UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended October 1, 1999 or
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 333-30699
RELIANT BUILDING PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1364873
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3010 LBJ Freeway, Suite 400, Dallas, Texas 75234
(Address of principal executive offices) (Zip Code)
(972) 919-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months or for such shorter period as the registrant was
required to file such reports, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---
Number of shares Common Stock outstanding as of November 12, 1999: 1,000
<PAGE>
RELIANT BUILDING PRODUCTS, INC. AND SUBSIDIARIES
QUARTER ENDED OCTOBER 1, 1999
INDEX
PART I. FINANCIAL INFORMATION
- ----------------------------------
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
PART II. OTHER INFORMATION
- -------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
----------------------------------
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
RELIANT BUILDING PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
OCTOBER 1, APRIL 2,
1999 1999
------------ ----------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,702 $ 851
Accounts receivable, net 32,905 26,331
Inventories (note 4) 25,084 19,220
Deferred tax assets 241 2,879
Prepaid expenses and other current assets 2,051 2,001
------------ ----------
Total current assets 61,983 51,282
Property, plant, and equipment, net 51,309 50,303
Intangible assets, net (note 3) 123,636 131,794
Assets held for sale 604 5,096
Other assets 4,784 5,180
------------ ----------
Total assets 242,316 243,655
============ ==========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable 24,628 15,399
Accrued expenses 15,786 16,467
Current portion of long-term debt (note 7) 7,763 5,533
Long-term debt currently being renegotiated (note 7) 189,837 -
------------ ----------
Total current liabilities 238,014 37,399
Long-term debt, less current portion (note 7) 33 113,877
Deferred income taxes 866 3,784
Other liabilities 3,676 3,417
Subordinated debt (note 7) - 70,000
------------ ----------
Total liabilities 242,589 228,477
Shareholder's equity (deficit):
Common stock, $1.00 par value:
Authorized shares - 10,000
Issued and outstanding shares - 1,000 1 1
Preferred stock of Holdings, stated at amount contributed 4,583 4,664
Notes receivable - equity securities (100) (475)
Additional paid-in capital 30,570 30,925
Accumulated deficit (35,327) (19,937)
------------ ----------
Total shareholder's equity (deficit) (273) 15,178
------------ ----------
Total liabilities and shareholder's equity (deficit) $ 242,316 $ 243,655
============ ==========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
RELIANT BUILDING PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
QUARTER ENDED
------------------------------------
OCTOBER 1, 1999 OCTOBER 2, 1998
----------------- -----------------
<S> <C> <C>
Net sales $ 68,006 $ 77,485
Cost of products sold 53,558 56,573
----------------- -----------------
Gross profit 14,448 20,912
Selling, general and administrative 16,612 16,441
Goodwill impairment 4,829 -
----------------- -----------------
Income (loss) from operations (6,993) 4,471
Interest expense, net 4,945 4,502
Other expenses 669 -
----------------- -----------------
Loss before income taxes (12,607) (31)
Income tax expense 396 1,030
----------------- -----------------
Net loss $ (13,003) $ (1,061)
================= =================
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
RELIANT BUILDING PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
SIX MONTHS ENDED
-------------------------------------
OCTOBER 1, 1999 OCTOBER 2, 1998
------------------ -----------------
<S> <C> <C>
Net sales $ 140,855 $ 156,429
Cost of products sold 108,069 117,138
------------------ -----------------
Gross profit 32,786 39,291
Selling, general and administrative 32,276 31,111
Goodwill impairment 4,829 -
------------------ -----------------
Income (loss) from operations (4,319) 8,180
Interest expense, net 9,759 9,128
Other expenses 1,041 -
------------------ -----------------
Loss before income taxes (15,119) (948)
Income tax expense (benefit) (78) 528
------------------ -----------------
Net loss $ (15,041) $ (1,476)
================== =================
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
RELIANT BUILDING PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED
------------------
OCTOBER 1, 1999 OCTOBER 2, 1998
------------------ -----------------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (15,041) $ (1,476)
Adjustments to reconcile net loss to net cash
provided by (used in) operations:
Depreciation and amortization 5,822 6,952
Non-cash interest expense 453 454
Deferred income taxes (278) 1,020
Provision for doubtful accounts 445 1,021
Goodwill impairment 4,829 -
Other 376 (88)
Changes in operating assets and liabilities:
Accounts receivable (7,193) (6,419)
Inventories (6,237) (2,323)
Prepaid expenses and other current assets (56) 1,119
Accounts payable and accrued expenses 8,482 2,493
Other. 1,582 (2,092)
------------------ -----------------
Net cash provided by (used in) operating activities (6,816) 661
Investing activities:
Purchases of property, plant and equipment (5,940) (3,231)
Proceeds from sale of property, plant and equipment 4,619 27
------------------ -----------------
Net cash used in investing activities (1,321) (3,204)
Financing activities:
Net proceeds from revolving loan 14,400 4,100
Proceeds from long-term debt 216 343
Principal payments on long-term debt (5,569) (1,571)
Redemption of preferred stock (81) (23)
Payment of debt issue costs - (70)
Preferred stock capital contribution - 47
Proceeds from equity notes 375 -
Payment of dividends to Holdings (353) (101)
Capital contribution from Holdings - 203
------------------ -----------------
Net cash provided by financing activities 8,988 2,928
Increase in cash and cash equivalents 851 385
Cash and cash equivalents at beginning of period 851 737
------------------ -----------------
Cash and cash equivalents at end of period $ 1,702 $ 1,122
================== =================
Supplementary Information:
Cash paid for interest $ 8,987 $ 7,842
================== =================
Cash paid for income taxes $ 231 $ -
================== =================
</TABLE>
See accompanying notes.
Reliant Building Products, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
1. The Company
Reliant Building Products, Inc. (formerly Redman Building Products, Inc.) and
subsidiaries (the "Company") are primarily engaged in the manufacture of
aluminum and vinyl or nonwood, framed windows primarily for the new
construction, repair and remodel, national home center chains and manufactured
housing markets. The Company has manufacturing facilities in Texas, Georgia,
Tennessee, Washington, New Jersey, Michigan, North Carolina and California, and
most of its customers are located throughout the United States.
2. Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with generally accepted accounting principles for
interim financial reporting, the instructions to Form 10-Q, and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The balance sheet at April 2, 1999 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
The accompanying unaudited consolidated financial statements and related notes
should be read in conjunction with the Company's audited consolidated financial
statements and related notes included in the Form 10-K filed with the Securities
and Exchange Commission on July 1, 1999. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation of the interim financial information have been included.
The results of operations for any interim period are not necessarily indicative
of the results of operations for a full year.
All significant intercompany transactions and balances have been eliminated in
consolidation. The Company utilizes a 52 or 53 week accounting period which
ends on the Friday closest to March 31. The quarters ended October 1, 1999 and
October 2, 1998 included 13 weeks.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
<PAGE>
3. Intangible Assets
Intangible assets, consisting of goodwill and other intangible assets, totaled
$123.6 million at October 1, 1999. Goodwill is being amortized on a
straight-line basis over a 40-year period. Other intangible assets consist
primarily of a covenant not to compete and trademarks that are being amortized
over five years.
In the current period, the Company recorded an impairment charge of $4.8 million
to reduce the carrying value of long-lived assets (including goodwill) to their
fair value. These long-lived assets are included in the North operating segment.
The review for impairment at this location was triggered by recent operating
cash flow losses and forecasted operating cash flows below those expected at the
time the manufacturing facility was acquired. The fair value of the long-lived
assets was determined based upon management's estimate of future operating cash
flows.
The Company's ability to fully recover the carrying amount of goodwill through
undiscounted cash flows assumes that results of operations and cash flows in
future periods will improve from their current levels. In the event that the
market or general economic conditions affecting the Company worsen or if
management is unable to achieve its business objectives, additional impairment
of goodwill may be necessary.
4. Inventories
<TABLE>
OCTOBER 1, 1999 APRIL 2, 1999
---------------- --------------
<S> <C> <C>
Raw materials. $ 16,714 $ 13,205
Finished goods and work-in-process 8,370 6,015
---------------- --------------
$ 25,084 $ 19,220
================ ==============
</TABLE>
5. Segment and Related Information
The Company currently manages its business by operating location and has
identified its reportable segments based primarily upon the geographic region of
the operating locations. The North region consists of three window
manufacturing facilities. The South region consists of five window
manufacturing facilities, four distribution centers and two extrusion
operations. The Other segment consists primarily of commercial windows and
specialty glass operations, both of which were sold on July 1, 1999. The North
and South regions manufacture and distribute aluminum and vinyl windows for the
new construction, repair and remodel, national home center chain, and
manufactured housing markets. Transactions between operating segments are
either at cost or predetermined mark-up percentages.
<TABLE>
<CAPTION>
(a) Segment Sales
QUARTER ENDED SIX MONTHS ENDED
----------------------------------- ----------------------------------
OCTOBER 1, 1999 OCTOBER 2, 1998 OCTOBER 1, 1999 OCTOBER 2, 1998
---------------- ----------------- ---------------- ----------------
Segment net sales
North
<S> <C> <C> <C> <C>
External customers $ 24,657 $ 28,245 $ 50,094 $ 55,497
Intersegment 1,141 675 1,849 1,203
---------------- ----------------- ---------------- ----------------
Total 25,798 28,920 51,943 56,700
South
External customers 43,318 42,546 85,652 87,842
Intersegment 154 2,412 744 3,125
---------------- ----------------- ---------------- ----------------
Total 43,472 44,958 86,396 90,967
Other
External customers 31 6,694 5,109 13,090
Intersegment - 300 336 856
---------------- ----------------- ---------------- ----------------
Total 31 6,994 5,445 13,946
Consolidated net sales to
external customers $ 68,006 $ 77,485 $ 140,855 $ 156,429
================ ================= ================ ================
</TABLE>
<TABLE>
<CAPTION>
(b) Segment Profit
Segment profit represents total segment sales less the costs of goods sold.
QUARTER ENDED SIX MONTHS ENDED
------------------------------------- -----------------------------------
OCTOBER 1, 1999 OCTOBER 2, 1998 OCTOBER 1, 1999 OCTOBER 2, 1998
----------------- ------------------ ----------------- -----------------
Segment profit
<S> <C> <C> <C> <C>
North $ 5,771 $ 8,100 $ 11,604 $ 15,601
South 8,863 11,996 19,806 21,864
Other 8 1,324 1,815 2,603
Inter-segment profit
elimination (194) (508) (439) (777)
----------------- ------------------ ----------------- ----------------
Total segment profit 14,448 20,912 32,786 39,291
Selling, general and
administrative expense 16,612 16,441 32,276 31,111
Goodwill impairment 4,829 - 4,829 -
Interest expense, net 4,945 4,502 9,759 9,128
Other, net 669 - 1,041 -
----------------- ------------------ ----------------- ----------------
Consolidated loss before
income taxes $ (12,607) $ (31) $ (15,119) $ (948)
================= ================== ================= ================
</TABLE>
6. Guarantor Subsidiaries
The Company's 10 7/8% senior subordinated notes due May 1, 2004 are jointly and
severally and fully and unconditionally guaranteed on a senior subordinated
basis by all of the Company's wholly-owned subsidiaries. Separate financial
statements and other disclosures concerning such guarantor subsidiaries have not
been presented because management has determined that such information is not
material to investors. The condensed summarized information (in thousands) of
the guarantor subsidiaries is as follows.
<TABLE>
<CAPTION>
OCTOBER 1, APRIL 2,
1999 1999
------------ ---------
<S> <C> <C>
Cash and cash equivalents $ 916 $ 677
Accounts receivable, net 19,624 15,153
Raw materials 8,439 7,199
Finished product and work in process 4,519 3,142
Other current assets 1,402 3,074
Property, plant and equipment, net 30,735 33,349
Intangible assets, net 95,619 102,245
------------ ---------
Total assets $ 161,254 $ 164,839
============ =========
Accounts payable $ 11,002 $ 6,457
Accrued expenses 4,662 4,251
Current portion of long-term debt 100 624
Long-term debt 25 400
Other liabilities - 2,301
Intercompany payable 35,735 41,807
Net equity 109,730 108,999
------------ ---------
Total liabilities and net equity $ 161,254 $ 164,839
============ =========
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
----------------------------------- --------------------------
October 1, October 2, October 1, October 2,
1999 1998 1999 1998
--------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 45,876 $ 48,296 $ 93,171 $ 95,119
Cost of products sold 36,592 37,236 73,947 73,807
Selling, general, and administrative 11,528 11,702 21,324 22,373
Goodwill impairment 4,829 - 4,829 -
Interest expense 846 820 1,586 1,545
Income tax expense (benefit) 167 536 141 (276)
--------------- ------------------ ------------ ------------
Net loss $ (8,086) $ (1,998) $ (8,656) $ (2,330)
=============== ================== ============ ============
Net cash used by operating activities $ (5,982) $ (3,704)
Net cash provided by (used in) investing activities 123 (2,872)
Net cash provided by financing activities 6,098 7,503
------------ ------------
Increase in cash and cash equivalents $ 239 $ 927
============ ============
</TABLE>
7. Long-term Debt Currently Being Renegotiated
On September 9, 1999, the Company began discussions with its lenders (the
"Lenders") under the Senior Credit Facility dated as of January 28, 1998 (as
amended, the "Senior Credit Facility") on alternatives to amend the Senior
Credit Facility to provide an increase in borrowing availability. These
discussions were the result of the Company's desire to continue its objectives
to refocus the organization into one of the major suppliers of aluminum and
vinyl windows.
Long-term debt currently being renegotiated consists of the following (in
thousands):
October 1, 1999
---------------
Senior Credit Facility:
Term loan A $ 38,667
Term loan B 60,087
Revolver 28,500
Senior Subordinated Notes 70,000
----------
Total long-term debt being renegotiated 197,254
Less current portion:
Long-term debt currently being renegotiated 189,837
Current maturities of long-term debt 7,417
----------
$ -
The Company has reached agreements with the Lenders under the Senior Credit
Facility and with holders of more than 80% of the principal amount of
outstanding Senior Subordinated Notes due 2004 (the "Existing Notes") on the
principal terms of a restructuring of the bank debt and the Existing Notes (the
"Restructuring"). In connection therewith, on October 1, 1999, the Lenders and
the Company executed a Second Amendment and Waiver (the "Second Amendment")
pursuant to which the Lenders waived, for a limited time period, certain
financial covenant non-compliance under the Senior Credit Facility. The waiver
is effective through the earliest of (i) January 31, 2000, (ii) the expiration
of the Company's agreement with the Bondholder Group (as hereinafter defined)
and (iii) December 31, 1999, if the Company fails to meet certain financial
requirements on that date. The Second Amendment also provides for an amendment
of financial covenants under the Senior Credit Facility and an $8.0 million
increase to the Revolver borrowing base that would be available incrementally,
if used, on the following dates (in thousands):
March 31, 2000 $2,000
June 30, 2000 2,000
December 31, 2000 2,000
March 31, 2001 500
June 30, 2001 500
September 30, 2001 500
December 31, 2001 500
The covenant amendments and borrowing base increase will not become effective
until satisfaction of certain conditions set forth in the Second Amendment,
specifically completion by the Company of an exchange offer for the Existing
Notes and contribution by existing equity owners of the Company's parent, RBPI
Holding Corporation, of a $10 million investment in the Company in the form of
equity or subordinated debt.
The Company has reached an agreement in principle, documented in a Term Sheet
Agreement dated November 1, 1999 (the "Term Sheet"), with holders of more than
80% of the principal amount of Existing Notes (the "Bondholder Group") on the
terms of an exchange offer (the "Exchange Offer") pursuant to which the Company
will issue an equal principal amount of new notes (the "New Notes") for Existing
Notes validly tendered. The New Notes will provide the Company with the option,
instead of paying interest in cash, to accrue interest payments until maturity
(at rates up to 100 basis points higher) for three years beginning November 1,
1999. The remaining terms of the New Notes will be substantially the same as
the terms of the Existing Notes. Consummation of the Exchange Offer is subject
to execution of definitive documentation and to a number of conditions. The
Company's obligation to accept Existing Notes for exchange is conditioned upon,
among other conditions, receipt of tenders from holders of at least 95% in
principal amount of Existing Notes (the "Tender Condition"), the new $10 million
investment by current equity owners, and effectiveness of the financial covenant
amendments and the Revolver borrowing base increase provided for by the Second
Amendment. In the event that the Tender Condition is not satisfied and the
other conditions to the Exchange Offer are satisfied or waived, the Company may
elect to file a prepackaged Chapter 11 plan of reorganization containing
substantially the same terms as the Exchange Offer. Members of the Bondholder
Group have agreed, subject to documentation, to vote in favor of a prepackaged
plan.
Because the conditions to effectiveness of the covenant amendments in the Second
Amendment have not yet been satisfied and the waiver contained therein expires
in less than one year, in accordance with generally accepted accounting
principles regarding classification of debt, the Company has classified its
indebtedness under the Senior Credit Facility and the Existing Notes as current
debt. As of October 1, 1999, the long-term debt payable, by its terms, within
one year is $7.8 million and the long-term debt that has been classified as
current, due to the Restructuring not yet having been completed, is $189.8
million.
The Company reasonably expects that the Restructuring will be consummated by
January 31, 2000. Upon completion of the Restructuring before the next balance
sheet reporting date and the Company's compliance with the amended financial
covenants under the Senior Credit Facility, that portion of the restructured
debt that is not due within one year will be reclassified as long-term debt.
The Company believes that the completion of the Restructuring will enable
adequate funds to be available to meet the Company's cash requirements for
capital expenditures, working capital and scheduled principal and interest
payments. The Company's ability to satisfy its future capital requirements will
depend on future capital expenditure requirements and the Company's future
financial performance, which will be subject to general economic conditions and
competitive and other factors, including factors beyond the Company's control.
If the Restructuring is not consummated, the Lenders may accelerate the
obligations under the Senior Credit Facility and the Company may not have the
financial resources needed to make such payment. In addition, failure to
complete the Restructuring could have a material adverse effect on the Company's
financial position, results of operations and liquidity and could result in the
commencement of a Chapter 11 reorganization case under the Bankruptcy Code.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
--------------------------------------------------------------------
OPERATIONS AND FINANCIAL CONDITION
-------------------------------------
THE COMPANY
Reliant Building Products, Inc. (the "Company"), is one of the nation's largest
manufacturers of aluminum and vinyl, or non-wood, framed windows. The Company's
products are marketed under well-recognized brand names including ALENCO,
CARE-FREE, ALPINE WINDOWS, and BUILDERS VIEW. The products are marketed across
all major price points. As a result of the January 28, 1998 acquisition of all
the capital stock of Care-Free Window Group ("Care-Free"), a privately held
vinyl window company, the Company has developed a significant national
manufacturing and marketing presence. Window products include single hung,
double-hung, sliders and casements. Door products include hinge doors, storm
doors and patio doors. All of these products are marketed primarily for use in
new construction, manufactured housing, repair and remodeling and the
do-it-yourself market.
The Company manufactures its products at eight facilities strategically located
throughout the U.S. within two geographic regions, North and South (See note 5
to Company's unaudited consolidated financial statements for more information
regarding its operating segments). The Company distributes its products
nationally through wholesalers and dealers, direct sales to large national home
builders (including manufactured housing), independent contractors, national
home centers and lumber yards. The Company also operates Company owned
distribution facilities in Phoenix, Arizona; Ontario, California; Metairie,
Louisiana and Dallas, Texas.
The Company supplements its window business through the manufacture of related
products such as custom aluminum extrusion and window components ("non-core
products") for the Company's internal needs and for sale to third parties. The
Company believes that its vertically integrated operations provide significant
manufacturing flexibility, a reliable supply of low-cost components and a
reduction in working capital requirements.
RESULTS OF OPERATIONS
Second Quarter Ended October 1, 1999 Compared to Second Quarter Ended October 2,
1998
Net Sales. Net sales decreased $9.5 million, or 12.2%, from $77.5 million in
the quarter ended October 2, 1998 ("Prior Period") to $68.0 million for the
quarter ended October 1, 1999 ("Current Period"). Approximately $5.5 million of
the decrease in net sales results from the sale of the commercial window and
specialty glass operations of the Other segment on July 1, 1999. Net sales were
also impacted by the discontinuance of product lines sold to customers that are
not the strategic focus of the Company and lower than expected sales of a new
product line intended to replace existing lines. Net sales were positively
impacted by revenues generated from sales to a national home center chain under
an exclusive supply contract for stores in Texas and Oklahoma.
Cost of Products Sold. Cost of products sold decreased $3.0 million from $56.6
million for the Prior Period to $53.6 million for the Current Period. Expressed
as a percentage of net sales, cost of products sold increased from 73.0% for the
Prior Period to 78.8% for the Current Period. This increase in cost of products
sold as a percentage of net sales is primarily the result of charges recorded
for the write-down and disposal of raw material used in the production of
discontinued product lines. In addition, cost of products sold was negatively
impacted by manufacturing inefficiencies resulting from the start-up of new
products.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $16.4 million in the Prior Period and $16.6 million
for the Current Period. Included in the Current Period is approximately $0.2
million of severance charges for a former officer of the Company.
Goodwill Impairment. The Company recorded an impairment charge of $4.8 million
to reduce the carrying value of long-lived assets (including goodwill) to their
fair value. These long-lived assets are included in the North operating segment.
The review for impairment at this location was triggered by recent operating
cash flow losses and forecasted operating cash flows below those expected at the
time the manufacturing facility was acquired. The fair value of the long-lived
assets was determined based upon management's estimate of future operating cash
flows.
The Company's ability to fully recover the carrying amount of goodwill through
undiscounted cash flows assumes that results of operations and cash flows in
future periods will improve from their current levels. In the event that the
market or general economic conditions affecting the Company worsen or if
management is unable to achieve its business objectives, additional impairment
of goodwill may be necessary.
Other Expenses, Net. Other expenses, net for the Current Period consists of an
impairment charge of $0.5 million to reduce the carrying amount of an unutilized
building and land that is held for sale to its estimated net realizable value
and a $0.2 million loss recorded upon the sale of a trademark and associated
manufacturing equipment of a non-core business.
Interest Expense, Net. Interest expense increased $0.4 million from $4.5
million in the Prior Period to $4.9 million for the Current Period. This
increase is due to a higher debt level in the Current Period.
Income Tax Expense. The income tax expense of $0.4 million (State and Federal
combined) is comprised of $0.1 million of state expense, $2.3 million of
potential deferred Federal income tax benefit, and $2.6 million of valuation
allowance established against deferred tax assets. The valuation allowance was
established to reduce deferred taxes, primarily net operating loss
carryforwards, to an amount where realization in future periods is considered to
be more likely than not. The allowance was determined based on the weight of
available evidence which consists primarily of taxable losses in recent years,
the types and amounts of existing temporary differences and the expiration dates
of the operating loss carryforward.
Six Months Ended October 1, 1999 Compared to Six Months Ended October 2, 1998
Net Sales. Net sales decreased $15.5 million, or 10.0%, from $156.4 million in
the quarter ended October 2, 1998 ("Prior YTD Period") to $140.9 million for the
quarter ended October 1, 1999 ("Current YTD Period"). Approximately $5.5 million
of the decrease in net sales results from the sale of the commercial window and
specialty glass operations of the Other segment on July 1, 1999. Net sales were
also impacted by the discontinuance of product lines sold to customers that are
not the strategic focus of the Company and lower than expected sales of a new
product line intended to replace existing lines. Also impacting net sales were
unrecovered sales resulting from weather related delays in the housing starts in
the Northwest and continued pricing pressures in the manufactured housing
market. Net sales were positively impacted by revenues generated from sales to
a national home center chain under an exclusive supply contract for stores in
Texas and Oklahoma.
Cost of Products Sold. Cost of products sold decreased $9.0 million from
$117.1 million for the Prior YTD Period to $108.1 million for the Current YTD
Period. Expressed as a percentage of net sales, cost of products sold increased
from 74.9% for the Prior YTD Period to 76.7% for the Current YTD Period. This
increase in cost of products sold as a percentage of net sales is primarily the
result of charges recorded for the write-down and disposal of raw material used
in the production of discontinued product lines and manufacturing inefficiencies
resulting from the start-up of new products. In addition, the Company has
recorded approximately $0.8 million in connection with the start-up of the
supply contract with a national home center chain.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.2 million from $31.1 million in the Prior
YTD Period to $32.3 million for the Current YTD Period. This increase is due
primarily to increased expenses associated with the national marketing and sales
organization and incremental costs related to the wind down of the businesses
sold during the Current YTD Period.
Goodwill Impairment. The Company recorded an impairment charge of $4.8 million
to reduce the carrying value of long-lived assets (including goodwill) to their
fair value. These long-lived assets are included in the North operating segment.
The review for impairment at this location was triggered by recent operating
cash flow losses and forecasted operating cash flows below those expected at the
time the manufacturing facility was acquired. The fair value of the long-lived
assets was determined based upon management's estimate of future operating cash
flows.
The Company's ability to fully recover the carrying amount of goodwill through
undiscounted cash flows assumes that results of operations and cash flows in
future periods will improve from their current levels. In the event that the
market or general economic conditions affecting the Company worsen or if
management is unable to achieve its business objectives, additional impairment
of goodwill may be necessary.
Other Expenses, Net. Other expenses, net for the Current YTD Period consists
of an impairment charge of $0.5 million to reduce the carrying amount of an
unutilized building and land that is held for sale to its estimated net
realizable value and a $0.2 million loss recorded upon the sale of a trademark
and associated manufacturing equipment of a non-core business. Also, included
in other expenses, net were losses in the first quarter related to the sale of
the commercial window and specialty glass operations.
Interest Expense, Net. Interest expense increased $0.7 million from $9.1
million in the Prior YTD Period to $9.8 million for the Current YTD Period.
This increase is due to a higher debt level in the Current YTD Period.
Income Tax Expense. The income tax benefit of $0.1 million (State and Federal
combined) is comprised of $0.2 million of state expense, $2.9 million of
potential deferred Federal income tax benefit, and $2.6 million of valuation
allowance established against deferred tax assets. The valuation allowance was
established to reduce deferred taxes, primarily net operating loss
carryforwards, to an amount where realization in future periods is considered to
be more likely than not. The allowance was determined based on the weight of
available evidence which consists primarily of taxable losses in recent years,
the types and amounts of existing temporary differences and the remaining
expiration dates of the operating loss carryforward.
LIQUIDITY AND CAPITAL RESOURCES
Net cash (used in)/provided by operating activities was $(6.8) million for the
Current YTD Period and $0.7 million in the Prior YTD Period. The decrease in
cash provided from operating activities is the result of comparatively lower
results of operations.
Capital expenditures for the Current YTD Period were $5.9 million compared to
$3.2 million for the Prior YTD Period. Investing cash flows also includes the
proceeds from the sale of non-strategic assets at the commercial window facility
in Bryan, Texas and the sale of the specialty glass subsidiary.
Cash flows provided by financing activities in the Current YTD Period were $9.0
million compared to $2.9 million in the Prior YTD Period. Current YTD Period
cash provided by financing activities was used primarily to fund capital
expenditures, interest payments and other working capital requirements.
Interest and principal payments on the Company's 10-7/8 Senior Subordinated
Notes due May 1, 2004 (the "Notes") and the credit agreement dated as of January
28, 1998 (the "Senior Credit Facility") represent significant obligations of the
Company. The Notes require semi-annual interest payments in May and November.
The Senior Credit Facility requires quarterly interest payments in April, July,
October, and January. In fiscal year 2000, amounts outstanding under the Senior
Credit Facility will require principal payments of approximately $854,000 in
each of the first three quarters and $2.2 million in the fourth quarter. In
addition to its debt service obligations, the Company's remaining liquidity
demands relate to capital expenditures and working capital needs. The Company's
working capital needs are seasonal, and historically have peaked during the
second and third fiscal quarters.
The Company's primary sources of liquidity are funds from operations and
borrowings under the Senior Credit Facility. The amount available as of October
28, 1999, under the revolving line of credit (the "Revolver") is approximately
$2.2 million. As of October 28, 1999, $30.9 million was borrowed and $2.8
million in letters of credit were outstanding under the Revolver. Interest on
the borrowings under the Revolver, which is currently payable at 8.7%, is at
3.25% over the Eurodollar rate. The Revolver agreement expires on December 31,
2003.
On September 9, 1999, the Company began discussions with its lenders (the
"Lenders") under the Senior Credit Facility dated as of January 28, 1998 (as
amended, the "Senior Credit Facility") on alternatives to amend the Senior
Credit Facility to provide an increase in borrowing availability. These
discussions were the result of the Company's desire to continue its objectives
to refocus the organization into one of the major suppliers of aluminum and
vinyl windows.
The Company has reached agreements with the Lenders under the Senior Credit
Facility and with holders of more than 80% of the principal amount of
outstanding Senior Subordinated Notes due 2004 (the "Existing Notes") on the
principal terms of a restructuring of the bank debt and the Existing Notes (the
"Restructuring"). In connection therewith, on October 1, 1999, the Lenders and
the Company executed a Second Amendment and Waiver (the "Second Amendment")
pursuant to which the Lenders waived, for a limited time period, certain
financial covenant non-compliance under the Senior Credit Facility. The waiver
is effective through the earliest of (i) January 31, 2000, (ii) the expiration
of the Company's agreement with the Bondholder Group (as hereinafter defined)
and (iii) December 31, 1999, if the Company fails to meet certain financial
requirements on that date. The Second Amendment also provides for an amendment
of financial covenants under the Senior Credit Facility and an $8.0 million
increase to the Revolver borrowing base that would be available incrementally,
if used, on the following dates (in thousands):
March 31, 2000 $2,000
June 30, 2000 2,000
December 31, 2000 2,000
March 31, 2001 500
June 30, 2001 500
September 30, 2001 500
December 31, 2001 500
The covenant amendments and borrowing base increase will not become effective
until satisfaction of certain conditions set forth in the Second Amendment,
specifically completion by the Company of an exchange offer for the Existing
Notes and contribution by existing equity owners of the Company's parent, RBPI
Holding Corporation, of a $10 million investment in the Company in the form of
equity or subordinated debt.
The Company has reached an agreement in principle, documented in a Term Sheet
Agreement dated November 1, 1999 (the "Term Sheet"), with holders of more than
80% of the principal amount of Existing Notes (the "Bondholder Group") on the
terms of an exchange offer (the "Exchange Offer") pursuant to which the Company
will issue an equal principal amount of new notes (the "New Notes") for Existing
Notes validly tendered. The New Notes will provide the Company with the option,
instead of paying interest in cash, to accrue interest payments until maturity
(at rates up to 100 basis points higher) for three years beginning November 1,
1999. The remaining terms of the New Notes will be substantially the same as
the terms of the Existing Notes. Consummation of the Exchange Offer is subject
to execution of definitive documentation and to a number of conditions. The
Company's obligation to accept Existing Notes for exchange is conditioned upon,
among other conditions, receipt of tenders from holders of at least 95% in
principal amount of Existing Notes (the "Tender Condition"), the new $10 million
investment by current equity owners, and effectiveness of the financial covenant
amendments and the Revolver borrowing base increase provided for by the Second
Amendment. In the event that the Tender Condition is not satisfied and the
other conditions to the Exchange Offer are satisfied or waived, the Company may
elect to file a prepackaged Chapter 11 plan of reorganization containing
substantially the same terms as the Exchange Offer. Members of the Bondholder
Group have agreed, subject to documentation, to vote in favor of a prepackaged
plan.
Because the conditions to effectiveness of the covenant amendments in the Second
Amendment have not yet been satisfied and the waiver contained therein expires
in less than one year, in accordance with generally accepted accounting
principles regarding classification of debt, the Company has classified its
indebtedness under the Senior Credit Facility and the Existing Notes as current
debt. As of October 1, 1999, the long-term debt payable, by its terms, within
one year is $7.8 million and the long-term debt that has been classified as
current, due to the Restructuring not yet having been completed, is $189.8
million.
The Company reasonably expects that the Restructuring will be consummated by
January 31, 2000. Upon completion of the Restructuring before the next balance
sheet reporting date and the Company's compliance with the amended financial
covenants under the Senior Credit Facility, that portion of the restructured
debt that is not due within one year will be reclassified as long-term debt.
The Company believes that the completion of the Restructuring will enable
adequate funds to be available to meet the Company's cash requirements for
capital expenditures, working capital and scheduled principal and interest
payments. The Company's ability to satisfy its future capital requirements will
depend on future capital expenditure requirements and the Company's future
financial performance, which will be subject to general economic conditions and
competitive and other factors, including factors beyond the Company's control.
If the Restructuring is not consummated, the Lenders may accelerate the
obligations under the Senior Credit Facility and the Company may not have the
financial resources needed to make such payment. In addition, failure to
complete the Restructuring could have a material adverse effect on the Company's
financial position, results of operations and liquidity and could result in the
commencement of a Chapter 11 reorganization case under the Bankruptcy Code.
<TABLE>
<CAPTION>
OTHER DATA - EBITDA
Quarter Ended Six Months Ended
--------------------------------- ------------------------
October 1, October 2, October 1, October 2,
1999 1998 1999 1998
-------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
EBITDA (1) $ 778 $ 7,494 $ 6,332 $ 15,132
</TABLE>
(1) The Company defines EBITDA as income from operations before
depreciation, amortization and impairment of long-lived assets including
goodwill. The Company includes information concerning EBITDA because it is used
by certain investors as a measure of the Company's ability to service debt.
EBITDA should not be considered in isolation or as a substitute for net income
or cash flows from operating activities presented in accordance with generally
accepted accounting principles or as a measure of a company's profitability or
liquidity. In addition, EBITDA measures presented may not be comparable to
other similarly titled measures of other companies. The Current and Current YTD
Periods include charges related to costs to position the Company on a
going-forward basis for both manual and technical process improvements, charges
recorded for the write-down of material for discontinued product lines, charges
in connection with the start-up of the supply contract with a national home
center chain and severance charges for a former officer of the Company.
YEAR 2000 COMPLIANCE
Many existing computer software and hardware programs were written using two
digits rather than four to refer to the year. These computer programs will not
properly interpret the year 2000. The Company has established an
enterprise-wide program (Year 2000 Plan) to prepare its computer systems and
applications for the year 2000 and is utilizing both internal and external
resources to identify, correct and test the systems for year 2000 compatibility.
The Year 2000 Plan is divided into the following three major components: (1)
Information Systems; (2) Embedded Controls; and (3) Lifeline Systems.
Information Systems includes all hardware, computer software and electronic data
interchange. Embedded Controls includes all production equipment and facility
systems. Lifeline Systems includes utilities, services and business
relationships, including vendors and suppliers. The Year 2000 Plan is being
implemented with respect to each of these components in the following six
general phases: (1) inventory the components discussed above; (2) assess the
impact of items determined not to be Year 2000 compatible; (3) assign priorities
to identified items; (4) remediate or replace mission critical items that are
determined not to be Year 2000 compatible; (5) test mission critical items; and
(6) design and implement contingency and business continuation plans for each of
the Company's locations. The Company has substantially completed phases 1
through 4 for each of the three major components and is currently performing
phases 5 and 6. The Company anticipates completion of the testing phase in
November 1999 and completion of the contingency plans by the end of November
1999.
To date, the Company has incurred approximately $462,000 in Year 2000 related
expense. It is estimated that an additional $88,000 will be incurred in calendar
year 1999 to complete the Year 2000 Plan. Expenses incurred to complete
remediation of the Year 2000 Plan are not expected to have a material impact on
the Company's results of operations or financial position. However, this
assessment is dependent on the ability of third-party suppliers and others whose
systems failures potentially could have an impact on the Company's operations to
be year 2000 compliant. The Company expects to reduce its level of uncertainty
and the adverse effect that any such failures may have through continued
assessment and development of contingency plans throughout calendar 1999
depending on circumstances encountered during the remainder of the year.
NEW ACCOUNTING PRONOUNCEMENTS
The Company is assessing the reporting and disclosure requirements of Statement
of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments and hedging activities. This
statement requires that all derivatives be recognized as either assets or
liabilities on the balance sheet and measured at fair value. The accounting for
changes in fair value of a derivative (that is, gains and losses) depends upon
the intended use of the derivative and resulting designation. The statement
amends and supercedes a number of existing Statements of Financial Accounting
Standards, and nullifies or modifies a number of the consensus reached by the
Emerging Issues Task Force. This statement is effective for financial
statements for fiscal years beginning after June 15, 2000. The Company has not
yet determined the impact of adopting SFAS No. 133. The Company currently
intends to adopt the provisions of SFAS No. 133 in the first quarter of fiscal
year 2002.
FORWARD LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. All these forward-looking
statements are based on estimates and assumptions made by management of the
Company which, although believed to be reasonable, are inherently uncertain.
Therefore, undue reliance should not be placed upon such estimates and
statements. No assurance can be given that any of such estimates or statements
will be realized and actual results may differ materially from those
contemplated by such forward-looking statements. Factors that may cause such
differences include: (i) increased competition; (ii) increased costs; (iii) loss
or retirement of key members of management; (iv) changes in general economic
conditions in the markets in which the Company may from time to time compete;
(v) effect of discussions of changes to the covenants in the Senior Credit
Facility and the Exchange Offer for the Existing Notes; (vi) and changes in the
number of housing starts in these markets. Many of such factors will be beyond
the control of the Company and its management.
PART II. OTHER INFORMATION
-------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.1 Second Amendment and Waiver, dated as of November 1, 1999, to
the Credit Agreement dated January 28, 1998 (as amended by
the Amendment and Waiver dated as of March 31, 1999) between
RBPI Holding Corporation and Reliant Building Products, Inc.
as "Borrower", Canadian Imperial Bank of Commerce as
"Documentation Agent", and The Chase Manhattan Bank as
"Administrative Agent".
Exhibit 10.2 Consent and Waiver, dated as of November 15, 1999, to the
Credit Agreement dated January 28, 1998 between RBPI
Holding Corporation and Reliant Building Products, Inc.
as "Borrower", Canadian Imperial Bank of Commerce as
"Documentation Agent", and The Chase Manhattan Bank as
"Administrative Agent".
.
Exhibit 10.3 Term Sheet, dated as of November 1, 1999, between Reliant
Building Products, Inc. and certain holders of Senior
Subordinated Notes due 2004.
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Reliant Building Products, Inc.
(Registrant)
Date: November 13, 1999 By: /s/ William Snyder
William K. Snyder,
Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
EXECUTION COPY
SECOND AMENDMENT AND WAIVER, dated as of October 1, 1999 (this
"Amendment") to the Credit Agreement, dated as of January 28, 1998, (as amended
by the Amendment and Waiver dated as of March 31, 1999, and as the same may be
further amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") among RELIANT BUILDING PRODUCTS, INC., a Delaware
-------------
corporation (the "Borrower"), the several banks and other financial institutions
----- --------
or entities from time to time parties to the Credit Agreement (the "Lenders"),
-------
CHASE SECURITIES INC., as advisor and arranger (in such capacity, the
"Arranger"), CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as
documentation agent (in such capacity, the "Documentation Agent"), and CHASE
-------------------
BANK OF TEXAS, NATIONAL ASSOCIATION, as administrative agent (in such capacity,
the "Administrative Agent").
---------------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower and Lenders are parties to the Credit Agreement; and
WHEREAS, the Borrower requests that the Lenders waive compliance with
certain financial covenants contained in the Credit Agreement; and
WHEREAS, the Borrower has requested that the Lenders consent to amendment
of certain financial covenant levels contained in the Credit Agreement; and
WHEREAS, the Borrower has requested that the Lenders amend certain other
provisions contained in the Credit Agreement; and
WHEREAS, the Lenders are willing to agree to the requested amendments and
waiver, but only upon the terms and conditions contained herein;
NOW THEREFORE, in consideration of the premises contained herein, the
parties hereto agree as follows:
I. Waivers to the Credit Agreement
-----------------------------------
1. Section 7.1(a) (Consolidated Leverage Ratio). The Lenders hereby
------------------------------------------------------
waive, for the period from October 1, 1999 to and including the Waiver
Termination Date (as defined below) only, any Default or Event of Default
occurring solely because the Borrower exceeds the Consolidated Leverage Ratio of
7.25 to 1.0 as at the end of the second fiscal quarter of Fiscal Year 2000 and
thereafter to and including the Waiver Termination Date.
<PAGE>
19
2. Section 7.1(b) (Consolidated Interest Coverage Ratio). The Lenders
-------------------------------------------------------
hereby waive, for the period from October 1, 1999 to and including the Waiver
Termination Date (as defined below) only, any Default or Event of Default
occurring solely because the Borrower does not meet the minimum Consolidated
Interest Coverage Ratio of 1.40 to 1.0 for the period of four consecutive fiscal
quarters ended with the second fiscal quarter of Fiscal Year 2000.
3. Section 7.1(c) (Maintenance of Minimum EBITDA). The Lenders hereby
------------------------------------------------
waive, for the period from October 1, 1999 to and including the Waiver
Termination Date (as defined below) only, any Default or Event of Default
occurring solely because the Borrower does not meet the minimum Consolidated
EBITDA of $26,000,000 for the period of four consecutive fiscal quarters ended
with the second fiscal quarter of Fiscal Year 2000.
4. "Waiver Termination Date" means October 31, 1999; provided that if on
----------------------- --------
or prior to October 31, 1999 the Borrower has entered into an agreement or
understanding evidenced in a manner reasonably satisfactory to the
Administrative Agent with the holders of the Senior Subordinated Notes pursuant
to which the Senior Subordinated Notes will be restructured the Waiver
Termination Date shall be extended to no later than November 16, 1999.
II. Amendments to the Credit Agreement
--------------------------------------
1. Amendment of Section 1.1 (Definitions). Section 1.1 is hereby amended
--------------------------------------
as follows:
(a) by amending and restating the following definitions appearing therein to
read in their respective entireties as follows:
"'Borrowing Base': at any date, the amount of the then most recent
---------------
computation of the Borrowing Base, determined by calculating the amount equal
to:
(a) 85% of the Net Amount of Eligible Receivables at such date;
plus
- ----
(b) 50% of the amount of Eligible Inventory at said date, calculated at the
lower of cost (determined on a FIFO basis) or market less the Slow Moving
Reserve then in effect; provided that in no event shall the portion of the
--------
Borrowing Base attributable to Eligible Inventory exceed 50% of the Borrowing
Base;
plus
- ----
(c) the Cumulative Incremental Availability at such date.
<PAGE>
The Borrowing Base will be computed hereunder on a monthly basis (based on all
information reasonably available to the Administrative Agent, including without
limitation, the periodic reports and listings delivered to the Administrative
Agent in accordance with Section 6.2(c)), and a monthly Borrowing Base
Certificate from a Responsible Officer of the Borrower presenting the Borrower's
computation of the Borrowing Base will be periodically delivered to the
Administrative Agent in accordance with Section 6.2(d)."
"'Consolidated EBITDA': for any period, Consolidated Net Income for such
--------------------
period plus, without duplication and to the extent reflected as a charge in the
----
statement of such Consolidated Net Income for such period, the sum of (a) income
tax expense, (b) interest expense, amortization or writeoff of debt discount and
debt issuance costs and commissions, discounts and other fees and charges
associated with Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) to the extent deducted in
determining such Consolidated Net Income, expenses relating to payments pursuant
to the George Group Consulting Agreements, not to exceed $3,500,000, in any
fiscal year of the Borrower, (f) to the extent deducted in determining such
Consolidated Net Income, cash expenses relating to the planned closure and
consolidation referred to in the Confidential Information Memorandum of certain
facilities of the Borrower, not to exceed $3,500,000 in the aggregate, (g) any
extraordinary, unusual or non-recurring expenses or losses (including, whether
or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, losses on sales of assets outside of
the ordinary course of business), (h) any other non-cash charges, (i) any charge
or expense incurred in connection with the acquisition or start-up of any sales
program at any Lowe's store or group of Lowe's stores,( including, without
limitation, the purchase of remaining inventory of other manufacturers), not to
exceed $6,000,000 in the aggregate, (j) in the case of any period which includes
the second or third fiscal quarter of Fiscal Year 2000 up to $1,500,000 in
product development costs written off in such fiscal quarters in respect of
product development undertaken prior thereto, (k) in the case of any period
which includes the third or fourth fiscal quarter of Fiscal Year 2000, the costs
incurred in connection with the Second Amendment and Waiver to this Agreement
and the transactions contemplated thereby, including costs incurred in
connection with the restructuring of Indebtedness contemplated thereby and (l)
any expenses incurred on or after April 4, 1998 for year 2000 remediation
programs and implementation of management information system proposals made by
J. D. Edwards, not to exceed $4,000,000 in the aggregate, and minus, to the
-----
extent included in the statement of such Consolidated Net Income for such
period, the sum of (a) interest income, (b) any extraordinary, unusual or
non-recurring income or gains (including, whether or not otherwise includable as
a separate item in the statement of such Consolidated Net Income for such
period, gains on the sales of assets outside of the ordinary course of business)
and (c) any other non-cash income, all as determined on a consolidated basis."
<PAGE>
"'Consolidated Interest Expense': for any period, total interest expense
----------------------------------
(including that attributable to Capital Lease Obligations) of the Borrower and
its Subsidiaries for such period with respect to all outstanding Indebtedness of
the Borrower and its Subsidiaries (including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and net costs under Interest Rate
Protection Agreements to the extent such net costs are allocable to such period
in accordance with GAAP) but excluding (a) amortization or writeoff of debt
discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness (including the Loans) and (b) any such
interest expense in respect of the Senior Subordinated Notes that may be payable
and is paid by the issuance of additional Senior Subordinated Notes."
(b) by adding thereto the following definitions in the appropriate
alphabetical order:
"'Cumulative Incremental Availability': as at any date of determination, the
-------------------------------------
amount calculated as follows:
(a) for each date set forth in the chart below which has occurred on or
prior to such date of determination, determine the lesser of (i) the amount set
forth opposite such date below under the caption "Maximum Incremental
Availability" and (ii) the amount borrowed under the Revolving Credit
Commitments on such date below (or, if such date is not a Business Day, the next
succeeding Business Day) to fund the principal payment then due and payable on
the Tranche A Term Loans (as specified in a notice from the Borrower to the
Administrative Agent on or about such date):
Maximum
Date Incremental Availability
- ---- -------------------------
March 31, 2000 $2,000,000
June 30, 2000 $2,000,000
December 31, 2000 $2,000,000
March 31, 2001 $ 500,000
June 30, 2001 $ 500,000
September 30, 2001 $ 500,000
December 31, 2001 $ 500,000
<PAGE>
Such lesser amount is the "Incremental Availability Amount" for each such
-------------------------------
date; and
(b) add the Incremental Availability Amounts for all of the dates in the
chart above which have occurred on or prior to such date of determination."
"'Second Amendment Effective Date': as defined in the Second Amendment and
-----------------------------------
Waiver to this Agreement."
---
2. Amendment of Subsection 7.1(a) (Consolidated Leverage Ratio).
------------------------------------------------------------------
Subsection 7.1(a) of the Credit Agreement is hereby amended by deleting such
subsection in its entirety and substituting in lieu thereof the following:
"(a) Intentionally Omitted."
3. Amendment of Subsection 7.1(b) (Consolidated Interest Coverage Ratio).
---------------------------------------------------------------------
Subsection 7.1(b) of the Credit Agreement is hereby amended by deleting such
subsection in its entirety and substituting in lieu thereof the following:
"(b) Consolidated Interest Coverage Ratio. Permit Consolidated Interest
--------------------------------------
Coverage Ratio for any period of four consecutive fiscal quarters of the
Borrower ending during any period set forth below to be less than the ratio set
forth below opposite such period:
Consolidated Interest
Period Coverage Ratio
------ --------------
3rd Quarter Fiscal Year 2000- 1.00:1.0
4th Quarter Fiscal Year 2000
1st Quarter Fiscal Year 2001- 1.40:1.0
2nd Quarter Fiscal Year 2001
3rd Quarter Fiscal Year 2001- 1.75:1.0
4th Quarter Fiscal Year 2001
1st Quarter Fiscal Year 2002- 2.00:1.0
Each Fiscal Quarter Thereafter
4. Amendment of Section 7.1(c) (Maintenance of Minimum EBITDA). Section
--------------------------------------------------------------
7.1(c) is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:
<PAGE>
"(c) Maintenance of Minimum EBITDA. Permit Consolidated EBITDA for any
--------------------------------
period of four consecutive fiscal quarters of the Borrower ending during any
period set forth below to be less than the amount set forth below opposite such
period:
Period Consolidated EBITDA
------ -------------------
3rd Quarter Fiscal Year 2000- $17,000,000
2nd Quarter Fiscal Year 2001
3rd Quarter Fiscal Year 2001- $19,000,000
4th Quarter Fiscal Year 2001
1st Quarter Fiscal Year 2002- $21,000,000
2nd Quarter Fiscal Year 2002
3rd Quarter Fiscal Year 2002- $23,000,000
4th Quarter Fiscal Year 2002
1st Quarter Fiscal Year 2003- $25,000,000
4th Quarter Fiscal Year 2003
Each Fiscal Quarter Thereafter $27,000,000
5. Amendment of Section 7.2 (Limitation on Indebtedness). Section 7.2 of
-----------------------------------------------------
the Credit Agreement is hereby amended by inserting the following words after
the phrase "not to exceed $70,000,000" in paragraph (g) thereof:
"plus the aggregate amount of interest expense in respect of the Senior
Subordinated Notes which is paid by the issuance of additional Senior
Subordinated Notes in accordance with the terms of the restructuring of the
Senior Subordinated Notes which occurred on or prior to the Second Amendment
Effective Date"
6. Amendment of Annex A (Pricing Grid). Annex A is hereby amended by
---------------------------------------
deleting the Pricing Grid contained therein and replacing it with the Pricing
Grid attached as Schedule I hereto. Interest and commitment fees accrued prior
to the Second Amendment Effective Date and payable thereafter shall be payable
for such period based on the Pricing Grid in effect prior to the Second
Amendment Effective Date, and interest and commitment fees accrued thereafter
shall be payable based on the Pricing Grid as amended hereby.
III. General Provisions
-------------------
<PAGE>
1. Representations and Warranties. On and as of the date hereof and after
------------------------------
giving effect to this Amendment and Waiver, the Borrower hereby confirms,
reaffirms and restates the representations and warranties set forth in Section 4
of the Credit Agreement mutatis mutandis, and to the extent that such
------- --------
representations and warranties expressly relate to a specific earlier date in
which case the Borrower hereby confirms, reaffirms and restates such
representations and warranties as of such earlier date, provided that the
--------
references to the Credit Agreement in such representations and warranties shall
be deemed to refer to the Credit Agreement as amended prior to the date hereof
and pursuant to this Amendment and Waiver.
2. Conditions to Effectiveness of Section I of this Amendment and Waiver.
---------------------------------------------------------------------
The waivers contained in Section I of this Amendment and Waiver shall become
effective as of the date on which the following conditions precedent have been
satisfied or waived:
(a) The Administrative Agent shall have received counterparts of this
Amendment, duly executed and delivered by the Borrower and the Required Lenders;
and
(b) Each Guarantor under the Guarantee and Collateral Agreement shall have
consented to this Amendment.
3. Conditions to Effectiveness of Section II of this Amendment and Waiver.
----------------------------------------------------------------------
The amendments contained in Section II of this Amendment and Waiver shall become
effective as of the date (the "Second Amendment Effective Date") on which all of
-------------------------------
the following conditions precedent have been satisfied or waived:
(a) The Administrative Agent shall have received counterparts of this
Amendment, duly executed and delivered by the Borrower and the requisite
Lenders;
(b) Each Guarantor under the Guarantee and Collateral Agreement shall have
consented to this Amendment;
(c) the Control Group shall have advanced $10,000,000 to the Borrower in
the form of either equity or debt that is subordinated to the Obligations, in a
manner reasonably satisfactory to the Administrative Agent and the Required
Lenders; and
(d) the Senior Subordinated Notes and Indebtedness of Holdings shall have
been restructured upon terms and conditions reasonably satisfactory to the
Control Group.
The Lenders parties hereto agree that no mandatory prepayment shall be required
as a result of any of the transactions referred to in paragraphs (c) and (d) of
this Section 3.
<PAGE>
4. Continuing Effect; No Other Amendments. Except as expressly amended or
--------------------------------------
waived hereby, all of the terms and provisions of the Credit Agreement are and
shall remain in full force and effect. The amendments and waivers provided for
herein are limited to the specific subsections of the Credit Agreement specified
herein and shall not constitute an amendment or waiver of, or an indication of
the Lenders' willingness to amend or waive, any other provisions of the Credit
Agreement or the same subsections for any other date or time period (whether or
not such other provisions or compliance with such subsections for another date
or time period are affected by the circumstances addressed in this Amendment and
Waiver).
5. Expenses. The Borrower agrees to pay and reimburse the Administrative
--------
Agent for all its reasonable costs and expenses incurred in connection with the
preparation and delivery of this Amendment and Waiver, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent.
6. Counterparts. This Amendment and Waiver may be executed by one or more
------------
of the parties to this Amendment and Waiver on any number of separate
counterparts (including by telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
7. GOVERNING LAW. THIS AMENDMENT AND WAIVER AND THE RIGHTS AND
--------------
OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY,
-
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
RELIANT BUILDING PRODUCTS, INC.
By:
Name:
Title:
<PAGE>
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Administrative Agent,
Swing Line Lender, Issuing Lender
and as a Lender
By:
Name:
Title:
<PAGE>
BANKBOSTON, N.A.
By:
Name:
Title:
<PAGE>
BALANCED HIGH YIELD FUND I LTD.
by BHF-Bank Aktiengesellschaft acting through
its New York Branch as
attorney-in-fact
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
PARIBAS
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS,
LDC
By: ING Capital Advisors, LLC
as Investment Advisor
By:
Name:
Title:
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
By: ING Capital Advisors, LLC
as Investment Advisor
By:
Name:
Title:
<PAGE>
BHF-BANK AKTIENGESELLSCHAFT
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
CIBC, INC.
By:
Name:
Title:
<PAGE>
FLEET BUSINESS CREDIT CORPORATION
F/k/a Sanwa Business Credit Corporation
By:
Name:
Title:
<PAGE>
KEY CORPORATE CAPITAL INC.
By:
Name:
Title:
<PAGE>
KZH CYPRESSTREE-1 LLC
By:
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research as
Investment Advisor
By:
Name:
Title:
<PAGE>
VAN KAMPEN CLO II, LIMITED
By: VAN KAMPEN MANAGEMENT INC., as
Collateral Manager
By:
Name:
Title:
ACKNOWLEDGMENT AND CONSENT
--------------------------
Each of the undersigned hereby consents to the foregoing Amendment and
hereby confirms, reaffirms and restates that its obligations under or in respect
of the Credit Agreement and the documents related thereto to which it is a party
are and shall remain in full force and effect after giving effect to the
foregoing Amendment:
RBPI HOLDING CORPORATION
By: /s/ William Snyder
Title: Vice President
RELIANT BUILDING PRODUCTS, INC.
By: /s/ William Snyder
Title: Senior Vice President
RBP OF ARIZONA, INC.
By: /s/ William Snyder
Title: Vice President
RBP CUSTOM GLASS, INC.
By: /s/ William Snyder
Title: Vice President
RBP OF TEXAS, INC.
By: /s/ William Snyder
Title: Vice President
<PAGE>
RBP TRANS, INC.
By: /s/ William Snyder
Title: Vice President
LEVAN BUILDIERS SUPPLY, INCORPORATED
By: /s/ William Snyder
Title: Vice President
TIMBER TECH, INC.
By: /s/ William Snyder
Title: Vice President
CFA HOLDING COMPANY
By: /s/ William Snyder
Title: Vice President
CARE FREE ALUMINUM PRODUCTS, INC.
By: /s/ William Snyder
Title: Vice President
<PAGE>
ULTRA BUILDING SYSTEMS, INC.
By: /s/ William Snyder
Title: Vice President
ALPINE INDUSTRIES, INC.
By: /s/ William Snyder
Title: Vice President
EXECUTION COPY
CONSENT AND WAIVER
CONSENT AND WAIVER, dated as of November 15, 1999 (this "Consent") to the
-------
Second Amendment and Waiver, dated as of October 1, 1999 (the "Second Amendment
----------------
and Waiver"), to the Credit Agreement, dated as of January 28, 1998, (as
- -----------
amended, supplemented or otherwise modified from time to time, the "Credit
- ------- ------
Agreement") among RELIANT BUILDING PRODUCTS, INC., a Delaware corporation (the
- ---------
"Borrower"), the several banks and other financial institutions or entities from
- ---------
time to time parties to the Credit Agreement (the "Lenders"), CHASE SECURITIES
-------
INC., as advisor and arranger (in such capacity, the "Arranger"), CANADIAN
--------
IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as documentation agent (in such
capacity, the "Documentation Agent"), and CHASE BANK OF TEXAS, NATIONAL
--------------------
ASSOCIATION, as administrative agent (in such capacity, the "Administrative
--------------
Agent").
-
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower and Lenders are parties to the Credit Agreement;
WHEREAS, the Borrower and Lenders have entered into the Second Amendment
and Waiver, pursuant to which the Lenders have agreed to waive compliance with
certain financial covenants contained in the Credit Agreement through the Waiver
Termination Date (as defined in the Second Amendment and Waiver);
WHEREAS, the Borrower entered into an understanding with the holders of the
Senior Subordinated Notes on October 31, 1999, pursuant to which the Senior
Subordinated Notes will be restructured, and such understanding has been
documented in a letter agreement, dated as of November 1, 1999 (the
"Restructuring Agreement");
-------------
WHEREAS, the Borrower has requested that the Lenders consent to the
extension of the Waiver Termination Date from November 16, 1999 to January 31,
2000, the date by which it reasonably expects to complete the restructuring of
the Senior Subordinated Notes pursuant to the Restructuring Agreement; and
WHEREAS, the Lenders are willing to consent to such requested extension of the
Waiver Termination Date, but only upon the terms and conditions contained
herein;
NOW THEREFORE, in consideration of the premises contained herein, the
parties hereto agree as follows:
<PAGE>
3
I. Defined Terms. Unless otherwise defined herein, terms defined in the
-------------
Credit Agreement shall have such meanings when used herein.
II. Consent. The Lenders hereby consent to the extension of the Waiver
-------
Termination Date (as defined in the Second Amendment and Waiver) to no later
than January 31, 2000; provided, however, that such consent shall only be
-------- ---------
effective for so long as no interest is paid on or after the date hereof by the
Borrower in respect of the Senior Subordinated Notes; and provided further, that
-------- -------
in no event shall the Waiver Termination Date extend beyond (i) the last day of
the third fiscal quarter of Fiscal Year 2000, if the Borrower does not meet the
financial covenants as set forth in the Second Amendment and Waiver for the
period of four fiscal quarters of the Borrower ending on the last day of the
third fiscal quarter of Fiscal Year 2000, notwithstanding the fact that the
Second Amendment Effective Date shall not have occurred, or (ii) the date upon
which the Restructuring Agreement shall cease to be in effect (it being
understood that this Consent is not conditioned upon the Control Group having
advanced $10,000,000 to the Borrower (such advance being a condition to
effectiveness of the Second Amendment and Waiver)).
III. Waiver to the Credit Agreement. The Lenders hereby waive, for the
---------------------------------
period from the Effective Date to and including the Waiver Termination Date
only, any Default or Event of Default occurring solely due to the nonpayment of
interest by the Borrower with respect to the Senior Subordinated Notes.
IV. General Provisions.
-------------------
1. Representations and Warranties. On and as of the date hereof and after
------------------------------
giving effect to this Consent, the Borrower hereby confirms, reaffirms and
restates the representations and warranties set forth in paragraph 1 of Section
III of the Second Amendment and Waiver mutatis mutandis, and to the extent that
------- --------
such representations and warranties expressly relate to a specific earlier date
in which case the Borrower hereby confirms, reaffirms and restates such
representations and warranties as of such earlier date, provided that the
--------
references to the Credit Agreement in such representations and warranties shall
be deemed to refer to the Credit Agreement as amended prior to the date hereof
and pursuant to this Consent.
2. Conditions to Effectiveness. This Consent shall become effective as of
---------------------------
the date (the "Effective Date") on which the following conditions precedent have
--------------
been satisfied or waived:
(a) The Administrative Agent shall have received counterparts of this
Amendment, duly executed and delivered by the Borrower and the Required Lenders;
and
(b) Each Guarantor under the Guarantee and Collateral Agreement shall have
acknowledged and consented to this Consent.
<PAGE>
4. Continuing Effect; No Other Amendments. This Consent shall not constitute
--------------------------------------
a waiver, amendment or modification of any other provision of the Credit
Agreement or the Second Amendment and Waiver not expressly referred to herein
and shall not be construed as a waiver or consent to any further or future
action on the part of the Borrower that would require a waiver or consent of the
Lenders or the Administrative Agent. Except as expressly modified hereby, the
provisions of the Credit Agreement and the Second Amendment and Waiver are and
shall remain in full force and effect.
5. Expenses. The Borrower agrees to pay and reimburse the Administrative
--------
Agent for all its reasonable costs and expenses incurred in connection with the
preparation and delivery of this Consent, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent.
6. Counterparts. This Consent may be executed by one or more of the
------------
parties to this Consent on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
7. GOVERNING LAW. THIS CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE
--------------
PARTIES UNDER THIS CONSENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
RELIANT BUILDING PRODUCTS, INC.
By:
Name:
Title:
<PAGE>
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Administrative Agent,
Swing Line Lender, Issuing Lender
and as a Lender
By:
Name:
Title:
<PAGE>
BANKBOSTON, N.A.
By:
Name:
Title:
<PAGE>
BALANCED HIGH YIELD FUND I
by BHF (USA) Capital Corporation acting as
attorney-in-fact
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
PARIBAS
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
ING HIGH INCOME PRINCIPAL
. PRESERVATION FUND HOLDINGS,
LDC
By: ING Capital Advisors, LLC
as Investment Advisor
By:
Name:
Title:
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
By: ING Capital Advisors, LLC
as Investment Advisor
By:
Name:
Title:
<PAGE>
BHF (USA) CAPITAL CORPORATION
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
CIBC, INC.
By:
Name:
Title:
<PAGE>
FLEET BUSINESS CREDIT CORPORATION
F/k/a Sanwa Business Credit Corporation
By:
Name:
Title:
<PAGE>
KEY CORPORATE CAPITAL INC.
By:
Name:
Title:
<PAGE>
KZH CYPRESSTREE-1 LLC
By:
Name:
Title:
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research as
Investment Advisor
By:
Name:
Title:
<PAGE>
VAN KAMPEN CLO II, LIMITED
By: VAN KAMPEN MANAGEMENT INC., as
Collateral Manager
By:
Name:
Title:
<PAGE>
VAN KAMPEN PRIME RATE INCOME TRUST
By: Van Kampen Investment Advisory Corp.
By:
Name:
Title:
ACKNOWLEDGMENT AND CONSENT
--------------------------
Each of the undersigned hereby consents to the foregoing Amendment and
hereby confirms, reaffirms and restates that its obligations under or in respect
of the Credit Agreement and the documents related thereto to which it is a party
are and shall remain in full force and effect after giving effect to the
foregoing Amendment and agrees and confirms, in the case of RBP Fenesco, Inc.,
that it is a party to the Guarantee and Collateral Agreement as a Grantor
thereunder:
RBPI HOLDING CORPORATION
By:
Title:
RBP OF ARIZONA, INC.
By:
Title:
RBP CUSTOM GLASS, INC.
By:
Title:
RBP OF TEXAS, INC.
By:
Title:
RBP TRANS, INC.
By:
Title:
<PAGE>
RBP FENESCO, INC.
By:
Title:
LEVAN BUILDIERS SUPPLY, INCORPORATED
By:
Title:
TIMBER TECH, INC.
By:
Title:
CFA HOLDING COMPANY
By:
Title:
CARE FREE ALUMINUM PRODUCTS, INC.
By:
Title:
ULTRA BUILDING SYSTEMS, INC.
By:
Title:
<PAGE>
ALPINE INDUSTRIES, INC.
By:
Title:
EXECUTION COPY
SECOND AMENDMENT AND WAIVER, dated as of October 1, 1999 (this
"Amendment") to the Credit Agreement, dated as of January 28, 1998, (as amended
by the Amendment and Waiver dated as of March 31, 1999, and as the same may be
further amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") among RELIANT BUILDING PRODUCTS, INC., a Delaware
-------------
corporation (the "Borrower"), the several banks and other financial institutions
----- --------
or entities from time to time parties to the Credit Agreement (the "Lenders"),
-------
CHASE SECURITIES INC., as advisor and arranger (in such capacity, the
"Arranger"), CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as
documentation agent (in such capacity, the "Documentation Agent"), and CHASE
-------------------
BANK OF TEXAS, NATIONAL ASSOCIATION, as administrative agent (in such capacity,
the "Administrative Agent").
---------------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower and Lenders are parties to the Credit Agreement; and
WHEREAS, the Borrower requests that the Lenders waive compliance with
certain financial covenants contained in the Credit Agreement; and
WHEREAS, the Borrower has requested that the Lenders consent to amendment
of certain financial covenant levels contained in the Credit Agreement; and
WHEREAS, the Borrower has requested that the Lenders amend certain other
provisions contained in the Credit Agreement; and
WHEREAS, the Lenders are willing to agree to the requested amendments and
waiver, but only upon the terms and conditions contained herein;
NOW THEREFORE, in consideration of the premises contained herein, the
parties hereto agree as follows:
I. Waivers to the Credit Agreement
-----------------------------------
1. Section 7.1(a) (Consolidated Leverage Ratio). The Lenders hereby
------------------------------------------------------
waive, for the period from October 1, 1999 to and including the Waiver
Termination Date (as defined below) only, any Default or Event of Default
occurring solely because the Borrower exceeds the Consolidated Leverage Ratio of
7.25 to 1.0 as at the end of the second fiscal quarter of Fiscal Year 2000 and
thereafter to and including the Waiver Termination Date.
<PAGE>
19
2. Section 7.1(b) (Consolidated Interest Coverage Ratio). The Lenders
-------------------------------------------------------
hereby waive, for the period from October 1, 1999 to and including the Waiver
Termination Date (as defined below) only, any Default or Event of Default
occurring solely because the Borrower does not meet the minimum Consolidated
Interest Coverage Ratio of 1.40 to 1.0 for the period of four consecutive fiscal
quarters ended with the second fiscal quarter of Fiscal Year 2000.
3. Section 7.1(c) (Maintenance of Minimum EBITDA). The Lenders hereby
------------------------------------------------
waive, for the period from October 1, 1999 to and including the Waiver
Termination Date (as defined below) only, any Default or Event of Default
occurring solely because the Borrower does not meet the minimum Consolidated
EBITDA of $26,000,000 for the period of four consecutive fiscal quarters ended
with the second fiscal quarter of Fiscal Year 2000.
4. "Waiver Termination Date" means October 31, 1999; provided that if on
----------------------- --------
or prior to October 31, 1999 the Borrower has entered into an agreement or
understanding evidenced in a manner reasonably satisfactory to the
Administrative Agent with the holders of the Senior Subordinated Notes pursuant
to which the Senior Subordinated Notes will be restructured the Waiver
Termination Date shall be extended to no later than November 16, 1999.
II. Amendments to the Credit Agreement
--------------------------------------
1. Amendment of Section 1.1 (Definitions). Section 1.1 is hereby amended
--------------------------------------
as follows:
(a) by amending and restating the following definitions appearing therein to
read in their respective entireties as follows:
"'Borrowing Base': at any date, the amount of the then most recent
---------------
computation of the Borrowing Base, determined by calculating the amount equal
to:
(a) 85% of the Net Amount of Eligible Receivables at such date;
plus
- ----
(b) 50% of the amount of Eligible Inventory at said date, calculated at the
lower of cost (determined on a FIFO basis) or market less the Slow Moving
Reserve then in effect; provided that in no event shall the portion of the
--------
Borrowing Base attributable to Eligible Inventory exceed 50% of the Borrowing
Base;
plus
- ----
(c) the Cumulative Incremental Availability at such date.
<PAGE>
The Borrowing Base will be computed hereunder on a monthly basis (based on all
information reasonably available to the Administrative Agent, including without
limitation, the periodic reports and listings delivered to the Administrative
Agent in accordance with Section 6.2(c)), and a monthly Borrowing Base
Certificate from a Responsible Officer of the Borrower presenting the Borrower's
computation of the Borrowing Base will be periodically delivered to the
Administrative Agent in accordance with Section 6.2(d)."
"'Consolidated EBITDA': for any period, Consolidated Net Income for such
--------------------
period plus, without duplication and to the extent reflected as a charge in the
----
statement of such Consolidated Net Income for such period, the sum of (a) income
tax expense, (b) interest expense, amortization or writeoff of debt discount and
debt issuance costs and commissions, discounts and other fees and charges
associated with Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) to the extent deducted in
determining such Consolidated Net Income, expenses relating to payments pursuant
to the George Group Consulting Agreements, not to exceed $3,500,000, in any
fiscal year of the Borrower, (f) to the extent deducted in determining such
Consolidated Net Income, cash expenses relating to the planned closure and
consolidation referred to in the Confidential Information Memorandum of certain
facilities of the Borrower, not to exceed $3,500,000 in the aggregate, (g) any
extraordinary, unusual or non-recurring expenses or losses (including, whether
or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, losses on sales of assets outside of
the ordinary course of business), (h) any other non-cash charges, (i) any charge
or expense incurred in connection with the acquisition or start-up of any sales
program at any Lowe's store or group of Lowe's stores,( including, without
limitation, the purchase of remaining inventory of other manufacturers), not to
exceed $6,000,000 in the aggregate, (j) in the case of any period which includes
the second or third fiscal quarter of Fiscal Year 2000 up to $1,500,000 in
product development costs written off in such fiscal quarters in respect of
product development undertaken prior thereto, (k) in the case of any period
which includes the third or fourth fiscal quarter of Fiscal Year 2000, the costs
incurred in connection with the Second Amendment and Waiver to this Agreement
and the transactions contemplated thereby, including costs incurred in
connection with the restructuring of Indebtedness contemplated thereby and (l)
any expenses incurred on or after April 4, 1998 for year 2000 remediation
programs and implementation of management information system proposals made by
J. D. Edwards, not to exceed $4,000,000 in the aggregate, and minus, to the
-----
extent included in the statement of such Consolidated Net Income for such
period, the sum of (a) interest income, (b) any extraordinary, unusual or
non-recurring income or gains (including, whether or not otherwise includable as
a separate item in the statement of such Consolidated Net Income for such
period, gains on the sales of assets outside of the ordinary course of business)
and (c) any other non-cash income, all as determined on a consolidated basis."
<PAGE>
"'Consolidated Interest Expense': for any period, total interest expense
----------------------------------
(including that attributable to Capital Lease Obligations) of the Borrower and
its Subsidiaries for such period with respect to all outstanding Indebtedness of
the Borrower and its Subsidiaries (including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and net costs under Interest Rate
Protection Agreements to the extent such net costs are allocable to such period
in accordance with GAAP) but excluding (a) amortization or writeoff of debt
discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness (including the Loans) and (b) any such
interest expense in respect of the Senior Subordinated Notes that may be payable
and is paid by the issuance of additional Senior Subordinated Notes."
(b) by adding thereto the following definitions in the appropriate
alphabetical order:
"'Cumulative Incremental Availability': as at any date of determination, the
-------------------------------------
amount calculated as follows:
(a) for each date set forth in the chart below which has occurred on or
prior to such date of determination, determine the lesser of (i) the amount set
forth opposite such date below under the caption "Maximum Incremental
Availability" and (ii) the amount borrowed under the Revolving Credit
Commitments on such date below (or, if such date is not a Business Day, the next
succeeding Business Day) to fund the principal payment then due and payable on
the Tranche A Term Loans (as specified in a notice from the Borrower to the
Administrative Agent on or about such date):
Maximum
Date Incremental Availability
- ---- -------------------------
March 31, 2000 $2,000,000
June 30, 2000 $2,000,000
December 31, 2000 $2,000,000
March 31, 2001 $ 500,000
June 30, 2001 $ 500,000
September 30, 2001 $ 500,000
December 31, 2001 $ 500,000
<PAGE>
Such lesser amount is the "Incremental Availability Amount" for each such
-------------------------------
date; and
(b) add the Incremental Availability Amounts for all of the dates in the
chart above which have occurred on or prior to such date of determination."
"'Second Amendment Effective Date': as defined in the Second Amendment and
-----------------------------------
Waiver to this Agreement."
---
2. Amendment of Subsection 7.1(a) (Consolidated Leverage Ratio).
------------------------------------------------------------------
Subsection 7.1(a) of the Credit Agreement is hereby amended by deleting such
subsection in its entirety and substituting in lieu thereof the following:
"(a) Intentionally Omitted."
3. Amendment of Subsection 7.1(b) (Consolidated Interest Coverage Ratio).
---------------------------------------------------------------------
Subsection 7.1(b) of the Credit Agreement is hereby amended by deleting such
subsection in its entirety and substituting in lieu thereof the following:
"(b) Consolidated Interest Coverage Ratio. Permit Consolidated Interest
--------------------------------------
Coverage Ratio for any period of four consecutive fiscal quarters of the
Borrower ending during any period set forth below to be less than the ratio set
forth below opposite such period:
Consolidated Interest
Period Coverage Ratio
------ --------------
3rd Quarter Fiscal Year 2000- 1.00:1.0
4th Quarter Fiscal Year 2000
1st Quarter Fiscal Year 2001- 1.40:1.0
2nd Quarter Fiscal Year 2001
3rd Quarter Fiscal Year 2001- 1.75:1.0
4th Quarter Fiscal Year 2001
1st Quarter Fiscal Year 2002- 2.00:1.0
Each Fiscal Quarter Thereafter
4. Amendment of Section 7.1(c) (Maintenance of Minimum EBITDA). Section
--------------------------------------------------------------
7.1(c) is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:
<PAGE>
"(c) Maintenance of Minimum EBITDA. Permit Consolidated EBITDA for any
--------------------------------
period of four consecutive fiscal quarters of the Borrower ending during any
period set forth below to be less than the amount set forth below opposite such
period:
Period Consolidated EBITDA
------ -------------------
3rd Quarter Fiscal Year 2000- $17,000,000
2nd Quarter Fiscal Year 2001
3rd Quarter Fiscal Year 2001- $19,000,000
4th Quarter Fiscal Year 2001
1st Quarter Fiscal Year 2002- $21,000,000
2nd Quarter Fiscal Year 2002
3rd Quarter Fiscal Year 2002- $23,000,000
4th Quarter Fiscal Year 2002
1st Quarter Fiscal Year 2003- $25,000,000
4th Quarter Fiscal Year 2003
Each Fiscal Quarter Thereafter $27,000,000
5. Amendment of Section 7.2 (Limitation on Indebtedness). Section 7.2 of
-----------------------------------------------------
the Credit Agreement is hereby amended by inserting the following words after
the phrase "not to exceed $70,000,000" in paragraph (g) thereof:
"plus the aggregate amount of interest expense in respect of the Senior
Subordinated Notes which is paid by the issuance of additional Senior
Subordinated Notes in accordance with the terms of the restructuring of the
Senior Subordinated Notes which occurred on or prior to the Second Amendment
Effective Date"
6. Amendment of Annex A (Pricing Grid). Annex A is hereby amended by
---------------------------------------
deleting the Pricing Grid contained therein and replacing it with the Pricing
Grid attached as Schedule I hereto. Interest and commitment fees accrued prior
to the Second Amendment Effective Date and payable thereafter shall be payable
for such period based on the Pricing Grid in effect prior to the Second
Amendment Effective Date, and interest and commitment fees accrued thereafter
shall be payable based on the Pricing Grid as amended hereby.
III. General Provisions
-------------------
<PAGE>
1. Representations and Warranties. On and as of the date hereof and after
------------------------------
giving effect to this Amendment and Waiver, the Borrower hereby confirms,
reaffirms and restates the representations and warranties set forth in Section 4
of the Credit Agreement mutatis mutandis, and to the extent that such
------- --------
representations and warranties expressly relate to a specific earlier date in
which case the Borrower hereby confirms, reaffirms and restates such
representations and warranties as of such earlier date, provided that the
--------
references to the Credit Agreement in such representations and warranties shall
be deemed to refer to the Credit Agreement as amended prior to the date hereof
and pursuant to this Amendment and Waiver.
2. Conditions to Effectiveness of Section I of this Amendment and Waiver.
---------------------------------------------------------------------
The waivers contained in Section I of this Amendment and Waiver shall become
effective as of the date on which the following conditions precedent have been
satisfied or waived:
(a) The Administrative Agent shall have received counterparts of this
Amendment, duly executed and delivered by the Borrower and the Required Lenders;
and
(b) Each Guarantor under the Guarantee and Collateral Agreement shall have
consented to this Amendment.
3. Conditions to Effectiveness of Section II of this Amendment and Waiver.
----------------------------------------------------------------------
The amendments contained in Section II of this Amendment and Waiver shall become
effective as of the date (the "Second Amendment Effective Date") on which all of
-------------------------------
the following conditions precedent have been satisfied or waived:
(a) The Administrative Agent shall have received counterparts of this
Amendment, duly executed and delivered by the Borrower and the requisite
Lenders;
(b) Each Guarantor under the Guarantee and Collateral Agreement shall have
consented to this Amendment;
(c) the Control Group shall have advanced $10,000,000 to the Borrower in
the form of either equity or debt that is subordinated to the Obligations, in a
manner reasonably satisfactory to the Administrative Agent and the Required
Lenders; and
(d) the Senior Subordinated Notes and Indebtedness of Holdings shall have
been restructured upon terms and conditions reasonably satisfactory to the
Control Group.
The Lenders parties hereto agree that no mandatory prepayment shall be required
as a result of any of the transactions referred to in paragraphs (c) and (d) of
this Section 3.
<PAGE>
4. Continuing Effect; No Other Amendments. Except as expressly amended or
--------------------------------------
waived hereby, all of the terms and provisions of the Credit Agreement are and
shall remain in full force and effect. The amendments and waivers provided for
herein are limited to the specific subsections of the Credit Agreement specified
herein and shall not constitute an amendment or waiver of, or an indication of
the Lenders' willingness to amend or waive, any other provisions of the Credit
Agreement or the same subsections for any other date or time period (whether or
not such other provisions or compliance with such subsections for another date
or time period are affected by the circumstances addressed in this Amendment and
Waiver).
5. Expenses. The Borrower agrees to pay and reimburse the Administrative
--------
Agent for all its reasonable costs and expenses incurred in connection with the
preparation and delivery of this Amendment and Waiver, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent.
6. Counterparts. This Amendment and Waiver may be executed by one or more
------------
of the parties to this Amendment and Waiver on any number of separate
counterparts (including by telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
7. GOVERNING LAW. THIS AMENDMENT AND WAIVER AND THE RIGHTS AND
--------------
OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY,
-
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
RELIANT BUILDING PRODUCTS, INC.
By:
Name:
Title:
<PAGE>
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Administrative Agent,
Swing Line Lender, Issuing Lender
and as a Lender
By:
Name:
Title:
<PAGE>
BANKBOSTON, N.A.
By:
Name:
Title:
<PAGE>
BALANCED HIGH YIELD FUND I LTD.
by BHF-Bank Aktiengesellschaft acting through
its New York Branch as
attorney-in-fact
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
PARIBAS
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS,
LDC
By: ING Capital Advisors, LLC
as Investment Advisor
By:
Name:
Title:
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
By: ING Capital Advisors, LLC
as Investment Advisor
By:
Name:
Title:
<PAGE>
BHF-BANK AKTIENGESELLSCHAFT
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
CIBC, INC.
By:
Name:
Title:
<PAGE>
FLEET BUSINESS CREDIT CORPORATION
F/k/a Sanwa Business Credit Corporation
By:
Name:
Title:
<PAGE>
KEY CORPORATE CAPITAL INC.
By:
Name:
Title:
<PAGE>
KZH CYPRESSTREE-1 LLC
By:
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research as
Investment Advisor
By:
Name:
Title:
<PAGE>
VAN KAMPEN CLO II, LIMITED
By: VAN KAMPEN MANAGEMENT INC., as
Collateral Manager
By:
Name:
Title:
ACKNOWLEDGMENT AND CONSENT
--------------------------
Each of the undersigned hereby consents to the foregoing Amendment and
hereby confirms, reaffirms and restates that its obligations under or in respect
of the Credit Agreement and the documents related thereto to which it is a party
are and shall remain in full force and effect after giving effect to the
foregoing Amendment:
RBPI HOLDING CORPORATION
By: /s/ William Snyder
Title: Vice President
RELIANT BUILDING PRODUCTS, INC.
By: /s/ William Snyder
Title: Senior Vice President
RBP OF ARIZONA, INC.
By: /s/ William Snyder
Title: Vice President
RBP CUSTOM GLASS, INC.
By: /s/ William Snyder
Title: Vice President
RBP OF TEXAS, INC.
By: /s/ William Snyder
Title: Vice President
<PAGE>
RBP TRANS, INC.
By: /s/ William Snyder
Title: Vice President
LEVAN BUILDIERS SUPPLY, INCORPORATED
By: /s/ William Snyder
Title: Vice President
TIMBER TECH, INC.
By: /s/ William Snyder
Title: Vice President
CFA HOLDING COMPANY
By: /s/ William Snyder
Title: Vice President
CARE FREE ALUMINUM PRODUCTS, INC.
By: /s/ William Snyder
Title: Vice President
<PAGE>
ULTRA BUILDING SYSTEMS, INC.
By: /s/ William Snyder
Title: Vice President
ALPINE INDUSTRIES, INC.
By: /s/ William Snyder
Title: Vice President
EXECUTION COPY
CONSENT AND WAIVER
CONSENT AND WAIVER, dated as of November 15, 1999 (this "Consent") to the
-------
Second Amendment and Waiver, dated as of October 1, 1999 (the "Second Amendment
----------------
and Waiver"), to the Credit Agreement, dated as of January 28, 1998, (as
- -----------
amended, supplemented or otherwise modified from time to time, the "Credit
- ------- ------
Agreement") among RELIANT BUILDING PRODUCTS, INC., a Delaware corporation (the
- ---------
"Borrower"), the several banks and other financial institutions or entities from
- ---------
time to time parties to the Credit Agreement (the "Lenders"), CHASE SECURITIES
-------
INC., as advisor and arranger (in such capacity, the "Arranger"), CANADIAN
--------
IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as documentation agent (in such
capacity, the "Documentation Agent"), and CHASE BANK OF TEXAS, NATIONAL
--------------------
ASSOCIATION, as administrative agent (in such capacity, the "Administrative
--------------
Agent").
-
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower and Lenders are parties to the Credit Agreement;
WHEREAS, the Borrower and Lenders have entered into the Second Amendment
and Waiver, pursuant to which the Lenders have agreed to waive compliance with
certain financial covenants contained in the Credit Agreement through the Waiver
Termination Date (as defined in the Second Amendment and Waiver);
WHEREAS, the Borrower entered into an understanding with the holders of the
Senior Subordinated Notes on October 31, 1999, pursuant to which the Senior
Subordinated Notes will be restructured, and such understanding has been
documented in a letter agreement, dated as of November 1, 1999 (the
"Restructuring Agreement");
-------------
WHEREAS, the Borrower has requested that the Lenders consent to the
extension of the Waiver Termination Date from November 16, 1999 to January 31,
2000, the date by which it reasonably expects to complete the restructuring of
the Senior Subordinated Notes pursuant to the Restructuring Agreement; and
WHEREAS, the Lenders are willing to consent to such requested extension of the
Waiver Termination Date, but only upon the terms and conditions contained
herein;
NOW THEREFORE, in consideration of the premises contained herein, the
parties hereto agree as follows:
<PAGE>
2
I. Defined Terms. Unless otherwise defined herein, terms defined in the
-------------
Credit Agreement shall have such meanings when used herein.
II. Consent. The Lenders hereby consent to the extension of the Waiver
-------
Termination Date (as defined in the Second Amendment and Waiver) to no later
than January 31, 2000; provided, however, that such consent shall only be
-------- ---------
effective for so long as no interest is paid on or after the date hereof by the
Borrower in respect of the Senior Subordinated Notes; and provided further, that
-------- -------
in no event shall the Waiver Termination Date extend beyond (i) the last day of
the third fiscal quarter of Fiscal Year 2000, if the Borrower does not meet the
financial covenants as set forth in the Second Amendment and Waiver for the
period of four fiscal quarters of the Borrower ending on the last day of the
third fiscal quarter of Fiscal Year 2000, notwithstanding the fact that the
Second Amendment Effective Date shall not have occurred, or (ii) the date upon
which the Restructuring Agreement shall cease to be in effect (it being
understood that this Consent is not conditioned upon the Control Group having
advanced $10,000,000 to the Borrower (such advance being a condition to
effectiveness of the Second Amendment and Waiver)).
III. Waiver to the Credit Agreement. The Lenders hereby waive, for the
---------------------------------
period from the Effective Date to and including the Waiver Termination Date
only, any Default or Event of Default occurring solely due to the nonpayment of
interest by the Borrower with respect to the Senior Subordinated Notes.
IV. General Provisions.
-------------------
1. Representations and Warranties. On and as of the date hereof and after
------------------------------
giving effect to this Consent, the Borrower hereby confirms, reaffirms and
restates the representations and warranties set forth in paragraph 1 of Section
III of the Second Amendment and Waiver mutatis mutandis, and to the extent that
------- --------
such representations and warranties expressly relate to a specific earlier date
in which case the Borrower hereby confirms, reaffirms and restates such
representations and warranties as of such earlier date, provided that the
--------
references to the Credit Agreement in such representations and warranties shall
be deemed to refer to the Credit Agreement as amended prior to the date hereof
and pursuant to this Consent.
2. Conditions to Effectiveness. This Consent shall become effective as of
---------------------------
the date (the "Effective Date") on which the following conditions precedent have
--------------
been satisfied or waived:
(a) The Administrative Agent shall have received counterparts of this
Amendment, duly executed and delivered by the Borrower and the Required Lenders;
and
(b) Each Guarantor under the Guarantee and Collateral Agreement shall have
acknowledged and consented to this Consent.
<PAGE>
4. Continuing Effect; No Other Amendments. This Consent shall not constitute
--------------------------------------
a waiver, amendment or modification of any other provision of the Credit
Agreement or the Second Amendment and Waiver not expressly referred to herein
and shall not be construed as a waiver or consent to any further or future
action on the part of the Borrower that would require a waiver or consent of the
Lenders or the Administrative Agent. Except as expressly modified hereby, the
provisions of the Credit Agreement and the Second Amendment and Waiver are and
shall remain in full force and effect.
5. Expenses. The Borrower agrees to pay and reimburse the Administrative
--------
Agent for all its reasonable costs and expenses incurred in connection with the
preparation and delivery of this Consent, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent.
6. Counterparts. This Consent may be executed by one or more of the
------------
parties to this Consent on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
7. GOVERNING LAW. THIS CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE
--------------
PARTIES UNDER THIS CONSENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
RELIANT BUILDING PRODUCTS, INC.
By:
Name:
Title:
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Administrative Agent,
Swing Line Lender, Issuing Lender
and as a Lender
By:
Name:
Title:
BANKBOSTON, N.A.
By:
Name:
Title:
BALANCED HIGH YIELD FUND I
by BHF (USA) Capital Corporation acting as
attorney-in-fact
By:
Name:
Title:
By:
Name:
Title:
PARIBAS
By:
Name:
Title:
By:
Name:
Title:
ING HIGH INCOME PRINCIPAL
. PRESERVATION FUND HOLDINGS,
LDC
By: ING Capital Advisors, LLC
as Investment Advisor
By:
Name:
Title:
NORTHERN LIFE INSURANCE COMPANY
By: ING Capital Advisors, LLC
as Investment Advisor
By:
Name:
Title:
BHF (USA) CAPITAL CORPORATION
By:
Name:
Title:
By:
Name:
Title:
CIBC, INC.
By:
Name:
Title:
FLEET BUSINESS CREDIT CORPORATION
F/k/a Sanwa Business Credit Corporation
By:
Name:
Title:
KEY CORPORATE CAPITAL INC.
By:
Name:
Title:
KZH CYPRESSTREE-1 LLC
By:
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research as
Investment Advisor
By:
Name:
Title:
VAN KAMPEN CLO II, LIMITED
By: VAN KAMPEN MANAGEMENT INC., as
Collateral Manager
By:
Name:
Title:
VAN KAMPEN PRIME RATE INCOME TRUST
By: Van Kampen Investment Advisory Corp.
By:
Name:
Title:
ACKNOWLEDGMENT AND CONSENT
--------------------------
Each of the undersigned hereby consents to the foregoing Amendment and
hereby confirms, reaffirms and restates that its obligations under or in respect
of the Credit Agreement and the documents related thereto to which it is a party
are and shall remain in full force and effect after giving effect to the
foregoing Amendment and agrees and confirms, in the case of RBP Fenesco, Inc.,
that it is a party to the Guarantee and Collateral Agreement as a Grantor
thereunder:
RBPI HOLDING CORPORATION
By:
Title:
RBP OF ARIZONA, INC.
By:
Title:
RBP CUSTOM GLASS, INC.
By:
Title:
RBP OF TEXAS, INC.
By:
Title:
RBP TRANS, INC.
By:
Title:
RBP FENESCO, INC.
By:
Title:
LEVAN BUILDIERS SUPPLY, INCORPORATED
By:
Title:
TIMBER TECH, INC.
By:
Title:
CFA HOLDING COMPANY
By:
Title:
CARE FREE ALUMINUM PRODUCTS, INC.
By:
Title:
ULTRA BUILDING SYSTEMS, INC.
By:
Title:
<PAGE>
ALPINE INDUSTRIES, INC.
By:
Title:
RELIANT BUILDING PRODUCTS, INC.
3010 LBJ Freeway
Suite 400
Dallas, Texas 75234
November 1, 1999
To the Holders of 10_ % Senior Subordinated
Notes due 2004 of Reliant Building Products, Inc.
Identified below:
The term sheet annexed hereto sets forth the principal terms on which you
have agreed in principle to exchange the entire principal amount beneficially
owned by you of the 10_ % Senior Subordinated Notes due 2004 (the "Old Notes")
of Reliant Building Products, Inc. (the "Company") for an equal aggregate
principal amount of new notes (the "New Notes") having substantially the terms
set forth therein, together with such other terms and conditions as are
customary in instru-ments similar to the New Notes and transactions of the type
contemplated.
Our signatures below evidence (i) our mutual non-binding inten-tion to
proceed with nego-tiations designed to carry out a transaction substan-tially in
the manner outlined herein and (ii) our mutual intention to proceed
expeditiously with the negotia-tion of a mutually satisfactory lock-up and
forbearance agreement and other related documentation. Consummation of the
trans-ac-tion will be subject to the negotiation and execu-tion of definitive
agreements with terms satisfacto-ry to you and the Company, each in your sole
discretion.
Very truly yours,
RELIANT BUILDING PRODUCTS, INC.
By: /s/ William Snyder
Name: William Snyder
Title: Senior Vice President
Confirmed as of the date first above written::
Name of Bondholder: Name of Bondholder:
Alliance Capital Management SunAmerica Life Insurance Company
By: /s/ Michael E. Sohr By: /s/ Rafael Fogel
Name: Michael E. Sohr Name: Rafael Fogel
Title: Vice President Title: Authorized Agent
Principal amount Principal amount
of bonds held: of bonds held:
$6,000,000
Name of Custodian: Name of Custodian:
Name of Bondholder: Name of Bondholder:
By: By:
Name: Name:
Title: Title:
Principal amount Principal amount
Of bonds held: of bonds held:
Name of Custodian: Name of Custodian:
<PAGE>
November __, 1999
RELIANT BUILDING PRODUCTS, INC.
SUMMARY OF PRINCIPAL TERMS
OF AMENDMENTS APPLICABLE TO
10_ % SENIOR SUBORDINATED NOTES DUE 2004
Issuer Reliant Building Products, Inc. (the "Company")
<PAGE>
The Exchange Offer and Related Restructuring
The Company intends to make an
offer to all Holders of the Company's outstanding 10_ % Senior Subordinated
Notes due 2004 (the "Old Notes") to exchange New Notes (as defined below) for an
equal principal amount of Old Notes (the "Exchange Offer"). In connection with
the Exchange Offer, the Company --intends to solicit (the "Solicitation")
consents (the "Consents") to certain proposed amendments (the "Proposed
Amendments") to the Old Indenture. The Company's obligation to accept for
exchange Old -Notes validly tendered pursuant to the Exchange Offer, and the
obligation of each Holder of Old Notes to tender such Old Notes, will be
conditioned upon (i) receipt of valid unrevoked tenders from holders of at
least 95% of the principal amount of the Old Notes outstanding (the "Tender
Condition"), (ii) execution by the Company and the Trustee under the indenture
pursuant to which the Old Notes were issued (the "Old Indenture"), following
receipt of Consents from Holders of at least a majority in principal amount of
the Old Notes out-standing, of a supplemental indenture pro-viding for the
Proposed Amendments (the "Consent Condition"), (iii) satisfaction of the Credit
Agreement Amendment Condition (as defined below), (iv) satisfaction of the
Investment Condition (as defined below), and (v) certain general conditions
to the Exchange Offer and the Solicitation set forth in Exhibit A hereto (the
---------
"General Conditions"). In the event that the Tender Condition is not
satisfied, the Company may elect to file a prepackaged Chapter 11 plan of
reorganization containing substantially the same terms as the Exchange Offer.
New Notes
Up to $70,000,000 aggregate principal amount of Senior
Subordinated Variable Rate Interest Option Notes due 2004 (the "New Notes")
Maturity of New Notes May 1, 2004
-------------
Interest
Interest on the New Notes will accrue and be payable as follows:
(a) On each of the interest payment dates November 1, 1999 and May 1,
2000, interest on the New Notes will be payable, at the option of the Company,
either in cash or by accrual at 10 7/8 % per annum. Accrued interest shall
compound semi-annually.
(b) On each of the interest payment dates November 1, 2000 and May 1,
2001, interest on the New Notes will be payable, at the option of the Company,
either in cash at 10 7/8 % per annum or by accrual at 11_ % per an-num. Accrued
interest shall compound semi-annually.
(c) On each of the interest payment dates November 1, 2001 and May 1,
2002, interest on the New Notes will be payable, at the option of the Company,
either in cash at 10 7/8 % per annum or by accrual at 11_ % per annum. Accrued
interest shall compound semi-annually.
(d) On the August 1, 2002 interest payment date, interest on the New Notes
will be pay-able, at the option of the Company, either in cash at 10.731 % per
annum or by accrual at 11 7/8 % per annum.
(e) On each interest payment date commencing November 1, 2002 through and
including May 1, 2004, interest on the New Notes will be payable quarterly in
cash at 10.731 % per annum.
(f) All deferred interest shall become payable at the final maturity date
of the New Notes.
Interest Payment Dates
Commencing November 1, 1999 through and including May
1, 2002, semi-annually on May 1 and November 1. Commencing August 1, 2002
through and including May1, 2004, quarterly on February 1, May 1, August 1, and
November 1. Interest that is deferred as aforesaid shall be paid in full at
the final maturity date of the New Notes.
<PAGE>
Subsidiary Guaranties
The New Notes will be guaranteed (the "Guaranties"),
jointly and severally on a senior subordinated basis, by each of the Company's
direct and indirect Subsidiaries (as defined) on the issue date of the New Notes
and by each direct and indirect Subsidiary of the Company (excluding
Unrestricted Subsidiaries) formed or acquired thereafter. The Guaranties will
be general unsecured obligations of the Guarantors. The Guarantors will also
guarantee all obligations of the Company under the Senior Credit Facility (as
defined), and each Guarantor will grant a security interest in all or
substantially all its assets to secure its guarantee obligations under the
Senior Credit Facility. The obligations of each Guarantor under its Guaranty
will be subordinated in right of payment to the prior payment in full of all
Guarantor Senior Indebtedness (as defined) of such Guarantor to substantially
the same extent as the Notes are subordinated to all existing and future Senior
Indebtedness of the Company.
Ranking
The Notes will be unsecured and will be subordinated to all
existing and future Senior Indebtedness of the Company. The Notes will rank
pari passu with any future senior subordinated indebtedness of the Company and
will rank senior to all other Subordinated Indebtedness of the Company.
Covenants Same as Old Notes
<PAGE>
Exchange Offer and Registration Rights
The Company will enter into a Registration Rights
Agreement containing terms customary for transactions of this type with the
holders who exchange Old Notes for New Notes, pursuant to which the Company
will either offer to exchange, pursuant to an effective registration statement,
an equal principal amount of notes having terms substantially identical to the
New Notes except for the transfer restrictions (the "Exchange Notes") or cause
the New Notes to be registered under the Securities Act and, if any such
registration statement is not filed and declared effective or such ex-change
offer is not consummated, in each case within certain customary time limits,
then additional interest (in addition to the interest otherwise due on the New
Notes) will be paid by the Company in cash or deferred (in the same manner as
interest otherwise due is paid in cash or deferred) to each holder of New Notes
on account of the first 90-day period immediately following the occurrence of
each such default in an amount equal to $0.05 per week per $1,000 principal
amount of New Notes, increasing by an additional $0.05 per week per $1,000
principal amount of New Notes for each subsequent 90-day period until such
default is cured, up to a maximum amount of additional interest of $0.50 per
week per $1,000 principal amount of New Notes. Such additional interest will
cease accruing on the New Notes when the default in filing such registration
statement or consummating such exchange offer has been cured.
Transfer Restrictions; Absence of a Public Market for the New Notes
The New Notes will not be registered under the Securities Act and will be
subject to restrictions on transferability and resale. If issued, the
Exchange Notes generally will be freely transferable, but there can be no
assurance as to the development or liquidity of any market for the Exchange
Notes. The Exchange Notes are expected to be eligible for trading in
the PORTAL market. The Company does not intend to apply for listing of the
New Notes or the Exchange Notes on any national securities exchange or for
their quotation through the National Association of Securities Dealers
Automated Quotation System.
<PAGE>
Observation Rights
The holders of the New Notes shall be entitled to name
one person as an observer to the Company's Board of Directors, who shall be
entitled to receive notice of and participate in all meetings of the Company's
Board of Directors but who shall not have any voting rights
Consent Fee
20 basis points per $1,000 principal amount of Old Notes as to
which Consents to the Proposed Amendments are duly given, payable at the
closing of the Exchange Offer
Expenses
All fees and expenses of the professionals to the Holders of Old
Notes to be paid at closing of restructuring, if not sooner paid.
<PAGE>
Certain Definitions
"Credit Agreement Amendment Condition" shall mean the
execution and delivery of that certain Second Amendment and Waiver to the Credit
Agreement, dated as of January 28, 1998, as amended, supplemented or otherwise
modified from time to time thereafter, by and between the Company, as Borrower,
the several banks and other financial institutions or entities from time to
time parties thereto, Chase Securities, Inc. as advisor and arranger, Canadian
Imperial Bank of Commerce, New York Agency, as documentation agent, and Bank of
Texas, National Association, as administrative agent, which shall be in a form
reasonably acceptable to the Holders of Old Notes and their counsel.
"Investment Condition" shall mean an equity investment of $10 million,
which shall be in a form reasonably acceptable to the Holders of Old Notes and
their counsel, from certain entities related to Reliant Partners, L.P. and
Reliant Partners II, L.P., the current controlling stockholders of Reliant's
parent, RBPI Holding Corporation (the "Stockholders"), pursuant to which
investment the Stockholders will acquire from the Company newly issued shares of
common stock in such amount that, after giving effect to such investment the
Stockholders will own substantially all of the common stock of the Company to be
then outstanding other than the common stock to be issued to management, if any.
The obligation of the Stockholders to make the equity investment will be
conditioned upon the satisfaction of the Tender Condition, the Consent
Condition, the Credit Agreement Amendment Condition, and the General
Conditions.
All other capitalized terms used but not defined herein shall have the
meanings given to them in the Old Indenture.
<PAGE>
EXHIBIT A
General Conditions
-------------------
For purposes of the Exchange Offer, the "General Conditions" shall be
deemed to have been satisfied unless any of the following conditions shall occur
on or after the date the Exchange Offer is commenced and prior to the acceptance
for exchange of any Old Notes tendered pursuant to the Exchange Offer:
(a) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities in the United States securities
or financial markets, (ii) a material impairment in the trading market for debt
securities, (iii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States (whether or not mandatory),
(iv) any limitation (whether or not mandatory) by any governmental authority
on, or other event having a reasonable likelihood of affecting, the extension
of credit by banks or other lending institutions in the United States, (v) a
commencement of a war, armed hostilities or other national or international
crisis involving the United States or (vi) any significant adverse change in the
United States securities or financial markets generally or in the case of any
of the foregoing existing on the date hereof, a material acceleration or
worsening thereof;
(b) there exists an order, statute, rule, regulation, executive order,
stay, decree, judgment or injunction that shall have been enacted, entered,
issued, promulgated, enforced or deemed applicable by any court or
governmental, regulatory or administrative agency or instrumentality that, in
the reasonable judgment of the Company, would or would be reasonably likely
to prohibit, prevent or materially restrict or delay consummation of the
Exchange Offer or the Solicitation or that is, or is reasonably likely to be,
materially adverse to the business, operations, properties, conditions
(financial or otherwise), assets, liabilities or prospects of the Company or
its subsidiaries;
(c) there shall have been instituted or be pending any action or
proceeding before or by any court or governmental, regulatory or administrative
agency or instrumentality, or by any other person, which challenges the making
of the Exchange Offer or the Solicitation or the Proposed Amendments or is
reasonably likely to directly or indirectly prohibit, prevent, restrict or
delay the consummation of the Exchange Offer or the Solicitation or the
Proposed Amendments or other-wise adversely affect in any material manner the
Exchange Offer, the Solicitation or the Proposed Amendments; or
(d) the Trustee under the Old Indenture shall have objected in any respect
to, or taken any action that would be reasonably likely to materially and
adversely affect the consummation of the Exchange Offer or the Solicitation
or the Company's ability to effect the Proposed Amendments, or shall have
taken any action that challenges the validity or effectiveness of the
procedures used by the Company in soliciting the Consents (including the form
thereof) or in the making of the Exchange Offer or the acceptance of the Old
Notes or the Consents or the issuance of New Notes in exchange for Old Notes.
