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Bt 3rd Supplemental Indenture 7-02-1998

This is an actual contract by Viskase Companies.
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Sectors: Manufacturing
Effective Date: July 02, 1998
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ENVIRODYNE INDUSTRIES, INC.
701 HARGER ROAD, SUITE 190
OAK BROOK, ILLINOIS 60523


July 2, 1998


TO: BT Commercial Corporation, Holders of the First Priority Senior
as Collateral Agent under Secured Notes due 2000
the Intercreditor Agreement CUSIP No. 294037 AJ5
referred to below CUSIP No. 294037 AK2
233 South Wacker Drive
Chicago, Illinois 60606


and


The First Priority Notes Indenture Trustee,
The Requisite First Priority Noteholders, the
Majority Noteholders, the LC Agent, the
LC Lender, the Revolving Lender, and the
Requisite Working Capital Lenders, as
defined in the Intercreditor Agreement
referred to below or as otherwise
defined below


Re: Proposed Disposition of Clear Shield National, Inc.
--------------------------------------------------


Ladies and Gentlemen:


Envirodyne Industries, Inc. (the "Company") hereby solicits (the "Solicitation"), by this letter ("Consent"), consent from (i) the holders (the "Holders") of First Priority Senior Secured Notes due 2000 (the "Notes") of the Company issued pursuant to an Indenture (the "Indenture"), dated as of June 20, 1995 and amended as of October 13, 1995 and on September 2, 1997, between the Company and State Street Bank and Trust Company of Connecticut, N.A. (formerly Fleet National Bank Connecticut and previously Shawmut Bank Connecticut, National Association), as trustee (the "Trustee"), to the Company's entering into a transaction more fully described below (the "Transaction") and the use of proceeds of the Transaction and (ii) the lenders identified in the Amended and Restated Credit Agreement (the "Credit Agreement"), dated as of June 1, 1998, among the Company, the lenders identified therein (the "Lenders," and collectively with the Holders, the "Creditors") and BT Commercial Corporation, as Agent, to the Company's entering into the Transaction and the use of proceeds of the Transaction.


The Company hereby simultaneously solicits, by this same Solicitation and Consent, consent from (i) the Holders to certain amendments to, and waivers under, the Indenture and (ii) the Lenders to certain amendments to, and waivers under, the Credit Agreement.
THIS SOLICITATION COMMENCES ON JULY 2, 1998 AND WILL EXPIRE AT 5:00 P.M., CHICAGO TIME, ON JULY 15, 1998 (THE "SOLICITATION PERIOD") UNLESS OTHERWISE EXTENDED BY THE COMPANY. THE COMPANY RESERVES THE RIGHT TO EXTEND THE SOLICITATION AT ANY TIME AND FROM TIME TO TIME, WHETHER OR NOT EXECUTED COUNTERPARTS TO THIS CONSENT HAVE BEEN RECEIVED, BY WRITTEN NOTICE TO THE CREDITORS OR BY PRESS RELEASE OR OTHER PUBLIC ANNOUNCEMENT. IN ADDITION, THE COMPANY RESERVES THE RIGHT, IN ITS SOLE DISCRETION, SUBJECT TO APPLICABLE LAW, TO TERMINATE THIS SOLICITATION, BY WRITTEN NOTICE TO THE CREDITORS OR BY PRESS RELEASE OR OTHER PUBLIC ANNOUNCEMENT, UPON FAILURE TO RECEIVE THE NECESSARY EXECUTED COUNTERPARTS TO THIS CONSENT.


SUMMARY OF PROPOSED TRANSACTION AND RESTRICTIONS


Reference is hereby made to that certain Intercreditor and Collateral Agency Agreement, dated as of June 20, 1995 (as may have been heretofore amended or modified, "Intercreditor Agreement"), among BT Commercial Corporation, in its capacities as "LC Agent," "LC Lender," "Collateral Agent" and "Revolving Lender" thereunder, and the Trustee. Undefined capitalized terms which are used in this letter shall have the meanings ascribed to such terms in the Intercreditor Agreement.


The Company has proposed to enter into a stock purchase agreement (the "Sale Agreement") pursuant to which the Company will sell all of the issued and outstanding capital stock of Clear Shield National, Inc., a California corporation ("Clear Shield"), to an unrelated third party for cash consideration of $140,000,000, all of which would be payable to the Company at the closing of such transaction subject to any purchase price adjustments as provided in such Sale Agreement (the "Clear Shield Sale"). The execution and delivery by the Company of the Sale Agreement and the consummation of the Clear Shield Sale have been duly authorized by a resolution of the Company's Board of Directors, subject to the effectiveness of the waivers, approvals and authorizations set forth in this letter. The Company intends to consummate the sale of Clear Shield as soon as practicable following receipt of consents from the Lenders under the Credit Agreement and Holders of a majority in aggregate principal amount of the Notes. Of the $140,000,000 that the Company expects to receive at the closing of the Clear Shield Sale, the Company anticipates that its expenses, state and local taxes and Federal alternative minimum taxes will equal approximately $7,000,000. The remaining proceeds (approximately $133,000,000) will be used to make a pro rata payment under the Credit Agreement and a pro rata redemption of the outstanding Notes (such payments are collectively referred to herein as the "Use of Proceeds"). The calculation of the pro rata amounts for the Use of Proceeds shall be made as of the closing date of the Clear Shield Sale, although the Company will not redeem the Notes until the Transfer Redemption Date (the next business day following the 30th day after the closing date of the Clear Shield Sale, as defined in the Indenture). Upon receipt of the consideration for the Clear Shield Sale, the Company intends to make a payment to BT Commercial Corporation of $30,000,000 (the current amount outstanding under the Credit Agreement) or such lesser amount then outstanding under the Credit Agreement and will invest the remaining net proceeds of the Clear Shield Sale in permitted Cash Equivalents until the Transfer Redemption Date. The Company estimates that on the Transfer Redemption Date the Noteholders will be entitled to receive approximately $112,000,000 (of which approximately $105,000,000 will be applied to the retirement of the principal amount of the outstanding Notes to be redeemed with the remaining amount applied to satisfy the Yield Maintenance Amount thereon).


The consummation of the Clear Shield Sale and the proposed Use of Proceeds of the Clear Shield Sale would violate (a) Sections 4.06, 4.09 and 4.13 of the Indenture (the "Specified Indenture Restrictions"), unless the Holders of a majority in aggregate principal amount of the Notes, by notice to the Trustee, waive the Company's compliance with the Specified Indenture Restrictions (excluding 4.06(e)(3) or any other provision of Section 4.06, 4.09 or 4.13 that would require unanimous written consent) with respect to the Clear Shield Sale (the "Majority Noteholders") and (b) Sections 8.6, 8.9 and 8.13 of the Credit Agreement (the "Specified Credit Agreement Restrictions"), unless waived in writing by each of the sole existing LC Lender and the sole existing Revolving Lender and the Clear Shield Sale would violate (a) Section 7 of the Company Pledge Agreement, dated as of June 20, 1995, by and between the Company and the Collateral Agent, unless waived in writing by the Collateral Agent (the "Specified Pledge Restriction") and (b) Section 5(j) of the Company Security Agreement, dated as of June 20, 1995, by and between the Company and the Collateral Agent, unless waived in writing by the Collateral Agent (the "Specified Sale Restriction"). Moreover, pursuant to the terms of Section 6 of the Intercreditor Agreement, the Trustee is prohibited from waiving the Specified Indenture Restrictions without the prior written consent of the Requisite Working Capital Lenders, each of the LC Lender and the Revolving Lender are prohibited from waiving the Specified Credit Agreement Restrictions without the prior written consent of each of the Requisite First Priority Noteholders and the Revolving Lender, and pursuant to Section 2(e) of the Intercreditor Agreement, the Collateral Agent is prohibited from waiving the Specified Pledge Restriction and the Specified Sale Restriction without the prior written consent of the Requisite First Priority Noteholders and the Requisite Working Capital Lenders.


It is a condition precedent to the consummation of the Clear Shield Sale that the capital stock and assets of Clear Shield be conveyed to the purchaser under the Sale Agreement free and clear of all claims, liens and security interests of the Secured Parties under the Financing Agreements and the Collateral Documents. The outstanding capital stock and assets of Clear Shield are currently subject to liens and security interests in favor of the Collateral Agent pursuant to the Collateral Documents, and the Secured Indebtedness of the Company under the Financing Agreements is guaranteed by Clear Shield pursuant to the Guaranty Agreement.


SUMMARY OF AMENDMENTS AND WAIVERS


The Company is considering a reorganization at Viskase Corporation, a wholly-owned subsidiary of the Company, in which case the Company will take a restructuring charge of approximately $25,000,000 for costs and expenses relating thereto (the "Restructuring Charge"), and therefore hereby seeks consent to amendments (collectively, the "Amendments") to the terms of the Notes issued pursuant to the Indenture. The Amendments would be effective for all purposes as of March 27,1998. A copy of the proposed Third Supplemental Indenture is attached hereto as Attachment B. The Company also seeks consent to amendments that are substantially identical to the Amendments with respect to the Credit Agreement (collectively, the "Additional Amendments").


The Amendments would modify the negative covenant in Section 4.01(b) of the Indenture to provide that the Fixed Charge Coverage Ratio (as defined in the Indenture) may not be less than 1.35:1 for the period from March 27, 1998 through June 30, 1999 (rather than 1.50:1 as currently provided in the Indenture), and 1.55:1 for the period from July 1, 1999 and thereafter. In addition, for purposes of determining Consolidated Cash Flow (as defined in the Indenture) for the calculation of the Fixed Charge Coverage Ratio (as defined in the Indenture) only and notwithstanding any tax effect of such Restructuring Charge, the Restructuring Charge will be added back to the calculation of Consolidated Net Worth and Consolidated Net Income (as those terms are defined in the Indenture) to the extent previously deducted therefrom.


In addition, the Amendments would modify Section 4.03(a) of the Indenture to provide that at no time may (i) Consolidated Senior Debt (as defined in the Indenture) be greater than 58.5% of Consolidated Total Capitalization (as defined in the Indenture) (rather than 52.5% as currently provided in the Indenture) or (ii) Consolidated Debt (as defined in the Indenture) be greater than 92.5% of Consolidated Total Capitalization (rather than 88% as currently provided in the Indenture).


The Company is also requesting that (i) Holders waive any prior default by the Company of Section 4.01(a), 4.01(b), or 4.03(a) of the Indenture (the "Specified Indenture Financial Covenants"), if any, and (ii) the Revolving Lender and the LC Lender each waives any prior default by the Company of Sections 8.1(a), 8.1(b) and 8.3 of the Credit Agreement (the "Specified Credit Financial Covenants"), if any.


Pursuant to the terms of Section 6 of the Intercreditor Agreement, the Trustee is prohibited from amending the Indenture or waiving the Specified Indenture Financial Covenants without the prior written consent of the Requisite Working Capital Lenders and each of the LC Lender and the Revolving Lender are prohibited from amending the Credit Agreement or waiving the Specified Credit Financial Covenants without
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