of
eligible domestic accounts receivable, net of
customary reserves and provided dilution does
not exceed five percent (5%); plus (b) the
lesser of (i) seventy percent (70%) of the
eligible domestic inventory, (ii) eighty-five
percent (85%) of the appraised net orderly
liquidation value of inventory and (iii)
$80,000,000; minus (2) the sum of (c)
$10,000,000, increasing to $20,000,000 60 days
after the Closing Date (as hereinafter
defined); plus (d) the principal balance of the
Term Loan (as hereinafter defined).






 









 






	 	 	 
	 

	 	Eligible domestic accounts receivable and
eligible domestic inventory shall be defined in
a manner reasonably satisfactory to the Lender
and the Company and valued based upon the
results of the Lender’s field examination,
audit and appraisal. In addition, the Lender
will have the right to establish reserves in
the reasonable business judgment of the Lender
which are customary in transactions of this
nature.
	 
	 	 
	 

	 	Term Loan Facility:
	 
	 	 
	 

	 	A term loan (the “Term Loan” and, together with
the Revolving Loans, the “Loans”) shall be made
on the Closing Date in the amount equal to
$50,000,000. The Term Loan shall not be
subject to amortization and shall be repaid in
full on the Maturity Date.
	 
	 	 
	LETTERS OF CREDIT:

	 	Each Letter of Credit shall be issued by a bank
selected by the Lender and shall be reasonably
acceptable to the Borrowers, and shall have an
expiry date that is not later than five (5)
days prior to the Maturity Date (as hereinafter
defined) unless on or prior to the Maturity
Date such Letter of Credit shall be cash
collateralized in an amount equal to 103% of
the face amount of such Letter of Credit. The
Borrowers will be bound by the usual and
customary terms contained in the Letter of
Credit issuance documentation of the issuing
bank.
	 
	 	 
	TERM:

	 	The Financing Facility shall terminate on the
fourth anniversary of the Closing Date
(the “Maturity Date”).
	 
	MANDATORY 

AND OPTIONAL PREPAYMENT:

	 	Mandatory: The Revolving Loans shall be
prepaid to the extent that the aggregate
outstanding principal amount of Revolving Loans
and the undrawn and unreimbursed amount of
Letters of Credit exceed the Borrowing Base in
effect at such time.
	 
	 	 
	 

	 	The outstanding principal amount of the Term
Loan shall be prepaid in the event that the
entire Revolving Credit Facility is terminated
in accordance with the terms of the Financing
Agreement.
	 
	 	 
	 

	 	In addition, other customary mandatory
prepayments will be included in the definitive
loan documentation as follows: (i) 100% of the
net cash proceeds of non-ordinary course asset
sales (subject to a minimum amount and
reinvestment provisions to be mutually agreed);
(ii) 100% of the proceeds of any debt issuance
(excluding proceeds from certain issuances of
permitted debt including issuances of
convertible debt contemplated by the Plan);
(iii) 100% of the proceeds of any equity
issuance (subject to certain exclusions and
limitations to be mutually agreed); and
(iv) 100% of the net cash proceeds of tax
refunds (not including refunds of estimated tax
payments or payments made with the extension of
a tax return), insurance and casualty proceeds






A-2









 






	 	 	 
	 

	 	(subject to a minimum amount and reinvestment
provisions to be mutually agreed and excluding
all such proceeds related to the PP&E ) and
other extraordinary cash receipts. No
prepayments shall be required to the extent of
any proceeds required to be paid over to the
Distribution Trust (as defined in the Plan).
	 
	 	 
	 

	 	All mandatory prepayments (except to the extent
required as a result of the aggregate
outstanding principal amount of Revolving Loans
and the undrawn and unreimbursed amount of
Letters of Credit exceeding the Borrowing Base
in effect at such time) shall be applied,
first, to the Revolving Loans (and, upon
termination of the commitment under the
Revolving Credit Facility, to the cash
collateralization of outstanding Letters of
Credit) and, second, to the Term Loan. All
mandatory prepayments (except to the extent
required as a result of the aggregate
outstanding principal amount of Revolving Loans
and the undrawn and unreimbursed amount of
Letters of Credit exceeding the Borrowing Base
in effect at such time) applied to the
Revolving Loans shall be accompanied by a
corresponding permanent reduction in the
revolving credit commitment under the Revolving
Credit Facility. Mandatory prepayments
required as a result of the aggregate
outstanding principal amount of Revolving Loans
and the undrawn and unreimbursed amount of
Letters of Credit exceeding the Borrowing Base
in effect at such time shall be applied to the
Revolving Loans and, if no Revolving Loans are
then outstanding, to cash collateralize
outstanding Letters of Credit (subject to
release of such cash collateral to the Loan
Parties upon compliance with the maximum
outstandings permitted under the Revolving
Credit Facility).
	 
	 	 
	 

	 	Optional: The Borrowers may prepay the Loans,
in whole at any time or in part from time to
time, subject, in the case of the reduction or
termination of the commitments under Revolving
Credit Facility and the prepayment of the Term
Loan, to the prepayment premium referred to
below.
	 
	 	 
	 

	 	Prepayment Premium: Voluntary termination or
reduction of the commitments under the
Revolving Credit Facility and voluntary
prepayment of the Term Loan shall be subject to
an early termination fee equal to the sum of
the amount of such reduction of the commitments
under the Revolving Credit Facility (or, in the
case of termination of the Revolving Credit
Facility, the total amount of the Revolving
Credit Facility immediately prior to such
termination) and the principal amount of such
prepayment of the Term Loan multiplied by (i)
2.0%, in the event that such termination or
reduction and prepayment occur on or before the
first anniversary of the Closing Date and (ii)
1.0% in the event that such termination or
reduction and prepayment occurs after






A-3









 






	 	 	 
	 

	 	the first
anniversary of the Closing Date and on or
before the second anniversary of the Closing
Date. No such termination fee will be payable
for any termination or reduction of the
commitments under the Revolving Credit Facility
or prepayment of the Term Loan occurring on or
after the second anniversary of the Closing
Date.
	 
	 	 
	CLOSING DATE:

	 	The first date on which all definitive loan
documentation satisfactory to the Lender (the
“Loan Documents”) is executed by the Loan
Parties and the Lender and all conditions
precedent set forth in such Loan Documents
shall have been satisfied, which date shall not
be later than October 15, 2008, unless
otherwise agreed in writing by the Lender and
the Company (the “Closing Date”).
	 
	 	 
	COLLATERAL:

	 	All obligations of the Loan Parties to the
Lender shall be secured by a perfected, first
priority lien (subject to customary permitted
prior liens to be agreed upon by the Lender and
the Company) on and security interest in all of
the Loan Parties’ now owned and hereafter
acquired assets, including, without limitation,
all real property, fixtures, accounts,
inventory, equipment, documents, general
intangibles, payment intangibles, contract
rights, chattel paper, instruments, investment
property, commercial tort claims, trademarks,
copyrights, patents and other intellectual
property, deposit accounts, cash and cash
equivalents and all other assets and property
of the Loan Parties, real and personal,
tangible and intangible, and all proceeds
thereof, including, without limitation, all of
the capital stock or other equity interests of
each subsidiary of the Company (the
“Collateral”); provided, that the Loan Parties
shall only be required to pledge 65% of the
capital stock or other equity interests of each
top-tier foreign subsidiary of the Company to
the extent that a pledge of more than 65% of
such capital stock or other equity interests
shall cause adverse tax consequences for the
Loan Parties.
	 
	 	 
	 

	 	Notwithstanding the foregoing, the Lender’s
lien on the Loan Parties’ PP&E shall be junior
to the lien thereon securing the New First Lien
Note (as defined in the Plan) upon consummation
of the Plan (the “PP&E Term Loan Facility”).
If required by the holders of the notes issued
under the PP&E Term Loan Facility, the Lender
shall, on the Closing Date, enter into an
intercreditor agreement, in form and substance
satisfactory to the Lender, governing the lien
priorities and the other rights of the
respective lenders in respect of the Collateral
(the “Intercreditor Agreement”).
	 
	 	 
	 

	 	All Loans, all reimbursement obligations with
respect to Letters of Credit, all costs, fees
and expenses of the Lender and all other
obligations owed to the Lender shall be secured
as described above and shall be charged to the
loan account to be established under the
Financing Facility.






A-4









 






	 	 	 
	INTEREST:

	 	At the Borrowers’ option, the Loans shall bear
interest at a rate per annum equal to either
(i) the Reference Rate (as hereinafter defined)
plus 3.75% or (ii) the LIBOR (as hereinafter
defined) plus 4.75%.
	 
	 	 
	 

	 	As used herein, (x) “Reference Rate” means the
rate of interest publicly announced from time
to time by JPMorgan Chase Bank in New York, New
York as its reference rate, base rate or prime
rate, provided that at no time shall the
Reference Rate be less than 5.75%, and (y)
“LIBOR” means the rate of interest determined
by the Lender in accordance with its customary
procedures, to be the rate at which dollar
deposits are offered to major banks in the
London interbank market for interest periods of
1, 2, or 3 months, as selected by the
Borrowers, adjusted by the reserve percentage
prescribed by governmental authorities as
determined by the Lender, provided that at no
time shall LIBOR be less than 3.25%.







A-5











 





	 	 	 
	 

	 	The Lender’s obligation to provide Loans of a type
bearing interest calculated based upon LIBOR (“LIBOR
Loans”) shall be subject to the following: (i) not more
than 7 separate interest periods may be in effect for
LIBOR Loans at any one time, (ii) if an event of default
shall occur and be continuing, all LIBOR Loans shall, at
the Lender’s option, be converted to Loans bearing
interest calculated based upon the Reference Rate and no
further LIBOR Loans shall be available while such event
of default exists, (iii) the minimum amount of each LIBOR
Loan shall be not less than $1,000,000 and in integral
multiples of $500,000 in excess thereof, and (iv) the
Borrowers shall be responsible for any breakage fees,
yield maintenance and other associated costs, as
determined by the Lender.
	 
	 	 
	 

	 	All interest and fees shall be computed on the basis of a
year of 360 days for the actual days elapsed. If any
event of default shall occur and be continuing, interest
shall accrue at a rate per annum equal to 2.00% in excess
of the rate of interest otherwise in effect. All
interest shall accrue from the Closing Date and shall be
payable monthly in arrears, provided that interest that
accrues at the default rate shall be payable on demand.
	 
	 	 
	CASH MANAGEMENT:

	 	All proceeds of accounts, inventory and other Collateral
(but not of any PP&E) of the Loan Parties shall be
deposited in lockbox or blocked accounts under the sole
dominion and “control” (as defined in the UCC) of the
Lender at closing. All funds deposited in such lockbox
or blocked accounts will be transferred to a
concentration account under the sole dominion and control
of the Lender on each business day and applied to repay
the outstanding obligations of the Loan Parties.
Collections will be credited to the obligations on the
day received in the lockbox or blocked accounts
conditional on final payment to the Lender and the Lender
shall charge one (1) collection day for interest
calculation purposes with respect to all collections. To
the extent such lockbox or blocked accounts are currently
maintained by Citizens Bank in connection with the
Company’s existing debtor-in-possession credit facility,
Ableco expects the lockbox and blocked account
arrangements for the Financing Facility to be
substantially similar to the arrangements currently
existing with Citizens Bank, provided that to the extent
requested by the Lender, such lockbox and blocked
accounts shall be moved to PNC Bank within 180 days after
the Closing Date or, if later, the date that is 180 days
after the date on which the Lender shall have made a
request.






A-6









 






	 	 	 	 	 
	FEES:

	 	Commitment Fee:
	 	$1,000,000, earned in full and due and
payable on the earlier of the execution of the Commitment
Letter by the Company and approval by the Bankruptcy
Court thereof, or the Closing Date.
	 
	 	 	 	 
	 

	 	Closing Fee:
	 	See Schedule A attached hereto.
	 
	 	 	 	 
	 

	 	Unused Line Fee:
	 	0.50% on the daily average unused
portion of the Revolving Credit Facility, payable monthly
in arrears.
	 
	 	 	 	 
	 

	 	Loan Servicing Fee:
	 	$31,250 per quarter, payable on the
Closing Date and quarterly in advance thereafter.
	 
	 	 	 	 
	 

	 	Letter of Credit Fees:
	 	An amount equal to the product of
(i) a per annum rate equal to 3.75% and (ii) the face
amount of each undrawn and unreimbursed letter of credit,
earned in full, non-refundable and payable in cash
monthly in arrears, plus the customary issuance charges
imposed by the letter of credit issuing bank.






	 	 	 
	USE OF PROCEEDS:

	 	The Loans under the Financing Facility shall be used to
(i) fund a portion of the payments to be made under the
Plan solicited pursuant to the Disclosure Statement (the
“Payoff Amount”), (ii) fund general corporate needs
including working capital needs after consummation of the
Plan, and (iii) pay fees and expenses related to the Case
and the Financing Facility and the transactions
contemplated thereby.
	 
	 	 
	CONDITIONS 

PRECEDENT:

	 	The obligation of the Lender to make any Loan or other
financial accommodations under the Financing Facility
will be subject to the following material conditions
precedent:
	 
	 	 
	 

	 	  (a) Execution and delivery of appropriate Loan Documents
(including, without limitation, the Intercreditor
Agreement (if applicable) and an intercompany
subordination agreements among all affiliates of the
Company) in form and substance reasonably satisfactory to
Ableco and the Borrowers and the satisfaction of the
conditions precedent contained therein.







A-7









 






	 	 	 
	 

	 	  (b) (i) The PP&E Term Loan Facility in an amount not
greater than $125,000,000 shall become effective
substantially simultaneously with the Financing Facility,
(ii) Ableco shall be satisfied, in its reasonable
discretion, with the terms and conditions of, and the
definitive documentation for, the PP&E Term Loan
Facility, and (iii) Ableco shall be satisfied, in its
reasonable discretion, with the terms and conditions of,
and the definitive documentation for, the convertible
note facility in an amount not less than $85,000,000.

	 
	 	 
	 

	 	  (c) No Material Adverse Change shall have occurred since
the date of the Commitment Letter.

	 
	 	 
	 

	 	  (d) The Plan shall be substantially in the form solicited
pursuant to the Disclosure Statement without any
modifications that are adverse to the Lender. The Plan
shall have been confirmed by the Bankruptcy Court
pursuant to a confirmation order (the “Confirmation
Order”) with the terms and conditions relating to the
Financing Facility being reasonably satisfactory to the
Lenders and such Confirmation Order shall be “Final” as
defined in the Plan. All conditions precedent to the
effectiveness of the Plan shall have been satisfied (or,
with the prior written consent of Ableco, waived).
Except as consented to by Ableco, the Bankruptcy Court’s
retention of jurisdiction under the Confirmation Order
shall not govern the enforcement of the loan
documentation for the Financing Facility or any rights or
remedies related thereto.

	 
	 	 
	 

	 	  (e) The Lender shall have been granted a perfected, first
priority lien on all Collateral (or, in the case of PP&E,
a second priority lien), and shall have received UCC, tax
and judgment lien searches and other appropriate
evidence, evidencing the absence of any other liens on
the Collateral, other than existing liens acceptable to
the Lender in its sole discretion.

	 
	 	 
	 

	 	  (f) Opinions from the Loan Parties’ counsel (including,
without limitation, local counsel) as to such matters as
the Lender and its counsel may reasonably request.

	 
	 	 
	 

	 	  (g) Each Loan Party shall be in good standing in its
respective jurisdiction of organization and duly
qualified to do business in each other jurisdiction where
its ownership or lease of property or the conduct of its
business requires such qualification.

	 
	 	 
	 

	 	  (h) Ableco will be named as (i) an additional insured
under the Loan Parties liability insurance policies and
(ii) loss payee under property insurance with respect to
the Collateral.








A-8











 





	 	 	 
	 

	 	(i)    The conditions set forth on
Schedule B attached hereto shall
have been satisfied.

	 
	 	 
	 

	 	(j)    All required governmental,
shareholder and third party
approvals, consents, licenses,
franchises and permits in connection
with the consummation of the Plan
and the Financing Facility and the
operation by the Loan Parties of
their businesses shall have been
obtained and remain in full force
and effect.

	 
	 	 
	 

	 	(k)   There shall exist no claim,
action, suit, investigation,
litigation or proceeding, pending or
threatened in any court or before
any arbitrator or governmental
instrumentality which relates to the
Financing Facility, the Plan or
which, in the reasonable opinion of
the Lender, has a reasonable
likelihood of having a material
adverse effect on (i) the condition
(financial or otherwise),
operations, performance, properties,
assets, liabilities, business or
prospects of the Loan Parties, (ii)
the ability of the Loan Parties to
perform their obligations under the
Loan Documents or (iii) the ability
of the Lender to enforce the Loan
Documents.

	 
	 	 
	 

	 	(l)    At all times the Borrowers shall
have a minimum of $10,000,000 in the
form of any combination of unused
but available borrowing capacity
under the Financing Facility and the
amount of unrestricted cash and cash
equivalents held in blocked accounts
subject to the Lender’s “control”
(as defined in the UCC) in excess of
the Loan Parties’ normal operating
requirements (in an amount to be
mutually agreed upon), after taking
into account the payment of the
Closing Fee, the Payoff Amount and
all Expenses (net of amounts paid to
date).

	 
	 	 
	 

	 	(m)   The Company’s
debtor-in-possession credit facility
shall have been terminated, and all
liens and security interests
thereunder shall have been released.

	 
	 	 
	 

	 	(n)   The Lender shall have received
landlord waivers and/or collateral
access agreements with respect to
the third party locations of the
Loan Parties as required by the
Lender. To the extent the Lender
does not enter into the
Intercreditor Agreement, the Lenders
shall enter into a collateral access
agreement with the agent for the
First Lien Term Debt lenders in form
and substance satisfactory to the
Lender.

	 
	 	 
	 

	 	(o)   The Lender shall have received a
mortgage, deed of trust







A-9 









 






	 	 	 
	 

	 	        or other
appropriate document, in form and
substance satisfactory to the
Lender, encumbering each parcel of
real property owned by a Loan Party
(each a “Mortgage”), duly executed
by such Loan Party and in suitable
form for recording in an appropriate
office and creating a continuing
first (or second, as the case may
be) priority lien in favor of the
Lender, subject to the liens
securing the PP&E Term Loan Facility
to the extent such property
comprises a portion of the PP&E.

	 
	 	 
	 

	 	(p)    The Lender shall have received a
title insurance commitment and
policy issued by a title insurance
company acceptable to the Lender, in
form and substance and in amounts
satisfactory to the Lender, insuring
the lien of each Mortgage and the
priority thereof in the real
property encumbered thereby, subject
only to such exceptions as are
satisfactory to the Lender and its
counsel.

	 
	 	 
	 

	 	(q)    The Lender shall have received
an ALTA survey of the real property
encumbered by each Mortgage.

	 
	 	 
	 

	 	(r)    The Loan Parties shall have paid
to the Lender all fees and expenses
then owing to the Lender, including,
without limitation, all audit fees,
attorneys’ fees, search fees, title
fees and documentation and filing
fees.

	 
	 	 
	 

	 	(s)    No default or event of default
shall exist under any Loan Document.

	 
	 	 
	REPRESENTATIONS 

AND WARRANTIES:

	 	Usual representations and
warranties, including, but not
limited to, corporate existence and
good standing, authority to enter
into loan documentation,
governmental approvals,
effectiveness of the Plan,
enforceability of Loan Documents,
capitalization, litigation and
commercial tort claims, financial
statements, non-violation of other
agreements, compliance with
environmental, pension and other
laws, ERISA, taxes, Regulations T, U
and X, nature of business, permits,
real property, insurance, use of
proceeds, solvency, location of
Collateral, material contracts,
intellectual property, customers and
suppliers, absence of Material
Adverse Change (other than filing of
the Case and the events resulting
from the filing of the Case) since
the date of the Commitment Letter,
absence of default or unmatured
default under the Financing Facility
and priority of the Lender’s liens.
	 
	 	 
	COVENANTS:

	 	Usual covenants, including, but not
limited to, provision of financial
statements, notices of litigation,
defaults and unmatured defaults and
other information, subsidiaries not
in existence on the Closing Date to
be Loan Parties, compliance with
laws, preservation of existence,
books and records, inspection of
properties, maintenance of
properties and insurance, obtaining
of






A-10 









 






	 	 	 
	 

	 	permits, change in Collateral
locations, landlord waivers and
collateral access agreements, after
acquired real property, fiscal year,
Borrowing Base compliance, and
limitations with respect to liens
and encumbrances, indebtedness,
dispositions, dividends and
retirement of capital stock and
management fees and certain other
payments, issuance of capital stock,
guarantees, sale and lease back
transactions, consolidations and
mergers, investments, capital
expenditures, loans and advances,
change in nature of business,
modifications of material contracts,
organization documents and certain
other agreements, compromise of
accounts receivable, compliance with
pension, environmental and other
laws, operating and capital leases,
transactions with affiliates and
prepayment of other indebtedness.
	 
	 	 
	 

	 	Financial covenants to include,
maximum total indebtedness/EBITDA,
minimum fixed charge coverage ratio,
minimum EBITDA and maximum capital
expenditures (including carryforward
rights to an extent to be mutually
agreed), to be mutually agreed upon
by the Lender and the Company.
	 
	 	 
	 

	 	Financial reporting to include: (i)
annual, audited financial
statements, (ii) quarterly,
internally prepared, financial
statements, (iii) monthly,
internally prepared, financial
statements, (iv) projections,
including monthly balance sheet,
profit and loss and cash flow
figures, (v) monthly borrowing base
certificate, and (vi) other
reporting as required by the Lender.
	 
	 	 
	EVENTS OF DEFAULT:

	 	Usual events of default (subject to
grace periods and materiality
qualifications to be mutually agreed
upon), including, but not limited
to, payment, cross-default,
violation of covenants, breach of
representations or warranties,
bankruptcy or insolvency, invalidity
of any provision of any Loan
Document, invalidity of lien on any
Collateral, failure to comply with
cash management agreements,
judgment, ERISA, environmental,
cessation of a substantial part of
the Loan Parties’ business, loss or
suspension of material licenses or
permits, indictment of a Loan Party
or a proceeding in which penalties
or remedies include forfeiture of a
material portion of property,
material adverse change and change
of control.
	 
	 	 
	GOVERNING LAW:

	 	All documentation in connection with
the Financing Facility shall be
governed by the laws of the State of
New York.
	 
	 	 
	ASSIGNMENTS, PARTICIPATIONS:

	 	The Lender may sell or assign to one
or more other persons a portion of
its loans or commitments under the
Financing Facility without the
consent of the Loan Parties. The
Lender may also sell participations
in its loans and commitments under
the Financing Facility without the
consent of the Loan Parties.






A-11 









 






	 	 	 
	OUT-OF-POCKET 

EXPENSES:

	 	The Borrowers shall pay on demand
all fees, costs and expenses of the
Lender (including legal fees, audit
fees, appraisal and valuation fees,
search fees, filing fees, and
documentation fees, and expenses in
excess of the Initial Deposit),
incurred in connection with the
Commitment Letter or this Term Sheet
and the transactions contemplated by
the Commitment Letter and this Term
Sheet, whether or not such
transactions close.







A-12