10000005736

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Exhibit A
to
Memorandum Regarding Plan Support Agreements, Lock-Up Agreements, and Plan Sponsorship Agreements filed by, among other entities,
Kirkland & Ellis LLP, Pachulski Stang Ziehl & Jones LLP, and Apollo Investment Corporation in various bankruptcy court jurisdictions.
Firm
Kirkland Ellis
Kirkland Ellis
Kirkland Ellis
Kirkland Ellis
Case Name
In re Dade Behring Holdings,
Inc.
In re Trico Marine Services,
Inc.
In re FV Steel & Wire Co.
In re American Color
Graphics, Inc. (AGC Holdings,
Inc.)
Case No.
02-29020
04-17985
04-22421
08-11467
Jurisdiction
Bankr. N.D.
Ill.
Bankr.
S.D.N.Y.
Bankr. E.D.
Wis.
Bankr. Del.
Fiduciary Out Provision Text
None.
Notwithstanding anything to the contrary herein,
nothing in this Agreement shall require Trico or any
directors or officers of Trico (in such person's
capacity as a director or officer of Trico) to take any
action, or to refrain from taking any action, to the
extent required to comply with its or their fiduciary
obligations under applicable law. Nothing herein will
limit or affect, or give rise to any liability, to the
extent required for the discharge of the fiduciary
obligations described m this [section]. See Trico
Marine Services Plan Support Agreement 9.
Nothing contained herein shall limit or restrict the
Debtors from acting in a manner consistent with their
fiduciary duties; provided, however, that [sections
dealing with the alternative plan process] shall govern
the Parties' actions with respect to any bid. See FV
Steel & Wire Co. Plan Support Agreement 24 .
... The ACG parties may terminate the Agreement and
Plan of Merger if ... the board of directors of the ACG
Parties determines that such termination is required in
accordance with the exercise of its fiduciary duties ...
See American Color Graphics, Inc. Restructuring and
Lock-Up Agreement 1.
Page 2
5 Kirkland Ellis
6 Kirkland Ellis
7 Kirkland Ellis
8 Kirkland Ellis
In re Portola Packaging, Inc.
In re Citadel Broadcasting
Corp.
In re DBSD North America,
Inc.
In re Lear Corporation
08-12001 Bankr. Del.
09-17442 Bankr.
S.D.N.Y.
09-13061 Bankr.
S.D.N.Y.
09-14326 Bankr.
S.D.N.Y.
The Company may terminate this Agreement as to all
Parties ... [ifJ the board of directors of the Company
reasonably determines based upon the advice of
counsel that proceeding with the Transactions wo'uld
be inconsistent with the exercise of its fiduciary
duties ... See Portola Packaging, Inc. Restructuring
Support Agreement 8.02.
. . . To the extent not inconsistent with the fiduciary
obligations of any of the Debtors or ~ m y of their
respective subsidiaries, [the Debtors must] use their
commercially reasonable efforts to: (a) file the
Disclosure Statement and prosecute its approval by the
Bankruptcy Court within the time frame set forth
herein; (b) obtain from the Bankruptcy Court an order
confirming a Qualified Plan ... ; and (c) effectuate and
consummate a Qualified Plan within the timeframe set
forth herein. See Citadel Broadcasting Corp. Plan
Support Agreement 5.
None.
As long as a Termination Event (as defined below) has
not occurred, or has occurred but has been duly
waived in accordance with the terms hereof, the
Debtors shall, to the extent not inconsistent with the
fiduciary obligations of any of the Debtors or any of
their respective subsidiaries under applicable law, use
their commercially reasonable efforts to: (a) file the
Disclosure Statement and prosecute its approval by the
Bankruptcy Court within the time frame set forth
herein; (b) obtain from the Bankruptcy Court an order
confirming a Qualified Plan within the time frame set
forth herein; . . . (c) effectuate and consummate a
Qualified Plan within the timeframe set forth herein.
Page 3
9 Kirkland Ellis
10 Kirkland Ellis
11 Kirkland Ellis
In re Masonite Corporation
In re Stallion Oilfield Services
Ltd.
In re Atrium Companies, Inc.
See Lear Corporation Plan Support Agreement 5.
09-10844 Bankr. Del. The Company may terminate this Agreement as to all
Parties upon five business days' prior written notice,
delivered in accordance with Section 8.11 hereof,
upon the occurrence of any of the following events: ...
(b) the board of directors of the Company reasonably
determines based upon the advice of counsel that
proceeding with the Transactions would be
inconsistent with the exercise of its fiduciary duties ...
See Lear Corporation Letter Agreement 6.02.
nothing in this Agreement shall require (a) the Debtors
or any directors or officers of the Debtors (in such
person's capacity as a director or officer of the
Debtors) to take any action, or to refrain from taking
any action, to the extent required to comply with its or
their fiduciary obligations under applicable law ... See
Lear Corporation Letter Agreement 23.
09-13562 Bankr. Del. The Company may terminate this Agreement as to all
Parties ... [if] the board of directors of the Company
reasonably determines based upon the advice of
counsel that proceeding with the Transactions would
be inconsistent with the exercise of its fiduciary duties
. . . See Stallion Oilfield Services Ltd. Restructuring
and Lock-Up Agreement 5.06.
09-13889 Bankr. Del. Notwithstanding anything to the contrary herein,
nothing in this Agreement shall require (a) the
Company or any directors or officers of the Company,
in such person's capacity as a director or officer of the
Company, to take any action, or to refrain from taking
any action, to the extent required to comply with its or
their fiduciary obligations under applicable law, (b)
Page 4
12 Apollo Investment
Corporation
13 Pachulski Stang
In re Penton Business Media
Holdings, Inc.
In re Redback Networks, Inc.
10-10689 Bankr.
S.D.N.Y.
03-13359 Bankr. Del.
any Consenting Holder or representative of a
Consenting Holder that is also a director or officer of
the Company to take any action, or to refrain from
taking any action, in such person's capacity as a
director or officer of the Company, to the extent
required to comply with their fiduciary obligations
under applicable law, or (c) any Consenting Holder or
representative of a Consenting Holder that is a
member of a statutory committee established in the
Chapter 11 Cases to take any action, or to refrain from
taking any action, in such person's capacity as a
statutory committee member, to the extent required to
comply with such person's fiduciary obligations
applicable under the Bankruptcy Code. See Atrium
Companies, Inc. Plan Support Agreement 28.5.
nothing in this Agreement shall require the Company
or any directors or officers of the Company, in such
person's capacity as a director or officer of the
Company, to take any action, or to refrain from
taking any action, that such person determines in
good faith, after consultation with counsel, 1s
inconsistent with its or their fiduciary obligations
under applicable law, and no action or failure to take
action, including, without limitation, any disclosure
that the board of directors of Holdings so determines
is required by its fiduciary duties pursuant to this
[section] shall be deemed to have been so required.
See Penton Business Media Holdings, Inc. Plan
Support Agreement 26.
Notwithstanding any provision of this Agreement,
nothing shall be deemed to prevent the Company from
taking, or failing to take, any action that it is obligated
to take (or not to take) in the performance of any
Page 5
14 Judge Chapman In re Adelphia
Communications Corporation,
et al.
15 Miscellaneous In re Almatis B. V., et al.
16 Miscellaneous (Wilke In re Ampex Corporation
Farr & Gallagher LLP
Counsel for Debtor)
02-41729 Bankr.
S.D.N.Y.
10-12308 Bankr.
S.D.N.Y.
08-11094 Bankr.
S.D.N.Y.
fiduciary or similar duty which the Company owed to
any other Person; it being understood and agreed that
if any such action (or failure to act) results in (i) an
alteration of the terms of the Restructuring not
permitted by Section 7 or (ii) the Company giving
written notice of its intention to terminate this
Agreement pursuant to Section 8(a)(v), then this
Agreement and all of the obligations and undertakings
of the parties set forth in this Agreement, other than
the obligations of the Company contained in Section
26, shall terminate and expire. See Redback Networks,
Inc. Plan Support Agreement 3(i).
None.
A copy of the actual Plan Support Agreement has not
been obtained. The Debtors' Motion__, however,
notes that the Plan Support Agreement does not
"prevent the Debtors' management from taking
actions in accordance with their fiduciary duties." See
Almatis B.V.'s Motion Pursuant to Sections 105(a),
363(b), and 1125(b) of the Bankruptcy Code and
Bankruptcy Rule 6004 for an Order Authorizing: (a)
the Debtors and Other Parties Thereto to Enter into the
Plan Support Agreement; (b) the Debtors to Execute
the Escrow Agreement and the Commitment Letters
and Pay the Fees, Other Amounts, and Reimbursement
of Expenses Required Thereunder; and (c) the Debtors
to Enter into Currency Rate Hedging Transactions
19.
Notwithstanding anything to the contrary contained in
this Agreement, nothing in this Agreement requires
the Company to breach any respective fiduciary
Page 6
17 Miscellaneous
18 Miscellaneous (Wilke
F arr & Gallagher LLP
Counsel For Debtor)
19 Miscellaneous
In re Oneida Ltd
In re Petroleum Ceo-Services
ASA
In re Dana Corporation
06-10489 Bankr.
S.D.N.Y.
03-14786 Bankr.
S.D.N.Y.
06-10354 Bankr.
S.D.N.Y.
obligation that it may have under applicable law, and
the Company may commit any act or take any actions
consistent with such fiduciary obligations; provided,
however, that it is agreed that such act may still result
in a Termination Eventhereunder and shall not affect
the rights of the Parties set forth in Section 8 hereof.
See Ampex Corporation Plan Support Agreement 4.
None.
In expressing such support and commitment, the
Parties do not desire and do not intend in any way to
derogate from or diminish . . . the fiduciary duties of
PGS under Norwegian law or as a debtor m
possession, or the fiduciary duties of any Supporting
Creditor who is appointed to the official committee of
unsecured creditors in the Chapter 11 Case. See
Petroleum Geo-Services ASA Plan Support
Agreement J.
The Debtors presently believe that, subject to the
exercise of their fiduciary duties as debtors and
debtors-in-possession (after consultation with outside
legal and financial advisors), prompt consummation of
the Plan will facilitate the Debtors' reorganization and
is in the best interests of their creditors, shareholders,
and other parties-in-interest. Accordingly, the Debtors
hereby agree, subject to the exercise of their fiduciary
duties as debtors and debtors-in-possession (after
consultation with outside legal and financial advisors),
to sue reasonable best efforts to propose the Plan and
prosecute confirmation and consummation thereof.
See Dana Corporation Plan Support Agreement,
Article III.
Page 7
20 Miscellaneous In re Journal Register 09-10769 Bankr. Notwithstanding anything to the contrary in this
Company S.D.N.Y. Agreement, (i) nothing herein requires the Company
to breach any fiduciary obligations it has under
applicable law; and (ii) to the extent such fiduciary
obligations require the Company to terminate its
obligations under the Term Sheet, it may do so
without incurring any liability to the Consenting
Lenders or the Existing Agent under this Agreement
or the Term Sheet. See Journal Register Company
Plan Support Agreement 3.
Page 8
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Plan Support Agreement filed in
In re Dade Behring Holdings Inc., Case No. 02-29020 (Bankr. N.D. Ill 2002).
Case 02-29020 Doc 53-1 Filed 08/01/02 Entered 08/01/02 00:00:00 Desc Page
269 of 364
Execution Draft
Settlement Communicatim Governed
by Federal Rule of Evidence 408
LOCK UP, VOTING AND CONSENT AGREEMENT
This Lock Up, Voting and Consent Agreement (this '1\greement"), dated as of May 24,
2002, is entered into and made by and among Dade Behring Holdings, Inc., a Delaware
corporation ("Holdings"), Dade Behring Inc., a Delaware corporation, ("DB!''), Dade MicroScan
Inc., a Delaware corporation ("MicroScan"), Dade Finance, Inc., a Delaware corporation
('Finance"), Syva Diagnostics Holding Co., a Delaware corporation ("Svva Holdings"), Syva
Company, a Delaware corporation Syva Childcare Inc., a Delaware corporation
("Childcare") and Chimera Research and Chemical, Inc., a Florida corporation ("Chimera", and
together with Holdings, DBI, MicroScan, Finance, Syva Holdings, Syva and Childcare,
collectively, the "Debtor'' or the "Company"), each of the undersigned holders (each, a
"Consenting Holder" and, collectively, the 'Consenting Holders") of the Existing Senior Debt,
the Old Notes and the Existing Common Stock (each as defined below). All capitalized terms
not otherwise defined herein have the meanings given to such terms in the Term Sheet (as
defined below).
WHEREAS, DBI is a borrower under that certain Credit Agreement, dated as of
June 29, 1999 (as amended, supplemented or otherwise modified from time to time, the
"Existing Senior Credit Agreement") by and among DBI, Dade Behring Holdings GmbH,
various lending institutions and Deutsche Bank Trust Company Americas (f/k/a Bankers Trust
Company), as administrative agent (in such capacity, the Agent"). As of
March 31, 2002, an aggregate principal amount of approximately $1,113,000,000 was
outstanding (including B Revolving Loans (as defined in the Existing Senior Credit Agreement)
to Dade Behring Holdings GmbH)) (the "Existing Senior Debt");
WHEREAS, DBI has issued 11 1/8 % Subordinated Notes Due 2006, Series B with an
aggregate original principal balance of $350,000,000 and accrued interest and fees as of
March 1, 2002, of approximately $51,000,000 (the ''Old Notes") pursuant to an indenture, dated
as of May 7, 1996, (the "Indenture") by and between DBI and HSBC USA, as trustee (the ''Old
Notes Trustee");
WHEREAS, Holdings has issued and has outstanding 48,382,243.72 shares, on a fully
diluted basis, including all vested options and warrants of common stock an:l Bain Capital Fund
IV, L.P., Bain Capital Fund IV-B, L.P., BCIP Associates, BCIP Trust Associates, L.P., Randolph
Street Partners (collectively, the "Bain Entities''), GS Capital Partners L.P., Bridge Street Fund
1994, L.P., Stone Street Fund 1994, L.P. (collectively, together with GS Dade LLC, the
"Goldman Entities"), and Hoechst AG hold in the aggregate not less than 82.9% (on a fully
diluted basis) of such common stock (the "Existing Common Stock") (the Bain Entities, the
Goldman Entities (other than GS Dade LLC) and Hoechst AG, are collectively referred to, for
purposes of this Agreement solely in their capacity as holders of Existing Common Stock, as the
"Eguityholders");
WHEREAS, the Bain Entities, the Goldman Entities and Hoechst AG own $18,736,186,
$9,269,000 and $39,645,000 in aggregate principal amount, respectively, of Old Notes
(collectively, for purposes of this Agreement solely in their capacity as holders of Old Notes, the
"Insider Noteholders").
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270 of 364
Execution Draft
Settlement Communication Governed
WHEREAS, Debtor and the Consenting Holders have engaged in good faith negotiations
with the objective of reaching an agreement with regard to restructuring of the Existing Senior
Debt and Old Notes and the treatment of all equity interests ofthe Debtor, including the Existing
Common Stock;
WHEREAS, Debtor and each of the Consenting Holders now desire to implement a
financial restructuring (the "Financial Restructuring") consistent in all material respects with this
Agreement and the term sheet attached hereto as Exhibit A (the "Term Sheet"), and in order to
implement the Financial Restructuring, Debtor intends to prepare and file a disclosure statement
(the "Disclosure Statement") and plan of reorganization reasonably acceptable to the
Administrative Agent, the ad hoc committee of holders of Old Notes, and holders of Existing
Common Stock and otherwise consistent in all material respects with the terms set forth in this
Agreement and the Term Sheet (the "Plan'') implementing the terms of the Financial
Restructuring pursuant to a prepackaged case (the 'Chapter 11 Case") to be filed under the
United States Bankruptcy Code, 11 U.S.C. 101 ! ~ (the "Bankruptcy Code"), and Debtor
intends to use its best efforts to have the solicitation of votes pursuant to the Disclosure
Statement approved under Section 1126(b )(2) of the Bankruptcy Code and such Plan confirmed
by the United States Bankruptcy Court for the Northern District of Illinois (the 'Bankruptcy
Court") in the Chapter 11 Case as expeditiously as possible under the Bankruptcy Code and the
Federal Rllies of Bankruptcy Procedure (the "Bankruptcy Rules") I;
WHEREAS, each Consenting Holder holds or is the legal or beneficial owner of the
aggregate principal amount of Existing Senior Debt, Old Notes and/or Existing Conunon Stock
(for each such party, the "Relevant Claim") or has investment authority and the right or authority
to vote ("Voting Control") in the solicitation of acceptances to the Plan and the Financial
Restructuring all as set forth in the Term Sheet, in each case as set forth below each such
Consenting Holder's signature attached hereto;
WHEREAS, each Consenting Holder has reviewed, or has had the opportunity to review,
with the assistance of professional financial and legal advisors of its choosing, the Term Sheet;
and
WHEREAS, each Consenting Hok:ler desires to support and (except for Consenting
Holders of Existing Conunon Stock, who, in such capacity, will be deemed to reject the Plan
pursuant to Section 1126(g) of the Bankruptcy Code) vote for confirmation of the Plan, and
Debtor desire to obtain the conunitment of the Consenting Holders to support and vote for the
Plan, in each case subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the receipt and
If all of the holders of Existing Senior Debt execute this Agreement, Holdings may elect, at its option, to file a
Chapter 11 Case that does not include all of its U.S. subsidiaries (the "Non-Filing Subsjdjarjes").
2
1:\Projccl VNO\Lock Up Agrcemcnt\K&B Drat\ Final.doc
271 of 364
Execution Draft
sufficiency of which are hereby acknowledged, Debtor and each of the Consenting Holders agree
as follows:
Section 1. Representations of Consenting Holder; Acknowledgment. (a) Each
Consenting Holder hereby severally (but not jointly) represents and warrants to the Company as
follows:
(1) As of the date hereof, Consenting Holder (a) is the legal or beneficial
owner of, or has Voting Control over, Existing Senior Debt and/or Old Notes in the aggregate
principal amount set forth below such Consenting Holder's name on the signature pages hereof;
if applicable, the registered holder and custodial party for the Existing Senior Debt and/or Old
Notes are as set forth on the signature pages hereof; and, subject, in the case of the Goldman
Entities and the Bain Entities to Section 1 (b) below, legally or beneficially owns, or has Voting
Control over, no other Existing Senior Debt and/or Old Notes, or (b) in the case of a Consenting
Holder of Existing Common Stock, has legal and/or beneficial ownership of, or has Voting
Control of the number of shares of Existing Common Stock as set forth on the signature pages
hereof and holds no legal and/or beneficial ownership in, or Voting Control with respect to, any
other shares of Common Stock or other equity interests in the Company or any of its
subsidiaries.
(2) As of the date hereof, all Existing Senior Debt, Old Notes and/or Existing
Common Stock (as the case may be), legally or beneficially owned by the applicable Consenting
Holder, is so owned free and clear of all claims, charges, leases, covenants, easements,
encumbrances, pledges, security interests, liens, options, pledges, rights of others, mortgages,
transfer, disposition, or otherwise), whether imposed by agreement, understanding, hw, equity,
or otherwise, except for (a) any restrictions on, transfer generally arising under any applicable
federal or state securities law, or other defects in title, and has not been pledged or assigned to
any person and (b) participations that may have been granted in Existing Senior Debt, it being
understood that any Consenting Holder that has granted any participation in the Existing Senior
Debt has or will obtain Voting Control in respect to such participations; and
(3) Each Consenting Holder has received and reviewed this Agreement, the
Term Sheet and all exhibits to the Term Sheet and has received all such information as it deems
necessary and appropriate to enable it to evaluate the financial risk inherent in the Financial
Restructuring pursuant to the terms of the Plan.
(b) Each Consenting Holder acknowledges that affiliates of the Goldman Entities and
the Bain Entities may legally or beneficially own Existing Senior Debt and agree that the terms
of this Agreement shall not bind such affiliates or extend to such Existing Senior Debt unless
such affiliates have executed this Agreement in respect of such Existing Senior Debt.
Section 2. Support of the Plan
3
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272 of 364
Execution Draft
( 1) Subject to the terms and conditions contained herein, each Consenting
Holder severally agrees that so long as it is the legal owner, beneficial owner and/or the holder of
Voting Control of all or any portion of the Relevant Claim, (i) from and after the date hereof
through the date of termination of the obligations under this Agreement pursuant to Section 9
hereof it will not, directly or indirectly, agree to, consent to, provide any support to, participate in
the formulation of, or vote for any plan of reorganization or liquidation, other than the Plan;
provided that the terms of all the Reorganization Documents (as defined below) are customary,
incorporate the terms and conditions set forth in, and are otherwise consistent in all material
respects with, the Term Sheet; (ii) (other than in respect of any Existing Senior Debt and
Existing Common Stock) it will at the request of the Debtor execute and deliver a customary
letter, in form and nubstance reasonably satisfactory to the Company and such Consenting
Holder, from the Consenting Holder (or an ad hoc committee of Consenting Holders) for
distribution to the holders of any impaired claims against or interests in the Company, stating
that such Consenting Holder supports and has committed to vote to approve the Plan; and (iii)
agree to permit disclosure in the Disclosure Statement and any filings by the Company with the
Securities and Exchange Commission of the contents of this Agreement, including, but not
limited to, the commitments given in clause (i) of this Section 2(1) and the aggregate Relevant
Claims held by all Consenting Holders; provided that the Company shall not disclose the amount
of the Relevant Claim of any individual Consenting Holder, except as otherwise required by
applicable securities law.
(2) Subject to the terms and conditions contained herein, each Consenting
Holder further severally agrees that so long as it is a holder of a Relevant Claim, it shall not
object to or otherwise commence any proceeding to oppose, or object to, confirmation of the
Plan, approval of the Disclosure Statement or any other document filed in connection with the
confirmation of the Plan (hereinafter, such documents together with the Plan and Disclosure
Statement, each a "Reorganization Document"), and shall not take any action which is
inconsistent with, or that would delay approval or confirmation (as the case may be) of any of the
Disclosure Statement, the Plan or any other Reorganization Document; provided that the terms of
the Plan, the Disclosure Statement and all other Reorganization Documents are customary,
incorporate the terms and conditions set forth in, and are otherwise consistent in all material
respects with, the Term Sheet.
(3) Subject to the terms and conditions contained herein, and without limiting
the generality of the foregoing, no Consenting Holder may directly or indirectly seek, solicit,
support or encourage any other plan, transaction, sale, proposal or offer of dissolution, winding
up, liquidation, reorganization, merger or restructuring of the Company or any of its subsidiaries
other than as contemplated by the Term Sheet or any other Reorganization Document.
Section 3. Voting. Each Consenting Holder agrees for itself that it shall timely vote
its Relevant Claim and any other claims or interests that it holds (and not revoke or withdraw
such vote) to accept the Plan; provided that the terms of the Plan, the Disclosure Statement and
each other Reorganization Document are customary, incorporate the terms and conditions set
forth in, and are otherwise consistent in all material respects with the terms described in the
Term Sheet.
4
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273 of 364
Execution Draft
Section 4. Forbearance. So long as this Agreemert shall remain in effect and subject
to the continued satisfaction of all material terms and conditions of the Term Sheet. each
Consenting Holder hereby severally agrees to forebear (and where necessary cause the
forbearance, including by giving all necessary instructions to the Old Notes Trustee and/or
Administrative Agent in accordance with the Indenture and/or Existing Senior Credit
Agreement) during the period commencing on the date hereof and ending on the earliest to occur
of: (a) the Effective Date (as defined in the Term Sheet) (it being understood that such
forbearance applies to any defaults caused solely by the commencement of the Chapter 11 Case
filed to implement the Financial Restructuring); (b) the date on which the obligations of the
Consenting Holders hereunder are terminated pursuant to Section 9 hereof; or (c) the date on
which any action against the Debtor, any Consenting Holder or any Equity Released Party (as
defined in the Term Sheet) in respect of any Equityholder Released Claim (as defined in the
Term Sheet) is commenced in any court:
(1) in the case of any Old Notes comprising all or part of the Relevant Claim
of such Consenting Holder, from (x) exercising any rights or remedies it may have under the
Indenture and all related documents, applicable law, or otherwise, (including, without limitation,
the filing of an involuntary petition against the Company), with respect to any existing default as
of the date hereof and including, without limitation, any default that has arisen or event of default
that may arise from the Company's failure to pay interest on the principal amount of the Old
Notes that was due and payable on May 1, 2002 under the Indenture and all related documents;
and (y) commencing any action in any court against the Debtor, any Equity Released Party or
any Consenting Holder in respect of any Equity Released Claim (as defined in the Term Sheet);
and
(2) in the case of any Existing Senior Debt comprising all or part of the
Relevant Claim of such Consenting Holder. from (a) exercising any rights and remedies it may
have under the Existing Senior Credit Agreement and all related documents, applicable law and
otherwise against the Debtor or the Non-Filing Subsidiaries with respect to any existing Default
or Event of Default (each as defined in the Existing Senior Credit Agreement) as of the date of
hereof, and after the date hereof (x)(i) any Default or Event of Default arising under Section
9.03(a) of the Existing Senior Credit Agreement as a result of Holdings failure to comply with
Section 8.10 or 8.11 of the Existing Senior Credit Agreement, (ii) any Default or Event of
Default arising under Section 9.03(b) of the Existing Senior Credit Agreement as a result of
Holdings failure to deliver the certification by independent certified public accountants described
in Section 7. 01 (c) of the Existing Senior Credit Agreement with respect to the annual financial
statements of Holdings' and its subsidiaries for the years ending December 31, 2000 and
December 31, 2001 and (iii) any Default or Event of Default arising under Section 9.04 of the
Existing Senior Credit Agreement as a result of the failure of DBI (I) to pay interest on the Old
Notes or (II) to file with the SEC and the Notes Trustee. pursuant to Section4.08 of the
Indenture, annual reports on Form 1 OK for the years ending December 31, 2000 and December
31, 2001 and quarterly reports on Form lOQ for the quarters ending March31, 2001, June 30,
2001. September 30, 2001 and March 31, 2002 (it being understood that such forbearance under
the Existing Senior Credit Agreement applies to any defaults (subject to the terms and conditions
5
!:\Project VIVO\Lock Up Agreement\K&E Drat\ Final.doc
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274 of 364
Execution Draft
of the Fourth Amendment to the Existing Senior Credit Agreement (as defined below)) caused
solely by the conunencement of the Chapter 11 Case filed to implement the Financial
Restructuring) and (b) conunencing any action in any court against the Debtor, any Equity
Released Party or any Consenting Holder in respect of any Equity Released Claim; and
(3) in the case of any B Revolving Loan comprising all or part of the Relevant
Claim of such Consenting Holder, from exercising any rights and remedies it may have on
account of the B Revolving Loans, subject to and in accordance with the terms of Fourth
Amendment to and Waiver under the Existing Senior Credit Agreement dated as of the date
hereof (the "Fourth Amendment").
Section 5. Restrictions on Transfer. Each of the Consenting Holders hereby
severally agrees that, for so long as this Agreement shall remain in effect, it shall not sell,
transfer or assign all or any of its Relevait Claims or any option thereon or any right, interest
(voting or otherwise) therein, unless the transferee agrees in writing to be bound by all of the
terms of this Agreement by executing counterpart signature pages to this Agreement (identifying
the transferee and the portion of the Relevant Claim transferred to such transferee) and the
transferor promptly provides the Company and other notice parties with a copy thereof, in which
event the Company shal1 be deemed to have acknowledged that its obligations to the Consenting
Holders hereunder shall be deemed to constitute obligations in favor of such transferee, and the
Company shall confinn such acknowledgment in writing. Any sale, transfer or assignment of
any Relevant Claim that does not comply with the :fOregoing shall be deemed void ab initio.
Section 6. Further Acquisition of Existing Senior Debt, Old Notes, Existing Conunon
Stock. This Agreement shall in no way be construed to preclude the Consenting Holders or any
of their respective subsidiaries from acquiring additional Existing Senior Debt, Old Notes and/or
equity interests (including any Existing Common Stock) in the Company. However, any such
additional Existing Senior Debt, Old Notes or equity interest acquired by a Consenting Holder
shall automatically be deemed to be Relevant Claims and to be subject to the terms of this
Agreement. The Consenting Holder agrees that it shall not create any subsidiary or affiliate or
cause any existing subsidiary or affiliate to create any subsidiary or affiliate for the sole purpose
of acquiring any Existing Senior Debt, Old Notes or Existing Conunon Stock. Upon the request
of the Company, each Consenting Holder shall provide an accurate current list of the Relevant
Claims held by such Consenting Holder to the Company and other notice parties hereto.
Section 7. Company Agreement. The Company hereby agrees to use its reasonable
best efforts to have the Disclosure Statement approved by the Bankruptcy Court, and thereafter
to use its reasonable best efforts to obtain an order of the Bankruptcy Court confinning the Plan,
in each case as expeditiously as commercially reasonable under the Bankruptcy Code and
Bankruptcy Rules, and incorporating the terms and conditions of this Agreement and the Term
Sheet and otherwise consistent in all material respects with this Agreement and the Term Sheet
(including with respect to the treatment of claims and interests and the form of distribution
therein contemplated). Each of the Consenting Holders shall take all necessary corporate action
to enable it to enter into this Agreement and to comply with all of its obligations hereunder.
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Section 8. Acknowledgment. This Agreement is not and shall not be deemed to be a
solicitation for consents to the Plan. The acceptance of those Consenting Holders entitled to vote
on the Plan will not be solicited until the Consenting Holders have received the Disclosure
Statement and related ballot in final form.
Section 9. Termination Upon the effectiveness of this Agreement in accordance
with paragraph 19, the obligations of the Consenting Holders hereunder shall remain effective
and binding until such time as one or more Consenting Holders whose Relevant Claims in
respect of the Existing Senior Debt, or Old Notes or Existing Common Stock, as the case may
be, equal or exceed one third in amount of the total of the Relevant Claims in respect of the
Existing Senior Debt, or Old Notes or Existing Common Stock, as the case may be, provide(s)
written notice to Debtor of the termination of this Agreement, and upon the receipt of such notice
by Debtor the obligations of the parties hereunder shall immediately and automatically terminate
and shall be of no further force or effect, which notice may be given by any such Consenting
Holder(s) (or the Administrative Agent acting upon the direction of any such Consenting
Holder(s) of Existing Senior Debt) if, and only if, one or more of any of the following occurs:
(a) the Plan or any Restructuring Document is modified to provide for
treatment of such Consenting Holder(s) which is different in any material adverse respect (it
being understood that any change in the form or amount of Plan distributions or in the terms of
any releases or indemnities contemplated by the Term Sheet shall be deemed "adverse" and
"material") to the treatment described in the Term Sheet;
(b) Debtor fails to commence the Chapter 11 Case on or before August
I, 2002, or the Chapter 11 Case is commenced without the simultaneous filing of the Plan and
Disclosure Statement;
(c) the Plan is either not confirmed within 90 days from the date that
Debtor commences the Chapter 11 Case or not consummated within 120 days from the date that
Debtor commences the Chapter 11 Case;
(d) any term or condition of the Term Sheet that is material to such
Consenting Holder and is required therein to be satisfied prior to the commencement of the
Chapter 11 Case shall not have been satisfied (or waived);
(e) The Chapter 11 Case of the Debtor is converted to a case under
Chapter 7 of the Bankruptcy Code or a trustee is appointed for the Debtor under any Chapter of
the Bankruptcy Code;
(f) Any written representation or warranty made by the Company or
its agents or representatives to the Consenting Holders in this Agreement or the Term Sheet
(including without limitation representations relating to the Company's financial performance)
is false or misleacling in any material respect when made;
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(g) The Debtor shall publicly announce its intention not to pursue the
Financial Restructuring in accordance with the Term Sheet or proposes a transaction or chapter
11 plan that is not the Plan in any material respect; and
(h) The Tolling Agreement dated as of the date hereof (as the same
may be hereafter amended, modified, supplemented, replaced or superceded, the "Tolling
Agreement") by and among, inter alia, Holdings, DBI, Deutsche Bank Trust Company
Americas as Collateral Agent for the holders of Existing Senior Debt, certain holders of Existing
Senior Debt that are or may become a party to the Tolling Agreement, certain holders of Old
Notes party to the Tolling Agreement, and certain holders of Existing Common Stock party to
the Tolling Agreement, shall terminate or as to a termination thereunder that requires the giving
of notice, such notice shall have been given, in each case in accordance with its terms.
No party shall have any liability to the other or any other person as a result of the
termination of such party's obligations hereunder in accordance with this paragraph 9.
Section 10. Release of Holders of Existing Common Stock. Subject to the condition
that the Plan is consummated, in addition to, and in no way limiting the releases in the Plan, each
of the Consenting Holders party hereto is hereby irrevocably deemed to have released, without
any further action as of the Effective Date, each of the Equity Released Parties from the
Equityholder Released Claims (each as defined in the Term Sheet). Subject to and effective as
of the consummation of the Plan, the releases by the Consenting Holders of the Equityholder
Released Claims with respect to the Equity Released Parties shall be valid and fully enforceable,
and shall be binding upon each Consenting Holder, as a matter of contract and irrespective of
whether a Reorganization Document, the order confirming the Plan (or any other order
pertaining to any Reorganization Document, or any order entered as a result of any appeal or
motion for reconsideration) modifies or eliminates all or any provisions of the Plan releasing the
Equityholder Released Claims with respect to the Equity Released Parties.
Section 11. Release of Non-Filing Subsidiaries. Subject to (i) the receipt by the
Debtor of signatures to this Agreement from Consenting Holders who in the aggregate hold
100% of the Existing Senior Debt, (ii) this Agreement not having been terminated in accordance
with Section 9 hereof, and (iii) the consummation of the Plan, each of the Consenting Holders
party hereto who hold Existing Senior Debt is irrevocably deemed to (A) have released as of the
Effective Date, without any further action, each of the Non-Filing Subsidiaries (if any) from their
respective Obligations (as such term is defined in the Existing Senior Credit Agreement) and (B)
have directed the Collateral Agent (as such term is defined in the Existing Senior Credit
Agreement) to take such steps and execute such releases and discharges, in accordance with the
terms of the Credit Documents (as such term is defined in the Existing Senior Credit
Agreement), as are reasonably necessary to effect the release set forth in (A) above.
Section 12. Good Faith Negotiation of Documents. Each party hereby further
covenants and agrees to negotiate the documentation implementing the Plan (including the
Reorganization Documents) and any definitive documents relating thereto (including, but not
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limited to, the New Notes and New Common Stock), in good faith and, in any event, in all
material respects consistent with the Term Sheet.
Section 13. Representations and Warranties. Each of the Consenting Holders and
Debtors severally (but not jointly) represent and warrant to each other that the following
statements are true, correct and complete as of the date hereof:
(1) Power and Authority. It has all requisite corporate, partnership, or limited
liability company power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby, and to perform its obligations hereunder.
(2) Due Organization. It is duly organized, validly existing and in good
standing under the laws of its state of organization and it has the requisite power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
(3) Authorization The execution and delivery of this Agreement and the
performance of its obligations hereunder have been duly authorized by all necessary corporate,
partnership or limited liability company action on its part.
(4) No Conflicts. The execution, delivery and performance of this Agreement
does not and shall not: (i) violate any provision of law, rule or regulation applicable to it or any
of its subsidiaries, (ii) violate its certificate of incorporation, bylaws or other organizational
documents or those of any of its subsidiaries; or (iii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any material contractual
obligation to which it or any of its subsidiaries is a party.
(5) Governmental Consents. The execution, delivery and performance by it of
this Agreement do not and shall not require any registration or filing with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other governmental authority
or regulatory body (other than the approval of the Bankruptcy Court in the case of Debtor).
(6) Binding Obligation Subject to the provision of Sections 1125 and 1126
of the Bankruptcy Code, this Agreement is a legally valid and binding obligation of such party,
enforceable against such party in accordance with its terms.
Section 14. Fees and Expenses. The Company shall pay the reasonable fees and
expenses of the financial and legal advisors for each of the informal committees formed by
certain holders of Existing Senior Debt, and Old Notes respectively, in accordance with the Tenn
Sheet.
Section 15. Complete Agreement, Modification of Agreement. This Agreement and
the other agreements referenced herein constitute the complete agreement between the parties
with respect to the subject matter hereof. No modification or amendment of the terms of this
Agreement shall be valid unless such modification or amendment is in writing and has been
signed by the Debtors and the other signatories hereto (and their permitted successors and
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assigns) that hold not less than two-thirds in amount of each of (i) all Existing Senior Debt (ii) all
Old Notes and (iii) all Existing Common Stock. Notwithstanding the foregoing, no modification
or amendment of the Agreement shall be binding on any Consenting Holder that has not
executed such modification or amendment.
Section 16. Specific Performance. It is Wlderstood and agreed by the parties hereto
that money damages would not be a sufficient remedy for any breach of this Agreement by any
party and each non-breaching party shall be entitled to the sole and exclusive remedy of specific
performance and injWictive or other equitable relief, including attorneys fees and costs, as a
remedy of any such breach, and each party agrees to waive any requirement for the securing or
posting of a bond in connection with such remedy.
Section 17. Assignment. Except as set forth in Section 5, no rights or obligations of
any party under this Agreement may be assigned or transferred to any other person or entity.
Section 18. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN SUCH
STATE. By its execution and delivery of this Agreement, each of the Parties hereto hereby
irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against
it with respect to any matter under or arising out of or in connection with this Agreement or for
recognition or enforcement of any judgment rendered in any such action, suit or proceeding, may
be brought in the U.S. District Court for the Southern District of New York. By execution and
delivery of this Agreement, each of the Parties hereto hereby irrevocably accepts and submits
itself to the nonexclusive jurisdiction of each such court, generally and unconditionally, with
respect to any such action, suit or proceeding. Notwithstanding the foregoing consent to
jurisdiction, upon the commencement of the Chapter 11 Case, each of the Parties hereto hereby
severally agrees that the Bankruptcy Court shall have exclusive jurisdiction of all matters arising
out of or in connection with this Agreement.
Section 19. Effectiveness of the Agreement. This Agreement shall become effective
when the Debtors have received counterparts hereof duly executed and delivered by the Debtors
and the holders of (1) the Existing Common Stock, (2) at least two-thirds in principal arnoWlt of
the Existing Senior Debt and (3) at least two-thirds in principal amount of all outstanding Old
Notes; provided that Debtors together with the written consent of each of the Administrative
Agent, the ad hoc committee of Holders of Old Notes through its counsel, and the holders of
Existing Common Stock that are signatories hereto shall have the right to waive such conditions
to the effectiveness of this Agreement, in whole or in part.
Section 20. Independent Due Diligence and Decision-Making. Each of the
Consenting Holders hereby confirms that its decision to execute this Agreement has been based
upon its independent investigation of the operations, businesses, financial and other conditions
and prospects of Debtor. To the extent any materials or information have been furnished to it by
Debtor, the undersigned hereby acknowledges that they have been provided for informational
purposes only, without any representation or warranty.
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Section 21. Reservation of Rights. This Agreement and the Term Sheet are part of a
proposed settlement of a dispute among the parties hereto. Except as expressly provided in this
Agreement and the Term Sheet: (a) nothing herein is intended to, or does, in any manner waive,
limit, impair or restrict the ability of the Company and each Consenting Holder to protect and
preserve its rights, remedies and interests, including without limitation, its claims against the
other; and (b) nothing contained herein effects a rrodification of the rights of the Company or the
Consenting Holders, unless and until the Plan is confirmed and the Financial Restructuring
becomes effective. If the transactions contemplated herein are not consummated, or if this
Agreement is terminated fir any reason, the parties hereto fully reserve any and all of their
rights. Pursuant to Federal Rule of Evidence 408 and any applicable state rules of evidence, this
Agreement and all negotiations relating thereto shall not be admissible into evidence in any
proceeding other than a proceeding to enforce its terms.
Section 22. Headings. The headings of the sections, paragraphs and subsections of
this Agreement are inserted for convenience only and shall not affect the interpretation hereof.
Section 23. Prior Negotiations. This Agreement, the Term Sheet and the
Reorganization Documents supersede all prior negotiations, and documents reflecting such prior
negotiations among the parties hereto with respect to the subject matter hereof.
Section 24. Representation by Counsel. Each party hereto acknowledges that it has
been represented by counsel in connection with this Agreement and the transactions
contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would
provide any party hereto with a defense to the enforcement of the terms of this Agreement
against such party based upon lack of legal counsel shall have no application and is expressly
waived.
Section 25. Several. Not Joint, Obligations. The agreements, representations and
obligations of the Consenting Holders under this Agreement and the Term Sheet are, in all
respects, several and not joint.
Section 26. Agreement. Delivery of an executed counterpart of the signature pages to
this Agreement by facsimile transmission shall be effective as delivery of a manually executed
counterpart thereof.
Section 27. Consideration It is hereby acknowledged by the Company and each of
the Consenting Holders that no consideration shall be due or paid to the Consenting Holders for
their agreement to vote to accept the Plan subject to and in accordance with the terms and
conditions of this Agreement, other than the provisions hereof and Company's agreement to use
its best efforts to obtain approval of the Disclosure Statement and to confirm the Plan in
accordance with the terms and conditions of this Agreement.
Section 28. No Third Party Beneficiaries. This Agreement shall be solely for the
benefit of the parties hereto and, solely with respect to Section 4 and Section 10 hereof, the
Equity Released Parties, including their permitted assigns, and no other person or entity shall be
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a third party beneficiary hereof. Nothing in this Agreement, express or implied, shall give to any
party or entity other than the parties any benefit or any legal or equitable right, remedy or claim
under this Agreement.
Section 29. Successors and Assigns. This Agreement is intended to bind and inure to
the benefit of the parties hereto and their respective successors, permitted assigns, heirs,
executors, administrators and representatives.
Section 30. Notices. ( 1) All notices hereunder to be served to the Company sha 11 be
deemed given if in writing and delivered or sent by telecopy, courier or by registered or certified
mail (return receipt requested) to the following addresses or telecopier numbers (or at such other
addresses or telecopier numbers as shall be specified by like notice:
Dade Behring Holdings, Inc.
1717 Deerfield Rd.
P.O. Box 778
Deerfield, IL 60015-0778
Attn: Louise Pearson, Esq.
General Counsel
Fax: (847) 267-5376
with copies to:
Kirkland & E11is
200 E. Randolph Drive
Chicago, Illinois 60601
Attn: James H.M. Sprayregen, P.C.
Marc Kieselstein, Esq.
Fax: (312) 861-2200
(2) All notices hereunder to be served to a Holder shall be deemed given if in
writing and delivered or sent by telecopy, courier or by registered or certified mail to the address
for such Consenting Holder set forth above its signature hereto (or at such other addresses or
telecopier numbers as shall be specified by like notice.
(3) All notices to any party hereunder shall also be copied to:
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Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attn: Peter V. Pantaleo, Esq.
Fax: (212) 455-2502
Hennigan, Bennett & Dorman
601 South Figueroa Street
Suite 3300
Los Angeles, CA 90017
Attn: Bennett J. Murphy, Esq.
Fax: (213) 694-1234
Ropes & Gray
One International Place
Boston, MA 02110
Attn: William F. McCarthy, Esq.
Fax: (617)
Baker Botts L.L.P.
The W amer Building
1299 Pennsylvania Avenue NW
Washington, D.C. 20004
Attn: Theodore C. Jonas, Esq.
Fax: (202) 585-1081
Fried Frank Harris Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attn: Robert Schwenke!, Esq.
Fax: (212)
Execution Draft
Settiement Communication Governed
Section 31. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall, collectively and separately, constitute one and the same
agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DADE BEHRING HOLDINGS, INC. DADE BEHRING INC.
By: By:
Its: Its:
DADE MICROSCAN INC. DADE FINANCE INC.
By: By:
Its: Its:
SYV A DIAGNOSTICS HOLDING CO. SYV A COMPANY
By: By:
Its: Its:
CHIMERA RESEARCH AND CHEMICAL, INC. SYV A CHILDCARE INC.
By:
Its:
By:. ____________ _
Its:. _____________ _
SIGNATURE PAGES TO LOCK UP, VOTING AND CONSENT AGREEMENT
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HOLDER OF RELEVANT CLAIM:
Name ofHolder:
By:
Its:
Aggregate Principal Amount of Old Notes: $, __ _
Aggregate Principal Amount of
Existing Senior Debt:
Total Amount of Relevant Claim:
Number of Shares of Existing Common
Stock (for Consenting Holders of
Existing Common Stock only)
Percentage of Shares of Existing
Common Stock on fully diluted basis
(for Consenting Holders of Existing
Common Stock only.)
Address for Notices
[
$ __ _
$ __ _
Execution Draft
SIGNATURE PAGES TO LOCK UP, VOTING AND CONSENT AGREEMENT
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FINAL DRAFT 05/31102
FOR DISCUSSION PURPOSES ONLY CONFIDENTIAL
SETTLEMENT COMMUNICATION
PREPARED AND DELIVERED IN CONNECTION WITH
COMPROMISE NEGOTIATIONS
SUMMARY OF TERMS AND CONDITIONS OF FINANCIAL
RESTRUCTURING OF DADE BEHRING HOLDINGS, INC.
AND DADE BEHRING INC. AND CERTAIN DIRECT
AND INDIRECT SUBSIDIARIES THEREOF
This Summary of Terms is provided in the context of a possible compromise and settlement.
Except to the extent set forth in the Lock-Up Agreement (as defined below) relating hereto,
under no circumstances shall this Summary of Terms constitute or be deemed to constitute a
legally binding commitment on the part of the Administrative Agent (as defined below), any
Bank, any Noteholder, any Debtor or any Equityholder or any of their respective affiliates or any
other person, nor shall it be construed as an undertaking by the Administrative Agent or any
Bank, any Noteholder, any Debtor or any Equityholder or any of their respective affiliates to
issue or arrange a commitment (including without limitation, with respect to any of the
financings contemplated hereunder). This Summary of Terms is for discussion purposes only.
DEBT TO BE RESTRUCTURED
1:\Projeel VIVOITerm Sheet.POR Tem1 Sheel K&E Final Dmn.doc
Indebtedness to be restructured will include (i) debt
of approximately $1.13 billion as of May 17, 2002,
in principal amount under the Credit Agreement (as
amended, the "Prepetition Credit Agreement") of
Dade Behring Holdings, Inc. ("Holdings"), Dade
Behring In:. ("Dade"), and certain of Dade's
subsidiaries with the Banks (as defined in the
Prepetition Credit Agreement) and Deutsche Bank
Trust Company Americas (f/k/a Bankers Trust
Company), as Administrative Agent (in such
capacity, the "Administrative Agent"), and (ii) debt
of $350 million in principal amount Wider Dade's
Series B 11-1/8% Senior Subordinated Notes (the
"Senior Subordinated Notes" and the Noteholders
thereof, the "Noteholders ") exchanged for the
Series A 11-118% Senior Subordinated Notes issued
under that certain Indenture dated as of May 7, 1996
(as amended, the "Senior Subordinated Notes
Indenture").
Such indebtedness will be restructured pursuant to a
prepackaged plan of reorganization under the terms
set forth herein (the "Plan'') to be filed jointly by
Holdings, Dade, Dade MicroScan Inc., Dade
Finance, Inc., Syva Diagnostics Holding Co., Syva
Company, Syva Childcare Inc., and Chimera
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TREATMENT OF EXISTING
BANK DEBT
FINAL DRAFT 05/31/02
Research and Chemical, Inc. (collectively, the
"Debtors"),
1
in proceedings (the "Cases") to be
commenced under Chapter 11 of title 11 of the
United States Code (the "Bankruptcy Code") in the
United States Bankruptcy Court for the Northern
District of Illinois. All other subsidiaries of
Holdings, including Dade Behring Holdings GmbH
(collectively, the 'Nondebtors '),shall not
commence proceedings under the Bankruptcy Code
and the Banks and the Noteholders shall, on the
Effective Date (as defined below), agree to forego
any and all causes of action and claims against the
Nondebtors and release the Nondebtors from any
and all Prepetition liabilities other than the
obligations, if any, of such subsidiaries under the
Plan and any documents related thereto (including,
without limitation, any documents executed and
delivered in connection with the Exit Facilities (as
defmed below)).
On the effective date of the Plan (the "Effective
Date"):
The aggregate outstanding principal amount of
Term A Loans, Term B Loans, Term C Loans,
A Revolving Loans and B Revolving Loans (as each
such term is defined in the Prepetition Credit
Agreement; collectively, the "Prepetition Loans")
and the interest accrued and unpaid on the
Prepetition Loans through the Effective Date
(collectively, the "Accrued Interest''), will be
repaid and/or converted, and thereby deemed
satisfied in full, through the distribution under the
Plan of a combination of (a) $400 million of cash
which shall be funded by the Debtors from the
proceeds of a new term loan facility to be provided
by Deutsche Bank Trust Company Americas as
more fully described on Exhibit A hereto and
containing such other terms acceptable to the
Debtors, the Administrative Agent and Noteholders
Committee (as defined below); (b) new senior
subordinated notes in an aggregate principal amount
If Lockup Agreements are obtained from all of the Holders of Existilg Senior Debt, Holdings may elect, at its
sole option, to file chapter 11 petitions only for Holdings and Dade.
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SENIOR SUBORDINATED NOTES
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of $335 mil1ion as more fully described on Exhibit
A hereto (the new tenn loan facility and the new
senior subordinated notes shall be collectively
referred to as the "Exit Facilities"); the principal
amount of new senior subordinated notes to be
received in respect of the Prepetition Loans shall be
reduced by (x) $8 million in respect of principal
amortization payments received by the Banks on or
about March 31,2002 and (y) 100% ofthe amount
of any principal amortization payments received by
the Banks thereafter prior to the commencement of
the Cases, and (c) on account of the Prepetition
Loans two-thirds (prior to giving effect to any
management stock incentive plan) of the Common
Stock (as defined below) of reorganized Holdings
issued under the Plan, with such cash, new senior
subordinated notes and Common Stock to be
distributed on a pro rata basis in accordance with the
Banks' shares of the Prepetition Loans on the record
date for distributions under the Plan. Provided that
the Lock-Up Agreement shall not have been
tenninated, the quarterly amortization payments that
become due under the Prepetition Credit Agreement
shall not be paid during the pendency of the Cases.
On the Effective Date, one-third of the Common
Stock of reorganized Holdings issued under the Plan
(prior to giving effect to any management stock
incentive plan) shall be distributed in respect of the
Senior Subordinated Notes and any accrued interest
on such Senior Subordinated Notes, which Common
Stock shall be distributed to the Noteholders, other
than the Insider Noteholders (as defined in the Lock-
Up Agreement) (the "Third-Party Noteholders").
On the Effective Date immediately prior to the
connnencement of distributions under the Plan (and
subject to the effectiveness of the Plan), the Insider
Noteholders shall contribute for cancellation 100%
of such Insider Noteholder's Senior Subordinated
Notes to Holdings (which principal amount of
Senior Subordinated Notes contributed by the
Insider Noteholders to Holdings shall not be less
than $67.65 million in aggregate principal amount).
In addition, on the Effective Date, Hoechst AG shall
3
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LETTERS OF CREDIT
FOREIGN CREDIT LINES
TREATMENT OF DIP LOANS
1:\Proj:l VIVOITenn SheeM'OR Tenn Sheet K&E Final DrnO.doc
receive $9 million in cash in respect of its
contribution of Senior Subordinated Notes (the
"Hoechst Payment").
Such Common Stock shall be distributed to the
Third-Party Noteholders on a pro rata basis in
accordance with the holdings of the Senior
Subordinated Notes on the record date for
distributions under the Plan.
The Plan shall provide for the Debtors to pay (no
later than the Effective Date) the reasonable fees and
expenses of the indenture trustee for the Senior
Subordinated Notes (the "Notes Trustee"),
including the reasonable fees and expenses of
counsel to the Notes Trustee, to the extent payable
under the Senior Subordinated Notes Indenture.
Drawings under letters of credit issued under the
Prepetition Credit Agreement ("Prepetition Letters
of Credit''), to the extent such drawings are made
prior to the Effective Date, will be, on the Effective
Date, outstanding indebtedness with respect to
A Revolving Loans under the Prepetition Credit
Agreement. Prepetition Letters of Credit that remain
outstanding as of the Effective Date will be replaced
with letters of credit issued under tre Exit Revolving
Credit Facility referred to below.
Existing foreign credit lines (excluding those that
are part of or replaced under the DIP Facility) of the
foreign subsidiaries of Holdings either will be (i)
restructured through bilateral arrangements with the
relevant creditors, (ii) replaced by letters of credit
issued under the Exit Revolving Facility to the
extent such lines are bid bonds, (iii) repaid or (iv)
otherwise unaffected.
On the Effective Date, loans and related amounts
outstanding under the DIP Facility may be repaid
with the proceeds of the Exit Revolving Credit
Facility referred to below. Such Exit Revolving
Credit Facility will be $125 million, all of which
shall be available on the Effective Date; provided
that all conditions to the initial borrowing thereunder
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EQUITY INTERESTS
1:\Projeol VIVO\Tenn Shce!J'OR Term Sheet K&E Final OroR.doe
shall have been satisfied (or waived).
All existing conunon and preferred equity interests
in Holdings (including, without limitation, the
Baxter Preferred Stock (as defined in the Prepetition
Credit Agreement), the equity interests held by the
Equityholders (as defined in the Lock-Up
Agreement) and other existing securities consisting
of (or convertible into) equity interests in Holdings,
including any warrants or vested or unvested options
to purchase equity interests in Holdings, shall be
extinguished as the Effective Date. All equity
interests in Dade and its subsidiaries shall continue
to be held by Holdings and the subsidiaries of Dade
holding such equity interests prior to the
commencement of the Cases.
As consideration for the agreements of the
Equityholders (x) to contribute 100% of such
Equityholders' Senior Subordinated Notes to
Holdings for cancellation as described above or to
cause their respective affiliated Insider Noteholders,
if any, to contribute 100% of such Insider
Noteholders' Senior Subordinated Notes to Holdings
for cancellation as described above, (y) to waive any
claim to assert that the equity interests in Holdings
held by them are entitled to receive consideration
under the Plan and (z) to waive any right to any
distribution under the Plan, other than (i) the
Hoechst Payment, (ii) distributions to the Insider
Noteholders as holders of Prepetition Loans, if any,
(iii) general unsecured claims under contracts and
unexpired leases assumed by the Debtors under the
Plan and (iv) trade payables owed by any Debtor or
N ondebtor to any Equity Released Party that arose
from the sale of services or products by such Equity
Released Party, the Plan (it being understood that
any management agreements between the
Equityholders or their affiliates and the Debtors
shall be deemed to be rejected (or terminated with
respect to management agreements with
Nondebtors) under the Plan) shall provide for a full
discharge and release of liability of the
Equityholders, the Insider Noteholders, their
respective current and former affiliates and
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1:\Proje<t VIVO\Tmn ShcciiPOR Term Sheel Kc\E Fino) Orafl.do<
investment advisors, and the current and former
principals, agents, officers, directors, shareholders,
partners, members, representatives and professionals
of each of the foregoing, including, without
limitation every such person who serves or served as
an officer, director, employee or agent of, or advisor
to, any Debtor or Nondebtor (the ''Equity Released
Parties") to any person, including, without
limitation, the Debtors, the Nondebtors, and their
affiliates (collectively, the "Dade Releasors"), and
the present and former holders of indebtedness
under the Prepetition Credit Agreement ani the
Senior Subordinated Notes, including, without
limitation, the Banks and Third-Party Noteholders,
the Notes Trustee, other creditors of the Debtors and
Nondebtors and present and former holders of equity
interests in the Debtors (such persons, together with
the Dade Releasors collectively, the "Releasors ")
from any and all claims and causes of action based
on circumstances existing prior to or on the
Effective Date arising from or related in any way to
the Debtors or the Nondebtors, including, without
limitation, any and all claims and causes of action
based on circumstances existing prior to or on the
Effective Date arising from or related in any way to
(I) any investment by any Equity Released Party in
any indebtedness under any credit facility under
which a Debtor or Nondebtor is or was a borrower
or guarantor, the Senior Subordinated Notes, or any
common or preferred equity investment in Holdings,
(II) any action or omission of any Equity Released
Party with respect to any indebtedness under any
credit facility under which a Debtor or Nondebtor is
or was a borrower or guarantor, the Senior
Subordinated Notes, or any common or preferred
equity investment in Holdings (including without
limitation any action or omission of any Equity
Released Party with respect to the acquisition,
holding, voting or disposition of any such
investment), (III) any action or omission of any
Equity Released Party in such Equity Released
Party's capacity as an officer, director, employee or
agent of, or advisor to, any Debtor or Nondebtor,
(IV) any disclosure made or not made by any person
to any current or former holder of any indebtedness
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290 of 364
J:\Projec1 VIVOITerm SheeiJ'OR Tcnn Shoel K&E final o..n.do<:
FINAL DRAFT 05/31/0:Z
under the Prepetition Credit Agreement or the
Senior Subordinated Notes, (V) any consideration
paid to any Equity Released Party by any of the
Debtors or the Nondebtors in respect of any
investment by any Equity Released Party in any
indebtedness under any credit facility under which a
Debtor or Nondebtor is or was a borrower or
guarantor, the Senior Subordinated Notes, or any
common or preferred equity investment in Holdings
or in respect of any services provided by any Equity
Released Party to any Debtor or Nondebtor under
any management agreement or otherwise, (VI) the
Recapitalization Agreement dated Aprill4, 1999,
the payment of a dividend by Dade to Holdings and
the redemption of equity interests of Holdings on or
about June 30, 1999, the payment and receipt of any
financial advisory fees in connection therewith, and
any and all documents executed and actions taken in
connection with the consummation of the
transactions contemplated thereby, and (VII) any
action taken or not taken in connection with the
Restructuring in the proposed Chapter 11 filing
involving the Debtors, but excluding (i) trade
payables owed by any Equity Released Party to any
Debtor or Nondebtor that arose from the sale of
services or products by such Debtor or Nondebtor
and (ii) any actions taken or not taken in violation of
the Lock-Up Agreement (the "Equityholder
Released Claims"); provided that, any written
contract in existence on the Effective Date (other
than contracts in respect of items I - VII above) to
which each of (i) one or more Equity Released
Party, (ii) one or more Debtor or Non-Debtor and
(iii) one or more present of fonner holder(s) of
indebtedness under the Prepetition Credit
Agreement (other than in such holder or holders'
capacity as a holder, purchaser or seller of
indebtedness under the Prepetition Credit
Agreement) or one or more present of fonner
holder( s) of Senior Subordinated Notes (other than
in such holder or holders' capacity as a holder,
purchaser or seller of Senior Subordinated Notes)
are parties shall be unaffected by the releases
described above, and all parties to such written
contracts, if any, shall retain all of their resp_ective
7
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TREATMENT OF GENERAL
UNSECURED CLAIMS
ADMINISTRATIVE FEES
TREATMENT OF EMPLOYEE
RETENTION AND
EMPLOYMENT PROGRAMS
l:\Projeol V!YO\Tenn Sheef.I'OR Term Sheel K&E final Oraft.doc
rights and obligations thereunder against the other
parties to such contracts. If requested by the
Equityholders, the Plan shall include a provision to
seek approval of the releases described above under
Rule 9019 of the Bankruptcy Code. Without
limiting tre foregoing, the Plan shall further include
(to the extent of the releases described above) (i) an
injunction enjoining the Releasors from the
commencement or continuation of any Equityholder
Released Claims against any Equity Released Party
and (ii) terms which shall provide that each of the
Debtors and the Nondebtors and each Bank and
Noteholder which shall vote in favor of the Plan
shall be deemed to have delivered a full discharge
and release of Equityholder Released Claims to the
Equity Released Parties and Insider Noteholders.
All general unsecured claims of the Debtors'
creditors set forth or otherwise described in the
disclosure statement filed in the Cases and
acceptable to the Banks and the Third-Party
Noteho lders, including claims under contractS and
unexpired leases assumed by the Debtors under the
Plan and trade payables owed by any Debtor or
Nondebtor to any Equity Released Party, but
excluding those of the Banks in respect of the
Prepetition Loans, the Third-Party Noteholders in
respect of the Senior Subordinated Notes and Insider
Noteholders (whether or not held in their capacity as
Noteholders other than the Hoechst Payment and
distributions to the Insider Noteholders as Holders
ofPrepetition Loans, if any), will be paid in the
ordinary course as such claims become due. The
Debtors' shall reserve all rights to challenge the
legal basis and amount of any general unsecured
claims.
The professional fees of Debtors, the Banks and the
Noteholders Committee (including without
limitation, the reasonable fees and expenses of
financial advisors and legal counsel) will, to the
extent not paid currently, be paid at the Effective
Date.
All retention bonus programs and employment
agreements (other than any existing management
and employee stock plans) will be paid out by
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MANAGEMENT EQUITY
INCENTIVE PLAN IN
REORGANIZED HOLDINGS
BOARD OF DIRECTORS OF
REORGANIZED HOLDINGS
INDEMNIFICATION
!:\Project VIVOITnn Sh<otJ>OR Term Sheet K&E Finall>raft.<loo
Debtors in accordance with their tenns. A new
management stock incentive plan will be
implemented (as discussed below).
Stock and options for up to 16 % of the Common
Stock of reorganized Holdings (on a fully diluted
basis) shall be granted pursuant to the Plan to
continuing employees of the Debtors with pricing,
vesting and exercise tenns to be detennined.
The initial board of directors of reorganized
Holdings shall be comprised of seven directors. The
chief executive officer of reorganized Holdings shall
be a member of the board of directors. The Banks
shall designate four directors. The Noteholders shall
designate two directors.
All indemnification provisions currently in place for
current and fonner directors, officers, employees
and agents of Holdings, Dade and their respective
subsidiaries and such directors' and officers'
respective affiliates (whether in the bylaws,
certificates of incorporation, board resolutions,
contracts assumed by the Debtors under the Plan or
otherwise) shall survive effectiveness of the Plan;
provided that, with respect to the officers and
directors of reorganized Holdings serving in such
capacities after the Effective Date, the
indemnification provisions in the certificate of
incorporation of reorganized Holdings shall
supercede the indemnification provisions in
existence prior to the Effective Date in Holdings'
current certificate of incorporation and bylaws, it
being understood that all indemnification provisions
in place on and prior to the Effective Date for
current and former directors and officers of
Holdings, Dade and their subsidiaries and such
directors' and officers' respective affiliates shall
survive effectiveness of the Plan for claims related
to or in connection with any actions, omissions or
transactions prior to the Effective Date. Holdings
and Dade will obtain sufficient tail coverage under a
directors and officers insurance policy for current
and former officers and directors. The Plan shall
provide for the indemnification by the reorganized
Debtors of the Equity Released Parties on tenns
9
293 of 364
REORGANIZED HOLDINGS AS A
PUBLIC REPORTING COMPANY
DESCRIPTION OF CAPITAL
STOCK AND NASDAQ LISTING
REGISTRATION RIGHTS
I :ll'rojeea VIVO\Tenn Sheelii'OR Tenn Sheea K&E Final DraO.doc
satisfactory to the Banks, the Third-Party
Noteholders and the Equity Released Parties in
respect of the Equityholder Released Claims (as
defmed herein). The Plan shall provide for the
indemnification by the reorganized Debtors of the
members of the Bank steering committee (the
"Bank Steering Committee"), Noteholders
Committee and its advisors on terms satisfactory to
them as to acts and omissions respecting the
negotiation and implementation of the Plan and the
transactkms contemplated thereby, excluding any act
that constitutes gross negligence or intentional
misconduct.
For certain purposes, including requiring
reorganized Holdings to become a public reporting
company under the Securities Exchange Act of 1934
(the "'34 Act"), the Plan shall require reorganized
Holdings to file and have declared effective a
registration statement on Form 10 ("Form 10")
under as soon as reasonably practicable following
the Effective Date.
From and after the Effective Date, subject to the
right of the stockholders to amend the Certificate of
Incorporation of reorganized Holdings after the
Effective Date, reorganized Holdings shall have one
class and one series of common stock (the
"Common Stock"). The Plan shall provide for
reorganized Holdings to use its reasonable best
efforts to obtain a listing for the Common Stock on
NASDAQ as soon as reasonably practicable
following the effectiveness ofthe Form 10 ~ .
after listing requirements are satisfied).
The Plan shall provide for a registration rights
agreement with reorganized Holdings in favor of all
initial holders of Common Stock and the permitted
transferees thereof. Certain of the key terms of the
registration rights agreement shall be as follows.
Shelf Registration At any time after the earlier of
(y) the initial public offering of reorganized
Holdings' (or any successor's) equity securities or
(z) the first anniversary of the Effective Date, the
holders of a specified percentage of the outstanding
10
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294 of 364
1:\Projcct VIVO\Tcnn ShectJ>OR Tcnn She<1 K&E Final Draft.doc
shares of registrable Common Stock shall be entitled
to require the Company to use its best efforts to file
and have declared effective a registration statement
covering the resale of the registrable Common Stock
of such holders. Subject to customary blackouts
referred to below, the Company shall use its
reasonable best efforts to maintain the effectiveness
of any such shelf registration statement continuously
for two years or such shorter period oftime which
will terminate the day after the date when all of the
registrable Common Stock covered by the shelf
registration statement has been sold pursuant thereto
or the first date there shall cease to be any
registrable common stock
Other Demand Registrations. Subject to any
breathing period referred to below and the
termination of registration rights described below, at
any time after the expiration or cessation of
effectiveness of the shelf registration statement, any
holder or group of holders collectively holding a
specified percentage of the outstanding shares of
registrable Common Stock shall be entitled to
demand up to two registrations of their registrable
Common Stock on Form S-3 (or, if Form S-3 is not
then available to the Company, Form S-1, or any
successor forms). All holders of Common Stock
shall be entitled to participate in any such demand
registration on a pro rata basis and the holders shall
have a priority over any shares sought to be sold by
the Company in any such registration. There shall
be at least a 180 day "breathing period" between any
of the shelf and/or other demand registrations
referred to above.
Piggyback Rights. Holders of registrable Common
Stock shall be entitled to piggyback onto any
registration (unless a shelf registration statement
covering all outstanding shares of registrable
Common Stock is then effective) by reorganized
Holdings of the Common Stock for its own account
or for the account of any other holders. The
Company shall have priority in any registration it
has initiated for its own account and the holders of
Common Stock collectively shall have priority in
11
295 of 364
I :\Project VIVOITerm ShoeM'OR Tenn Sh .. t KkE Final DnR.doc
any registration initiated for the account of any
holder. Any cutback required with respect to the
holders shall be done on a pro rata basis.
Selection of Underwriters. In the event the offering
is to be underwritten, with respect to (i) any shelf or
other demand registration, the Company and the
holders of a majority of the shares being offered
shall mutually agree on the underwriters, and (ii)
any registration initiated by the Company for its own
account, the Company shall select a nationally
recognized firm of underwriters in its sole
discretion.
Blackouts. Reorganized Holdings shall have a
customary right to suspend, at any time (but not
more than once in any twelve-month period) the
registration process and/or suspend a holder's ability
to use a prospectus if certain significant corporate
events are contemplated.
Expenses. Reorganized Holdings shall pay all
customary costs and expenses associated with each
registration, including the reasonable fees and
expenses of one firm of attorneys selected by the
holders of a majority of the shares of Common
Stock covered by such registration. Holders of
Common Stock will pay underwriting discounts,
commissions and applicable transfer taxes, if any, on
any shares sold by them.
Expiration Reorganized Holdings' obligations to
register Common Stock for sale under the Securities
Act shall terminate on the earlier of (i) the first date
on which no shares of registrable Common Stock are
outstanding or (ii) the first date on which less than a
specified percentage of the aggregate number of
shares of Common Stock issued pursuant to the Plan
are held by the initial holders thereof or their
affiliates.
Notes. The Plan shall also provide for a registration
rights agreement with Holdings, Dade, and certain
subsidiaries as guarantors in favor of all initial
holders of the new senior subordinated notes and the
12
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296 of 364
CHARTER PROVISIONS
STOCKHOLDER RIGHTS PLAN
TAX ATTRIBUTES
J:\Project V(VO\Tenn Tenn Sheet K&E Final Dran.doc
permitted transferees thereof, with terms
substantially similar to the registration rights
provided to holders of Common Stock.
The Plan shall provide that the certificate of
incorporation of reorganized Holdings shall contain
the following provisions:
(a) Director liability exculpation
provisions, to the fullest extent
permitted by Delaware law;
(b) Classified board (three classes;
accordingly, no director will be
removable except for cause);
(c) Stockholders may only take
action at a duly organized
meeting;
(d) Stockholders may not call special
meetings;
(e) The board may fill vacancies on
the Board; and
(f) Stockholders must give advance
written notice of director
nominations or other business
they intend to bring before a
stockholder meeting.
The Plan shall provide that reorganized Holdings
shall adopt a customary Stockholder Rights Plan.
The rights plan will be triggered by any person or
group acquiring 15% or more of the Common Stock
(holders having 15% or more of the Common Stock
on the Date will be grandfathered at such
level, as reduced by dispositions of
Common Stock by such holder).
The tertn:s"ofthe Plan and the restructuring
dll dlli! fj;;' ';
contemplated by this Term Sheet shall be subject to
satisfactory due diligence by the Banks and the
NotehofCiers"'Committee with respect to tax issues,
and wi1i
11
pres'e1Ve favorable tax attributes of the
Debtors iri a"manner reasonably satisfactory to the
Banks and the Noteholders Committee in light of the
13
297 of 364
PRINCIPAL AND INTEREST ON
PREPETITION LOANS AND
SENIOR SUBORDINATED NOTES
CERTAIN CONDITIONS
FINAL DRAFT OS/31/02
FOR DISCUSSION l'URPOSES ONLY CONFIDENTIAL
change of control contemplated under the Plan by
the distribution of the entire equity interest in
Holdings (other than equity under the Management
Equity Incentive Plan) to the Banks and the Third-
Party Noteholders.
During the Cases, Dade shall continue to (i) pay
postpetition interest (at the original non-default
interest rates) on the Prepetition Loans, the
reasonable fees, costs and expenses of counsel to
each of the "underwriting lenders" under the DIP
Facility and of counsel and financial advisors to the
agents under the DIP Facility but shall suspend any
and all payments of principal payable under the
Prepetition Credit Agreement, (ii) pay the
reasonable fees, costs and expenses of Hennigan,
Bennett & Dorman as counsel and Ernst & Young
Capital Advisors LLC as financial advisor to the
informal committee of the Noteholders (the
"Noteholders Committee"), (iii) upon approval of
the DIP Facility in the Cases, pay the reasonable
fees due and payable under the DIP Facility. Prior
to commencement of the Cases, Dade shall continue
to pay (x) principal, interest (at the original non-
default interest rates)
2
and other amounts due and
owing with respect to the Prepetition Loans and the
reasonable fees, costs and expenses of counsel to the
Bank Steering Committee and counsel and Houlihan
Lokey Howard & Zukin as financial advisor to the
Administrative Agent and the Banks, (y) the
reasonable fees, costs and expenses of Hennigan,
Bennett & Dorman as counsel and Ernst & Young
Capital Advisors LLC as financial advisor to the
Noteholders Committee.
Conditions to the agreement of the Banks, Third-
Party Noteholders, the Debtors and the
Equityholders to the Plan, the Effective Date, and to
the restructuring described in this Term Sheet will
include, without limitation, the following:
(i) definitive documentation, including without
limitation, all first day motions and orders relating
2
Intent to revert to nondefault interest rates with interest payments beginning April 30, 2002.
14
!:\Project VJVO\Tellll SheeiiPOR Term Sheer K.!<E Final OraO.d<JC
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298 of 364
!:\Project V!VOITemt Sheet.POR Term Sheet K&E Final Dtoft.doc:
thereto and the documentation in connection with
the Exit Facilities, in form and substance reasonably
satisfactory to the Administrative Agent, the Banks,
the Noteholders Committee, the Debtors and the
Equityholders; (ii) arrangements (consistent with the
terms hereof) with respect to the holders of any
other claims reasonably satisfactory to the
Administrative Agent, the Banks, the Third-Party
Noteholders, the Equityholders and the Debtors;
(iii) reasonable satisfaction of the Administrative
Agent, the Banks, the lenders under the DIP Facility,
the Third-Party Noteholders, the Equityho lders and
the Debtors with the Plan and the confirmation order
therefor, and approval thereof through the execution
and delivery of prepetition "Jock up" or similar
voting arrangements by and among the Debtors, the
requisite Banks, Noteholders, and Equityholders in
numbers and amounts necessary for class acceptance
of the Plan under 11 U.S.C. 1126(c) (the "Lock-Up
Agreement"); provided that such lock up or similar
voting agreements shall, among other things,
commit the signatories to support the Plan and
ensure that, if any signatory sells, assigns or
otherwise conveys its claims or interests, it shall
condition such transfer upon a transferee's
assumption of such lock up or similar voting
agreement; (iv) satisfaction (consistent with the
terms herein) of the Banks and the Third-Party
Noteholders with any distributions pursuant to the
Plan to the Insider Noteholders, (v) satisfaction
(consistent with the terms herein) of the Insider
Noteholders and the Equity Released Parties with
respect to (a) the provisions of the Plan (including
any document with respect to voting thereon) and
any order confinning the Plan, which relate to the
full discharge and release of Equityholder Released
Claims against all Equity Released Parties consistent
with the terms hereof am (b) any injunction under
the Plan or the order confirming the Plan against
actions inconsistent with such full discharge and
release of the Equity holder Released Claims against
Equity Released Parties; (vi) reasonable satisfaction
(consistent with the terms herein) of the Banks and
the Third-Party Noteholders with (I) the full
discharge and release of liability in favor of
15
1:\Projecl VIVO\Tfnn ShetJ>OR Term Sh .. l K&E Final DraA.doc
299 of 364
(x) Holdings, Dade, Reorganized Holdings and
Reorganized Dade (and their respective
subsidiaries), the Administrative Agent, the Banks
the Noteholders and (y) each of the respective past
and present principals, partners, members,
investment advisors, employees, agents, officers,
directors, shareholders, representatives,
professionals and affiliates of the persons and
entities described in clause (x) above from any and
all claims and causes of action arising prior to the
Effective Date, including, but not limited to, any and
all claims arising from the actions taken or not taken
in connection with the Plan, including without
limitation, th! filing and prosecution of the Cases;
(II) an injunction under the Plan against actions
inconsistent with such release and discharge; and
(III) authorization in the Cases to enter into a debtor-
in-possession revolving credit facility with the
Administrative Agent (the "DIP Facility") on
substantially the terms set forth in the existing
commitment letter dated August 7, 2001, as
amended with any material changes thereto to be
reasonably acceptable to the Administrative Agent
under the DIP Facility; (vii) reasonable satisfaction
of the Banks, the Debtors and the Third-Party
Noteholders with all severance, retention and post-
restructuring employment arrangements, and the
amount and tenns of any stock and options of
reorganized Holdings to continuing employees of
the Debtors; (viii) effectiveness and substantial
consummation of the Plan by December 1, 2002;
(ix) the granting on the Effective Date of a perfected
security interest in all personal, mixed and real
property of Holdings, Dade and its domestic
subsidiaries (subject to certain pennitted liens and
other exceptions reasonably satisfactory to Deutsche
Bank Trust Company Americas) to secure the Exit
Facilities; (x) no material adverse change;
(xi) satisfaction (or waiver) of all conditions
required to be met under the definitive
documentation; (xii) reasonable satisfaction of the
Banks and Noteholders Committee with any
projected financial statements submitted by Dade in
connection with the confirmation of the Plan; and
(xiii) at the Effective Date the Lock-Up Agreement
16
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300 of 364
TIMING:
1:\Projccl VJVO\Term Sh.oii'OR Term Sheet K&E Final Drafl.doc
shall not have been terminated.
To be detennined.
17
301 of 364
I.
A.
FOR DISCUSSION iURPOSES ONLY CONFIDENTIAL
EXHIBIT A
SUMMARY OF CERTAIN TERMS AND CONDITIONS
OF REORGANIZED DADE'S EXIT FACILITIES
Description of Facilities Compromising the Exit Facilities
Senior Bank Financing
1. Term Loan Facility
Term Loan Facility: $450 million; provided that, at the election of the Borrower (as defined
below), up to $150.0 million (or the Euro equivalent thereof) of the Term
Loan Facility may be retranched to a Euro denominated term loan facility.
Maturity:
Amortization:
Interest Rate:
Use of Proceeds:
The final maturity of the Term Loan Facility shall be six years from the
Effective Date.
The loans made pursuant to the Term Loan Facility (the "Term Loans")
shall be subject to scheduled annual amortization requirements, paid
quarterly, in amounts set forth below:
Year
1
2
3
4
5
6
LIBOR plus 325 bps.
3
Percentage
$0
$25,000,000
$25,000,000
$30,000,000
$85,000,000
$290,000,000
The Term Loans shall be used as follows: (x) to repay a portion ofthe
loans or fees payable under the DIP Facility, if any; (y) to repay a portion
of the Borrower's prepetition credit facility (the "Prepetition Credit
Facility"); and (z) for working capital and other general corporate
purposes of the Borrower.
Tenn Loan Facility and Revolving Credit Facility to incorporate step-downs to interest rate margins based upon
consolidated leverage ratio pursuant to a pricing grid.
18
I c\Projecl VIVOITOIT!l SheetJ>OR Term Sheet K&E Final Draft.doo
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302 of 364
Availability:
Term Loans may only be incurred on the Effective Date. No amount of
Term Loans once repaid may be reborrowed.
2. Revolving Credit Facility
Revolving
Credit Facility:
Maturity:
Interest Rate:
Use of Proceeds:
A vail ability:
$125 million multicurrency revolving credit facility; provided that ro more
than $75 million of the Revolving Credit Facility will be made available in
Euros (determined on a U.S. Dollar equivalent basis).
The final maturity of the Revolving Credit Facility shall be five years from
the Effective Date. Loans made pursuant to the Revolving Credit Facility
(the "Revolving Credit Loans") shall be repaid in full on such date.
LIBOR plus 300 bps.
The proceeds of all Revolving Credit Loans shall be utilized at the
Effective Date to finance, in part, payments required to effectuate the Plan,
and thereafter for the working capital, capital expenditures and general
corporate purposes of the Borrower and its foreign and domestic
subsidiaries.
Revolving Credit Loans may be borrowed, repaid and reborrowed on and
after the Effective Date.
B. Terms Applicable to the Senior Bank Financing
Borrower:
Agent:
Guaranty:
Collateral:
Reorganized Dade Behring Inc. (the "Borrower").
Deutsche Bank Trust Company Americas
AU obligations under the Senior Bank Financing shall be unconditionally
guaranteed by Reorganized Dade Behring Holdings, Inc. ("Reorganized
Holdings") and each of the domestic subsidiaries of the Borrower
(together with Holdings, the "Guarantors"), subject to customary
exceptions for transactions of this type.
The obligations of the Borrower and the Guarantors shall be secured by a
first priority (subject to customary exceptions) perfected security interest
in (x) all stock, equity interests and promissory notes owned by the
Borrower and the Guarantors, provided that no more than 65% of the total
voting stock of each first-tier material foreign subsidiary of shall required
to be pledged and (y) all other tangible and intangible assets of Borrower
and each of its direct and indirect domestic subsidiaries, in each case
subject to customary exceptions for transactions of this type.
19
1:\Projeot VIVO\Tenn SheetJ'OR Tonn Sheet K&E Finl Draft.doc
303 of 364
Hedging:
Voluntary
Prepayments:
Mandatory
Repayments:
Conditions
Precedent:
Representations
and Warranties:
Reorganized Dade will require some form of foreign currency and interest
rate protection hedging, which could be accomplished either through the
use of multi-currency subfacilities within the Senior Bank Financing and
customary hedging transactions.
Voluntary prepayments may be made at any time, with prior notice and
without premium or penalty, subject to limitations as to minimum
prepayment amounts. Voluntary prepayments of Term Loans shall apply
to reduce future scheduled amortization payments of the Term Loans :Q!Q.
rata based upon the then remaining amounts of such payments, provided
that at the option of the Borrower, any such voluntary prepayment may be
applied first to scheduled amortization payments coming due within 12
months of the date of such prepayment.
Mandatory repayments of outstanding Term Loans to be required from, in
each case with exceptions to be mutually agreed upon: (a) 100% of the net
proceeds from asset sales (with the ability to reinvest asset sale proceeds
within 365 days and other exceptions to be negotiated); (b) 100% of the
net proceeds from issuances of debt (excluding ordinary course
transactions such as factoring, equipment leasing programs and similar
arrangements as well other than permitted debt to be mutually agreed
upon); (c) 50% of the net proceeds of each public offering of equity to the
extent not used (i) to finance one or more acquisitions or (ii) for other
uses, if any, to be mutually agreed upon; (iii) inter-company equity
issuances and (iv) equity issuances to employees; (d) 100% of the net
proceeds of insurance and condemnation proceeds (with ability to reinvest
such proceeds within 365 days); and (e) 50% of annual excess cash flow
(the definition of which will be mutually agreed upon).
Conditions precedent to the making of Loans on the Effective Date will be
customary for these types of facilities and any other conditions appropriate
in the context of the proposed transaction mutually agreed upon, and the
conditions to making all Loans will include the absence of defaults or
unmatured defaults under the Senior Bank Financing, continued accuracy
of representations and warranties in all material respects and receipt of
such documentation as shall be reasonably required by the Administrative
Agent.
The Senior Bank Financing and related documentation smll contain
representations and warranties by Borrower customary for these types of
20
f,\J'roject VJVO\Tenn Sbee!POR Tenn Sheet K&E Final DraR.doc
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304 of 364
facilities, as well as any additional ones mutually deemed appropriate in
the context of the proposed transaction.
Covenants: Those affirmative and negative covenants customary for these types of
facilities and any additional covenants mutually deemed appropriate in the
context of the proposed transaction (with such covenants having such
exceptions and baskets as may be mutually agreed upon). Although the
covenants have not yet been specifically determined, we anticipate that the
covenants shall in any event include: financial covenants; reporting
requirements; restrictions on other indebtedness (with various exceptions
for permitted debt and baskets, and including, but not limited to, other
foreign working capital lines, factoring of accounts receivable, vendor
financing programs, equipment financing programs, obligations under bid
bonds and other similar obligations, and indebtedness under interest rate
protection and other hedging agreements); restrictions on liens; restrictions
on asset sales and acquisitions; restrictions on capital expenditures; and
restrictions on transactions with affiliates and conduct of business.
Events of Default: Those customary for these types of facilities and any additional ones
appropriate in the context of the proposed transaction (with customary
thresholds and cure periods) including, without limitation, payment,
material misrepresentations, covenant defaults, bankruptcy and a change
of control of Holdings or the Borrower.
Required Lenders: Majority.
Governing Law: State ofNew York.
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1:\Ptojeca VJVO\Ttrm SheeWOR TennSheel K&E final Oraft.doc
305 of 364
DADE BEHRING INC.
SUMMARY OF TERMS AND CONDITIONS FOR SENIOR SUBORDINATED NOTES
Issuer:
Guarantors:
Holders:
Trustee
Description of the Notes:
Ranking:
Use of Proceeds:
Coupon:
Optional Redemption:
Reorganized Dade Behring Inc. (the "Company").
Reorganized Dade Behring Holdings Inc. and each of the domestic
subsidiaries of the Company that guarantees the Company's senior
secured credit facility shall guarantee the Notes (as defined below) on a
senior subordinated basis.
The banks and other fmancial institutions parties on the Closing Date (as
defined below) to Prepetition Credit Facility.
Deutsche Bank Trust Company Americas
$327,000,000 of principal amount of senior notes (the "Notes") (which
shall be reduced by 1 00% of the amount of any principal amortization
payments received by the Banks party to the Prepetition Credit
Agreement between April 1, 2002 and the commencement of the Chapter
11 cases) and shall have a final maturity on the eighth anniversary of the
date of issuance thereof (such date of issuance, the "Closing Date").
The Notes will be senior subordinated unsecured obligations of the
Company.
The Notes will be used to replace $327,000,000 (or such lesser amount as
shall be reduced by 100% of the amount of any principal amortization
payments received by the Banks party to the Prepetition Credit
Agreement between April 1, 2002 and the commencement of the Chapter
11 cases) of the loans under the Prepetition Credit Agreement.
The coupon will be fixed on the Closing Date equal to the sum of: (a) the
most recently available yield to maturity set forth in the Healthcare sub-
index of the Bear Stearns High Yield Index plus (b) 41 basis points (as of
April26, 2002, this sum would have equaled 9.5%) (the "Coupon").
The Notes will be redeemable at the option of the Company, in whole or
in part, at any time on not less than 30 nor more than 60 days notice. In
the case of redemption in the first, second or third year after the Closing
Date, the redemption shall be for an amount equal to the higher of (i) par,
or (ii) the present value of (A) the redemption amount at the beginning of
the fourth year and (B) interest payments through the beginning of the
fourth year (discounted in each case at a rate equal to the yield to
22
1:\Proje<l VJVOITenn Sheet>POR Tenn Sheel K&E Final Dn1R.doc
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306 of 364
Offer to Purchase:
Covenants:
maturity for comparable maturity U.S. Treasury securities plus 0.50%).
In the case of any redemption thereafter, the redemption shall be for the
following amounts in addition to any accrued and unpaid interest at the
time of redemption: (i) if redeemed in the fourth year after the Closing
Date, at par plus Ylof the Coupon; (ii) if redeemed in the fifth year after
the Closing Date, at par plus 3/8 of the Coupon; (iii) if redeemed in the
sixth year after the Closing Date, at par plus \14 of the Coupon; and (iv) if
redeemed in the seventh year after the Closing Date, at par plus 1/8 of the
Coupon and (v) if redeemed in the eight year after the Closing Date, at
par.
Equity clawback allowing redemption of up to 35% of the Notes at par,
plus the Coupon, plus accrued and unpaid interest up to the redemption
date, with the proceeds of an equity issuance by the Company prior to the
third anniversary of the Closing Date.
Upon the occurrence of a "change of control" (the definition of which is
to be agreed upon), the Company will make an offer to purchase the
Notes at 101% of the outstanding principal amount ofthe Notes, plus
accrued and unpaid interest up to the purchase date.
Customary for fmancings of this type (with customary baskets and
exceptions), including without limitation, limitations on (i) indebtedness,
(ii) layering, (iii) restricted payments, (iv) liens, (v) restrictions on
distributions from restricted subsidiaries, (vi) sales of assets and
subsidiary stock, (vii) affiliate transactions, (viii) mergers and
consolidation, and (ix) lines ofbusiness.
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1:\Projccc VJVO\Term She<ld'OR Tenn Sheel K&E Final Orofi.doc
In re Trico Marine Services, Inc., Case No. 04-17985 (Bankr. S.D.N.Y. 2004).
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PRIVILEGED AND CONFIDENTIAL
PROVIDED AS PART OF SETTLEMENT DISCUSSIONS
SUBJECT TO RULE 408 OF THE FEDERAL RULES OF EVIDENCE
AND ALL BANKRUPTCY AND STATE LAW EQUIVALENTS
EXECUTION VERSION
PLAN SUPPORT AGREEMENT REGARDING
TRICO MARINE SERVICES, INC., TRICO MARINE ASSETS, INC.,
AND TRICO MARINE OPERA TORS, INC.
THIS PLAN SUPPORT AGREEMENT (as the same may be amended,
modified, or supplemented from time to time, this "Agreement"), is entered into as of September
8, 2004, by and among (a) Trico Marine Services, Inc., Trico Marine Assets, Inc., and Trico
Marine Operators, Inc. (collectively, the "Company" or "Trico"); and (b) the holders (or
investment managers or advisers for the beneficial owners) identified on Schedule I (the
"Supporting Noteholders") of the Trico Marine Services, Inc. $250 million 8 7/8% Senior Notes
Due 2012 (the "Senior Notes") (Trico together with the Supporting Noteholders, the "Parties"
and each individually, a "fm:!y").
RECITALS
WHEREAS, Trico has determined in the exercise of its fiduciary duty that it is
necessary, appropriate and timely to undertake a restructuring of its debt and equity interests and,
to that end, is contemplating a restructuring of its financial obligations (the "Financial
Restructuring") through the prosecution of jointly administered chapter 11 cases (collectively,
the "Chapter 11 Cases") under chapter 11 of title 11 of the United States Code, 11 U.S.C.
101-1330 (as amended, the "Bankruptcy Code") which shall be filed in the United States
Bankruptcy Court for the Southern District ofNew York (the "Bankruptcy Court");
WHEREAS, the Supporting Noteholders hold in the aggregate, not less than 66
2/3% of the outstanding principal amount of the Senior Notes;
WHEREAS, certain of the Supporting Noteholders are members of an ad hoc
group of certain holders of the Senior Notes (the "Prepetition Ad Hoc Committee") that has
engaged in good faith negotiations with Trico with the objective of reaching an agreement
regarding the principal terms of the Financial Restructuring and has reached agreement in
principle on the terms and conditions set forth in the Chapter 11 Plan Term Sheet (the "Term
Sheet"), a copy of which is attached hereto as Exhibit A;
WHEREAS, certain of the Supporting Noteholders may agree from time-to-time
to enter into one or more confidentiality agreements with Trico for the purposes of forming an ad
hoc committee (the "Ad Hoc Committee") to make various decisions pursuant to this
Agreement;
WHEREAS, in order to implement the Financial Restructuring, Trico intends to
(i) prepare a disclosure statement that is consistent in all respects with the Term Sheet and
CTDOCS/1602117.4
otherwise in form and substance reasonably satisfactory to the holders of a majority in amount of
the Senior Notes (the "Disclosure Statement"), (ii) prepare a plan of reorganization that is
consistent in all respects with the Term Sheet and otherwise in form and substance reasonably
satisfactory to the holders of a majority in amount of the Senior Notes (the "Plan"), (iii) solicit
the requisite votes in favor of the Plan, (iv) commence the Chapter 11 Cases before the
Bankruptcy Court, (v) on the date of commencement of the Chapter 11 Cases, submit the Plan
and Disclosure Statement for approval of the Bankruptcy Court, and (vi) use reasonable best
efforts to have the Disclosure Statement approved and the Plan confirmed by the Bankruptcy
Court, in each case, as expeditiously as practicable under the Bankruptcy Code and the Federal
Rules of Bankruptcy Procedure;
WHEREAS, each Supporting Noteholder holds or is the legal or beneficial holder
of, or the investment manager with discretionary authority with respect to, the aggregate
principal amount of Senior Notes set forth below each such Supporting Noteholder's signature
attached hereto and, in order to facilitate the implementation of the Financial Restructuring, each
of the Supporting Noteholders is prepared to support, to the extent legally possible, on the terms
and subject to the conditions of this Agreement and applicable law, if and when solicited to do so
in accordance with applicable law, to vote (or, in the case of managed or advised accounts,
instruct its custodial agents to vote) to accept the Plan in the Chapter 11 Cases; and
WHEREAS, Trico desires to obtain the commitment of the Supporting
Noteholders to support and vote for the Plan, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, and for other good and valuable consideration, the receipt and
sufflciency of which are hereby acknowledged, each of the Parties hereto hereby agrees as
follows:
1. Support of Financial Restructuring. As long as this Agreement has not
been terminated pursuant to Section 6 hereof each Supporting Noteholder severally agrees with
each other Supporting Noteholder and with the Company that, if the Company proposes the Plan,
such Supporting Noteholder (i) will, subject to receipt of a Disclosure Statement prepared
pursuant to and satisfying the requirements of chapter 11 of title 11 of the United States Code
(the "Bankruptcy Code") applicable to disclosure statements that contains information
concerning the Company and such Plan that is in all material respects consistent with the
information presently available and contains no information that is materially inconsistent with
such presently available information, and further subject to its vote on the Plan being solicited in
accordance with the Bankruptcy Code (the "Solicitation Standards"), vote all of its claims
against, and equity interests in, the Company, whether now owned or hereafter acquired, to the
extent lawfully allowed to vote, to accept such Plan and otherwise support and take all
reasonable actions to facilitate, the proposal, solicitation, confirmation, and consummation of
such Plan; (ii) will not object to confirmation of, or vote to reject, the Plan or otherwise
commence any proceeding to oppose or alter the Plan, the Disclosure Statement in respect of the
Plan, the solicitation of its acceptance of the Plan in accordance with the Solicitation Standards
or any other reorganization documents containing terms and conditions consistent in all respects
with the Term Sheet and this Agreement; (iii) will vote against any restructuring workout or plan
of reorganization relating to Trico other than the Plan; and (iv) will not directly or indirectly
CTDOCS!l602117 .4 2
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seek, solicit, support, encourage, vote for, consent to, or participate in the negotiation or
formulation of (x) any plan of reorganization, proposal, offer, dissolution, winding up,
liquidation, reorganization, merger, or restructuring for the Company other than the Plan, (y) any
disposition outside of the Plan of all or any substantial portion of the assets of the Company, or
(z) any other action that is inconsistent with, or that would delay or obstruct the proposal
solicitation, confirmation, or consummation of, the Plan.
2. Proposal of Plan. The Company (a) represents to each Supporting
Noteholder individually that it is their present intention to promptly and diligently (i) initiate the
Chapter 11 Cases upon fulfillment of the conditions precedent to the Company's obligations
under this Agreement; (ii) prepare and deliver the Plan, the Disclosure Statement in respect of
the Plan, and other necessary or appropriate reorganization documents containing terms and
conditions consistent with the Term Sheet; (iii) solicit acceptances of the Plan by means of the
Disclosure Statement in accordance with the Solicitation Standards; and (iv) achieve the
confirmation and consummation of such Plan; and (b) agree, as long as this Agreement has not
been terminated pursuant to Section 6 hereof, to use their reasonable best efforts, subject to their
fiduciary duty to equityholders and creditors, to promptly and diligently carry out, and oppose
any efforts to prevent, the actions described in section (a) of this sentence.
3. No Solicitation. Notwithstanding any other provision of this Agreement,
nothing in this Agreement is intended to be or constitute, and nothing in this Agreement shall be
deemed to be or constitute, a solicitation of any vote or any agreement to vote for any plan of
reorganization.
4. Restrictions on Transfer. As long as this Agreement has not been
terminated pursuant to Section 6 hereof and the confirmation and effective date of the Plan have
not occurred, no Supporting Noteholder may, directly or indirectly, sell, assign, transfer,
hypothecate, grant any option or right to acquire, or otherwise dispose of (each, a "Transfer") all
or any portion of any claim against or equity interest in the Company or any interest therein,
unless the purchaser, assignee, or transferee (the "Transferee") agrees in writing in the form
attached hereto as Exhibit B (such writing a "Transferee Acknowledgement") at the time of such
Transfer to be bound by all of the terms of this Agreement in its entirety, without revisions, as a
Party hereto, including without limitation Section 1 hereof. Upon execution of the Transferee
Acknowledgement, the Transferee shall be deemed to be a Supporting Noteholder. Any Transfer
not effected in accordance with the foregoing shall be deemed void ab initio. In the event of a
Transfer, the transferor shall, within three business days after such Transfer, provide notice of
such transfer to Trico Marine Services, Inc., together with a copy of the Transferee
Acknowledgement and, if the transferor has transferred all of its claims subject to this
Agreement, then such transferor shall automatically be released from any further obligations
hereunder.
5. Further Acquisition of Senior Notes and Claims. This Agreement shall in
no way be construed to preclude any Supporting Noteholder from acquiring additional Senior
Notes. However, any such Senior Notes so acquired shall automatically be deemed to be subject
to all ofthe terms of this Agreement.
CTDOCS/1602117.4 3
6. Termination. Upon the occurrence of any of the following events or
conditions:
then:
(i) the final terms of the Plan have not been agreed to by the Parties by
October 11, 2004;
(ii) the solicitation pursuant to the Disclosure Statement and Plan has not
commenced on or before November 12, 2004 (the "Solicitation Date");
(iii) an order confirming the Plan shall not have been entered by the
Bankruptcy Court on or before May 4, 2005;
(iv) the Company shall file with the Bankruptcy Court a plan of
reorganization on terms and conditions not materially different from, or a disclosure
statement not materially inconsistent with, the Term Sheet or otherwise in form and
substance not reasonably satisfactory to all of the Supporting Noteholders;
(v) the Company shall file with the Bankruptcy Court a plan of
reorganization on terms and conditions materially different from, or a disclosure
statement materially inconsistent with, the Term Sheet or otherwise in form and
substance not reasonably satisfactory to all of the Supporting Noteholders;
(vi) once filed, and prior to the confirmation of the Plan, any or all of the
Chapter 11 Cases shall have been converted to a case or cases under chapter 7, to one or
more liquidating chapter 11 cases, or dismissed;
(vii) an examiner is appointed pursuant to section 1104(c)(l) of the
Bankruptcy Code with expanded powers to run the business of the Company, or such
examiner makes a finding of fraud, dishonesty, or misconduct by any officer or director
of Trico, or a trustee under chapter 7 or chapter 11 of the Bankruptcy Code is appointed
for the Company in any of the Chapter 11 Cases;
(viii) there shall have occurred any material breach of this Agreement by the
Company or any representation or warranty made by the Company in this Agreement
shall be incorrect in any material respect;
(ix) any court shall enter a final nonappealable judgment or order declaring
this Agreement to be unenforceable;
(x) the Company shall withdraw the Plan or publicly announce its
intention not to support the Plan;
(xi) the Company has failed to satisfy the conditions precedent specified in
the side letter dated September 8, 2004 by the Solicitation Date,
CTDOCS/160211 7.4 4
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all obligations of the Parties under this Agreement shall automatically terminate and be of no
further force or effect; provided, however, that upon the occurrence of the event described in
clause (v) such termination shall only occur five (5) days after the filing of the Plan or Disclosure
Statement, and provided such event has not been waived by all of the Supporting Noteholders;
and provided, further, that upon the occurrence of the event described in clause (iv) such
termination shall only occur ten (I 0) days after the filing of the Plan or Disclosure Statement,
and provided such event has not been waived by two-thirds in amount of the Ad Hoc Committee
members, or if no Ad Hoc Committee then exists, two-thirds in amount of the Supporting
Noteholders. No Party shall have the right to terminate this Agreement upon the occurrence of
any of the events and conditions described in clause (i), (ii), (iii), (viii) or (xi) unless such Party
has first given written notice thereof to each of the other Parties hereto specifically identifYing
the basis upon which such Party is exercising its right to terminate, and the event or condition
giving rise to such right is not cured within ten (10) days of such written notice; and, provided,
further, that such event or condition shall be deemed cured if the applicable requirement
contained in such clause is satisfied within such ten (I 0) day period regardless of any date
specified in such claims. For the avoidance of doubt, only a majority in amount of the Ad Hoc
Committee members, or if no Ad Hoc Committee then exists, a majority in amount of the
Supporting Noteholders shall have the right to terminate this Agreement under clauses (ii), (iii),
(viii) or (xi) referenced above. During the period following the commencement of the Chapter
I1 Cases but prior to the scheduling, by the Bankruptcy Court, of the confirmation hearing,
enforcement of this Agreement as to the Company shall be limited by applicable bankruptcy law.
Termination in accordance with this paragraph shall not affect any Party's remedies as a result of
any breach by any other Party. Notwithstanding anything to the contrary set forth in this
Agreement, this Agreement shall terminate on May 4, 2005.
7. Conditions to Effectiveness of this Agreement. This Agreement shall not
become effective until such time as each of the following conditions have been satisfied:
(a) The receipt by Trico of the authorized signatures to this Agreement by at
least two Supporting Noteholders holding, in the aggregate, not less than 66 2/3% of the
outstanding principal amount of the Senior Notes; and
(b) Execution of this Agreement by the Company.
8. Public Disclosures. Prior to the issuance of any public disclosures regarding
the Financial Restructuring, Trico shall consult with the Ad Hoc Committee, or if no such Ad
Hoc Committee then exists, the Supporting Noteholders (or so many of the Supporting
Noteholders that are willing to receive restricted information at such time), as to the form and
substance of such public disclosures, provided that at all times the Company shall be solely
responsible for each public disclosure made by it. Without limiting the generality of the
foregoing, unless required by lawful subpoena issued by a court of competent jurisdiction, Trico
shall not, and shall cause each of its direct and indirect subsidiaries not to, disclose (i) any
Supporting Noteholder's identity or (ii) the amount of such holder's holdings of Senior Notes,
without the prior written consent of such Supporting Noteholder in each case; and, if such
announcement or disclosure is so required, Trico shall afford the Supporting Noteholders a
reasonable opportunity to review and comment upon any such announcement or disclosure prior
to the applicable announcement or disclosure.
CTDOCS/ 1602117.4 5
9. Fiduciary Duties. Notwithstanding anything to the contrary herein,
nothing in this Agreement shall require Trico or any directors or officers of Trico (in such
person's capacity as a director or officer of Trico) to take any action, or to refrain from taking
any action, to the extent required to comply with its or their fiduciary obligations under
applicable law. Nothing herein will limit or affect, or give rise to any liability, to the extent
required for the discharge of the fiduciary obligations described in this Section 9.
10. Impact of Appointment to Creditors' Committee. Trico agrees to use its
reasonable best efforts, if requested by any Supporting Noteho1der, to support such Supporting
Noteholder's appointment to any official unsecured creditors' committee ("Creditors'
Committee") formed pursuant to 11 U.S.C. 1102 in the Chapter 11 Cases. Notwithstanding
anything herein to the contrary, if any Supporting Noteholder is appointed to and serves on the
Creditors' Committee in the Chapter 11 Cases, the terms of this Agreement shall not be
construed so as to limit such Supporting Noteholder's exercise (in its sole discretion) of its
fiduciary duties to any person arising from its service on such Creditors' Committee, and any
such exercise (in the sole discretion of such Supporting Noteholder) of such fiduciary duties shall
not be deemed to constitute a breach of the terms of this Agreement.
11. Notices. All notices, requests, elections, and demands under or in
connection with this Agreement shall be in writing and shall be delivered by hand, sent by
recognized overnight courier, or sent by facsimile or similar electronic means to the Party as set
forth under its signature hereto, or to such other address or facsimile number as such Party shall
provide to all other Parties hereto in writing, and shall be deemed sent or given hereunder, in the
case of personal delivery or delivery by recognized overnight courier, on the date of actual
delivery, and in the case of transmission by facsimile or similar electronic means, on the date of
actual transmission.
12. Entire Agreement; Modification; Waiver. This Agreement and the Plan
(the provisions of which are incorporated herein) constitute the entire agreement among the
Parties as to the subject matter hereof and supersede all prior and contemporaneous agreements,
representations, warranties, and understandings of the Parties, whether oral, written, or implied,
as to the subject matter hereof. Notwithstanding anything to the contrary herein, no supplement,
modification, or amendment of this Agreement shall be binding unless executed in writing by all
Parties. No waiver of any of the provisions of this Agreement shall be deemed or constitute a
waiver of any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the Party making
the waiver.
13. No Third-Party Beneficiaries. Nothing contained in this Agreement is
intended to confer any rights or remedies under or by reason of this Agreement on any person or
entity other than the Parties hereto, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third party to any Party to this Agreement, nor shall
any provision give any third party any right of subrogation or action over or against any Party to
this Agreement.
CTDOCS/1602117 .4 6
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14. Successors and Assigns. This Agreement shall be binding upon, and shall
inure to the benefit of, each Party hereto and their respective legal representatives, successors,
and assigns.
15. Further Documents. Each Party hereto agrees to execute any and all
documents, and to do and perform any and all acts and things, reasonably necessary or proper to
effectuate or further evidence the terms and provisions of this Agreement and agrees to negotiate
in good faith the defmitive documents relating to this Agreement and the Plan, provided that this
shall not require Supporting Noteholders to incur any costs, fees or expenses unless paid (or
reimbursed) by the Company.
16. Representations and Warranties:
(a) Representations and Warranties of the Supporting Noteholders. Each
Supporting Noteholder hereto severally and not jointly, as to itself only, represents and
warrants to each of the Parties hereto that, as of the date of this Agreement, it is the legal
or beneficial holder of, or the investment manager with discretionary authority with
respect to, the principal amount of Senior Notes set forth below its name on the signature
page hereto.
(b) Representations and Warranties of Trico. Each of the Trico entitles
represents and warrants to each of the Supporting Noteholders that the following
statements are true, correct, and complete as of the date hereof:
(i) Trico has due authority to enter into, to perform its obligations under,
and to consummate the transactions contemplated by, this Agreement; and
(ii) There are no actions, suits, claims, proceedings or, to its knowledge,
investigations pending or, to its knowledge, threatened against any of the Trico entities or
any of its current or former directors or officers that would give rise to a claim for
indemnification against any of the Trico entities by any of such directors or officers under
applicable law or the certificate of incorporation and/or by-laws of any of the Trico
entities, except as set forth on Schedule 16(b )(ii); and
(iii) The information provided by Trico to the Supporting Noteholders in
connection with the Financial Restructuring did not, when provided, contain any untrue
statement of a material fact nor did it fail to state any fact necessary in order to make such
information not materially misleading.
(c) Representations and Warranties of Trico and the Supporting Noteholders.
Each of the Parties, hereto severally and not jointly, and as to itself only, represents and
warrants to the other Parties that the following statements, as applicable to it, are true,
correct and complete as ofthe date hereof:
(i) The execution and delivery of this Agreement and the performance of
its obligations hereunder have been duly authorized by all necessary corporate or similar
action on its part, subject, in the case of performance by the Company, to required
Bankruptcy Court approvals related to the solicitation, confirmation, and consummation
CTDOCS/160211 7.4 7
of the Plan, and that the person executing this Agreement on behalf of such Party has
been duly-authorized to execute this Agreement on behalf of and bind such Party;
(ii) This Agreement is the legally valid and binding obligation of it,
enforceable against it in accordance with its terms, subject in the case of the Company, to
required Bankruptcy Court approvals related to the solicitation, confirmation, and
consummation of the Plan;
(iii) Subject in the case of the Company to required Bankruptcy Court
approvals related to the solicitation, confirmation, and consummation of a Plan, the
execution, delivery and performance by it of this Agreement do not and shall not (i)
violate any provision of law, rule or regulation applicable to it or any of its affiliates or its
certificate of incorporation or bylaws, (ii) conflict with, result in the breach of or
constitute (with due notice or lapse of time or both) a default under any material
contractual obligations to which it or any of its affiliates is a party or under its certificate
of incorporation or bylaws, or (iii) require the consent of any third party which has not
been obtained.
(iv) It has entered into this Agreement after receiving the advice of counsel
regarding the matters contemplated hereby.
(d) Except as expressly set forth in this Agreement, none of the Parties hereto
makes any representation or warranty, written or oral, express or implied.
17. Severability. If any portion of this Agreement shall be held to be invalid
or unenforceable, then that portion shall be deemed modified (only to the extent necessary and in
a manner consistent with the remainder of this Agreement) so as to be valid and enforceable, or
if such modification is not reasonably feasible, shall be deemed to have been severed out of this
Agreement, and the Parties acknowledge that the balance of this Agreement shall in any event be
valid and enforceable unless the effect shall be to materially alter the terms and conditions of this
Agreement.
18. Headings. The descriptive headings of the several sections of this
Agreement are inserted for convenience of reference only and do not constitute a part of this
Agreement.
19. Specific Performance. This Agreement, including without limitation the
Parties' agreement herein to support the Plan and to facilitate its confirmation, is intended as a
binding commitment enforceable in accordance with its terms. It is understood and agreed by
each of the Parties hereto that money damages would not be a sufficient remedy for any breach
of this Agreement by any Party and each non-breaching Party shall be entitled to specific
performance and injunctive or other equitable relief as a remedy of any such breach.
20. Interpretation. This Agreement is the product of negotiations among the
Parties, and in the enforcement or interpretation hereof, is to be interpreted in a neutral manner,
and any presumption with regard to interpretation for or against any Party by reason of that Party
having drafted or caused to be drafted this Agreement, or any portion hereof, shall not be
effective in regard to the interpretation hereof.
CTDOCS/1602117.4 8
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1
21. Consideration. It is hereby acknowledged by the Parties that no payment
or additional consideration shall be due or paid to the Supporting Noteholders for their
agreement to vote in accordance with and otherwise comply with the terms and conditions of this
Agreement other than the obligations of the other Parties hereunder.
22. Rule of Interpretation. Notwithstanding anything contained herein to the
contrary, it is the intent of the Parties that all references to votes or voting in this Agreement be
interpreted to include (i) votes or voting on a plan of reorganization under the Bankruptcy Code
and (ii) all means of expressing agreement with, or rejection of, as the case may be, a
restructuring or reorganization transaction that is not implemented under the Bankruptcy Code.
23. Counterparts: Fax Signatures. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Delivery of an executed counterpart of a signature page
by facsimile transmission shall be effective as delivery of a manually executed counterpart.
24. Governing Law. Except to the extent that the Bankruptcy Code or
Bankruptcy Rules are applicable, the rights and obligations arising under this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the State ofNew York
applicable to contracts made and performed entirely within such state.
25. Jurisdiction. By its execution and delivery of this Agreement, each of the
Parties hereto irrevocably and unconditionally agrees that any legal action, suit, or proceeding
against it with respect to any matter under or arising out of or in connection with this Agreement
or for recognition or enforcement (including specific performance) of any judgment rendered in
any such action, suit or proceeding, shall be brought in the Bankruptcy Court or prior to the
commencement of the Chapter II Cases, in the federal district court or appropriate state court
located within the State ofNew York. By its execution and delivery of this Agreement, each of
the Parties hereto irrevocably accepts and submits itself to the jurisdiction of the Bankruptcy
Court and the federal and state courts located within the State of New York for such purposes
and agrees that any such legal action, suit, or proceeding shall constitute a core proceeding
within the meaning of 28 U.S.C. section 157(b)(2).
26. Expenses.
(a) In any action or proceeding brought by a Party hereto against any other Party
hereto to enforce any provision of this Agreement, or to seek damages for a breach of any
provision hereof, or where any provision hereof is validly asserted as a defense, the prevailing
party shall be entitled to recover reasonable attorneys' fees and costs from the other party in
addition to any other available remedy.
(b) The Company shall pay or procure the payment of, before the commencement
of the Chapter II Cases, all prepetition fees and expenses of the Supporting Noteholders, the
Prepetition Ad Hoc Committee, Ad Hoc Committee and the Indenture Trustee for the Senior
Notes (the "Indenture Trustee") and of their respective legal and financial advisors relating to the
Financial Restructuring, outstanding at the time of such commencement and to undertake in the
Plan to pay, or procure the payment of, upon the consummation of the Plan all postpetition fees
CTDOCS/1 602117.4 9
and expenses of the Supporting Noteholders, the Prepetition Ad Hoc Committee, Ad Hoc
Committee and the Indenture Trustee and of their respective legal and financial advisors relating
to the Chapter 11 Cases. For the avoidance of doubt, nothing in this Section 26(b) shall require
the Company to pay the fees and expenses of any advisor retained by a Supporting Noteholder
who is not also an advisor to the Prepetition Ad Hoc Committee and/or the Ad Hoc Committee.
27. Effectiveness of the Agreement. This Agreement shall be effective on the
date it has been signed by each of the Supporting Notebolders and each of the Trico entities.
With respect to any Party who becomes a Party hereto after the date hereof, including
Transferees pursuant to Section 4 hereof, this Agreement shall be effective as of the date such
signatory executes and delivers this Agreement.
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement
to be executed and delivered by its duly authorized officers as of the date fust written above.
CTDOCS!I602 1 1 7 4
TRICO MARINE SERVICES, INC.
TRICO MARINE ASSETS, INC.
TRICO MARINE OPERATORS, INC.
Address:
Phone:
Facsimile:
10
1-i./O/ . .s...,,k '(Zo-' #o:.J.k"' 'IX
1t3 - 7'id-7'/1.(
'11 5 - 7 [{u -oo& '1.
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SCHEDULE 1
Supporting Noteholders
1. AIG Global Investment Corp., as Investment Adviser
2. Barclays Bank PLC
3. Cargill Financial Services International, Inc.
4. Dalton Investments
5. Merrill Lynch Bond Fund, Inc.- High Income Portfolio
6. Merrill Lynch Global Investment Series: Income Strategies Portfolio
7. Master U.S. High Yield Trust
8. Corporate High Yield Fund, Inc.
9. Corporate High Yield Fund III, Inc.
10. Corporate High Yield Fund V, Inc.
11. Corporate High Yield Fund VI, Inc.
12. Debt Strategies Fund, Inc.
13. Floating Rate Income Strategies Fund, Inc.
14. Merrill Lynch International Investment Funds- U.S. High Yield Bond Fund
15. Merrill Lynch World Income Fund, Inc.
16. Moore Credit Fund, Ltd.
17. Scoggin Capital Management, L.P.
CTDOCS/1 602 I 17.4
SCHEDULE 16(b)(ii)
Leif Weitzman v. Trico Marine Services, Inc., Thomas E. Fairley, and
Ronald 0. Palmer, Civil Action No. 04-1565, was filed in the United States District Court for
the Eastern District of Louisiana alleging violations of 10(b) and 20(a) of the Securities Act of
1934 against the Company, its Chief Executive Officer and former Chairman of the Board.
Plaintiff seeks to certify a class consisting of purchasers of the Company's common stock from
May 6, 2003 through May 10, 2004, and requests an unspecified amount of compensatory
damages, interest and costs.
CTDOCS/1602117.4
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EXHIBIT A
Term Sheet
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CTDOCS/1602117.4
l
Exhibit A to Plan Support Agreement
Final Draft
TRICO MARINE SERVICES, INC.
DRAFT PROPOSED TERMS OF RESTRUCTURING
Confidential
September 8, 2004
This term sheet, proposed by Trico Marine Services, Inc. ("TMAR"), sets forth a brief summary
of the principal terms of a proposed restructuring (the "Restructuring") of the $250 million
8-7/8% Senior Notes due 2012 (the "Senior Notes") issued by TMAR. Capitalized terms used
but not defined herein have the respective meanings ascribed thereto in the Indenture dated as of
May 31, 2002 among TMAR, the Guarantors (as defined therein), and JPMorgan Chase Bank as
Trustee. As used herein, TMAR, the Guarantors, and all domestic remaining subsidiaries of
TMAR are referred to as "Trico." This term sheet does not represent a commitment, obligation
or understanding on the part of Trico, the holders of the Senior Notes (the "Senior Noteholders"),
or the Trustee to, as applicable, (a) amend, waive or otherwise modify (including without
limitation by way of restructuring, refinancing, termination, cancellation or exchange) any
agreement, including without limitation the Senior Notes, or any term or provision thereof or of
any agreement, instrument or document related thereto, (b) forbear from exercising remedies
with respect thereto, (c) agree with, admit or concede the validity or enforceability of any claim
by the Senior Noteholders or (d) take action, or refrain from taking action, with respect to the
foregoing. No party shall be so obligated unless and until all internal credit, board and other
necessary approvals, as applicable, are sought and obtained, all definitive documentation is
negotiated and executed and all conditions precedent are satisfied or waived.
The terms discussed herein are an integrated offer, are not divisible except as described herein,
and are subject to the terms and conditions hereof. This term sheet is provided in confidence and
may be distributed only with the express written consent of TMAR and counsel to the Ad Hoc
Committee of Senior Noteholders (the "Ad Hoc Committee"). Certain elements of the proposal
concerning the implementation of the Restructuring may be modified as a consequence of the
parties' tax review. This term sheet does not include a description of all of the terms, conditions
and other provisions that are to be contained in the definitive documentation governing such
matters, which remain subject to discussion and negotiation to the extent not inconsistent with
the specific matters set forth herein. This term sheet is proffered in the nature of a settlement
proposal in furtherance of settlement discussions, and is intended to be entitled to the protections
of rule 408 of the Federal Rules of Evidence and any other applicable statutes or doctrines
protecting the use or disclosure of confidential information and information exchanged in the
context of settlement discussions.
THIS TERM SHEET IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OF
TRICO OR A SOLICITATION OF ACCEPTANCES OF A CHAPTER 11 PLAN OF
REORGANIZATION. SUCH OFFER OR SOLICITATION WILL ONLY BE MADE IN
COMPLIANCE WITH ALL APPLICABLE SECURITIES LAWS AND/OR PROVISIONS OF
THE BANKRUPTCY CODE.
9/8/04
CTDOCS/1602124 3
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Trlco Marine Services, Inc.
Final Draft
I. Companies Affected:
II. Bear Stearns Credit
Facility:
III. NOK 150 Million Term
Loan
IV. NOK 800 Million
Revolving Facility
V. GECC Master Bareboat
Charter
VI. MARAD 2006 Notes
CTDOCS/1602124.3
Confidential
The Restructuring will impact TMAR, Trico Marine
Assets, Inc. ("TMA") and Trico Marine Operators,
Inc. ("TMO").
Except as otherwise provided herein, all of the
respective obligations of TMAR, TMO and TMA
pursuant to the Bear Stearns Credit Facility will be
unimpaired and/or reinstated in full. Depending on
the form of Restructuring, certain consents, waivers,
amendments or modifications may be required from a
requisite number of lenders under the Bear Stearns
Credit Facility.
Except as otherwise provided herein, the NOK 150
Million Term Loan will be unimpaired/unaffected by
the Restructuring. Depending on the form of
Restructuring, certain consents, waivers, amendments
or modifications may be required from a requisite
number of lenders under the NOK 150 Million Term
Loan.
The NOK 800 Million Revolving Facility will be
unimpaired/unaffected by the Restructuring.
Depending on the form of Restructuring, certain
consents, waivers, amendments or modifications may
be required from a requisite number of lenders under
the NOK 800 Million Revolving Facility.
All of the respective obligations of TMAR, TMO and
TMA pursuant to the GECC Master Bareboat Charter
Agreement will be unimpaired and/or reinstated in
full. Depending on the form of Restructuring, certain
consents, waivers, amendments or modifications may
be required from GECC.
All of the respective obligations of TMAR, TMO and
TMA pursuant to the MARAD 2006 Notes Indenture
and related documentation will be unimpaired and/or
reinstated in full. Depending on the form of
or modifications may be required from MARAD.
-2-
Trico Marine Services, Inc.
Final Draft
VII. MARAD 2014 Notes
VIII. Trade Credit and Other
General Unsecured Claims:
IX. Federal, State and Local
Tax Claims:
X. Other Priority Claims:
CTDOCS/1602124.3
Confidential
All ofthe respective obligations ofTMAR, TMO and
TMA pursuant to the MARAD 2014 Notes Indenture
and related documentation will be unimpaired and/or
reinstated in full. Depending on the form of
or modifications may be required from MARAD.
Claims not to exceed an amount to be agreed
between TMAR and Houlihan in the aggregate
resulting from all credit extended to TMAR and its
subsidiaries by its vendors and suppliers, including
operating leases, will be unimpaired and/or assumed
in full. Other general unsecured claims against
TMAR and its subsidiaries not to exceed an amount
to be agreed between TMAR and Houlihan in the
aggregate will be unimpaired and will be paid in the
ordinary course of business.
The claims of Federal, State and Local taxing
authorities against TMAR and its subsidiaries not to
exceed an amount to be agreed between TMAR and
Houlihan in the aggregate shall be paid in full in cash
when due or as permitted by section 1129(a)(9) of the
Bankruptcy Code.
Other priority claims against TMAR and its
subsidiaries not to exceed an amount to be agreed
between TMAR and Houlihan in the aggregate shall
be paid in full in cash upon consummation of the
Restructuring, or upon such other terms as TMAR
and the beneficiary of such payment may agree.
-3-
9/8/2004
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Final Draft
XI. Senior Note Claims:
CTDOCS/1602124.3
Confidential
On the effective date of the relevant plan of
reorganization (the "Effective Date"), all of the
Senior Notes shall be cancelled and in exchange
therefore, each Senior Noteholder shall receive a pro
rata portion of newly authorized and issued TMAR
common stock (the "New TMAR Stock")
representing I 00% of the common stock ownership
of TMAR as of the Effective Date. All New TMAR
Stock allocations to the Senior Noteholders are
subject to dilution from the exercise of (i) options on
the re-capitalized equity to be reserved for
distribution pursuant to the TMAR LTIP, as
described below and (ii) the warrants to be provided
to the existing holders of equity interests in TMAR.
TMAR will take all reasonably necessary actions to
permit the New TMAR Stock to be traded on at least
the NASDAQ OTC Bulletin Board market.
Following the Effective Date, TMAR will use its
reasonable best efforts to obtain listing of the New
TMAR Stock on the NASDAQ Small Cap Market.
On the Effective Date, TMAR will enter into a
Registration Rights Agreement in form, scope and
substance reasonably satisfactory to the Ad Hoc
Committee providing the Senior Noteholders with
customary demand and piggy-back registration rights
with respect to the New TMAR Stock.
-4-
9/8/2004
Final Draft
XII. Equity Security Holders:
XIII. Section SlO(b) Claims
XIV. Tax Structure:
CTDOCS/1602124.3
Confidential
If the holders of existing TMAR common stock as a
class approve the plan of reorganization described in
this Term Sheet, then in exchange for the TMAR
common stock that they presently hold, holders of
existing TMAR common stock will receive (i)
warrants, exercisable for a period of five years after
the Effective Date for 5% of the pro forma common
equity of reorganized TMAR (subject to dilution
from the exercise of options on the re-capitalized
equity to be reserved for distribution pursuant to the
TMAR LTIP, as described below), with a per share
exercise price calculated on the basis of the value of
TMAR's equity being $187.5 million; and (ii)
warrants, exercisable for a period of three years after
the Effective Date for 5% of the pro forma common
equity of reorganized TMAR (subject to dilution
from the exercise of options on the re-capitalized
equity to be reserved for distribution pursuant to the
TMAR LTIP, as described below), with an exercise
price calculated on the basis ofTMAR's equity being
$250 million.
For the avoidance of doubt, the pro forma ownership
of New TMAR Stock assuming the grant and
exercise of all options under the L TIP and the
exercise of all warrants shall be: former Senior
Noteholders- 83.25%; LTIP option grantees -7.5%;
warrantholders- 9.25%.
All securities litigation claims and other claims that
come within the scope of section 51 O(b) of the
Bankruptcy Code shall be treated in accordance
therewith.
PwC, K&E, Lazard, and Trico are reviewing tax
issues and potential tax structures and will consult
with counsel to the Ad Hoc Committee on tax issues
and tax structures.
-5-
9/8/2004
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Final Draft
XV. Management Incentive:
XVI. Corporate Governance:
XVII. Exit Facility:
XVIII. Releases:
CTDOCS/1602124.3
Confidential
On the Effective Date, a new long-term stock
incentive program (the "TMAR LTIP") will be
approved and implemented. The TMAR L TIP will
provide options to purchase up to 7.5% of the New
TMAR Stock, on a fully diluted basis. The options
shall be granted in accordance with the allocations set
forth on Exhibit A, attached hereto, and incorporated
herein by reference, and shall be subject to the
vesting schedule also set forth on Exhibit A. All
options will be exercisable for a period of seven
years after issuance. The per share exercise price of
all options granted at the Effective Date will be the
per share value of the New TMAR Stock at the
Effective Date.
As of the Effective Date, TMAR shall have a seven
person Board of Directors consisting of TMAR' s
current Chairman and its chief executive officer, and
five nominees of the Senior Noteholders selected by
a majority in amount of those Senior Noteholders
willing to go restricted at the appropriate time for the
purpose of selecting such five nominees, or, failing
such restricted Senior Noteholders, a majority in
amount of the Senior Noteholders.
On the Effective Date, TMAR will implement
revised Bylaws and Certificate of Incorporation
which shall be in form, scope and substance
satisfactory to the Ad Hoc Committee.
Trico will seek an exit facility to ensure adequate
liquidity for the operation of its businesses and will
consult with the Ad Hoc Committee in connection
with obtaining and implementing such exit facility.
The plan of reorganization shall include a full
discharge and release of liability in favor of (a)
TMAR and each of its subsidiaries, (b) the Senior
Noteholders, and (c) each of their respective
principals, employees, agents, officers, directors, and
professionals from: (i) any and all claims and causes
of action arising prior to the Effective Date and (ii)
any and all claims arising from the actions taken or
not taken in good faith in connection with the
Restructuring.
-6-
9/8/2004
Final Draft
XIX. Conditions:
CTDOCS/1602124.3
Confidential
The Restructuring proposal set forth herein shall be
subject to, among other things:
i. the receipt of all required legal and regulatory
approvals;
ii. the approval of the Board of Directors of the
TMAR, TMA and TMO;
iii. fulfillment of the conditions precedent
specified in the side letter dated September 8,
2004, between TMAR and the Ad Hoc
Committee concerning required amendments
to the credit facilities and exit financing;
tv. the negotiation and execution of definitive
documentation reasonably acceptable to the
signatories of the supporting agreements for
the Restructuring.
-7-
9/8/2004
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Final Draft
XX. Plan Support Agreement:
CTDOCS/1602124.3
Confidential
Upon agreement between Trico and the Senior
Noteholders regarding the terms of the Restructuring,
Trice and a majority of the Senior Noteholders will
enter into one or more formal agreements (the "Plan
Support Agreements"). The signatories to the Plan
Support Agreements, would among other things,
support the Restructuring, and (a) subject to receipt
of an approved disclosure statement satisfying the
requirements the Bankruptcy Code applicable to
disclosure statements that contains information
concerning Trico and a Plan that conforms with the
terms of the Restructuring (the "Plan"), vote all of its
claims against, and equity interests in, TMAR, TMA
and TMO to accept such Plan and otherwise support
and take all reasonable actions to facilitate, the
proposal, solicitation, confirmation, and
consummation of such Plan; (b) not object to
confirmation of, or vote to reject, the Plan or
otherwise commence any proceeding to oppose or
alter the Plan, the disclosure statement in respect of
the Plan, the solicitation of its acceptance of the Plan
or any other reorganization documents containing
terms and conditions consistent in all material
respects with the Term Sheet; (c) vote against any
restructuring workout or plan of reorganization
relating to Trico other than the Plan; and (d) not
directly or indirectly seek, solicit, support, encourage,
vote for, consent to, or participate in the negotiation
or formulation of (x) any plan of reorganization,
proposal, offer, dissolution, winding up, liquidation,
reorganization, merger, or restructuring for any of
Trico other than the Plan, (y) any disposition outside
of the Plan of all or any substantial portion of the
assets of Trico or any of its subsidiaries, or (z) any
other action that is inconsistent with, or that would
delay or obstruct the proposal solicitation,
confirmation, or consummation of, the Plan. The
signatories to the Plan Support Agreement would,
among other things, support the Plan and the
Restructuring and in the event that any signatory
sells, assigns or otherwise conveys its claims (a "Sale
Transaction"), it would condition said Sale
Transaction upon the transferee's assumption of the
Plan Support Agreement.
-8-
9/8/2004
Final Draft
XXI. Plan Support Agreement:
XXII. Implementation
XXIII. Fees and Expenses
CTDOCS/1602124.3
Confidential
It shall be a condition precedent to Trico taking
action to implement the Restructuring that the
holders of a minimum of 66
213
% of the currently
outstanding Senior Notes have each executed and
delivered to Trico Plan Support Agreements.
The Restructuring will be effectuated through a
mutually acceptable pre-packaged or pre-arranged
Chapter 11 plan of reorganization of Trico, the
Guarantors, and, only to the extent necessary, certain
or all ofTrico's remaining domestic subsidiaries. The
definitive documentation shall be in form and
substance reasonably satisfactory to Trico and the Ad
Hoc Committee and may not contain terms which
vary materially from the terms described herein. For
the avoidance of doubt, none of Trico's foreign
subsidiaries or affiliates shall be subject to any
Chapter 11 filing, bankruptcy proceeding or any
other similar reorganization or insolvency proceeding
existing under the laws of the jurisdiction of its
organization or principle place of business.
In addition to paying the expenses of its own legal
and financial advisors, Trico will continue to pay the
reasonable fees and expenses of Bingham
McCutchen LLP and Houlihan Lokey Howard &
Zukin through the Effective Date, in accordance with
the terms of the existing fee agreements. Trico also
agrees to pay the reasonable fees and expenses of
local counsel (if required) to the Ad Hoc Committee
through the Effective Date.
-9-
9/8/2004
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September 8, 2004
Exhibit A
SUMMARY OF THE KEY EMPLOYEE RETENTION PROGRAM ("KERP")
Trico will implement the terms of the KERP as follows:
Tier 1: The aggregate budget shall not exceed $500,000.00, with no eligible individual
employee to receive in excess of$250,000.00.
Tiers 11-IV: The aggregate budget shall not exceed $600,000.00; payments to eligible
individual employees shall be made at Trico management's discretion, but in no event will any
individual employee award payment exceed the lesser of $75,000.00 per person or 75% of such
employee's base salary.
Severance payments for Tier I eligible employees will be limited to 12 months' base salary.
Distributions under the KERP to Tier I eligible employees will be made as follows:
(a) 25% to be paid on the Voting Deadline, as defined in the Plan of Reorganization;
(b) 25% to be paid upon the Effective Date;
(c) 50% to be paid six months after the Effective Date.
Distributions under the KEPR to Tiers II-IV eligible employees will be made as follows:
(a) 25% to be paid on the Voting Deadline, as defined in the Plan of Reorganization;
(b) 25% to be paid upon the Effective Date;
(c) 25% to be paid 6 months following the Effective Date;
(d) 25% to be paid 1 year following the Effective Date.
SUMMARY OF THE KEY TMAR LTIP TERMS
Options to purchase New TMAR Stock pursuant to the TMAR L TIP shall be granted as
follows:
(i) Thomas Fairley: 2. 5%
(ii) Joseph Compofelice: 2.00% (as a director's fee)
(iii) Trevor Turbidy: 1.5%
CTDOCS/1602129.3
(iv) Tiers II-IV: 1.5% in the aggregate, with such distributions subject to the discretion
of the board of reorganized Trico.

The options granted pursuant to the TMAR L TIP shall vest as follows:
(i) 25% of such options shall vest on the Effective Date;
(ii) 50% of such options shall vest 114 of such amount on each anniversary of the
Effective Date for four years; and
(iii) 25% of such options shall be issued on the same schedule as in (ii) above,
however, the Board of Directors of TMAR may impose appropriate performance targets
for vesting.
Notwithstanding the foregoing, the TMAR LTIP shall provide that all unvested options
shall immediately vest upon a change of control or termination without cause.
EMPLOYMENT AGREEMENTS
On the Effective Date, reorganized TMAR will enter into employment agreements with Trevor
Turbidy and Tommy Fairley that are consistent with the terms set forth in the term sheet and
which will include other terms customary for similarly situated executives.
On the Effective Date, Joseph Compo felice shall be appointed the non-executive chairman of the
Board of Directors of reorganized Trico, and shall perform the functions and duties as set forth
in the revised Bylaws and Certificate of Incorporation of reorganized Trico. On the Effective
Date Mr. Compofelice and TMAR will enter into an agreement that is consistent with the terms
set forth in the Term Sheet, which will include other terms customary for similarly situated non-
executive board chairs, pursuant to which Mr. Compofelice will agree to serve as non-executive
chairman and to perform such functions and duties for a period of at least one year after the
Effective Date and provide that for his service as the non-executive chairman, Mr. Compofelice
will (i) receive annual cash compensation of $240,000, to be paid in equal monthly installments;
(ii) participate in the TMAR L TIP, on the terms and subject to the conditions set forth in this
Term Sheet; and (iii) receive an amount equal to 12 months of his cash compensation in the
event of a termination not-for-cause or a change in control, as those terms are defmed in his
agreement with the Company.
2
CTDOCS/1602129.3
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CTDOCS/ 1602117.4
EXHIBITB
Transferee Acknowledgment
EXHIBITB
[TO BE INSERTED INTO LETTERHEAD OF TRANSFEROR]
--------__ , 2004
-----------(the "Transferee")
Re: Transferee Acknowledgment
Ladies and Gentlemen:
This letter (this "Letter") is in reference to paragraph 4 of that certain Plan Support Agreement
(the "PSA") entered into as of September 8, 2004, among Trico Marine Services, Inc., Trico
Marine Assets, Inc., and Trico Marine Operators, Inc. (collectively, the "Company" or "Trico")
and the Supporting Noteholders. All capitalized terms used but not defined herein have the
meanings given to them in the PSA.
Paragraph 4 of the PSA provides, in relevant part, as follows:
As long as this Agreement has not been terminated pursuant to Section 6 hereof and the
confirmation and effective date of the Plan have not occurred, no Supporting Noteholder
may, directly or indirectly sell, assign, transfer, hypothecate, grant any option or right to
acquire, or otherwise dispose of (each, a "Transfer") all or any portion of any claim
against or equity interest in the Company or any interest therein, unless the purchaser,
assignee, or transferee (the "Transferee") agrees in writing in the form attached hereto as
Exhibit B (such writing a "Transferee Acknowledgment") at the time of such Transfer to
be bound by all of the terms of this Agreement in its entirety, without revisions, as a
Party hereto, including without limitation Section 1 hereof. Upon execution of the
Transferee Acknowledgment, the Transferee shall be deemed to be a Supporting
Noteholder. Any Transfer not effected in accordance with the foregoing shall be deemed
void ab initio. In the event of a Transfer, the transferor shall, within three business days
after such Transfer, provide notice of such transfer to Trico Marine Services, Inc.,
together with a copy of the Transferee Acknowledgment and, if the transferor has
transferred all of its claims subject to this Agreement, then such transferor shall
automatically be released from any further obligations hereunder.
CTDOCS/1602117.4
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As of _, 2004, we, the undersigned have agreed to Transfer the following
principal amount of Senior Notes to the countersigning party, as Transferee:
Issuance Issue Amount Maturity Princiuai Amount
Transferred
8.875% Senior Notes $250 million May 15,2012 $
By your countersignature in the space provided below, you, as Transferee, represent and warrant
that you have received the PSA (attached as Exhibit A) and the Term Sheet (attached hereto as
Exhibit B).
Please indicate your agreement to be bound by (a) the PSA as a Supporting Noteholder and (b)
the terms and conditions of this Letter, in each case in their entirety without revisions (including
with respect to any and all claims or interests you already may hold against or in Trico prior to
the Transfer of the interests described above), by countersigning below and returning a copy of
this Letter to the Transferor. This Letter may be executed in one or more counterparts, each of
which shall be deemed an original and all of which shall constitute one and the same Letter.
Delivery of an executed signature page of this Letter by facsimile shall be effective as deli very of
a manually executed signature page of this Letter. Upon receipt of your countersignature to this
Letter, which is a precondition to any Transfer of the interests described above, this Letter shall
be provided to Trico Marine Services, Inc. pursuant to paragraph 4 of the PSA.
Very truly yours,
[INSERT NAME OF TRANSFEROR]
CTDOCS/1602117.4
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ACCEPTED AND AGREED
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[INSERT NAME OF TRANSFEREE]
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CTDOCS/1602117 .4
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Dated: September 8, 2004
SIDE LETTER BETWEEN TMAR AND AD HOC COMMITTEE
SUMMARY OF PROPOSED MODIFICATION TO TRICO CREDIT FACILITIES
As set forth in paragraphs II, III and IV ofthe Draft Proposed Terms of Restructuring dated
September 8, 2004, (the "Term Sheet")
1
, the Bear Stearns Credit Facility, the NOK 150 Million
Term Loan and the NOK 800 Million Revolving Facility (collectively the "Credit Facilities")
will be unimpaired/unaffected by the Restructuring. However, as part of the Restructuring, Trico
will seek certain amendments or modifications to the Credit Facilities. These proposed
modifications are summarized below but are set out in greater detail in Exhibit A attached hereto.
I. Conditions Precedent
Notwithstanding anything to the contract in this document or the Term Sheet, the amendments
and modifications to the Credit Facilities listed on Exhibit A as 2.2, 3.4, 4.1, 4.2, 4.3, 4.4, 4.5 and
4.6 shall constitute conditions precedent to the effectiveness and enforceability of the Plan
Support Agreement dated September 8, 2004 (the "Plan Support Agreement"), against the Senior
Noteholders, and TMAR agrees that it will use its reasonable best efforts to obtain a binding
commitment from the lenders under the Credit Facilities, by the time that solicitation pursuant to
any disclosure statement and plan of reorganization proposed by TMAR commences, to
implement such amendments.
It is a further condition precedent to the enforceability of the Plan Support Agreement against the
Senior Noteholders that TMAR secure, by the time that solicitation pursuant to any disclosure
statement and plan of reorganization proposed by TMAR commences, either: (i) a binding
commitment for the amendments and modifications to the Credit Facilities listed on Exhibit A as
2.1, 2.3, 2.4, 3.1 and 3.2, or (ii) a binding commitment to provide an exit facility to TMAR upon
emergence from chapter 11 in an amount not to exceed $75 million (inclusive of, or in
replacement of, the existing Bear Stearns Credit Facility, and including a revolving/LC
component of no less than $20 million).
The above conditions precedent may only be waived by a majority in amount of the members of
the Senior Noteholders who are parties to the Plan Support Agreement.
II. Bear Stearns Credit Facility:
As a part of the Restructuring, Trico will seek certain amendments or modifications to the Bear
Steams Credit Facility, including, but not limited to amendments and modifications that may be
necessary or desirable to:
A. enable the implementation ofTrico's business plan;
Terms used herein and not defined herein shall have the meaning ascribed to them in the Term Sheet.
CTDOCS/1602126.2
B.
c.
D.
permit Trico to obtain the exit facility described in the Term Sheet;
permit TMO and TMA to pay dividends to TMAR for the purposes of allowing
TMAR to pay dividends to its common stockholders subject to a customary
dividend payment covenant; and
modify the change of control events that constitute an event of default so as to
facilitate implementation of the Restructuring.
III. NOK 150 Million Term Loan
As a part of the Restructuring, Trico will seek certain amendments or modifications to the NOK
150,000,000 Loan Agreement, including, but not limited to amendments and modifications that
may be necessary or desirable to:
A. enable the implementation ofTrico's business plan;
B. provide Trico Shipping AS with additional borrowing capacity ofNOK 50
million; and
C. extend the maturity of the loan to June 30, 2008 and modify the repayment
schedule accordingly.
To the extent necessary and to meet its obligations arising under the Term Sheet, Trico will also
be prepared to offer additional unencumbered collateral owned by Trico Shipping AS.
IV. NOK 800 Million Revolving Facility
As a part of the Restructuring, Trico will seek certain amendments or modifications to the NOK
800 Million Revolving Facility, including, but not limited to amendments and modifications that
may be necessary or desirable to:
A. enable the implementation of Trico' s business plan; and
B. provide Trico Shipping AS with additional borrowing capacity ofNOK 50
million.
To the extent necessary and to meet its obligations arising under the Term Sheet, Trico will also
be prepared to offer additional unencumbered collateral owned by Trico Shipping AS.
2
CTDOCS/1602126.2
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1.
2.
Exhibit A
Amendments to Credit Facilities to be Sought J!.y Trico
Master Bareboat Charter dated September 20, 2002
At Effective Date, return of cash collateral provided as a result of S&P credit rating
downgrade (Section 17(a)(xi)) in return for a letter of credit in the same amount.
NOK 800,000,000 Loan Agreement dated 24 April 2002
I. Exclude "mirror note" to be issued by Trico Shipping AS to Trico Supply ASA from
definition of "Funded Debt" (Section 2) or otherwise amend the Loan Agreement to provide
for additional borrowings in the amount ofNOK 50 million and facilitate repatriation of
funds from Norway to the United States in a tax-efficient manner. Also, make sure that the
subordination of any such "mirror note" required by Section 13.09(a) does not preclude
payment as long as no Event of Default under the Loan Agreement has occurred.
2. Permit Trico Shipping ASAto register ownership ofup to [X] Norwegian Vessels in the
ship registry of a country other than Norway [and the UK Vessel in the ship registry of a
country other than Great Britain](Sections 3.06, 3.07, 5.03, 13.12 and 13.14).
3. Provide Trico Shipping ASA with a permanent overadvance to available borrowing in the
amount ofNOK 50 million or otherwise provide for additional borrowings under the NOK
facilities in the same amount.
4. Exclude the amount of the overadvancl! on the Loan Agreement from the definition of
"Funded Debt" (Section 2) or otherwise amend the Loan Agreement to provide for additional
borrowings ofNOK 50 million.
3. NOK 150,000,000 Loan Agreement dated 26 June 2003
I. Exclude "mirror note" to be issued by Trico Shipping AS to Trico Supply ASA from
definition of "Funded Debt" (Section 2) or otherwise amend the Loan Agreement to provide
for additional borrowings in the amount ofNOK 50 million and facilitate repatriation of
funds from Norway to the United States in a tax-efficient manner.
2. Exclude the amount of the overadvance on the NOK 800,000,000 Loan Agreement from
the definition of "Funded Debt" (Section 2) or otherwise provide for additional borrowings
under the NOK facilities in the same amount.
3. Extend maturity to June 30, 2008, and amend amortization schedule accordingly (Section
7.01).
4. Permit Trico Shipping ASA to register ownership of Vessels in the ship registry of a
country other than Norway (Sections 12.09 and 12.10).
3
CTDOCS/1602126.2
4. $55,000,000 Credit Agreement dated February 12, 2004
1. Permit up to [X] Collateral Vessels to be reregistered or reflagged in a jurisdiction other
than the U.S. (Section 5.5).
2. Amend limitation on borrowings and negative pledge to permit the exit facility (Sections
6.1 and 6.2).
3. Relief from prohibition on disposition of property (Section 6.4) and prohibition on their
disposition (Section 3.12 of First Preferred Fleet Mortgage) to permit contribution ofvessels
to a joint venture.
4. Although the Credit Agreement does not limit the payment of dividends by Trico Marine
Services, Inc., the Credit Agreement does limit the payment of dividends by Trico Marine
Assets, Inc. and Trico Marine Operators, Inc. Dividends are permitted to the extent
necessary to allow Trico Marine Services, Inc. to pay interest on the Senior Notes, therefore
equitization of the Senior Notes would reduce the ability of the Trico Marine Assets, Inc. and
Trico Marine Operators, Inc. to pay dividends. This needs to be fixed to allow TMAR to pay
dividends to its common stockholders subject to a customary dividend payment covenant
(Section 6.5).
5. Relief from limitation on investments to permit investment in joint ventures (Section 6.6).
6. Waiver of the "change in control" event of default to facilitate equitization of Senior
Notes and election of new board of directors as provided in Term Sheet (Section 7(k)).
4
CTDOCS/1602126.2
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In re FV Steel & Wire Co., Case No. 04-22421 (Bankr. E.D. Wis. 2004).
LOCK-UP AGREEMENT
This Lock-Up Agreement ("Agreement"), dated as of March 21, 2005, is entered
into by and among FV Steel and Wire Company, a Wisconsin corporation, Keystone
Consolidated Industries, Inc., a publicly listed Delaware corporation, DeSoto Environmental
Management, Inc., a Delaware corporation; J.L. Prescott Company, a New Jersey corporation;
Sherman Wire Company (flk/a DeSoto, Inc.), a Delaware corporation; and Sherman Wire of
Caldwell, Inc., a Nevada corporation (collectively, the "Debtors" and each, individually, a
"Debtor"), Contran Corporation, a Delaware corporation (together with its affiliates, including
without limitation, EWP Financial, LLC "EWP Financial," "Contran"), the "authorized
representatives" (the "Retiree Representatives"), as such term is defmed in 1114(b)(l) of the
Bankruptcy Code, for the Affected Retirees (as defined in the 1114 Agreement (defmed below)),
the Independent Steel Workers Alliance (the " ~ " ) ,
1
the Official Committee of Unsecured
Creditors of the Debtors (the "Committee"), and Ameren Cilco, the Bank of New York, not
individually but as indenture trustee (the "Indenture Trustee"), Midwest Mill Service and
Peoria Disposal Company, each of whom, in a direct or representative capacity, holds or controls
a claim classified as a General Unsecured Claim in Class A6 under the Debtors' Joint Plan of
Reorganization Pursuant to Chapter 11 of the United States Bankruptcy Code flied October 4,
2004 (the "Debtors' Plan") and is a member of the Committee (collectively, the "Committee
Members").
RECITALS
WHEREAS, on February 26, 2004 (the "Petition Date"), each of the Debtors
filed a voluntary petition for relief (the "Proceedings") pursuant to Title 11 of the United States
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Eastern District of
Wisconsin (the "Bankruptcy Court") to facilitate a reorganization of the Debtors and a
reduction of their debt levels and accompanying debt service payments;
WHEREAS, each of the Committee Members holds an allowed claim against the
Debtors in the Proceedings or, in the case of the Indenture Trustee, acts as authorized
representative of the Holders of allowed claims against the Debtors in the Proceedings, in the
following amounts (collectively, the "CM Claims" and individually, a "CM Claim"):
Committee Member CM Claim Amount
Ameren Energy Marketing Co. (Cilco) $3,052,408.75
BankofNew York $6,487,075.52
The ISWA represents both the active employees of the Independent Steel Workers
Alliance and a group of retirees from the Independent Steel Workers Alliance as one of the
Retiree Representatives. Accordingly, the term "ISWA" as used in this Agreement refers only to
the ISW A as representative of active employees pursuant to Section 1113 of the Bankruptcy
Code.
f<&E I 0062611.24
Case 04-22421-svk Doc 2225-4 Filed 06/21/05 Page 30 of 64
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Committee Member CM Claim Amount
Midwest Mill Service $313,031.79
Peoria Disposal Company $682,866.58
WHEREAS, Contran has asserted claims against the Debtors in the Proceedings
in the following amounts (the "Contran Claims"):
I. The EWP Financial DIP Claim (as defmed in the Debtors' Plan), including, for
purposes of this Agreement, EWP Financial's contingent claim on account of a
$250,000 prepetition letter of credit issued by EWP Financial for the benefit of
the Debtors;
2. Unsecured, prepetition claims related to the ISA (defmed below) in the
approximate amount of $3,259,448.22, excluding any post-petition payments
thereon and subject to reductions to the extent of post-petition payments thereon
(the "ISA Prepetition Claims");
3.
4.
5.
6.
Subordinated, unsecured, prepetition claims related to dividends on account of
Old Preferred Stock (as defined in the Debtors' Plan) in the approximate amount
of$10,747,952.13 (the "Prepetition Dividend Claims");
Post-petition, administrative claims and all other claims, excluding the post-
petition amounts payable under the DIP Loan Participation, the Notes Secured
Claim, the LIC Claims and any Insurance Program Claims (each as defined
below), in the approximate amount of $1,000,000 including but not limited to
claims related to the Intercorporate Services Agreement dated January 1, 2001
(the "ISA") but not including amounts paid to Contran under the ISA in the
ordinary course of the Debtors' businesses during the pendency of the
Proceedings (the "Contran Administrative Claims");
The $2 million principal participation by EWP Financial in the Congress DIP
Facility (as defined in the Debtors' Plan) (the "DIP Loan Participation"); and
That portion of the 8% subordinated secured notes due 2009 issued by KCI (the
"8% Notes") owned by Contran in the approximate principal amount of
$18,318,750 together with accrued interest through the Petition Date of
approximately $1,754,529 plus post-petition interest at eight percent (8%)
thereafter (the "Notes Secured Claim").
WHEREAS, Contran has also asserted an unsecured, unliquidated, contingent,
prepetition claim in the amount of $4,391,229 in connection with certain undrawn letters of
credit issued by Contran for the benefit of the Debtors (the "L/C Claims"), which, together with
any Insurance Program Claims, are not, for purposes of this Agreement, included among the
Contran Claims (as defined herein);
2
K&E 10061611.14
WHEREAS, the Retiree Representatives represent the interests of Affected
Retirees in the Proceedings including, inter alia, with respect to: (1) an allowed claim against the
Debtors in the amount of $5,000,000 only in the event of confinnation of the Consensual Plan
that, pursuant to the 1114 Agreement, is held by the Affected Retirees (the "Retiree Claim"); or
(2) an allowed claim against the Debtors in the amount of $116,000,000 (the "$116.000,000
Claim") only in the event that (A) a Qualified Alternative Plan is confirmed and (B) the Retiree
Representatives collectively and unanimously make the $116,000,000 Claim Election (as defined
below); provided however, that nothing in this paragraph shall impair the Parties' rights under
and in connection with the 1114 Agreement;
WHEREAS, the ISW A represents the interests of active ISW A employees in the
Proceedings including, inter alia, with respect to an allowed claim against the Debtors in the
amount of $9,000,000 (the "Union Claim") that the ISWA holds pursuant to the 1113
Agreement (as defined below);
WHEREAS, on October 4, 2004, the Debtors filed the Debtors' Plan (terms used,
but not defined, herein shall have the meanings set forth in the Debtors' Plan);
WHEREAS, on October 14, 2004, the Committee filed a motion to terminate the
Debtors' exclusive right to file a plan or seek acceptances thereof in accordance with Section
1121 of the Bankruptcy Code (the "Exclusivity Motion");
WHEREAS, each of the Debtors, the Committee Members, Contran, the Retiree
Representatives, the Committee and the ISW A has engaged in good faith negotiations with the
objective of reaching an agreement with regard to a consensual resolution of the Proceedings that
would include proposing and seeking confirmation of an amended plan of reorganization for the
Debtors (the "Consensual Plan") and a simultaneous process to consider unsolicited offers to
obtain ownership and/or control of the Debtors' businesses and assets and, if appropriate,
approve binding agreements related thereto in connection with a Qualified Alternative Plan (as
defmed below);
WHEREAS, each of the Debtors, the Committee Members, Contran, the Retiree
Representatives, the Committee and the ISW A now desires to evidence their agreement
regarding the Consensual Plan and the Qualified Alternative Plan process on the terms and
conditions set forth in this Agreement and in the exhibits attached hereto; and
WHEREAS, subject to approval of the Bankruptcy Court, each of the Debtors,
the Committee Members, the Committee, the Retiree Representatives, Contran and the ISW A
(collectively, the "Parties" and individually, a "Party") has due authority to enter into and agree
to the terms of this Agreement;
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Recitals. Each of the Recitals set forth above is hereby incorporated as fully
set forth herein.
3
KAE I 0062611.24
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2. Agreements of the Debtors. The Debtors hereby agree to the following:
(a) within five (5) business days of execution hereof by all Parties, the
Debtors shall file a motion in the Proceedings seeking authority from the Bankruptcy
Court to enter into this Agreement; provided however, that, in connection with such
motion, the Debtors shall use their reasonable best efforts to file this Agreement under
seal, and the Parties shall use their reasonable best efforts to agree upon a summary of
this Agreement for inclusion in the motion;
(b) the Debtors shall in good faith negotiate with the Committee, the Retiree
Representatives, the ISW A and Contran the terms and provisions of the Consensual Plan
and, if and as applicable, negotiate in good faith with the Committee, the Retiree
Representatives and/or the ISW A the terms and provisions of any Offer, Qualified Offer
and the Qualified Alternative Plan (each as defined below), in each case consistent with
the terms and provisions of this Agreement;
(c) the Debtors shall file the Consensual Plan in form and substance
reasonably acceptable to the Committee and Contran and in accordance with the
provisions of Section 17 hereof. The acceptance by the Committee and Contran of the
Consensual Plan shall not be unreasonably withheld or delayed. The Debtors shall not
(i) amend the Debtors' Plan other than by filing the Consensual Plan, (ii) file any other
plan of reorganization or liquidation other than the Consensual Plan without the express
written consent of the Committee or (iii) make any material amendments to the
Consensual Plan, once filed, without the consent of the Committee and Contran (which
consents shall not be unreasonably withheld or delayed); provided however, that in the
event of a dispute between the Parties regarding whether a consent has been unreasonably
withheld or delayed, the Parties consent to seeking resolution of such dispute by the
Bankruptcy Court on an expedited basis of not less than two (2) business days notice,
subject to the Bankruptcy Court's availability;
(d) with respect to provisions relating to the 1114 Agreement (including
without limitation, the treatment of Class A4 or Class A6 Claims), the Debtors shall file
the Consensual Plan in form and substance reasonably acceptable to the Retiree
Representatives, Contran and the Committee and in accordance with the provisions of
Section 17 hereof. The acceptance of the Retiree Representatives, Contran and the
Committee shall not be unreasonably withheld or delayed. With respect to provisions
relating to the 1114 Agreement (including without limitation, the treatment of Class A4
or Class A6 Claims), the Debtors shall not (i) amend the Debtors' Plan other than by
filing the Consensual Plan, (ii) file any other plan of reorganization or liquidation other
than the Consensual Plan without the express written consent of the Committee or
(iii) make any material amendments to the Consensual Plan, once filed, without the
consent of the Retiree Representatives, Contran and the Committee (which consents shall
not be unreasonably withheld or delayed); provided however, that in the event of a
dispute between the Parties regarding whether a consent has been unreasonably withheld
or delayed, the Parties consent to seeking resolution of such dispute by the Bankruptcy
Court on an expedited basis of not less than two (2) business days notice, subject to the
Bankruptcy Court's availability;
4
K&E 10062611.24
(e) with respect to provisions relating to the 1113 Agreement, the Debtors
shall file the Consensual Plan in form and substance reasonably acceptable to the ISWA,
Contran and the Committee and in accordance with the provisions of Section 17 hereof.
The acceptance of the ISW A, Contran and the Committee shall not be unreasonably
withheld or delayed. With respect to provisions relating to the 1113 Agreement, the
Debtors shall not make any material amendments to the Consensual Plan, once filed,
without the consent of the ISWA, Contran and the Committee (which consents shall not
be unreasonably withheld or delayed); provided however, that in the event of a dispute
between the Parties regarding whether a consent has been unreasonably withheld or
delayed, the Parties consent to seeking resolution of such dispute by the Bankruptcy
Court on an expedited basis of not less than two (2) business days notice, subject to the
Bankruptcy Court's availability;
(f) except as otherwise provided herein, the Debtors shall not initiate or
participate in any discovery concerning matters arising prior to the date hereof related to
the Committee, the Committee Members, Contran, the Retiree Representatives or the
lSWA;
(g) the Debtors shall not object to or seek to subordinate, recharacterize,
reclassify or otherwise adversely affect the CM Claims, the Contran Claims, the Retiree
Claim, the Union Claim or, as set forth in the 1114 Agreement, the $116,000,000 Claim;
provided however, that the Parties agree that except in the event of confirmation of the
Consensual Plan, the Prepetition Dividend Claim shall be (i) subordinated to all allowed
general unsecured claims against the Debtors; (ii) separately classified from all general
unsecured claims against the Debtors; and (iii) not paid until all allowed general
unsecured claims against the Debtors are fully paid and satisfied;
(h) the Debtors shall in good faith take all reasonably necessary steps to
support (i) the confirmation. consummation and effectiveness of the Consensual Plan;
(ii) the consummation and effectiveness of the Qualified Alternative Plan (if confirmed);
and (iii) approval of a combined disclosure statement related to the Consensual Plan and,
if applicable, the Qualified Alternative Plan;
(i) the Debtors shall seek approval of the 1114 Agreement only at the time of
and in conjunction with obtaining confirmation of the Consensual Plan and shall seek
approval of the 1114 Agreement in conjunction with obtaining confirmation of the
Qualified Alternative Plan only with the express written consent of the Retiree
Representatives, the Committee and the Potential Bidder (as defined below); provided
however, that in the event that neither the Consensual Plan nor the Qualified Alternative
Plan is confirmed, no Party shall seek approval of the 1114 Agreement without providing
for a new and separate notice and hearing thereon;
G) the Debtors and their legal and fmancial advisors shall cooperate in good
faith with the Committee, the Retiree Representatives and/or the ISW A in connection
with any Offer or Qualified Offer, including without limitation, providing any Potential
Bidder that has executed a confidentiality agreement with reasonably requested diligence
information (not including competitively sensitive information if the Potential Bidder is a
5
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competitor of the Debtors or EWP) and access to the Debtors' facilities and management
personnel and actively participating in the negotiation and drafting of any Definitive
Agreement (as defmed below), Qualified Alternative Plan or other related document or
agreement as necessary or appropriate under the circumstances or as may reasonably be
requested by any Party and/or Potential Bidder; and
(k) the Debtors shall provide information reasonably requested by each of the
Retiree Representatives, the ISW A and the Committee that is necessary for the Retiree
Representatives, the ISW A and the Conunittee to fulfill their respective duties to their
respective constituencies.
3. Agreements of the Committee . The Conunittee hereby agrees to:
(a) withdraw the Exclusivity Motion;
(b) negotiate in good faith with the Debtors, the Retiree Representatives, the
ISW A and Contran the terms and provisions of the Consensual Plan and, if and as
applicable, negotiate in good faith with the Debtors, the Retiree Representatives and the
ISW A regarding the terms and provisions of a Qualified Alternative Plan, in each case
consistent with the terms and provisions of this Agreement;
(c) issue a letter recommending that all Holders of all unsecured claims
against the Debtors, including Class A6 General Unsecured Claims, vote to accept their
respective treatment under the Consensual Plan (the "Support Letter"); provided
however, that if any Party has proposed a Qualified Alternative Plan, the Committee may
indicate a preference (and the reasons therefor) as to the Consensual Plan or the Qualified
Alternative Plan in the Support Letter and at the confnmation hearing related to the
Consensual Plan and the Qualified Alternative Plan;
(d) not object to or seek to subordinate, recharacterize, reclassify or otherwise
adversely affect the Contran Claims, the Retiree Claim, the CM Claims or the Union
Claim; provided however, that the Parties agree that except in the event of confirmation
of the Consensual Plan, the Prepetition Dividend Claim shall be (i) subordinated to all
allowed general unsecured claims against the Debtors; (ii) separately classified from all
general unsecured claims against the Debtors; and (iii) not paid until all allowed general
{e) not object to the $116,000,000 Claim only if either the Consensual Plan is
confirmed or the Qualified Alternative Plan is confirmed under which the Retiree
Representatives make the $116,000,000 Claim
(f) so long as the Committee is not a sponsor of a Qualified Alternative Plan,
in good faith, take all reasonably necessary steps to support the confirmation,
consummation and effectiveness of the Consensual Plan and, in any event, support the
approval of a disclosure statement related to the Consensual Plan and, if applicable, the
Qualified Alternative Plan;
6
l<4<ll 1006l611.24
(g) not object or take any other action in opposition to the confinnation of the
Consensual Plan; provided however, that if the Committee supports or is the sponsor of
the Qualified Alternative Plan, the Committee may object to confirmation of the
Consensual Plan except as otherwise provided herein;
(h) except as otherwise provided herein, adjourn and suspend all discovery
and/or not initiate, continue or participate in any discovery concerning matters arising
prior to the date hereof related to the Debtors, Contran, the Retiree Representatives or the
ISWA; and
(i) not file or support any further motions seeking to modify or terminate the
Debtors' exclusive right to file a plan or seek acceptances thereof in accordance with
Section 1121 of the Bankruptcy Code ("Exclusivity") and support the Debtors' request(s)
for extension of Exclusivity in accordance with this Agreement.
4. Agreements of the Committee Members. Each Committee Member hereby
agrees to:
(a) support the Committee in its agreement to:
(i) withdraw the Exclusivity Motion;
(ii) execute and issue the Support Letter; and
(iii) so long as the Committee is not a sponsor of a Qualified
Alternative Plan, in good faith, take all reasonably necessary steps to support the
confirmation, consummation and effectiveness of the Consensual Plan and, in any
event, support the approval of a disclosure statement related to the Consensual
Plan and, if applicable, the Qualified Alternative Plan;
(b) negotiate in good faith with the Debtors, the Retiree Representatives, the
ISW A and Contran the terms and provisions of the Consensual Plan and, if and as
applicable, negotiate in good faith with the Debtors, the Retiree Representatives and the
ISWA regarding the terms and provisions of a Qualified Alternative Plan, in each case
consistent with the terms and provisions of this Agreement;
(c) not object to or seek to subordinate, recharacterize, reclassify or otherwise
adversely affect the Contran Claims, the Retiree Claim or the Union Claim; provided
however, that the Parties agree that except in the event of confirmation of the Consensual
Plan, the Prepetition Dividend Claim shall be (i) subordinated to all allowed general
unsecured claims against the Debtors; (ii) separately classified from all general unsecured
claims against the Debtors; and (iii) not paid until all allowed general unsecured claims
against the Debtors are fully paid and satisfied;
(d) not object to the $116,000,000 Claim only if either the Consensual Plan is
confirmed or the Qualified Alternative Plan is confirmed under which the Retiree
Representatives make the $116,000,000 Claim Election;
7
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(e) subject to approval of a disclosure statement relating to the Consensual
Plan, vote to accept treatment of their respective Class A6 General Unsecured Claims
under the Consensual Plan; provided however. that if any Party has proposed a Qualified
Alternative Plan, the Committee Members may indicate a preference as to the Consensual
Plan or the Qualified Alternative Plan in connection with their vote and at the
confirmation hearing related to the Consensual Plan and the Qualified Alternative Plan;
(f) not object or take any other action in opposition to the Consensual Plan;
provided however, that if the Committee supports or is the sponsor of the Qualified
Alternative Plan, the Committee Members may object to confinnation of the Consensual
Plan except as otherwise provided herein;
(g) except as otherwise provided herein, adjourn and suspend all discovery
and/or not initiate, continue or participate in any discovery concerning matters arising
prior to the date hereof related to the Debtors, Contran, the Retiree Representatives or the
ISWA; and
(h) not file or support any motions seeking to modifY or terminate the
Debtors' Exclusivity and support the Debtors' request(s) for extension of Exclusivity in
accordance with this Agreement.
5. Agreements of Contran. Contran hereby agrees to:
(a) negotiate in good faith with the Committee, the Committee Members, the
Retiree Representatives, the ISW A and the Debtors the terms and provisions of the
Consensual Plan consistent with the terms and provisions of this Agreement;
(b) subject to approval of a disclosure statement relating to the Consensual
Plan, vote to accept the treatment accorded under the Consensual Plan for the Contran
Claims;
(c) in good faith, take all reasonably necessary steps to support the
confirmation, consummation and effectiveness of the Consensual Plan and approval of a
disclosure statement related thereto;
(d) not object or take any other action in opposition to confmnation of the
Consensual Plan;
(e) except as otherwise provided herein, not initiate or participate in any
discovery concerning matters arising prior to the date hereof related to the Committee,
the Committee Members, the Debtors, the Retiree Representatives or the ISW A;
(f) not object to or seek to subordinate, recharacterize, reclassifY or otherwise
adversely affect the CM Claims, the Retiree Claim, the Union Claim or, as set forth in the
1114 Agreement, the $116,000,000 Claim;
(g) in the event of a Qualified Alternative Plan or a Termination that does not
result in confirmation of the Consensual Plan, not object to or otherwise oppose
8
K&E 10062611.24
case 04-22421-svk Doc 2225-4 Filed 06/21/05
Page 37 of 64
(i) subordination of the Prepetition Dividend Claim to all allowed general unsecured
claims against the Debtors; (ii) separate classification of the Prepetition Dividend Claim
from all general unsecured claims against the Debtors; and (iii) treatment that affords no
payments on account of the Prepetition Dividend Claim until all allowed general
(h) cause EWP Financial to extend the maturity of the EWP Financial DIP
Facility until the earlier of July 31, 2005 or the maturity date of the Congress DIP Facility
including any extension thereof;
(i) not take any action to enforce rights or remedies under or in connection
with the Contran Claims until, if at all, a Termination pursuant to Section 18 hereof has
occurred; and
G) not terminate or cease performance under the ISA (as such may be
modified pursuant to its terms), except as a result of a material breach thereof by the
Debtors, until the effective date of either the Consensual Plan or the Qualified Alternative
Plan.
6. Agreements of Retiree Representatives. The Retiree Representatives hereby
agree to:
(a) negotiate in good faith with the Committee, the Committee Members,
Contran and the Debtors the terms and provisions of the Consensual Plan relating to the
1114 Agreement consistent with the terms and provisions of this Agreement;
(b) subject to approval of a disclosure statement relating to the Consensual
Plan, vote to accept the treatment accorded under the Consensual Plan for the Retiree
Claim; provided however, that if any Party has proposed a Qualified Alternative Plan,
each Retiree Representative may indicate a preference (and the reasons therefor) as to the
Consensual Plan or the Qualified Alternative Plan in connection with their vote and at the
confirmation hearing related to the Consensual Plan and the Qualified Alternative Plan;
(c) so long as the Retiree Representatives are not a sponsor of a Qualified
Alternative Plan, in good faith, take all reasonably necessary steps to support the
confirmation, consummation and effectiveness of the Consensual Plan and, in any event,
support the approval of a disclosure statement related to the Consensual Plan and, if
applicable, the Qualified Alternative Plan;
(d) not object or take any other action in opposition to the Consensual Plan;
provided however, that if the Retiree Representatives support or are the sponsor of the
Qualified Alternative Plan, the Retiree Representatives may object to confirmation of the
Consensual Plan except as otherwise provided herein;
(e) except as otherwise provided herein, not initiate or participate in any
discovery concerning matters arising prior to the date hereof related to the Debtors,
Contran, the Committee, the Committee Members or the ISWA;
9
K&B 10062611.24
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(f) not object to or seek to subordinate, recharacterize, reclassify or otherwise
adversely affect the CM Claims, the Contran Claims or the Union Claim; provided
however, that the Parties agree that except in the event of confirmation of the Consensual
Plan, the Prepetition Dividend Claim shall be (i) subordinated to all allowed general
unsecured claims against the Debtors; (ii) separately classified from all general unsecured
claims against the Debtors; and (iii) not paid until all allowed general unsecured claims
against the Debtors are fully paid and satisfied;
(g) not file or support any motions seeking to modify or terminate the
accordance with this Agreement; and
(h) seek approval of the 1114 Agreement only at the time of and in
conjunction with obtaining confirmation of the Consensual Plan and seek approval of the
1114 Agreement in conjunction with obtaining confirmation of the Qualified Alternative
Plan only with the express written consent of the Committee and the Potential Bidder
provided however, that in the event that neither the Consensual Plan nor the Qualified
Alternative Plan is confmned, no Party shall seek approval of the 1114 Agreement
without providing for a new and separate notice and hearing thereon;.
7. Agreements of ISW A. The ISW A hereby agrees to:
(a) negotiate in good faith with the Committee, the Committee Members,
Contran, the Retiree Representatives and the Debtors the terms and provisions of the
Consensual Plan relating to the 1113 Agreement consistent with the terms and provisions
of this Agreement;
(b) negotiate in good faith with a Potential Bidder and, as applicable, the
Committee and/or the Retiree Representatives concerning any Offer, Qualified Offer
and/or the Qualified Alternative Plan;
(c) subject to approval of a disclosure statement relating to the Consensual
Plan, vote to accept the treatment accorded under the Consensual Plan for the Union
Claim; provided however, that if any Party has proposed a Qualified Alternative Plan, the
ISWA may indicate a preference (and the reasons therefor) as to the Consensual Plan or
the Qualified Alternative Plan in connection with its vote and at the confirmation hearing
related to the Consensual Plan and the Qualified Alternative Plan;
(d) so long as the ISW A is not a sponsor of a Qualified Alternative Plan, in
good faith, take all reasonably necessary steps to support the confirmation,
consummation and effectiveness of the Consensual Plan and, in any event, support the
approval of a disclosure statement related to the Consensual Plan and, if applicable, the
Qualified Alternative Plan;
(e) not object or take any other action in opposition to the Consensual Plan;
provided however, that if the ISW A supports or is the sponsor of the Qualified
Alternative Plan, the ISW A may object to confirmation of the Consensual Plan except as
otherwise provided herein;
10
K&E 10062611.24
Page 39 of 64
(f) except with respect to workers' compensation claims and grievances, and
except as otherwise provided herein, not initiate or participate in any discovery
concerning matters arising prior to the date hereof related to the Debtors, Contran, the
Committee, the Committee Members or the Retiree Representatives;
(g) not object to or seek to subordinate, recharacterize, reclassify or otherwise
adversely affect the CM Claims, the Contran Claims, the Retiree Claim or the
$116,000,000 Claim; provided however, that the Parties agree that except in the event of
confirmation of the Consensual Plan, the Prepetition Dividend Claim shall be
(i) subordinated to all allowed general unsecured claims against the Debtors; (ii)
separately classified from all general unsecured claims against the Debtors; and (iii) not
paid until all allowed general unsecured claims against the Debtors are fully paid and
satisfied;
(h) not file or support any motions seeking to modify or tenninate the
accordance with this Agreement.
8. Certain Provisions of the Consensual Plan. Each Party agrees that the
Consensual Plan, inter alia, shall contain provisions to the effect of the following:
(a) Class A3 Union Claim. The "Modifications" (as defmed in the Tentative
Agreement dated July 16, 2004 (the "1113 Agreement")) shall (without further
modification except as expressly set forth herein) be incotporated into the Consensual
Plan, including without limitation, the provisions of Paragraph 2 of the 1113 Agreement
under "Effective Date;" provided however, that if the Committee and the Committee
Members issue the Support Letter and Class A6 votes to accept treatment under the
Consensual Plan, then the $9,000,000 unsecured Union Claim referenced in such
Paragraph 2 of the 1113 Agreement shall be extinguished, and there shall be no
distributions or allocations on account of such $9,000,000 Union Claim.
(b) Class A4 Retiree Claims. The 1114 Agreement (executed on October 22,
2004 by and among the Debtors and the Retiree Representatives, a copy of which is
attached hereto as Exhibit A and by this reference made a part hereof, as modified by the
tenns hereof, including without limitation, Section 9 hereof (the "1114 Agreement")),
shall be submitted to the Bankruptcy Court for approval in connection with confirmation
of the Consensual Plan, and the Parties shall, in good faith, take all reasonably necessary
steps to support such approval. Upon approval of the 1114 Agreement and confirmation
of the Consensual Plan, the 1114 Agreement, including without limitation, Paragraph 1
thereof, shall be and become an integral part of the Consensual Plan, and, pursuant
thereto, the Retiree Claim shall receive payments from the Debtors as provided in the
1114 Agreement and the Consensual Plan.
(c) Class A3, A4 and A6 Claims Treatment.
(i) Except as otherwise provided herein, each Holder of an Allowed
Class A3 Claim, an Allowed Class A4 Claim (i.e. the Retiree Claim) and an
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K&E 10062611.24
Allowed Class A6 Claim will receive its Pro Rata Share of the consideration as
described in clauses (A), (B) and (C) below, in each case subject to adjustment
pursuant to Section 8(c)(ii) below, with the consideration described in clause (C)
being held in the Creditor Trust (as defined below) for the benefit of Holders of
the Allowed Class A3 Union Claim (if applicable) and Allowed Class A6 General
Unsecured Claims. Notwithstanding the foregoing, (a) the Holders of Class A4
Claims shall not receive any of the consideration described in clause (C) below
(such consideration to be distributed ona pro rata basis to Holders of Allowed
Class A6 Claims (assuming the Committee and the Committee Members issue the
Support Letter and Class A6 votes to accept treatment under the Consensual Plan,
and, if not, pro rata to Holders of Allowed Class A3 Claims and Allowed A6
Claims)) and (b) if the Committee and the Committee Members issue the Support
Letter and Class A6 votes to accept treatment under the Consensual Plan, then (x)
the Class A3 Claim shall be extinguished, (y) there shall be no distributions on
account thereof, and (z) the full amount of consideration in clause (C) below shall
be distributed to the Holders of Allowed Class A6 Claims.
(A) Cash Payment: $5,200,000 of the cash to be distributed
on the Effective Date of the Consensual Plan.
(B) Stock Issuance: Forty-nine percent (49%) of the New
Common Stock. The New Common Stock shall be issued free and clear of
all liens and shall not be subject to any contractual transfer restrictions,
other than to the extent necessary to preserve KCI's I.R.C. 382(1)(5) NOL
treatment. By no later than the second anniversary of the Effective Date,
there shall be no tax-related transfer restrictions of the New Common Stock
held by the Holders of Allowed Class A3, A4 and A6 Claims.
(C) Secured Note Issuance: A secured promissory note issued
jointly and severally by the Reorganized Debtors in the original principal
amount of $4,800,000 (the "Secured Note"), which Secured Note will
have the following terms:
(1) The Secured Note will be due and payable on the
date that is the fourth anniversary of the Effective Date of the
Consensual Plan (the "Maturity Date"). The Secured Note
(including accrued interest) may be prepaid, in whole or in part, at
any time without premium or penalty.
(2) Interest will accrue on the outstanding principal
amount of the Secured Note at a rate per annum equal to twelve
percent (12%) (computed on the basis of a 360-day year and the
actual number of days elapsed in any year), which interest will
accrue and compound on the first Business Day of each July,
October, January and April commencing on the Effective Date and
ending on September 30, 2006. Commencing with the quarter
beginning on October 1, 2006 and continuing thereafter, cash pay
12
Page 41 of 64
!(& 10062611.24
interest will accrue on the outstanding principal amount of the
Secured Note at a rate per annum equal to eight percent (8%)
(computed on the basis of a 360-day year and the actual number of
days elapsed in any year), which interest will accrue and be
payable in arrears on the first Business Day of each July, October,
January and April together with the principal payments set forth
below and on the date the obligations under the Secured Note have
been paid in full.
(3) Principal payments on the Secured Note shall
commence on January 1, 2007. On October 1, 2006 (the
"Conversion Date"), KCI will convert all accrued and unpaid
principal and interest on the Secured Note into an amortizing loan.
The initial principal payment (the "Initial Principal Payment")
shall be due on January 1, 2007 and shall be equal to the cash
payments that would have resulted under the Base Structure (as
defined below) from the issuance date of the Secured Note through
January 1, 2007. The "Base Structure" assumes that the terms of
the Secured Note were modified as follows: (a) the Secured Note
principal amortization and cash interest payments commence on
May 1, 2006; (b) principal payments would be paid in equal
quarterly payments on the frrst day of each of May, August,
November and February starting with May 1, 2006 through the
Maturity Date; and (c) in the event that the Maturity Date did not
coincide with a principal payment date, the principal payment
required to be made on the Maturity Date would be equal to the
pro rata portion of such quarterly payment amount. For purposes
of determining the Initial Principal Payment, the portion of the
quarterly payment due on February 1, 2007 under the Base
Structure shall be prorated through January 1, 2007 (i.e., two thirds
included). Principal payments subsequent to the Initial Principal
Payment shall be made on the frrst day of each April, July, October
and January thereafter, in equal quarterly amounts which in
aggregate shall be equal to the principal amount of the Secured
Note on January 1, 2007 after giving effect to the Initial Principal
Payment. To the extent that the Maturity Date does not coincide
with a principal payment date, the principal payment due on the
Maturity Date shall be equal to the pro rata portion of each
principal payment (other than the Initial Principal Payment) and
shall fully repay the outstanding balance of the Secured Note.
For example, if: (a) the amount of the Secured Note is equal to
$4,800,000; (b) the Secured Note is issued on July 1, 2005; and
(c) no Default (as defmed below) occurs during the life of the
Secured Note, the principal payments shall be as follows
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Koldl10062611.24
Date of Amount of Princi12al Paxment
Pavment
111107 $1,572,255.52
4/1/07 $399,226.00
7/1107 $399,226.00
10/1107 $399,226.00
111/08 $399,226.00
4/1108 $399,226.00
7/1108 $399_,_226.00
10/1/08 $399,226.00
1/1/09 $399,226.00
4/1109 $399,226.00
7/1/09 $399,226.00
In the case of a Default occurring prior to January 1, 2007, the
additional Default PIK interest shall be incorporated into the
principal amount of the Secured Note and the payments
determined as described above. In the case of a payment Default
subsequent to January 1, 2007, the additional PIK interest (as
described in Section 8(c)(i)(C)(4)), shall be spread pro rata over
the remaining Principal Payments of the Secured Note.
(4) While a Default under the Secured Note exists,
interest on the obligations under the Secured Note shall accrue at a
rate per annum which is determined by adding four percent (4%)
per annum to the interest rate then in effect (the "Default Rate").
The Default Rate shall commence on the date of occurrence of
such Default and continue until such Default is cured or waived in
the manner described in clause (5) below, at which time the
interest rate on the obligations under the Secured Note shall revert
to the non-Default rate. Upon the occurrence of a payment Default
after December 31, 2006, interest will accrue and compound
quarterly at a rate of sixteen percent (16%) per annum until such
payment default is cured, at which time the interest rate on the
obligations under the Secured Note shall revert to the non-Default
rate.
(5) The Secured Note will contain customary events of
default no more restrictive than the events of default under the Exit
Financing and any refinancing thereof (the "Senior Bank Debt")
and will provide that a default under the Senior Bank Debt or the
8% Notes or the failure to pay principal and interest under the
Secured Note after the Conversion Date shall constitute a default
under the Secured Note (each, a "Default"). If a Default based on
a cross default to the Senior Bank Debt or the 8% Notes occurs, the
Default will continue until it is either cured (to the extent curable)
14
Page 43 of 64
KkE 10062611.2-4
or waived by the Creditor Trustee (as defmed in Section 8()
below). The waiver of a Default under the indebtedness that
triggered such Default will not constitute a waiver of the
corresponding Default under the Secured Note. The sole remedy
for any Default shall be the accrual or payment of interest at the
Default Rate and the holder of the Secured Note will not be
entitled to accelerate the Secured Note except as permitted by the
subordination terms described in clause (7) below.
(6) The initial covenants in the Secured Note will be
identical to those contained in the documents evidencing the
Senior Bank Debt that becomes effective on the Effective Date, but
only so long as the Senior Bank Debt is provided by unaffiliated
third parties on an arms-length basis. If there is no Senior Bank
Debt on the Effective Date, or if the Senior Bank Debt is provided
by an affiliated entity of Contran, the holder of the Secured Note
may impose reasonable covenants based on the Debtors' business
plan projections (to be provided through the Maturity Date). The
initial covenants in the Secured Note will not be required to be
modified upon execution of any new, or any amendment,
modification or refinancing to any existing, Senior Bank Debt
documentation if that documentation contains covenants less
restrictive to the Debtors. If, however, the Debtors become party
to any Senior Bank Debt documentation having covenants that are
more restrictive, the Secured Note shall be deemed to be amended
to incorporate the more restrictive covenants. Breach of a
covenant will be deemed cured as and when KCI complies with
such covenant in a subsequent reporting period.
(7) The obligations under the Secured Note will be
secured by a lien (the "Secured Note Lien") on all of the equity
interests (the "EWP Stock") in Engineered Wire Products, Inc.
("EWP"), and the proceeds thereof. The obligations under the
Secured Note and the Secured Note Lien will be contractually
subordinated to any Senior Bank Debt and all valid and duly
perfected liens du1y and voluntarily granted thereon by the Debtors
securing the Senior Bank Debt, any refinancings thereof, and any
other post Effective Date debt and liens approved by the New
Board (as defmed below), which contractual terms at a minimum
will provide the following:
The holder of the Secured Note may not
exercise any of its rights and remedies under applicable law
including, without limitation, part 6 of Article 9 of the
Uniform Commercial Code, until the earliest to occur of
(i) the sale of all or substantially all of the EWP Stock or
the assets of EWP, (ii) the sale of all or substantially all of
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K&:E 10062611.24
the equity interests or assets of KCI, (iii) the institution of
bankruptcy or other insolvency proceedings with respect to
KCI or EWP; and (iv) the maturity of the Secured Note;
The holder of the Secured Note may not
accelerate the obligations under the Secured Note prior to
maturity thereof unless one of the following occur: (i) all
or substantially all of the EWP Stock or the assets of EWP
are sold, (ii) all or substantially all of the equity interests or
assets of KCI are sold, (iii) bankruptcy or other insolvency
proceedings with respect to KCI or EWP are instituted, or
(iv) the Senior Bank Debt is accelerated; and
The enforcement of any remedies under the
Secured Note shall be subject to customary standstill
periods and provisions under the subordination and/or
intercreditor agreement relating to the Senior Bank Debt
and any other post-Effective Date debt approved by the
New Board.
The Secured Note will not contain any restrictions on the ability ofKCI to,
upon approval of the New Board, enter into additional debt facilities and
grant additional (including senior) liens on the EWP Stock.
(ii) Increase in the Cash and Secured Note. The treatment of each
Allowed Class A3, A4 and A6 Claim described in Section 8(c)(i) above is
premised on the total amount of Allowed Class A4 Claims plus the total amount
of Allowed Class A6 Claims not exceeding $53,500,000. At least six (6) days
prior to the date first scheduled for commencement of the hearing to approve a
disclosure statement for the Consensual Plan, the Committee, Contran and the
Debtors will attempt to agree upon a reasonable estimate of the total amount of
Class A6 Claims (including claims of Sherman Wire Company and envirorunental
claims). If any of the Committee, Contran or the Debtors reasonably believe, in
good faith, on the basis of information shared with the Parties, that the estimated
amount of Allowed Class A4 Claims plus Allowed Class A6 Claims (including
claims of Sherman Wire Company and environmental claims) exceeds
$68,000,000, and, by six (6) days prior to the date first scheduled for
commencement of the hearing to approve a disclosure statement for the
Consensual Plan, (a) no Party has agreed to absorb the fmancial impact of the
increase in estimated Class A6 General Unsecured Claims, (b) the Committee and
Contran have failed to reach agreement on amending this Agreement and/or the
Consensual Plan to adjust for the increase in estimated Class A6 General
Unsecured Claims and (c) the Bankruptcy Court has not entered an order
estimating the Class A4 and Class A6 Claims in an aggregate amount equal to or
less than $68,000,000, this Agreement shall terminate in accordance with Section
18 hereof. To the extent that the estimated amount of Allowed Class A4 Claims
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plus Allowed Class A6 Claims exceeds $53,500,000, but is equal to or less than
$68,000,000:
(A) Up to $12,000,000 (excluding any Allowed Class A4
Claim) of such incremental unsecured claims will be included in Class A6
and receive treatment as described in Section 8(c)(i) hereof;
(B) The Debtors shall increase the amount described in Section
8(c)(i)(A) hereof in an amount equal to the product of (x) the amount by
which the aggregate amount of Allowed Class A4 Claims plus Allowed
Class A6 Claims exceeds $53,500,000 and (y) 5.2%; and
(C) The Debtors shall increase the amount described in Section
8(c)(i)(C) hereof in an amount equal to the product of (x) the amount by
which the aggregate amount of Allowed Class A6 Claims exceeds
$51,000,000 and (y) 4.8%.
By way of illustration, if the total amount of the Allowed Class A4 Claim
is $5,000,000 and the total amount of the Allowed Class A6 Claims is
$54,500,000, the increase in cash consideration described in Section
8(c)(i)(A) would be $312,000 (5.2% of$6,000,000) and the increase in the
face amount of the Secured Note described in Section 8(c)(i)(C) would be
$168,000 (4.8% of$3,500,000).
(iii) Notwithstanding anything to the contrary herein, if the Class A3
Claim is not extinguished: (a) there shall be no increase in consideration pursuant
to Section 8(c)(ii) hereof on account thereof; (b) the Holder of the Class A3 Claim
shall share pro rata in the distribution provided for in Section 8( c) hereof; and
(c) the Class A3 Claim shall not cause a Termination pursuant to Section
18(a)(i)(G) hereof.
(d) Contran Claims and the L/C Claims. With respect to the Contran
Claims and the LIC Claims, the Consensual Plan will provide as follows:
K&H 10062611.24
(i) Conversion of Certain Contran Claims. The EWP Financial
DIP Claim, the ISA Prepetition Claims, the Prepetition Dividend Claims and the
Contran Administrative Claims shall not be paid, and shall, together with other
intangible benefits provided to the Debtors by Contran, be converted into fifty-
one percent (51%) of the New Common Stock. Contran's fifty-one percent (51%)
of the New Common Stock shall be issued free and clear of all liens and shall be
subject to transfer restrictions to the extent necessary, in the first instance without
imposing any transfer restrictions on the forty-nine percent (49%) of the New
Common Stock issued to the Holders of Class A3, A4 and A6 Claims, to preserve
KCI's I.RC. 386(1)(5) NOL treatment.
(ii) The DIP Loan Participation. The DIP Loan Participation shall
be paid in full, in cash, on the Effective Date of the Consensual Plan.
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(iii) The Notes Secured Claim. The Notes Secured Claim, and the
rights thereunder, shall be unimpaired in accordance with 11 U.S.C. 1124(1).
(iv) The L/C Claims. Unless the Parties reach an agreement on the
form and substance of the specific treatment of LIC Claims in the Consensual
Plan (or the Qualified Alternative Plan, if applicable), the Parties hereby agree as
follows:
(A) The LIC Claims will not be or be deemed allowed claims in
the Proceedings and Contran will receive no distribution on account
thereof, unless and until a final order of the Bankruptcy Court is entered in
connection with the Proceedings (the "L/C Claims Allowance Order"),
after notice to the Parties and a hearing is conducted with respect thereto.
(B) If Contran seeks entry of an L/C Claims Allowance Order
after confirmation of any plan in the Proceedings, the creditor
representative(s) appointed in conjunction with such plan (and in the case
of confirmation of the Consensual Plan, the Creditor Trustee) shall be
deemed a Party for purposes of this Section 8(d)(iv).
(e) Contran Intercorporate Services Agreement. Contran will enter into a
new contract to provide intercorporate services (the "New ISA"), which New ISA will be
on substantially the same terms as the ISA. KCI and Contran shall only be entitled to
amend the terms of the New ISA with the approval of the New Board. In the event that
prior to the Effective Date of the Consensual Plan, Contran and the Debtors determine
that the New ISA will not be on substantially the same terms as the ISA, Contran and the
Debtors will obtain the consent of the Committee, which consent will not be
unreasonably withheld or delayed, to the terms of the New I SA.
(f) Formation of the Creditor Trust. The Committee shall establish a trust
(the "Creditor Trust") to receive on the Effective Date of the Consensual Plan the
Secured Note from the Debtors under the Consensual Plan for the benefit of the Holders
of the Allowed Class A3 Claim (if not extinguished) and Allowed Class A6 Claims and
to administer and liquidate the assets of the Creditor Trust for ultimate distribution to
such Holders on a pro rata basis (as applicable). The Creditor Trust will qualify as a
liquidating trust as described in Treasury Regulation 301.7701-4(d) and shall be treated
as a grantor trust for United States federal income tax purposes. The Committee shall
appoint a trustee (the "Creditor Trustee"), which Creditor Trustee shall have the
authority to manage the day to day operations of the trust including making decisions
with respect to the Secured Note, appearing as a party in interest, calculating
distributions, paying taxes and such other matters as more particularly described a
Creditor Trust Agreement, the form of which will be acceptable to the Committee and the
Debtors, whose acceptance shall not be unreasonably withheld. KCI shall pay the
Creditor Trust fees in an amount not to exceed $10,000 per year plus the reasonable
expenses actually incurred by the Creditor Trust; such fees and expenses first shall be
payable ninety (90) days after the Effective Date and shall be payable quarterly thereafter
until the Secured Note is fully paid and satisfied. The Committee and/or the Committee
18
K&E 10062611.24
Members shall cause the Creditor Trustee to enter into the subordination and/or
intercreditor agreement(s) relating to any Senior Bank Debt, any refinancings thereof,
and any other post Effective Date debt approved by the New Board, in accordance with
Section 8(c)(i)(C)(7) above.
(g) Miscellaneous:
(i) The Consensual Plan shall provide for the issuance of New
Common Stock, as set forth herein, and shall not provide for the issuance of any
other class of equity or convertible securities.
(ii) The Consensual Plan shall not provide for the payment of cash or
issuance or reinstatement of debt inconsistent with the terms of the Debtors' Plan
as modified by the terms of this Agreement.
9. Modifications to 1114 Agreement. The Parties hereby agree to the following
modifications to the 1114 Agreement in the context of a Consensual Plan and, if a Definitive
Agreement assumes the 1114 Agreement, in the context of a Qualified Alternative Plan:
(a) Elimination of $30,000,000 Claim. The $30,000,000 claim referenced in
Paragraph 1 of the 1114 Agreement shall be eliminated and there shall be no distribution
under the Consensual Plan on account thereof.
(b) Treatment of $5,000,000 Claim. The $5,000,000 claim referenced in
Paragraph 1 of the 1114 Agreement shall be treated as set forth in Section 8( c) above.
(c) Secured Note Deduction from Free Cash Flow. Fifty percent (50%) of
the cash payments under the Secured Note described in Section 8(c)(i)(C) above will
qualify as a deduction from Free Cash Flow (as defined in the 1114 Agreement);
provided however, that with respect to determining the amount of payments to Affected
Retirees in 2009 and thereafter, that portion of the deduction from Free Cash Flow on
account of the Secured Note payments necessary to prevent Free Cash Flow from being
less than $6,000,000, if any, shall be disallowed.
(d) Definition of Material Event. Provision (2) in the definition of "Material
Event" in Paragraph 4(a) of the 1114 Agreement shall be modified to eliminate "the sale
or disposition of greater than 50% of the Company's New Preferred Stock" and
substitute, in lieu thereof, "a change in the composition of the Company's board of
directors such that less than half of the directors have been named or elected by Contran
or Contran's appointees."
(e) Affected Retiree Payments in 2005. Effective immediately upon
execution of this Agreement by all Parties, the monthly contributions payable to Affected
Retirees under Paragraph 3( d) of the 1114 Agreement in 2005 shall be $150 per month
per participant, retroactive to January 1, 2005, and there shall be no increase to such
contributions under the Additional Contribution Grid (as defined in the 1114 Agreement)
in 2005; provided however, that in the event of confirmation of a Qualified Alternative
Plan that assumes the 1114 Agreement (including application of Schedule C thereof), the
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KAtE 10062611.24
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monthly contributions payable to Affected Retirees shall comply with Schedule C as of
the Effective Date of such plan and, accordingly, such monthly contributions for the
balance of2005 shall be $130.
(f) Administrative Claim for Counsel to ISWA. Paragraph 9 of the 1114
Agreement shall be modified to eliminate the "$40,000" figure therein and substitute, in
lieu thereof, "$100,000." In the event of confirmation of a Qualified Alternative Plan
that does not assume the 1114 Agreement, counsel for the ISW A shall hold an allowed
administrative claim for fees and expenses incurred in making a substantial contribution
to the Proceedings in an amount not to exceed $100,000.
(g) Payment of Pipeline Claims. The Debtors' agreement to pay pipeline
claims in Paragraph 3(e) of the 1114 Agreement shall include pipeline claims of all
retirees of the Debtors. Pipeline claims shall be paid within ten (10) days after execution
of the Agreement by all Parties and Bankruptcy Court approval of this Agreement.
10. Modifications to 1113 Agreement. In addition to Section 8(a) hereof, the Parties
hereby agree to the following modifications to the 1113 Agreement:
(a) Post-1993 Retirees. ISWA employees retiring between the Petition Date
and May 2, 2006 shall be considered Affected Retirees for all purposes.
(b) Healthcare Premiums. Commencing in January, 2005, KCI shall
implement the healthcare premiums for active ISW A employees presented to the ISW A
in November, 2004 (the "Presumed Premiums"). In August, 2005, KCI will obtain an
actuarial estimate of the healthcare premiums for active ISW A employees for the then-
current plan year (the "Calculated Premiums"). If the Calculated Premiums exceed the
Presumed Premiums, the Presumed Premiums shall remain in effect through
December 31, 2005. If the Calculated Premiums are less than the Presumed Premiums,
such Calculated Premiums shall be implemented as soon as reasonably practicable, and
KCI and the ISW A shall negotiate in good faith to effect the method of reimbursement of
any premium amounts above the Calculated Premiums paid by active ISW A employees
from January through the implementation date of the Calculated Premiums.
(c) Health Benefits. The ISWA and KCI shall cooperate in good faith to
achieve comparable or better health benefits to those currently offered to active ISW A
employees at less cost and with no reduction in subsidy by KCI.
(d) Premium Payments During Lay Off. Active ISW A employees who are
laid off between the Petition Date and May 2, 2006 and would otherwise be required to
pay healthcare premiums during their lay off period shall not be required to pay
healthcare premiums during such lay off period. For purposes of this policy, an
employee on lay off, who, during such lay off period, elects to take paid vacation, shall
not be required to pay healthcare premiums as a result of electing to take such paid
vacation.
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K&E 10061611.24
11. KCI Documents. To the extent not set forth in the Consensual Plan and related
Confirmation Order, or as may be otherwise required under applicable law, each of the Parties
agrees to execute such documents as necessary to implement the following:
(a) Restriction on KCI's Ability to Issue Additional Equity. KCI will be
restricted from issuing New Common Stock or other equity securities or equity-
convertible securities for less than the then current market value of New Common Stock
on a fully-diluted basis to any insider of the reorganized Debtors (including Contran)
during a five-year period following the Effective Date.
(b) Composition of KCI's Board of Directors. The initial board of directors
of Reorganized KCI (the "New Board") shall consist of seven (7) members to be selected
as follows:
(i) Contran will name two representatives to the New Board.
(ii) The Committee will name two representatives to the New Board.
(iii) Three (3) directors who will qualify as independent directors in
accordance with NASDAQ standards shall be selected as follows:
(A) Contran will name two of the independent directors
(subject to the consent of the Committee, which consent shall not be
unreasonably withheld or delayed)
(1) Initially, Paul Bass will be one of the two
independent directors, and the Committee consents to Paul Bass;
and
(2) Contran agrees that its second independent director
will be unrelated to Contran and will qualify as a financial expert
for audit committee purposes.
(B) The Committee will name one director (subject to the
consent of Contran, which consent shall not be unreasonably withheld or
delayed).
(iv) Contran and the Committee shall use their reasonable best efforts
to agree upon nominees for the New Board prior to a hearing to approve a
disclosure statement for the Consensual Plan and, if applicable, the Qualified
Alternative Plan.
(c) So long as the Secured Note is outstanding, but in no event less than three
(3) years after the Effective Date:
K&E 10062611.24
(i) If a vacancy is created by any of the directors appointed in Section
ll(b)(i) or 11(b)(iii)(A) above or their successors, the vacancy shall be filled by
the remaining directors appointed in Section ll(b)(i) or ll(b)(iii)(A) or their
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successors. If a vacancy is created by any of the directors appointed in Section
ll(b)(ii) or ll(b)(iii)(B) above or their successors, the vacancy shall be filled by
the remaining directors appointed in Section ll(b)(ii) or ll(b)(iii)(B) or their
successors with the consent of the Creditor Trustee, if the Creditor Trust is still in
existence; and
(ii) The New Board shall select the boards of directors of the other
Reorganized Debtors and the subsidiaries and affiliates of all of the Reorganized
Debtors, including EWP.
12. Restriction on Transfer. Each Party agrees that, so long as this Agreement has
not been terminated in accordance with Section 18 hereof, it shall not sell, transfer or assign any
of its claims or any option thereon or any right or interest (voting or otherwise and including any
participation interest) therein, unless the transferee thereof agrees in writing to be bound by all of
the terms of this Agreement by executing a counterpart signature page of this Agreement, and the
transferor provides the other Parties with a copy thereof, in which event the other Parties shall be
deemed to have acknowledged that its obligations to the transferring Party under this Agreement
shall be deemed to constitute obligations in favor of such transferee, and the other Parties shall
confirm that acknowledgment in writing upon the request of such transferee. Upon a transferee's
joining this Agreement, the transferor shall have no further liability under this Agreement with
respect to the claims transferred, except for breaches occurring prior to such transfer.
13. Additional Covenants and Agreements.
(a) The Committee shall have the right to participate. in negotiations and
decisions regarding the Consensual Plan, including without limitation, exit financing
sought in connection therewith, allowance of the Sherman Wire Company claims and
allowance of environmental claims. The Debtors shall keep the Committee and the
Retiree Representatives timely apprised as to the status of the solicitation of consents to
the Consensual Plan and, if applicable, the Qualified Alternative Plan and all negotiations
related thereto.
(b) Subject to Section 13(i) hereof, the Committee, the Retiree
Representatives and/or the ISW A shall have the right to engage in negotiations and
discussions with any Potential Bidder, without disclosing confidential information (unless
such Potential Bidder has executed a confidentiality agreement), concerning any Offer,
Qualified Offer and/or the Qualified Alternative Plan and shall each further have the right
to sponsor, file and pursue confirmation of a Qualified Alternative Plan in accordance
with the provisions of Sections 17 and 18 hereof. The Debtors shall have the right to
participate in negotiations and decisions regarding any Qualified Alternative Plan.
(c) The Debtors agree to consult with the Committee and the Retiree
Representatives prior to taking any significant action in the Proceedings or in connection
with any threatened or pending litigation or governmental action relating to, referring to
or involving EWP.
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KkE 10062611.24
Page 51 of 64
(d) None of the Committee, any of its members, the Retiree Representatives,
the ISW A, Contran or the Debtors shall initiate or participate in a sale process for or
market test of the value of the Debtors, EWP or their respective assets, except as
provided in Section 17 hereof.
(e) The Debtors will use their reasonable best efforts to obtain Bankruptcy
Court approval of this Agreement on or before twenty (20) days after filing a motion to
approve the Agreement.
(f) The Debtors, Contran and the Committee shall (i) meet and confer on or
before six (6) days prior to the date first scheduled for commencement of the hearing to
approve a disclosure statement for the Consensual Plan in an effort to estimate
anticipated allowed Class A6 Claims; (ii) in good faith thereafter, as necessary or
appropriate, meet and confer in furtherance thereof; and (iii) timely keep the ISWA and
the Retiree Representatives apprised of the progress of such meetings.
(g) Any Proposing Party (as defined below) shall use its reasonable best
efforts to negotiate a Definitive Agreement that does not provide for any bid protection,
including, but not limited to, breakup fees or related expense reimbursements. If, despite
the Proposing Party's reasonable best efforts, a Defmitive Agreement provides for any
fonn of bid protection, such provision shall be subject to separate Bankruptcy Court
approval, and the Parties reserve all rights under the Bankruptcy Code or other applicable
law to contest such a provision.
(h) In order to maintain stability in the Debtors' business in connection with
the Qualified Alternative Plan process, the Parties agree to support approval of a key
employee retention plan ("KERP") on tenns and conditions substantially similar to those
outlined in Exhibit B hereto. The Debtors will seek Bankruptcy Court approval of the
KERP contemporaneously with seeking Bankruptcy Court approval of this Agreement.
(i) Prior to the filing of a disclosure statement for the Consensual Plan and, if
applicable, the Qualified Alternative Plan and except as set forth in the summary of this
Agreement to be filed pursuant to Section 2(a) hereof, the Parties shall keep the tenns and
provisions of this Agreement confidential and shall not, without the prior written consent
of each of the Parties, disclose such terms and provisions to any third party; proyided
however, that notwithstanding a Potential Bidder's execution of a confidentiality
agreement, the Parties shall not disclose to any Potential Bidder the tenns and provisions
of the Consensual Plan.
(j) All Parties shall act in good faith in honoring their obligations and in
perfonning under this Agreement.
(k) In connection with the proposal and confirmation of a Qualified
Alternative Plan, the Parties agree as follows:
K&E 10062611.24
(i) If the Definitive Agreement provides for assumption of the 1114
Agreement (which, pursuant to the 1114 Agreement, would trigger Schedule C
thereof, including for purposes of reducing monthly contributions to Affected
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K&E 10062611.24
Retirees to $130 for the balance of 2005, effective as of the Effective Date of the
applicable Qualified Alternative Plan), as modified pursuant to Section 9 hereof,
the Retiree Representatives may, in their collective and unanimous discretion
prior to corrunencement of the hearing on the Dual Plan Disclosure Statement:
(A) withdraw from the 1114 Agreement (effective as of the effective date of a
confirmed Qualified Alternative Plan); (B) on behalf of the Affected Retirees,
forego all payments and benefits thereunder (the "1114 Stream of Payments");
and (C) in lieu thereof, receive payments, pro rata with other general unsecured
creditors, on account of the $116,000,000 Claim (the "$116.000,000 Claim
Election"); provided however, that if the Retiree Representatives make the
$116,000,000 Claim Election and the Committee determines, in its sole
discretion, that the 1114 Stream of Payments is of higher and/or better value than
the additional consideration, if any, offered by the Qualified Bidder in lieu of the
1114 Stream of Payments, the amount of the 1114 Stream of Payments payable by
the Qualified Bidder under the Definitive Agreement (in connection with the
intent to assume the 1114 Agreement) shall be paid, pro rata, to all general
unsecured creditors including without limitation, the Affected Retirees (on
account of the $116,000,000 Claim); provided further, that if the Retiree
Representatives make the $I 16,000,000 Claim Election, the Affected Retirees
shall have, and be deemed to have, received a prepayment on account of the
$116,000,000 Claim in an amount equal to the aggregate payments that each
Affected Retiree received during the pendency of the Proceedings (approximately
$3,600,000 as of March 31, 2005) under and pursuant to orders of the Bankruptcy
Court (the "Interim 1114 Payments") such that the holders of allowed general
unsecured claims, other than the Affected Retirees, shall receive payments under
the Qualified Alternative Plan in the same pro rata amount as the Affected
Retirees receive thereunder after giving effect to the $116,000,000 Claim and the
Interim 1114 Payments, as illustrated in the schedule attached hereto as Exhibit C.
(ii) If the Definitive Agreement does not provide for assumption of the
1114 Agreement, the Affected Retirees shall receive, on account of the
$116,000,000 Claim, pro rata treatment with the holders of other allowed general
unsecured (non-subordinated) claims against the Debtors; provided however, that
the Affected Retirees shall have, and be deemed to have, received a prepayment
on account of the $116,000,000 Claim in an amount equal to the Interim 1114
Payments such that the holders of allowed general unsecured claims, other than
the Mfected Retirees, shall receive payments under the Qualified Alternative Plan
in the same pro rata amount as the Affected Retirees receive thereunder after
giving effect to the $116,000,000 Claim and the Interim 1114 Payments, as
illustrated in the schedule attached hereto as Exhibit C.
(iii) Distributions to the Affected Retirees on account of the
$116,000,000 Claim shall be allocated to Affected Retirees as follows:
(A) ISW A Affected Retirees: 59.0%;
(B) UA W Affected Retirees: 26.5%; and
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(C) Management Affected Retirees: 14.5%.
(1) In the event that a Qualified Alternative Plan is confirmed, all accrued,
unpaid Contran Administrative Claims arising under the ISA shall be paid on the
effective date of such Qualified Alternative Plan.
(m) The LIC Claims shall be allowed or disallowed, in whole or in part, in
connection with the claims allowance process in the Proceedings. The Parties reserve all
rights, remedies and defenses in respect of the LIC Claims and all other rights, claims,
remedies and defenses that may arise under or in connection with the intercompany
insurance program maintained by Contran and the Debtors, including, without limitation,
all rights, claims, remedies and defenses related to any administrative expense priority
claims that may be asserted by Contran in respect of such intercompany insurance
program (the "Insurance Program Claims").
(n) The Debtors and Contran shall, at their respective option, be relieved of
their respective obligations under Sections 2, 5 and 8 of this Agreement (excluding
Section 8(d)(iv) hereof) relating specifically and only to negotiating, supporting and
seeking conftnnation of the Consensual Plan upon the occurrence of a Material Adverse
Change; provided, however, that the Debtors and Contran shall not thereupon be relieved
of any of their other respective obligations under this Agreement, and the occurrence of a
Material Adverse Change shall not be deemed to cause a Termination. For purposes of
this Agreement, a Material Adverse Change shall mean (i) a determination by the Court
that the Consensual Plan is not feasible or may not be confirmed for other reasons, (ii) a
material adverse change in, or a material adverse effect upon, the operations, business,
prospects, properties or condition (fmancial or otherwise) of the Debtors, taken as a
whole, or (iii) an inability of the Debtors to perform the terms and provisions of the
Consensual Plan applicable to them; provided, however, that a Material Adverse Change
shall not include an adverse change, effect or event attributable to (A) any adverse
change in general economic conditions affecting the U.S. economy as a whole or the
industry in which the Debtors operate, or (B) any adverse change in regulatory conditions
in the industry in which the Debtors operate. The occurrence of a Material Adverse
Change shall not affect the survival of certain provisions of this Agreement pursuant to
Section 18(b) hereof.
14. Authority Concerning Committee Member and Contran Claims.
(a) Each Committee Member represents and warrants to the Debtors and
Contran that, as of the date hereof, it is the Holder (with power to vote and dispose of
such claims, and any and all rights and claims relating thereto) of, or is the person with
investment discretion for, its CM Claim.
(b) Contran represents and warrants to the Debtors, the Committee and the
Committee Members that, as of the date hereof, it is the Holder (with power to vote and
dispose of such claims, and any and all rights and claims relating thereto) of, or is the
person with investment discretion for, the Contran Claims.
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15. Releases and Preferences.
(a) Plan Releases. The Consensual Plan and, if applicable, the Qualified
Alternative Plan will provide for releases and exculpations for the Debtors, the
Committee, the Committee Members, the Retiree Representatives, the ISW A and
Contran, including without limitation, their respective officers, directors, members,
attorneys, advisors, representatives and employees.
(b) Limited Mutual Releases. Each Party on behalf of itself and its
successors, assigns, advisors, representatives, agents and counsel hereby releases all other
Parties including their successors, assigns, advisors, representatives, agents and counsel
with respect to any debts, liabilities, claims or causes of action arising from or related to
any act or omission occurring prior to the date hereof; provided however, that the
foregoing release shall not apply to, and each Party shall retain all rights with respect to:
(i) any claim or cause of action on account of any loan by such Party, money owed to
such Party or executory contract between the Debtors and such Party; (ii) any employee
grievance arising under a collective bargaining agreement; (iii) any workers'
compensation claim; and (iv) any claim arising under or related to the Keystone
Employees' Retirement Plan.
(c) Preferences. The Consensual Plan and, if applicable, the Qualified
Alternative Plan will provide that (i) neither the Debtors nor any authorized creditor
representative will commence any adversary proceedings or otherwise pursue recovery of
preferences under 11 U.S.C. 547 against any Party and (ii) with respect to other
creditors, except as hereinafter provided, the Debtors will not commence any adversary
proceedings or otherwise pursue recovery of preferences under II U.S.C. 547 without
the consent of the Committee, the Creditor Trustee or other authorized creditor
representative, as applicable (which consents shall not be unreasonably withheld or
delayed). Notwithstanding anything herein to the contrary, the Debtors may take any
action necessary to seek disallowance of a claim of any non-Party creditor pursuant to
Section 502( d) of the Bankruptcy Code.
16. Committee Existence. The Committee shall exist and participate as a party-in-
interest in the Proceedings until the effective date of the Consensual Plan or, if applicable, the
Qualified Alternative Plan.
17. The Qualified Alternative Plan Process and Provisions.
(a) The QuaUfied Alternative Plan Process. Notwithstanding anything to
the contrary herein, upon execution of this Agreement by all Parties, the Parties shall
consider unsolicited expressions of interest by third parties (each, a "Potential Bidder'')
to obtain possession, ownership and/or control of all or substantially all of the businesses
or assets of the Debtors (a "Transaction") in accordance with the following provisions:
K&B 10062611,24
(i) Upon receipt of an unsolicited expression of interest from a
Potential Bidder (a "Bid") on or before fifty-two (52) days after execution of this
Agreement by all Parties:
26
K&E 10062611.24
(A) The Party receiving such Bid shall immediately distribute it
to all of the other Parties (other than Contran);
(B) Upon the written request of any Party (other than Contran),
after a detennination in such Party's reasonable judgment that the Potential
Bidder is a party that realistically could close a Transaction under the
process set forth below that would be a Qualified Offer, the Debtors shall,
within one (1) business day of receipt of such request, send a
confidentiality agreement (in the form attached hereto as Exhibit D) to the
Potential Bidder, with a copy to each of the Parties (other than Contran);
and
(C) Upon receipt of the confidentiality agreement duly
executed by the Potential Bidder, the Debtors shall, within a reasonable
period of time under the circumstances, but in no event more than three (3)
business days thereafter, send to the Potential Bidder reasonably requested
diligence information (not including competitively sensitive information if
the Potential Bidder is a competitor of the Debtors or EWP). The Parties
agree that the information specified in the request attached hereto as
Exhibit E (to the extent maintained by the Debtors in the ordinary course of
business) describes what the Parties consider to be reasonably requested
initial diligence information. The Debtors shall also duly provide the
Potential Bidder reasonably requested additional diligence infonnation,
documents and schedules as well as reasonable access to the Debtors'
facilities and management personnel. The Debtors shall keep the Parties
(other than Contran) apprised of the status of all diligence requests and
visits.
(ii) Any of the Parties (other than Contran) may negotiate a letter of
intent with a Potential Bidder which, upon completion, shall be circulated to the
other Parties (other than Contran); provided however, that the Debtors shall have
the right to participate in negotiations regarding such letter of intent and the other
Parties (other than Contran) shall be informed of the status, progress and terms
thereof on a timely and regular basis.
(iii) If a letter of intent is submitted by a Party to the other Parties
(other than Contran) for consideration in compliance with subparagraph (ii) above
(an "Offer"), the Parties (other than Contran) shall meet and confer to discuss and
analyze the merits and benefits of the Transaction set forth in the letter of intent
and to detennine which of the Parties (other than Contran) is in the overall best
position to negotiate a definitive agreement (i.e. an asset purchase agreement, a
plan sponsorship agreement or some other similar agreement) with the Potential
Bidder (a "Definitive Agreement") that will form the basis of a Qualified
Alternative Plan.
(iv) In the event that the Parties (other than Contran) cannot agree on
the Party in the overall best position to negotiate a Definitive Agreement, the
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KollE 10062611.24
Committee shall be deemed so designated and shall keep the other Parties (other
than Contran) advised of the terms, status and progress of negotiations of the
Definitive Agreement; provided however, that, in any event, the Debtors shall be
obligated, and the Party submitting the Offer for consideration shall have the
right, to participate directly in the negotiation of the related Definitive Agreement.
(v) Prior to the filing of the Qualified Alternative Plan, none of the
Parties, without the consent of the Committee and any other Proposing Party,
shall disclose information to Contran, or involve Contran in negotiations,
concerning a Bid, letter of intent, or Definitive Agreement. Promptly following
the filing of the Qualified Alternative Plan, or upon the failure to execute a
Definitive Agreement within the time period set forth in Section 17(b)(i) hereof,
Contran shall be entitled to receive, and the other Parties shall provide to Contran,
complete information concerning the identities of all Potential Bidders, the terms
and conditions of all Bids and letters of intent received from Potential Bidders, the
names of all persons who have expressed indications of interest in a transaction
involving any of the Debtors or their assets or received confidential information
concerning the Debtors, and copies of all confidentiality agreements executed by
and all confidential information provided to such persons; ,Qrovided however, that
in the event of a dispute among the Parties with respect to the failure to execute a
Definitive Agreement within the time period set forth in Section 17(b)(i) hereof,
Contran shall not be entitled to receive any of the foregoing information until
such dispute has been resolved either by the Parties or the Bankruptcy Court.
(vi) A Definitive Agreement will be deemed a "Qualified Offer" if the
Definitive Agreement satisfies the following requirements:
(A) The Definitive Agreement has been executed by the
Potential Bidder by the later of fifty (50) days after delivery by the Debtors
of the first set of diligence materials reasonably requested by the fust
Potential Bidder and fifty-two (52) days after the execution of this
Agreement by all Parties;
(B) Consummation of the Definitive Agreement is not
contingent upon further due diligence by the Potential Bidder or the
availability of fmancing;
(C) The Potential Bidder recognizes a duty to negotiate in good
faith with the ISWA;
(D) As security for performance of its obligations under the
Definitive Agreement, the Potential Bidder has made a deposit of a
material amount;
(E) Any Party (the "Proposing Party") believes, with the
advice of its professionals, that the consummation of the Defmitive
Agreement is in the best interests of the Debtors' estates, taking into
28
account the value and benefits of the Consensual Plan on the terms set forth
herein, including without limitation, Section 8 hereof.
(vii) The Proposing Party shall be principally responsible for drafting
and negotiating with the Potential Bidder that is submitting the Qualified Offer
(the "Qualified Bidder") a plan to implement such Qualified Offer (a "Qualified
Alternative Plan"); provided however, that the Debtors shall participate in
negotiations and decisions regarding the Qualified Alternative Plan and the other
Parties (other than Contran) shall be informed of and provide input to the status,
progress and terms thereof on a timely and regular basis.
(viii) The Parties shall work cooperatively on a single disclosure
statement for both the Consensual Plan and the Qualified Alternative Plan (the
"Dual Plan Disclosure Statement"), and the Debtors shall, with input from the
other Parties, be principally responsible for the drafting of the Dual Plan
Disclosure Statement, related exhibits and schedules, voting ballots, notices and a
scheduling motion, including joint solicitation materials explaining that the voting
and confirmation processes relating to both plans will proceed simultaneously and
only one confirmation hearing will be held for both plans.
(ix) Subject to approval of the Dual Plan Disclosure Statement, the
Proposing Party (or the Committee Members, if the Committee is the Proposing
Party) shall vote to accept both the Consensual Plan and the Qualified Alternative
Plan; provided however, that any Party, including a Proposing Party, may indicate
a preference for and argue in favor of confirmation of one plan over the other.
(x) All Parties agree that the Consensual Plan does not discriminate
unfairly, and is fair and equitable, with respect to each class of claims or interests
that is impaired under the Consensual Plan, and no Party shall object to
confirmation of the Consensual Plan under Section l129(b) of the Bankruptcy
Code if the Consensual Plan otherwise satisfies the requirements of Section
1129(a) of the Bankruptcy Code.
(b) Timing and Process for the Qualified Alternative Plan, the
Consensual Plan and Other Related Matters.
K&.B I 0062611.24
(i) If (a) no Qualified Offer exists by the later of fifty (50) days after
delivery by the Debtors of the first set of diligence materials reasonably requested
by the first Potential Bidder and fifty-two (52) days after the execution of this
Agreement (and there is no pending bona fide dispute related thereto) or (b) prior
to such time the Committee, the Retiree Representatives and the ISW A each
advise the Debtors in writing that they are no longer pursuing a Qualified
Alternative Plan, the Debtors shall promptly file the Consensual Plan and a
disclosure statement related thereto, together with a motion requesting a schedule
for a hearing on the disclosure statement and a confirmation hearing for the
Consensual Plan.
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18.
Evidence.
K&E 1006261 1.24
(ii) If a Qualified Offer exists within the timeframe set forth in Section
17(b)(i) above, the Debtors and the Proposing Party shall simultaneously file the
Consensual Plan and the Qualified Alternative Plan, and the Debtors shall also
file the Dual Plan Disclosure Statement and a motion requesting a schedule for a
hearing on the Dual Plan Disclosure Statement and simultaneous confirmation
hearings for the Consensual Plan and the Qualified Alternative Plan.
(iii) The confirmation hearings for the Consensual Plan and the
Qualified Alternative Plan shall occur on the same schedule.
(iv) The Parties shall use their reasonable best efforts to obtain an order
approving a disclosure statement related to the Consensual Plan or, if applicable,
the Dual Plan Disclosure Statement as soon as reasonably practicable, but in any
event, on or before June 15, 2005.
(v) The Parties shall use their reasonable best efforts to commence a
confirmation hearing on the Consensual Plan and, if applicable, the Qualified
Alternative Plan as soon as reasonably practicable, but in any event, on or before
July 29, 2005.
(vi) The Qualified Alternative Plan may provide a mechanism for
receiving and approving "overbids" to the Qualified Offer; provided however,
that no Party shall affirmatively seek additional Bids or Potential Bidders.
Termination of Agreement; Survival of Certain Provisions; Inadmissibility of
(a) Termination of Agreement.
(i) An "Agreement Termination Evenf' shall mean any of the
following:
(A) Any Party (the "Breaching Partv") commits a material
breach of this Agreement which has not been waived by all Parties or, if
curable, cured within five (5) business days after the Parties' receipt of
written notice of the occurrence of such breach; provided however, that the
Breaching Party shall not be permitted to cause a Termination related to its
own breach or, if the Breaching Party is the Conunittee or any Committee
Member, neither the Committee nor any of the Committee Members shall
be permitted to cause a Termination related to such breach;
(B) The Chapter 11 Case of KCI is dismissed or converted to a
case under chapter 7 of the Bankruptcy Code;
(C) An examiner with expanded powers or chapter 11 trustee is
appointed in the Chapter 11 Case of KCI;
30
K&E 10062611.24
(D) There shall have been commenced any proceedings in
bankruptcy by or against EWP, or alleging that EWP is insolvent or unable
to pay its debts as they mature, or for the readjustment or arrangement of
EWP's debts or the appointment of a receiver, receiver-manager or trustee
over a substantial portion of the assets ofEWP;
(E) The Consensual Plan and, if applicable, the Qualified
Alternative Plan are both rejected by the Holders of any non-insider
impaired class of claims thereunder pursuant to Sections 1126 and 1129(a)
of the Ba.nk:ruptcy Code and are not subsequently confirmed pursuant to
Section l129(b) of the Bankruptcy Code;
(F) The Bankruptcy Court declines to confirm both the
Consensual Plan and, if applicable, the Qualified Alternative Plan;
(G) Any of the Committee, Contran or the Debtors reasonably
believe, in good faith, on the basis of information shared with the Parties,
that the estimated amount of Allowed Class A4 Claims plus Allowed Class
A6 Claims (including claims of Sherman Wire Company and
environmental claims) exceeds $68,000,000, and, by six (6) days prior to
the date frrst scheduled for commencement of the hearing to approve a
disclosure statement for the Consensual Plan, (i) no Party has agreed to
absorb the financial impact of the increase in estimated Class A6 General
Unsecured Claims, (ii) the Committee and Contran have failed to reach
agreement on amending this Agreement and/or the Consensual Plan to
adjust for the increase in estimated Class A6 General Unsecured Claims
and (iii) the Bankruptcy Court has not entered an order estimating the Class
A4 and Class A6 Claims in an aggregate amount equal to or less than
$68,000,000;
(H) A Final Order approving a disclosure statement for the
Consensual Plan or, if applicable, the Dual Plan Disclosure Statement has
not been entered in the Proceedings by July 29, 2005 (unless the Parties
agree to a later date); or
(I) A Final Order confirming the Consensual Plan or, if
applicable, the Qualified Alternative Plan, has not been entered in the
Proceedings by September 15, 2005 (unless the Parties agree to a later
date).
(ii) Upon the occurrence of any Agreement Termination Event, any
Party may give written notice to the other Parties of the occurrence of such
Agreement Termination Event. If such Agreement Termination Event is not
waived by all Parties or cured (including through enforcement of specific
performance under Section 19 hereof) within ten (10) business days after the
Parties' receipt of such written notice, this Agreement shall terminate (the
"Termination").
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(iii) If a Termination occurs prior to the filing of the Consensual Plan
and, if applicable, the Qualified Alternative Plan, the Debtors and Contran shall
not in any manner proceed in seeking any orders in connection with confirmation
of the Consensual Plan (or any other plan), including without limitation,
scheduling orders, orders approving a disclosure statement and orders approving
notices and balloting procedures, for a period of twenty-one (21) days after such
Termination; provided however, that this provision shall not apply where the
Termination is a result of a breach of this Agreement by the Committee or any of
the Committee Members.
(iv) If a Termination occurs after the filing of the Consensual Plan and,
if applicable, the Qualified Alternative Plan, any Proposing Party (or any other
Party) may proceed in seeking confrrrnation of the Qualified Alternative Plan, and
the Debtors and Contran may proceed in seeking confirmation of the Consensual
Plan.
(b) Survival of Certain Provisions. Upon Termination, each of the Debtors,
Contran, the Committee, the Committee Members, the Retiree Representatives and the
ISW A shall have all rights that are available to each of them under applicable law or
otherwise; provided however, that the provisions of Sections 2(f), 2(g), 3(d), 3(h), 4(c),
4(g), 5(e), 5(f), 5(g), 6(e), 6(f), 7(f), 7(g), 8(d)(iv), 13(m), 15(b), 15(c), 18 and 19(b)
hereof shall survive Termination and none of the Debtors, Contran, the Committee, the
Committee Members, the Retiree Representatives and the ISWA shall be relieved oftheir
rights or obligations thereunder, except that the Parties shall be permitted to engage in
discovery and assert claims and causes of action relating to the Agreement Termination
Event and/or the Termination and otherwise pursue rights or remedies under the
Bankruptcy Code or other applicable law, including seeking to terminate exclusivity
under Section 1121 ofthe Bankruptcy Code.
(c) Inadmissibility of Evidence. All Parties agree that upon Termination,
this Agreement, all drafts thereof and all related communications, discussions and
correspondence are settlement communications protected under Rule 408 of the Federal
Rules of Evidence other than those provisions of this Agreement that survive Termination
as provided in Section 18(b) hereof.
19. Specific Performance.
(a) It is understood and agreed by each of the Parties that money damages
would not be a sufficient remedy for any breach of this Agreement by any Party and each
non-breaching Party shall be entitled to the remedy of specific performance and
injunctive or other equitable relief as a remedy for any such breach, without the necessity
of securing or posting a bond or other security in connection with such remedy.
(b) No Party shall have any monetary liability to any other Party for any
breach of this Agreement.
32
K.&E 10062611.24
20. Representations and Warranties. Subject to approval of the Bankruptcy Court,
each of the Debtors, Contran, the Committee Members, the Committee, the Retiree
Representatives and the ISWA represents and warrants to the other that the following statements
are true, correct and complete as of the date hereof:
(a) Corporate Power and Authority. It has all requisite power and authority
to enter into this Agreement and to carry out the transactions contemplated by, and
perform its respective obligations under, this Agreement, including, as to each Committee
Member, that as of the date hereof, it is the beneficial owner of, and/or the investment
adviser or manager for the beneficial owners of (with the power to vote and dispose of),
or acts in a representative capacity with respect to the CM Claims;
(b) Authorization. The execution and delivery of this Agreement and the
performance of its obligations hereunder have been duly authorized by all necessary
action on its part; and
(c) Binding Obligation. This Agreement is the legally valid and binding
obligation of it, enforceable against it in accordance with its terms.
21. Effectiveness; Amendments. This Agreement shall not become effective and
binding on the Parties unless and until counterpart signature pages to this Agreement have been
executed and delivered by each Debtor, Contran, the Committee, each Committee Member, each
Retiree Representative and the ISW A. Once effective, this Agreement may not be modified,
amended or supplemented except in writing signed by each Debtor, Contran, the Committee,
each Committee Member, each Retiree Representative and the ISW A.
22. Accredited Investors. Each Committee Member represents that (a) it is a
sophisticated investor with respect to the transactions described herein with sufficient knowledge
and experience in owning and investing in securities similar to the Secured Note described herein
to evaluate properly the transactions contemplated by this Agreement and it has made its own
analysis and decision to enter in this Agreement; and (b) it is an "accredited investor" within the
meaning of Section 2(15) of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
23. Creditors Committee. Nothing contained herein shall limit or restrict the
Committee or the Committee Members from acting in a manner consistent with their fiduciary
duties; provided however, that Sections 13(d) and 17 hereof shall govern the Parties' actions
with respect to any Bid.
24. Debtors' Fiduciary Duties. Nothing contained herein shall limit or restrict the
Debtors from acting in a manner consistent with their fiduciary duties; provided however, that
Sections 13(d) and 17 hereof shall govern the Parties' actions with respect to any Bid.
25. Limited Right of Withdrawal. The Parties acknowledge and agree that, in
entering into this Agreement, the Indenture Trustee is not acting in its individual capacity but,
rather, is acting in its capacity as the duly authorized, qualified and acting indenture trustee for
the holders (the "Noteholders") of those certain 9-5/8% Subordinated Unsecured Notes due
2007 (the "Notes"). Notwithstanding any other provision of this Agreement, in the event that the
33
K&E 10062611.24
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Indenture Trustee receives written direction from Noteholders constituting a majority in principal
amount of the Notes to withdraw from this Agreement (a "Majority Direction"), the Indenture
Trustee shall have the right, exercisable in its sole discretion and upon written notice to each of
the other Parties, to voluntarily withdraw from this Agreement without incurring any penalty or
liability to any other Party. Upon such withdrawal, this Agreement shall be deemed null and
void as to the Indenture Trustee, and the Indenture Trustee shall be released from any duties or
obligations hereunder.
26. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Illinois, without regard to any
conflicts of law provision that would require the application of the law of any other jurisdiction.
By its execution and delivery of this Agreement, each of the Parties hereby irrevocably and
unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to
any matter under or arising out of or in connection with this Agreement or for recognition or
enforcement of any judgment rendered in any such action, suit or proceeding, may be brought in
the Bankruptcy Court, which shall have exclusive jurisdiction of all matters arising out of or in
connection with this Agreement.
27. Notices. All notices and consents hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered by courier service, messenger, or
telecopy or initially deposited in the mails, by certified or registered mail, postage prepaid return
receipt requested, to the following addresses, or such other addresses as may be furnished
hereafter by notice in writing, to the following parties:
(a) ifto the Debtors. to:
Keystone Consolidated Industries, Inc.
7000 SW Adams Street
Peoria, Illinois 61641
Attn: David L. Cheek
Keystone Consolidated Industries, Inc.
5430 LBJ Fwy., Ste. 1740
3 Lincoln Centre
Dallas, TX 75240-2697
Attn: Bert E. Downing, Jr.
With a copy to:
Kirkland & Ellis LLP
200 East Randolph Dr.
Attn: David L. Eaton
Anne M. Huber
(b) if to any Committee Member, to: such Committee Member at the
address shown for such entity on the applicable signature page hereto, to the attention of
the person who has signed this Agreement on behalf of such entity.
34
K&e 1006261 1.24
K&B 10062611.24
(c)
(d)
(e)
(f)
if to the Committee, to:
Jenner & Block LLP
One IBM Plaza
Attn: Jeff J. Marwil
if to Contran. to:
Contran Corporation
5430 LBJ Fwy., Ste. I 700
3 Lincoln Centre
Dallas, Texas 75240-2697
Attn: Bob D. O'Brien
With a copy to:
Rogers & Hardin LLP
2700 International Tower
229 Peachtree Street, NE
Atlanta, Georgia 30303-1601
Attn: Edward J. Hardin
Robert A. Parker
if to the Retiree Representatives, to:
Cusack, Fleming, Gilfillan & O'Day
124 Southwest Adams Street
Suite 520
Attn: Daniel G. O'Day
Schoenberg, Fisher, Newman & Rosenberg, Ltd.
222 South Riverside Plaza
Chicago, Illinois 60606-6101
Attn: Trent P. Cornell
Jon Cohen
International Union, United Automobile, Aerospace
& Agricultural Implement Workers of America-
UAW
8000 East Jefferson Avenue
Detroit, Michigan 48214
Attn: Niraj R. Ganatra
if to the ISWA, to:
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Cusack, Fleming, Gilfillan & O'Day
124 Southwest Adams Street
Suite 520
Attn: Daniel G. O'Day
28. Reservation of RiKbts. This is part of a proposed settlement of a dispute among
the Parties. Except as expressly provided in this Agreement: (A) nothing herein is intended to,
or does, in any manner waive, limit, impair or restrict the ability of each Debtor, Contran, the
Committee, each Committee Member, each Retiree Representative and the ISWA to protect and
preserve its rights, remedies and interests, including without limitation, its claims against the
other; (B) nothing herein shall be deemed an admission of any kind; (C) nothing contained
herein effects a modification of the rights of the Debtors, Contran, the Committee, the
Committee Members, the Retiree Representatives or the ISWA unless and until any plan is
confirmed; and (D) nothing contained herein is intended to, or does, in any manner waive, limit,
impair or restrict the ability of any Party to object to any motion for relief by any other party
during the Proceedings. If the transactions contemplated herein are not consummated, or if this
Agreement is terminated for any reason, the Parties fully reserve any and all of their rights.
Federal Rule of Evidence 408 and any applicable state rules of evidence apply to this Agreement
and all negotiations relating thereto.
29. Consideration. The Parties hereby acknowledge that, other than each Debtor's
agreements, covenants, representations and warranties, as more particularly set forth herein, no
consideration shall be due or paid to the Committee Members for their agreement, subject to
approval of a disclosure statement, to vote their Claims to accept the Consensual Plan in
accordance with the terms and conditions of this Agreement.
30. Acknowledgment. This Agreement is not and shall not be deemed to be a
solicitation for consents to any plan. The acceptance of Contran, the Committee Members, the
Retiree Representatives and the ISW A will not be solicited until they have received the
disclosure statement for the Consensual Plan and related ballots, as approved by the Bankruptcy
Court.
31. Headings. The headings of the paragraphs and subparagraphs of this Agreement
are inserted for convenience only and shall not affect the interpretation hereof.
32. Successors and Assigns. This Agreement is intended to bind and inure to the
benefit of the Parties and their respective successors, assigns, heirs, executors, administrators and
representatives.
33. Several, Not Joint, Obligations. The agreements, representations and
obligations of the Committee Members under this Agreement are, in all respects, several and not
joint.
34. Prior Negotiations. This Agreement supersedes all prior negotiations with
respect to the subject matter hereof.
36
K&E 10062611.24
35. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which shall constitute one and the same
Agreement. This Agreement may be executed by facsimile and facsimile signatures shall have
the same effect as original signatures.
36. No Third-Party Beneficiaries. Unless expressly stated herein, this Agreement
shall be solely for the benefit of the Parties, and no other person or entity shall be a third party
beneficiary hereof.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
37
KAE 10062611.24
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In re American Color Graphics, Inc. (In re ACG Holdings, Inc.), Case No. 08-11467 (Bankr. Del.
2008).
EXECUTION COPY
RESTRUCTURING AND LOCK-UP AGREEMENT
This Restructuring and Lock-Up Agreement dated as of May 22, 2008 (this
"Agreement') is made by and among (i) the undersigned holders or investment advisers
or managers of discretionary accounts that hold the Notes (as defined below) set forth on
such holder's or manager's signature page hereto (each, a "Consenting Noteholder"), (ii)
American Color Graphics, Inc. ("ACG") and ACG Holdings Inc. ("ACG Holdings" and,
together with ACG, the "ACG Parties"), and (iii) Vertis, Inc. ("Vertis" and, together with
ACG, the "Companies"), Vertis Holdings, Tnc. ("Vertis Holdings"), Webcraft, LLC,
Webcraft Chemicals, LLC, Enteron Group, LLC, Vcrtis Mailing, LLC and USA Direct,
LLC (collectively with the other entities in (iii), the" Vertis Parties") (each of the
foregoing, a "Party," and collcctivcly, the "Parties").
RECITALS
WHEREAS, contemporaneously with the execution of this Agreement, ACG
Holdings and the Vertis Parties are executing an Agreement and Plan of Merger (the
"Agreement and Plan of Merger") with respect to the proposed merger of ACG Holdings
with Victory Merger Sub, LLC, a subsidiary ofVertis (the "Proposed Merger");
WHEREAS, the Vertis Parties, the ACG Parties, certain of the Consenting
Noteholders that are holders of the ACG Second Lien Notes (the "ACG Initial
Consenting Note holders"), certain of the Consenting Noteholders that are holders of one
or more of the Vertis Second Lien Notes, the Vertis Senior Notes, and the Vertis
Subordinated Notes (the "Vert is Initial Consenting Note holders," and together with the
ACG Initial Consenting Noteholders, the "Initial Consenting Noteholders") are
negotiating restructuring and recapitalization transactions with respect to the debt of the
Companies (including ACG's $280MM 10% Senior Second Secured Notes due 2010 (the
"ACG Second Lien Notes"), Vertis' $350MM 9.75% Senior Secured Second Lien Notes
due 2009 (the ''Vertis Second Lien Notes"), Vertis' $350MM 10.875% Senior Notes due
2009 (the "Vertis Senior Notes"), and Vertis' $293.5MM 13.5% Senior Subordinated
Notes due 2009 (the "Vertis Subordinated Notes" and together with the ACG Second
Lien Notes, the Vertis Second Lien Notes and the Vcrtis Senior Notes, the "Notes")) in
connection with the Proposed Merger and pursuant to the terms and conditions set forth
in the Term Sheet attached hereto as Exhibit A (the "Term Sheet") and in this Agreement
(the restructuring and recapitalization transactions, collectively, the "Transactions");
WHEREAS, it is anticipated that the Transactions will be implemented through a
solicitation of votes for a prepackaged plan of reorganization of the Vertis Parties and the
ACG Parties, respectively, pursuant to Regulation D under the Securities Act of 1933, as
amended, and Sections 1125, 1126 and 1145 ofthe Bankruptcy Code (the "Vertis
Solicitation" and the "ACG Solicitation," respectively);
WHEREAS, the ACG Parties intend to commence voluntary reorganization cases
(the "ACG Chapter 11 Cases") under chapter 11 oftitle 11 of the United States Code, 11
U.S.C. 101-1532 (the "Bankruptcy Code"), in the United States Bankruptcy Court for
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the District of Delaware (the "Bankruptcy Court') to effect the Transactions through a
prepackaged chapter 11 plan of reorganization that is materially consistent with the terms
and conditions set forth in the Term Sheet (the "ACG Plan"); and
WHEREAS, the Vertis Parties intend to commence voluntary reorganization
cases (the "Vertis Chapter 11 Cases," together with the ACG Chapter 11 Cases, the
"Chapter 11 Cases") under chapter 11 of the Bankruptcy Code in the Bankruptcy Court
to effect the Transactions through a prepackaged chapter 11 plan of reorganization that is
materially consistent with the terms and conditions set forth in the Term Sheet (the
"Vertis Plan").
NOW, THEREFORE, in consideration of the foregoing, the Parties agree as
follows:
AGREEMENT
Section 1. Agreement and Plan of Merger. This Agreement is executed in
contemplation of the simultaneous completion ofthe financial restructuring of the Vertis
Parties and the ACG Parties pursuant to the Vertis Plan and the ACG Plan, respectively.
The Vertis Parties and the ACG Parties hereby agree that the Agreement and Plan of
Merger shall be materially amended, materially modified, restated or terminated only
with the consent of the Consenting Noteholders constituting the Requisite Noteholder
Consent (as defined below), which consent shall not be unreasonably withheld or
delayed, and consistent with the termination provisions herein; provided, however, that
(A) the ACG Parties may terminate the Agreement and Plan of Merger if(i) the
conditions in Section 8.1 or 8.3 of the Agreement and Plan of Merger have not been
satisfied on the proposed Effective Date (as defined in the Term Sheet) or if termination
is permitted by Section 9.l(f) or Section 9.1(g) of the Agreement and Plan of Merger on
the proposed Effective Date, (ii) the board of directors of the ACG Parties determines
that such termination is required in accordance with the exercise of its fiduciary duties,
and (iii) the ACG Parties have consulted in good faith with the Vertis Parties and the
Consenting Noteholders prior to such termination and (B) the Vertis Parties may
terminate the Agreement and Plan of Merger if (x) the conditions in Section 8.1 or 8.2 of
the Agreement and Plan of Merger have not been satisfied on the proposed Eftective Date
or iftermination is permitted by Section 9.l(e) or Section 9.l(g) ofthe Agreement and
Plan of Merger on the proposed Effective Date, (y) the board of directors of the Vertis
Companies determines that such termination is required in accordance with the exercise
of its fiduciary duties, and (z) the Vertis Companies have consulted in good faith with the
ACG Parties and the Consenting Noteholders prior to such termination. Neither the ACG
Parties nor the Vertis Parties shall waive any material obligation, material right or
material condition under the Agreement and Plan of Merger without the consent of the
Consenting Noteholders constituting the Requisite Noteholder Consent, which consent
shall not be unreasonably withheld or delayed. Anything in this Section 1 to the contrary
notwithstanding, amendments, waivers, modifications and consents of or under Section
6.1 of the Agreement and Plan of Merger shall not require the consent or agreement of
any person other than Vertis and ACG Holdings. Any consent required pursuant to this
Section 1 shall not include the consent of the ACG Initial Consenting Noteholders if such
NY2:\ 1865471 \35\13Z#N35! .DOC\ 79081.0003 2
requested consent is by the Vertis Parties and shall not inc I ude the consent of the Vertis
Initial Consenting N oteholders if such requested consent is by the ACG Parties.
Section 2. Term Sheet. The Term Sheet is expressly incorporated herein
and is made part of this Agreement. The general terms and conditions ofthc
Transactions are set forth in the Term Sheet; however, the Term Sheet is supplemented
by the terms and conditions of this Agreement. In the event of any inconsistencies
between the terms of this Agreement and the Term Sheet, this Agreement shall govern.
Section 3. Commitments Regarding a Transaction.
3.01. Agreement to Vote.
(a) Subject to the conditions contained in Section 3.02 hereof and as long as this
Agreement has not been terminated in accordance with the terms hereof, each Consenting
Noteholder agrees that it shall, subject to the receipt by such Consenting Noteholder of a
disclosure statement and other solicitation materials in respect of the ACG Plan or the
Vertis Plan, as applicable, that is subsequently approved by the Bankruptcy Court as
complying with section 1126(b) ofthe Bankruptcy Code:
(i) vote its claims against the ACG Parties or the Vertis Parties, as
applicable, to accept the ACG Plan or the Vertis Plan, as applicable, by delivering its
duly executed and completed ballot accepting such Plan on a timely basis following the
commencement of the ACG Solicitation and the Vertis Solicitation, as applicable;
provided, however, that such vote shall be immediately revoked and deemed void ab
initio upon termination of this Agreement pursuant to the terms hereof (other than
Section 8.06 hereof);
(ii) not change or withdraw (or cause to be changed or withdrawn) such
vote; and
(iii) not, in any material respect, (x) object to, delay, impede or take any
other action to interfere with acceptance or implementation of either the ACG Plan or the
Vertis Plan, or (y) propose, file, support, or vote for any restructuring, workout or plan of
reorganization for the ACG Parties or the Vertis Parties other than the ACG Plan and the
Vertis Plan (provided, that, notwithstanding anything else to the contrary herein,
discussions or negotiations permitted by Section 8.08 of this Agreement may take place).
(b) For the avoidance of doubt, each Consenting Noteholder also agrees that,
unless the Agreement is validly terminated, it will not take any action that would in any
material respect interfere with, delay or postpone the consummation of the ACG Plan or
the Vertis Plan or the Proposed Merger; provided, however, that, except as set forth in
this Agreement, the foregoing prohibition will not limit any Consenting Noteholder's
rights under any indenture governing the Notes (including the exercise of any available
remedies), its right, subject to Section 3.03 hereof, to sell or enter into any transactions in
connection with any ofthe Notes, and its rights under any applicable bankruptcy,
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insolvency, foreclosure or similar proceeding, including, without limitation, appearing as
a party in interest in any matter to be adjudicated in any case under the Bankruptcy Code
concerning the Vertis Parties or the ACG Parties so long as such appearance and the
positions advocated in connection therewith are not materially inconsistent with the
Vertis Plan or the ACG Plan and are not for the purpose of hindering, delaying or
preventing the consummation of the Transactions; provided further, however, that
notwithstanding the foregoing proviso, each Consenting N oteholder agrees, subject to the
terms ofthe existing forbearance agreement with certain holders ofVertis Second Lien
Notes, that, so long as this Agreement has not been validly terminated, it will forbear
from exercising any rights and remedies resulting from Vertis' failure to make an interest
payment under any of the Notes or from the acceleration of any such Notes.
(c) Nothing contained herein shall limit (i) the ability of any of the Consenting
Noteholders to consult with each other or the ACG Parties or the Vertis Parties or (ii) the
ability of any Consenting Noteholder to appear and be heard concerning any matter
relating to the Transactions, the ACG Chapter II Cases or the Vertis Chapter 11 Cases,
so long as such appearance is not materially inconsistent with such Consenting
Noteholder's obligations hereunder and the terms of this Agreement.
(d) The parties agree that any breach by a Consenting Noteholder of the
foregoing prohibition would give rise to irreparable damage for which monetary damages
would not be an adequate remedy. Each Consenting Noteholder accordingly agrees that
the Vertis Parties and the ACG Parties, as the case may be, will be entitled to enforce the
terms of the foregoing prohibition by decree of specific performance without the
necessity of proving the inadequacy of monetary damages as a remedy and to obtain
injunctive relief against any breach or threatened breach, and the Vert is Parties and the
ACG Parties, as the case may be, agree that such relief will be their only remedy against
the applicable Consenting Noteholder with respect to a breach of the foregoing
prohibition.
3.02 Certain Conditions. The obligations of each Consenting Noteholder set
forth in Section 3.01 hereof arc subject to the following conditions:
(a) Each Informal Committee and the Vertis Second-Lien Noteholder Group (as
each is defined in the Term Sheet) shall have (i) provided the consents set forth in the
Term Sheet with respect to documents described therein that have been executed, filed
with the Bankruptcy Court, become effective, or otherwise been finalized and (ii)
approved the form and substance of any other applicable agreements or documents
implementing the Transactions (i.e., those documents not described in the Term Sheet)
that have been executed, filed with the Bankruptcy Court, become effective, or otherwise
been finalized, including, without limitation, documents relating to the terms and
conditions of the registration rights agreement and documents relating to corporate
governance (including bylaws and articles of incorporation), (each of (i) and (ii), a
"Transaction Document') as being consistent in all material respects with this Agreement
and the Term Sheet and otherwise acceptable, which approval shall not be unreasonably
:-.IY2:\1865471\35\13Z#N351 ,DOC\79081.0003 4
withheld or delayed, with such approval to be reported by counsel to such lnfonnal
Committee and the Vertis Second-Lien Noteholder Group;
(b) all material Transaction Documents have been or will be entered into by all
applicable parties and have or will become valid, binding and enforceable with respect to
each party thereto; and
(c) the Agreement has not been terminated in accordance with the tenns hereof.
3.03. Transfer oflnterests and Securities. Except as expressly provided
herein, this Agreement shall not in any way restrict the right or ability of any Consenting
Notcholder to sell, use, assign, transfer or otherwise dispose of ("Transfer") any of the
Notes, provided, however, that for a period commencing as of the date such Consenting
Noteholder executes this Agreement until the tennination of this Agreement pursuant to
the terms hereof (such period, the "Restricted Period'), no Consenting Noteholder shall
Transfer any Notes, and any purp01ted Transfer of Notes shall be void and without effect,
unless the transferee is a Consenting Noteholder, or if the transferee is not a Consenting
Noteholder, such transferee delivers to the Companies, at or prior to the time of the
proposed Transfer, a written agreement containing, among other things, a provision
substantially similar to the provision set forth in Exhibit B attached hereto pursuant to
which such transferee shall assume all obligations of the Consenting Noteholder
transferor hereunder in respect of the Notes Transferred (such transferee, if any, to also
be a "Consenting Noteholder" hereunder). This Agreement shall in no way be construed
to preclude the Consenting Noteholders from acquiring additional Notes; provided,
however, that (i) any Consenting Noteholder that acquires additional Notes after
executing this Agreement shall notify the Vertis Parties and the ACG Parties of such
acquisition within five business days after the closing of such trade and (ii) any such
Notes shall automatically and immediately upon acquisition by a Consenting Noteholder
be deemed subject to all of the terms of this Agreement whether or not notice is given to
the Vertis Parties or the ACG Parties of such acquisition; provided further, however, that
the immediately precedent proviso shall not apply to Notes that are acquired after the date
hereof in order for the transferee to meet any contractual short sale obligations that the
transferee entered into prior to the date of this Agreement.
3 .04. Representation of Consenting Notcholdcrs' Holdings. Each of the
Consenting Noteholders represents that, as of the date such Consenting Noteholder
executes and delivers this Agreement:
(i) it is the beneficial owner and/or the investment adviser or manager of
discretionary accounts for the holders or beneficial owners of the aggregate principal
amount of the Notes set forth on its signature page (the "Relevant Securities"), with the
power to vote and dispose of all or substantially all ofthe aggregate principal amount of
the Relevant Securities on behalf of such holders or beneficial owners and is entitled (for
it<> own account or for the account of other persons claiming through it) to all of the rights
and economic benefits of such holdings; provided, however, that notwithstanding
anything else to the contrary herein, a Consenting Noteholder may identify on its
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signature page those Notes that shall not be considered Relevant Securities for the
purposes herein and that shall not otherwise be subject to the terms and conditions set
forth herein in any way;
(ii) it is acquiring the securities to be acquired by it pursuant to the Transaction
(the "New Securities") for investment purposes, solely for its own account and/or the
account of a holder for which it serves as the investment adviser or manager and not with
a view to, or for resale in connection with, the distribution thereof and such Consenting
Noteholder will not resell, transfer, assign or distribute the New Securities acquired by it,
except in compliance with this Agreement, until this Agreement is validly terminated,
and the registration requirements of the Securities Act of 1933, as amended (the
"SecuriOes Acf'), and applicable state securities laws or pursuant to an available
exemption therefrom;
(iii) it, or the holder for whom it acts as investment adviser or manager, is an
"Accredited Investor" (as such term is defined in Rule 501 ofRegulation D promulgated
under the Securities Act);
(iv) the financial situation of such Consenting Noteholder is such that it can afford
to bear the economic risk of holding the New Securities;
(v) the knowledge and experience of such Consenting Noteholder in financial and
business matters is such that it, together with its advisors, is capable of evaluating the
merits and risks of the investment in the securities;
(vi) such Consenting Noteholder acknowledges that no representations, express or
implied, are being made with respect to the ACG Parties, the Vertis Parties, the New
Securities being acquired hereunder, or otherwise, other than those expressly set forth
herein or in the Term Sheet;
(vii) such Consenting Noteholder understands that the New Securities are a
speculative investment that involve a high degree of risk of loss of its investment therein,
that there may be substantial restrictions on the transferability of the New Securities and,
accordingly, it may not be possible to liquidate such Consenting Noteholder's
investment;
(viii) in making its decision to invest in the New Securities hereunder, such
Consenting Noteholder has relied upon independent investigations made by such
Consenting Noteholder and, to the extent believed by such Consenting Noteholder to be
appropriate, such Consenting Noteholder's representatives, including such Consenting
Noteholder's own professional, tax and other advisors;
(ix) such Consenting Noteholder and its representatives have been given the
opportunity to examine all documents and to ask questions of, and to receive answers
from, the ACG Parties, the Vertis Parties, and their respective representatives concerning
the terms and conditions of the investment in the New Securities;
NY2:\1865471\35\13ZfiN35! .DOC\79081.0003 6
(x) it has been advised by the ACG Parties and the Vertis Parties that (a) the offer
and sale of the New Securities has not been registered under the Securities Act; (b) the
offering and sale of the New Securities is intended to be exempt from registration under
the Securities Act pursuant to Section 4(2) of the Securities Act and Regulation D
thereunder and, if issued pursuant to the ACG Plan or the Vertis Plan, section 1145 of the
Bankruptcy Code; and (c) there is no established market for the New Securities and such
a public market for the New Securities may not be established in the foreseeable future;
and
(xi) it is familiar with Rule 144 promulgated by the Securities and Exchange
Commission under the Securities Act ("Rule 144"), as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
3.05. Confidentiality. So long as this Agreement has not been terminated in
accordance with the terms hereof, to the extent that a Consenting Noteholder has
executed a confidentiality agreement with the Vertis Parties or the ACG Parties (a
"Confidentiality Agreement"), each Consenting Noteholder, and any Vertis Party or ACG
Party who is a counterparty thereto, hereby agrees to be bound by the terms of such
Confidentiality Agreement during the period commencing on the date hereof and ending
on the earliest of (x) the date information is required to be released pursuant to Section
I I .0 I hereof (whether or not such information has been releas.ed), solely as to the
information required to be released pursuant to Section 11.01 hereof, (y) the date that the
Transactions are consummated and (z) the date that this Agreement is terminated.
3.06. Obligations under the Vertis Side Letter. Each Consenting Noteholder
that holds Notes ofVertis agrees to be bound by the terms of Section 6 of the Vertis Side
Letter (as defined below), including the releases contained therein, a copy of which
Section 6 of the Vertis Side Letter is attached hereto as Exhibit C.
Section 4. INTENTIONALLY OMITTED.
Section 5. Undertakings and Representations.
5.01 Requisite Noteholder Consent.
In this Agreement, "Requisite Noteholder Consenf' means the consent of (i)
Consenting Noteholders holding no less than a majority in principal amount of the Vcrtis
Second Lien Notes held at such time by Consenting Noteholders, (ii) Consenting
Noteholders holding no less than a majority in principal amount of the Vertis Senior
Notes held at such time by Consenting Noteholders and (iii) Consenting Noteholders
holding no less than a majority in principal amount of the ACG Second Lien Notes held
at such time by Consenting Noteholders.
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5.02 Representation ofthe Vertis Parties and the ACG Parties.
(a) Each ofthe ACG Parties and each of the Vertis Parties represents that, as of
the date hereof, such entity (in each case other than in connection with the Agreement
and Plan of Merger and the Proposed Merger) (i) has not resolved to engage in any
merger, consolidation, asset sale, or the purchase or acquisition of all or a substantial part
of the assets of another entity and (ii) has not been a party to any agreement or engaged in
any discussions or negotiations with any person that is reasonably likely to lead to any
merger, consolidation, asset sale, or the purchase or acquisition of all or a substantial part
of the assets of another entity, in each case, which would be material to the ACG Parties
or the Vertis Parties, respectively, except as set forth in Section 5.03(a)(v) hereof and
subject to Section 8.08 hereof.
(b) Each ofthe ACG Parties and each of the Vertis Parties further represents as to
itself only that, other than as a result of filing the ACG Chapter 11 Cases or the Vertis
Chapter 11 Cases, as applicable, and except as set forth in the disclosure letters to the
Agreement and Plan of Merger as of the date hereof, its obligations hereunder and under
the Agreement and Plan of Merger do not materially conflict with, or result in the breach
of, or constitute a default under, or result in or permit the termination or acceleration of,
any material contractual obligation of either the ACG Parties or the Vertis Parties.
(c) Each of the ACG Parties and each ofthe Vertis Parties represents that, as of
the date hereof, the representations and warranties made in the Agreement and Plan of
Merger by such Party are true, correct and complete, subject to Section 7.12 of the
Agreement and Plan of Merger.
5.03 Conduct of Business Pending the Consummation Date ofPian.
Each of the Vertis Parties and the ACG Parties agree that, prior to the effective
date of the Vertis Plan and the ACG Plan and prior to termination of this Agreement,
unless (x) otherwise expressly permitted by this Agreement or (y) consented to by the
Consenting Noteholders constituting Requisite Noteholder Consent, which consent shall
not be unreasonably withheld or delayed:
(a) Each ofthe Vertis Parties and the ACG Parties shall not, and shall cause each
of its respective subsidiaries not to, directly or indirectly do or permit to occur any of the
following: (i) issue, sell, pledge, dispose of or encumber any additional shares of, or any
options, warrants, conversion privileges or rights of any kind to acquire any shares of,
any of its equity interests including, without limitation, capital stock or partnership
interests; provided, however, that each ofthe Vertis Parties and the ACG Parties may
honor options and warrants outstanding on the date hereof and issue the New Securities
subject to the terms of the Vertis Plan or the ACG Plan, as the case may be; (ii) amend or
propose to amend its respective articles of incorporation, bylaws or comparable
organizational documents, except pursuant to the Transactions; (iii) split, combine or
reclassify any outstanding shares of its capital stock or other equity interests, or declare,
set aside or pay any dividend or other distribution payable in cash, stock, property or
NY2:\J865471 \35113Z#N35!.DOC\ 79081.0003 8
otherwise with respect to any of its equity interests; (iv) redeem, purchase or acquire or
offer to acquire any of its equity interests, including, without limitation, capital stock or
partnership interests; (v) acquire or divest (by merger, exchange, consolidation,
acquisition of stock or assets or otherwise) (I) any corporation, partnership, limited
liability company, joint venture or other business organization or division or (II) assets
thereof having an aggregate book value in excess of $500,000 individually, or $2,500,000
in the aggregate, for the Vertis Parties, or, other than in the case of capital expenditures,
$250,000 individually, or $1,250,000 in the aggregate, for the ACG Parties, other than in
the ordinary course of business or pursuant to an existing agreement for the sale of
property in Riverside County, California, or, in the case of capital expenditures by the
ACG Parties, as permitted by Section 6.1 (b )(vii) of the Agreement and Plan of Merger;
(vi) incur any indebtedness for borrowed money or issue any debt securities, except (A)
indebtedness incurred in the ordinary course of business of the ACG Parties or the Vertis
Parties, as applicable, (B) pursuant to the Vertis Plan and the ACG Plan, (C) any
financing necessary to fund the operations of the Vertis Parties or the ACG Parties
through the commencement of the Chapter II Cases, (D) any debtor-in-possession
financing or use of cash collateral reasonably acceptable to Consenting Notcholdcrs
constituting the Requisite Noteholder Consent, or (E) intercompany indebtedness
incurred in the ordinary course of business; (vii) enter into any executive employment
agreements other than the new employment agreements specified in the Term Sheet,
which employment agreements shall become effective no earlier than the Effective Date;
(viii) enter into any non-executive employment agreements other than employment
agreements consistent with past practice including in terms of compensation and
duration; (ix) allow or settle claims or any pending litigation for more than $500,000 per
claim for the Vertis Parties or more than $500,000 per claim for the ACG Parties;
provided that such cap shall not apply to workers' compensation claims; or (x) enter into
or modify any agreement with respect to any of the matters set forth in this Section
5.03(a); and
(b) Each of the Vertis Parties and the ACG Parties shall (i) maintain their good
standing under the laws of the state or other jurisdiction in which they are incorporated or
organized, and (ii) notify the other Parties of any governmental or third party complaints,
litigations, investigations or hearings (or communications indicating that the same may be
contemplated or threatened), in either case of clause (i) or clause (ii), which could
reasonably be anticipated to have a Material Adverse Effect (as defined below).
5.04 Certain Additional Chapter 11 Related Matters. Each ofthe Vertis
Parties and each of the ACG Parties, as the case may be, shall, except where it is not
reasonably practicable, provide draft copies of all motions or applications and other
documents any of the Vertis Parties or ACG Parties intends to file with the Bankruptcy
Court to counsel for the Consenting Noteholders at least three business days prior to the
date when the Vcrtis Parties and the ACG Parties intend to file any such document and
shall consult in good faith with such counsel regarding the form and substance of any
such proposed filing with the Bankruptcy Court.
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5.05 Advisors to the Consenting Noteholders. The Vertis Parties or the ACG
Parties, as applicable, shall pay, when due and payable, any invoice (for professional
fees, expense reimbursement or otherwise) for reasonable fees and expenses presented for
payment by the counsel or financial advisors retained by each of the Initial Consenting
Noteholders in accordance with any engagement letter, as applicable, executed by any of
the Vertis Parties or the ACG Parties and by Dewey & LeBoeufLLP, subject to any cap
Set forth in the Term Sheet.
5.06 Other Undertakings.
(a) Subject to Section 8.08 hereof, each of the Vertis Parties and the ACG
Parties agree to (i) act in good faith and use commercially reasonable efforts to support
and complete successfully the ACG Solicitation and the Vertis Solicitation in accordance
with the terms of this Agreement, (ii) do all things reasonably necessary and appropriate
in furtherance of consummating the Transactions in accordance with, and within the time
frames contemplated by, this Agreement (including within the deadlines set forth in
Section 8.04 hereof), and (iii) act in good faith and usc commercially reasonable etTorts
to consummate the Proposed Merger.
(b) The V crtis Parties have delivered a side letter from its Shareholders (as
defined in the Term Sheet) acceptable to the ACG Parties, each Informal Committee and
the Second-Lien Noteholder Group (the "Vertis Side Letter"). The ACG Parties have
delivered a side letter from its Shareholders acceptable to the Vertis Parties, each
Informal Committee and the Second-Lien Noteholder Group, (the "ACG Side Letter").
The Vertis Partis have delivered a side letter from CLl Associates LLC acceptable to the
ACG Parties, each Informal Committee and the Vertis Second-Lien Noteholder Group
(the "CLI Side Letter"). The ACG Side Letter shall not be amended, terminated, or
restated by the ACG Parties without the consent of the Vertis Parties and Consenting
Noteholders constituting the Requisite Noteholder Consent. The Vertis Side Letter and
the CLI Side Letter shall not be amended, terminated, or restated by the Vcrtis Parties
without the consent of the ACG Parties and Consenting Noteholders constituting the
Requisite Noteholder Consent. Upon notice by Consenting Noteholders constituting the
Requisite Noteholder Consent, Vertis shall give the Shareholders ofVertis Holdings
notice of a termination ofthe Vertis Side Letter pursuant to Section 9(a)(vii) thereof if
Vertis has a right to do so pursuant to such Section 9(a)(vii).
(c) to Section 3.01 and Section 8.08 the ACG Parties and each
Consenting Noteholder agree that they shall not directly or indirectly, in any material
respect, object to, delay, impede or take any other action that interferes with the
acceptance or implementation of the Plans and/or the Proposed Merger other than upon
the occurrence of a Standalone Event (as defined below).
Section 6. Mutual Representations, Warranties, and Covenants. Each of
the Parties represents, warrants, and covenants to the others, as of the date ofthis
Agreement, as follows (each of which is a continuing representation, warranty, and
covenant):
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6.0 1. Enforceability. It is validly existing and in good standing under the
laws of the state of its organization, and this Agreement is a legal, valid, and binding
obligation of such Party, enforceable against it in accordance with its terms, except as
enforcement may be limited by applicable laws relating to or limiting creditor's rights
generally or by equitable principles relating to enforceability.
6.02. No Consent or Approval. Except as expressly provided in this
Agreement or in Section 4.4 or Section 5.4 of the Agreement and Plan of Merger, no
consent or approval is required by any other person or entity in order for it to carry out
the transactions contemplated by, and perform the respective obligations under, this
Agreement (including the consummation of the Proposed Merger).
6.03 Power and Authority. Except as expressly provided in this Agreement,
it has all requisite power and authority to enter into this Agreement and to carry out the
Transactions contemplated by, and perform its respective obligations under, this
Agreement (including the consummation of the Proposed Merger).
6.04 Authorization. The execution and delivery of this Agreement and the
performance of its obligations hereunder (including the consummation of the Proposed
Merger) have been duly authorized by all necessary action on its part.
Section 7. No Waiver of Participation and Reservation of Rights. Except
as expressly provided in this Agreement, nothing herein is intended to, or does, in any
manner waive, limit, impair, or restrict any right of any Consenting Noteholder or the
ability of each of the Consenting Noteholders to protect and preserve its rights, remedies
and interests, including without limitation, its claims against the Vertis Parties and the
ACG Parties. Ifthe transactions contemplated by this Agreement are not consummated,
or if this Agreement is terminated for any reason (other than pursuant to Section 8.06
hereof), the Parties fully reserve any and all of their rights.
Section 8. Termination Events.
8.01 Consenting Noteholder Termination Events. This Agreement may be
terminated by delivery to the ACG Parties and the Vertis Parties of a written notice in
accordance with Section 10.12 hereof by the Consenting Noteholders holding no less
than the majority in principal amount of the Vertis Second Lien Notes held at such time
by Consenting Noteholders, Consenting Noteholders holding no less than the majority in
principal amount of the Vertis Senior Notes held at such time by Consenting Noteholders,
or Consenting Noteholders holding no less than the majority in principal amount of the
ACG Second Lien Notes held at such time by Consenting Noteholders, upon the
occurrence and continuance of any of the following events (each, a ''Consenting
Noteholders' Termination Event'');
(a) the breach in any material respect by the Vertis Parties or the ACG Parties of
any of the undertakings, representations, warranties or covenants of such Parties set forth
NY2:\1865471\35\13ZIIN35
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in this Agreement and the Agreement and Plan of Merger which remains uncured for a
period of three business days after the receipt of notice of such breach;
(b) the issuance by any governmental authority, including any regulatory
authority or court of competent jurisdiction, of any ruling or order enjoining the
consummation of a material portion of the Transactions;
(c) the occurrence of an Event of Default (other than an Event of Default resulting
from the filing of the Chapter 11 Cases or from the failure to make any interest payments)
as defined in and under any indenture governing any of the Notes, in each case which is
not waived pursuant to the terms of or remains uncured for the applicable period under
the relevant indenture, (and except in each case for any such Event of Default, relating to
any obligations to file, furnish or deliver any reports, information or documents under the
terms of the indentures governing such Notes);
(d) if any change, effect, event, occurrence, development, circumstance or state of
facts occurs that has or would be expected to have a Material Adverse Effect or that
materially impairs the ability of any ofthe Vertis Parties or the ACG Parties to perform
its obligations under this Agreement or have a material adverse effect on, or prevent or
materially delay the consummation of, the Transactions. As used herein "Material
Adverse Effect" shall have the meaning on Schedule I, attached hereto;
(e) subject to Section 8.08 hereof, the ACG Parties or the Vcrtis Parties lose the
exclusive right to file and solicit acceptances of a plan of reorganization;

(f) any term of any Transaction Document that has been executed, been filed with
the Bankruptcy Court, become effective or been otherwise finalized, has not been
approved in accordance with Section 3.02 hereof or any such Transaction Document that
has been approved is modified without Requisite Noteholder Consent;
(g) an examiner with expanded powers or a trustee shall have been appointed in
the ACG Chapter 11 Cases or the Vertis Chapter 11 Cases, the ACG Chapter 11 Cases or
the Vertis Chapter 11 Cases shall have been converted to cases under chapter 7 of the
Bankruptcy Code, or the ACG Chapter 11 Cases or the Vertis Chapter 11 Cases shall
have been dismissed by order of the Bankruptcy Court;
(h) the ACG Parties or the Vertis Parties file any motion or pleading with the
Bankruptcy Court that is not consistent in any material respect with this Agreement or the
Term Sheet and such motion or pleading has not been withdrawn prior to the earlier of (i)
two business days of the ACG Parties or the Vertis Parties, as applicable, receiving notice
that such motion or pleading is inconsistent with this Agreement or the Term Sheet and
(ii) entry of an order of the Bankruptcy Court approving such motion;
(i) the Bankruptcy Court grants relief that is inconsistent with this Agreement or
the Term Sheet in any material respect, including with respect to the adequate protection
to the holders of the Vertis Second Lien Notes provided for in the Term Sheet;
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(j) the Bankruptcy Court grants relief terminating, annulling, or modifying the
automatic stay (as set forth in section 362 of the Bankruptcy Code) with regard to any
assets having an aggregate value in excess of $1,000,000;
(k) other than pursuant to the Vertis Plan or the ACG Plan, the Vertis Parties or
the ACG Parties have moved for, or the Bankruptcy Court shall have entered, an order
authorizing or directing the assumption of an executory contract or unexpired lease
without Requisite Noteholder Consent, which consent shall not be unreasonably withheld
or delayed, if (i) the cure amount plus the future contractual obligations of any of the
Vcttis Parties or the ACG Parties, as the case may be, under such executory contract or
unexpired lease, as of the date of such assumption, exceeds $1,000,000 per contract or
lease or $6,750,000 in the aggregate for all such contracts or leases or (ii) any
counterparty to such executory contract or unexpired lease is an insider (as such term is
defined in section 101 of the Bankruptcy Code) of the Vertis Parties or the ACG Parties;
or
(I) subject to the execution of an appropriate and otherwise reasonable
confidentiality agreement, the failure by the Vertis Parties or the ACG Parties to provide
to the Initial Consenting Noteholders and their advisors, including Akin Gump Strauss
Hauer & Feld LLP, Jefferies & Company, Inc., Skadden, Arps, Slate, Meagher & Floro
LLP, Stroock & Stroock & Lavan LLP, Houlihan Lokey Howard & Zukin Capital, Inc.,
Milbank, Tweed, Hadley & McCloy LLP, Perella Weinberg Partners L.P. and Wachtell,
Lipton, Rosen & Katz (i) reasonable access to the books and records of the Vertis Parties
and the ACG Parties, as applicable and (ii) reasonable access to the respective
management and advisors of the Vertis Parties and the ACG Parties for the purposes of
evaluating the Vertis Parties' and ACG Parties' respective business plans and
participating in the plan process with respect to the Transactions.
8.02 Company Termination Events. Either the Vertis Parties or the ACG
Parties may terminate this Agreement as to all Parties upon three business days' prior
written notice, delivered in accordance with Section 10.12 hereof, upon the occurrence of
any of the following events (each, a "Company Termination Event"): (a) the breach by
any of the Consenting Noteholders of any of the representations, warranties or covenants
of such Consenting Noteholders set forth in this Agreement that would have a material
adverse impact on the Vertis Parties or the ACG Parties, or with respect to the
consummation of the Transactions, that remains uncured for a period of three business
days after the receipt by the Consenting Noteholdcrs of notice of such breach; (b) the
Issuance by any governmental authority, including any regulatory authority or court of
competent jurisdiction, of any ruling or order enjoining the consummation of a material
portion ofthe Transactions; or (c) the Agreement and Plan of Merger is terminated in
accordance with its terms and Section 1 hereof.
8.03 Mutual Termination. This Agreement, and the obligations of all Parties
hereunder, may be terminated by mutual agreement among (a) both of the Companies and
(b) any of the following: (i) Consenting Noteholders representing not less than two-thirds
in principal amount of the ACG Second Lien Notes held by the Consenting Noteholders,
NY2:\1865471 \35\l3Z#N35l.DOC\7908l.0003 13
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(ii) Consenting Noteholders representing not less than two-thirds in principal amount of
the Vertis Second Lien Notes held by the Consenting Noteholders or (iii) Consenting
Noteholders representing not less than two-thirds in principal amount of the Vertis Senior
Notes held by the Consenting Noteholders.
8.04 Automatic Termination. This Agreement, and the obligations of all
Parties hereunder shall terminate automatically without any further required action or
notice:
(a) at 5:00P.M. prevailing Eastern Time on the date that is twenty days after the
execution of this Agreement unless the ACG Parties and the Vertis Parties have
commenced the ACG Solicitation and the Yertis Solicitation, respectively (the
"Solicitation Commencement Date");
(b) at 5:00P.M. prevailing Eastern Time on the date that is twenty-one business
days after the Solicitation Commencement Date (the "Solicitation Termination Date")
unless the ACG Parties and the Yertis Parties have successfully concluded the ACG
Solicitation and the Vertis Solicitation, respectively (i.e., have obtained votes accepting
the ACG Plan from holders of the ACG Second Lien Notes sufficient to satisfy the
conditions for acceptance set forth in Sections 1126(b) and (c) of the Bankruptcy Code
and have obtained votes accepting the Vertis Plan from holders of each of the Vertis
Second Lien Notes and the Vertis Senior Notes sufficient to satisfy the conditions for
acceptance set forth in Sections 1126 (b) and (c) ofthe Bankruptcy Code);
(c) at 5:00P.M. prevailing Eastern Time on the date that is three business days
after the Solicitation Termination Date unless the ACG Parties and the Vertis Parties
have commenced chapter 11 cases and have filed, and are pursuing confirmation of, the
ACG Plan and the Vertis Plan, respectively;
(d) at 5:00P.M. prevailing Eastern Time on the 60th day after the filing of chapter
11 petitions by the ACG Parties and/or the Vertis Parties if the ACG Plan and/or the
Yertis Plan, as applicable, has not been confirmed by the Bankruptcy Court on or before
such date; provided, however, that so long as the Vertis Parties are proceeding in good
faith towards confirmation and/or consummation of the Vertis Plan, upon notice from the
Vertis Parties to the ACG Parties and Consenting Noteholders holding ACG Second-Lien
Notes, there shall be a 30-day extension of such 60-day period;
(e) at 5:00P.M. prevailing Eastern Time on the 60th day after the filing of chapter
11 petitions by the ACG Parties and/or the Vertis Parties if the ACG Plan and/or the
Yertis Plan, as applicable, has not been consummated on or before such date; provided,
however, that so long as the Vertis Parties are proceeding in good faith towards
confirmation and/or consummation of the Vertis Plan, upon notice from the Vertis Parties
to the ACG Parties and Consenting Notcholders holding ACG Second Lien Notes, there
shall be a 30-day extension of such 60-day period;
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(f) at 5:00 P.M. prevailing Eastern Time five business days after the date of this
Agreement if this Agreement has not been executed by the holders of at least 66-%% of
the outstanding principal amount of each of the Vertis Second Lien Notes, the Vertis
Senior Notes and the ACG Second Lien Notes and the holders of at least 58% of the
outstanding principal amount of the Vertis Subordinated Notes;
(g) upon the commencement of any chapter 11 cases against any of the Vertis
Parties or any of the ACG Parties prior to the Solicitation Commencement Date;
(h) at 5:00P.M. prevailing Eastern Time on July 8, 2008 if Vertis and/or the ACG
Parties, as the case may be, fail to obtain a Vertis Debtor-in-Possession Commitment
Letter and an ACG Debtor-in-Possession Commitment Letter (as such terms are defined
in the Term Sheet) materially consistent with the Term Sheet (including obtaining the
consents set forth therein) by the earlier of such date and the date that is at least five (5)
business days prior to the commencement of any Chapter 11 Case;
(i) at 5:00P.M. prevailing Eastern Time on July 8, 2008 ifVertis fails to obtain
New Credit Facilities Commitment Letters and New Credit Facilities Term Sheets (as
such terms are defined in the Term Sheet) materially consistent with the Term Sheet
(including obtaining the consents set forth therein) by the earlier of such date and the date
that is at least five business days prior to the commencement of any Chapter 11 Case;
provided that the New Facilities Commitment Letters and New Facilities Term Sheets
shall be deemed acceptable to the Vertis Second-Lien Noteholder Group if acceptable to
the Vertis Second-Lien Noteholder Advisors (as such terms are defined in the Term
Sheet);
(j) if the Vertis Debtor-in Possession Commitment Letter, the ACG Debtor-in-
Possession Commitment Letter, or any of the New Credit Facilities Commitment Letters
has been validly terminated by the lender(s) party thereto;
(k) upon the termination of the Agreement and Plan of Merger in accordance with
its terms and Section I hereof; and
(I) subject to Section 8.08 hereof, the ACG Parties or the Vertis Parties file,
propound or otherwise support any plan of reorganization other than the ACG Plan and
the V ertis Plan, as the case may be;
provided, however, any of the dates set forth in this Section 8.04 may be extended by
agreement among the ACG Parties, the Vertis Parties, and the Consenting Notcholders
constituting the Requisite Noteholder Consent.
8.05 Effect of Termination. Subject to Section 10.09 hereof, upon
termination ofthis Agreement, each Party hereto shall be released from its commitments,
undertakings and agreements under or related to this Agreement and shall have the rights
and remedies that it would have had and shall be entitled to take all actions, whether with
respect to the Transactions or otherwise, that it would have been entitled to take had it not
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entered into this Agreement. Upon the occurrence of any termination of this Agreement
any and all consents tendered by the Consenting Noteholders prior to such termination
shall be deemed, for all purposes, to be null and void from the first instance and shall not
be considered or otherwise used in any manner by the Parties in connection with the
Transactions and this Agreement. Notwithstanding anything else to the contrary in this
Agreement and the Agreement and Plan of Merger, the Agreement and Plan of Merger
shall be deemed term ina ted for all purposes upon the termination of this Agreement.
Nothing in this Section 8.05 shall apply to a termination pursuant to Section 8.06 hereof.
8.06 Termination Upon Effective Date of Plans. This Agreement shall
terminate automatically without any further required action or notice on the date that the
Vertis Plan and the ACG Plan become effective.
8.07 Automatic Stay. The Vertis Parties and the ACG Parties acknowledge
that after the commencement of the Vertis Chapter 11 Cases or the ACG Chapter 11
Cases, the giving of notice of termination by any Party pursuant to this Agreement shall
not be a violation of the automatic stay of section 362 of the Bankruptcy Code; provided,
however, nothing herein shall prejudice any Party's rights to argue that the giving of
notice of termination was not proper under the terms of this Agreement.
8.08 ACG Parties Standalone Restructuring.
(a) So long as the Vertis Parties are complying with the terms of this
Agreement and the Agreement and Plan of Merger in all material respects, neither the
Vertis Parties, the ACG Parties, nor the Consenting Noteholders (subject to Section 3.01
hereof) shall seek, solicit, negotiate or otherwise take any action to encourage the making
of any alternative proposal to effect a reorganization, restructuring, recapitalization,
merger or sale of all or substantially all of its assets in a single transaction or series of
related or unrelated transactions, or provide any information to any party contemplating
such transaction.
(b) Notwithstanding anything to the contrary in Section 8.08(a) hereof, but
subject to the provisos in this Section 8.08(b), the ACG Parties may take any actions they
deem necessary to eftect a standalone restructuring in a "prepackaged" bankruptcy case
in lieu of the Transactions (the "ACG Standalone Restructuring'); provided, however,
that to consummate the ACG Standalone Restructuring (a) a vote cast in favor of any
plan of reorganization embodying such ACG Standalone Restructuring will be valid only
if the party casting such vote has voted (and not withdrawn) a valid vote in favor ofthe
ACG Plan in the same amount as any claim voted in favor of the ACG Standalone
Restructuring and such party has not voted to reject the ACG Plan with respect to any
claim such party holds and (b) either (i) the Agreement and Plan of Merger or this
Agreement has validly terminated in accordance with the terms thereof and Section 1
hereof or (ii) the Effective Date (as defined in the Term Sheet) has not occurred within 60
days after the commencement ofthe Chapter 11 Cases (such events (i) or (ii) constituting
a "Standalone Event"); provided further, however, that so long as the Vertis Parties arc
proceeding in good faith towards confirmation and/or consummation of the Vertis Plan,
NY2:\1865471\35113Z#N35!.DOC\79081.0003 16
upon notice from the V ertis Parties to the ACG Parties and Consenting N oteholders
holding ACG Second-Lien Notes, there shall be a 30-day extension of such 60-day
period. The ACG Parties shall provide the Vertis Parties and counsel to each Informal
Committee and the V ertis Second-Lien Noteholder Group a draft of any ACG Standalone
Restructuring plan of reorganization and related disclosure statement at least three (3)
business days before commencing solicitation thereon.
Section 9. Effectiveness; Amendments. This Agreement shall become
effective and binding upon each of the Parties that have executed and delivered
counterpart signature pages hereto; provided, however, that signature pages executed by
Consenting Noteholders shall be delivered to (a) other Consenting Noteholders in a
redacted form that removes such Consenting Noteholders' holdings of the Notes and (b)
the Companies and advisors to the Consenting Noteholders in an unredacted form;
providedfitrther, however, that the advisors to the Consenting Noteholders shall not
disclose the unredacted signature pages to any Consenting Noteholder. Once effective,
this Agreement, including the Term Sheet, may not be modified, amended, or
supplemented (except as expressly provided herein or therein) except in writing signed by
the Vertis Parties, the ACG Parties and the Consenting Noteholders constituting the
Requisite Noteholder Consent; provided, however, the value of the distributions to
holders ofVertis Subordinated Notes may not be diminished by changes to provisions
directly specifying distributions to holders ofVertis Subordinated Notes or materially
diminished by changes to provisions governing distributions to other entities, other than
by changes that affect the holders of the Vertis Subordinated Notes in the same manner as
other parties receiving New Senior Notes and New Common Stock (as such terms are
defmed in the Term Sheet) with respect to those securities (i.e., changes that do not affect
the holders ofVertis Subordinated Notes disproportionately with respect to each New
Senior Note and each share of New Common Stock), except in writing signed by the
Vertis Parties, the ACG Parties, the Consenting Noteholders constituting the Requisite
Noteholdcr Consent, and any party that is a signatory hereto and holds only Vertis
Subordinated Notes (i.e., does not hold any other Notes).
Section 10. Miscellaneous.
I 0.0 I. Further Assurances. Subject to the other terms of this Agreement, the
Parties agree to execute and deliver such other instruments and perform such acts, in
addition to the matters herein specified, as may be reasonably appropriate or necessary,
from time to time, to effectuate the ACG Solicitation, the Vertis Solicitation, the ACG
Plan, the Vertis Plan, the Proposed Merger and/or the Transaction, as applicable.
1 0.02. Complete Agreement. This Agreement is the entire agreement
between the Parties with respect to the subject matter hereof and supersedes all prior
agreements, oral or written, between the Parties with respect thereto, except for any
Confidentiality Agreement described in Section 3.05 hereof. No claim of waiver,
modification, consent or acquiescence with respect to any provision of this Agreement
shall be made against any Party, except on the basis of a written instrument executed hy
or on behalf of such Party.
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I 0.03. Parties. This Agreement shall be binding upon, and inure to the
benefit of, the Parties. No rights or obligations of any Party under this Agreement may
be assigned or transferred to any other person or entity except as provided in Section 3.03
hereof. Nothing in this Agreement, express or implied, shall give to any person or entity,
other than the Parties, any benefit or any legal or equitable right, remedy or claim under
this Agreement.
10.04. Headings. The headings of all sections of this Agreement are inserted
solely for the convenience of reference and are not a part of and are not intended to
govern, limit or aid in the construction or interpretation of any term or provision hereof.
10.05. GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM; WAIVER OF TRIAL BY JURY. THIS AGREEMENT IS
TO BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO
BE PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF. Each Party hereto agrees that it shall
bring any action or proceeding in respect of any claim arising out of or related to this
Agreement or the transactions contained in or contemplated by this Agreement, to the
extent possible, in the United States District Court for the Southern District of New York
or any New York State court sitting in New York City (the "Chosen Courts"), and solely
in connection with claims arising under this Agreement or the transactions that are the
subject ofthis Agreement (i) irrevocably submits to the exclusive jurisdiction ofthc
Chosen Courts, (ii) waives any objection to laying venue in any such action or
proceeding in the Chosen Courts and (iii) waives any objection that the Chosen Courts
arc an inconvenient forum or do not have jurisdiction over any party hereto; provided,
however, that if either ACG files the ACG Plan or Vertis files the Vertis Plan, then the
Bankruptcy Court shall be the sole Chosen Court. Each party hereto irrevocably waives
any and all right to trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
I 0.06. Execution of Agreement. This Agreement may be executed and
delivered (by facsimile or otherwise) in any number of counterparts, each of which, when
executed and delivered in accordance with Section 9 herein, shall be deemed an original,
and all of which together shall constitute the same agreement. Except as expressly
provided in this Agreement, each individual executing this Agreement on behalf of a
Party has been duly authorized and empowered to execute and deliver this Agreement on
behalf of said Party.
1 0.07. Interpretation. This Agreement is the product of negotiations between
the Vertis Parties, the ACG Parties and Initial Consenting Notcholdcrs, and in the
enforcement or interpretation hereof, is to be interpreted in a neutral manner, and any
presumption with regard to interpretation for or against any Party by reason of that Party
having drafted or caused to be drafted this Agreement, or any portion hereof, shall not be
NY2:\J865471 \35\J3Z#N35!.DOC\79081.0003 18
1 0.08. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of the Parties and their respective successors, assigns, heirs, executors,
administrators and representatives, other than a trustee or similar representative appointed
in a bankruptcy case. The agreements, representations and obligations of the Consenting
Noteholders under this Agreement are, in all respects, several and not joint.
10.09. Survival. Notwithstanding the termination ofthis Agreement, the
agreements and obligations of the Parties in this Section 10 and in Sections 5.05, 7, 8.05
hereof, and clause (b) of the last sentence of Section 11.02 hereof shall survive such
termination and shall continue in full force and effect for the benefit of the Parties in
accordance with the terms hereof. Notwithstanding the termination of this Agreement
pursuant to Section 8.06 hereof, the agreements and obligations of the Parties in Section
3.06 of this Agreement shall survive such termination and shall continue in full force and
effect in accordance with the terms hereof.
10.1 0. Creditors' Committee. Notwithstanding anything herein to the
contrary, if any Consenting Noteholder is appointed to and serves on an official
committee of creditors in the ACG Chapter 11 Cases or the Vertis Chapter 11 Cases, the
terms of this Agreement shall not be construed so as to limit such Consenting
Noteholder' s exercise (in its sole discretion) of its fiduciary duties to any person arising
from its service on such committee, and any such exercise (in the sole discretion of such
Consenting Noteholder) of such fiduciary duties shall not be deemed to constitute a
breach of the terms of this Agreement;provided,further, that nothing in this Agreement
shall be construed as requiring any Consenting Noteholder to serve on any official
committee in any such chapter 11 case.
1 0.11. Relationship Among Parties. It is understood and agreed that no
Consenting Noteholder has any duty of trust or confidence in any form with any other
Consenting Noteholder, and, except as provided in this Agreement, there are no
commitments among or between them. In this regard, it is understood and agreed that
any Consenting Noteholder may trade in the Notes or other debt or equity securities of
the Vertis Parties or the ACG Parties without the consent ofthe Vertis Parties or the ACG
Parties, as the case may be, or any other Consenting Noteholder, subject to applicable
securities laws and the terms of this Agreement; provided further that no Consenting
Noteholder shall have any responsibility for any such trading by any other entity by
virtue of this Agreement. No prior history, pattern or practice of sharing confidences
among or between the Consenting Noteholders shall in any way affect or negate this
understanding and agreement.
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1 0.12. Notices. All notices hereunder shall be deemed given if in writing and
delivered, if sent by telecopy, e-mail, courier or by registered or certified mail (return
receipt requested) to the following addresses and telecopier numbers (or at such other
addresses or telecopier numbers as shall be specified by like notice):
(1)
(2)
ifto the ACG Parties, to:
100 Winners Circle
Brentwood, Tennessee 3 7027
Attention: Chief Executive Officer
E-mail address: steve.dyott@acgholdings.com
with copies to:
153 East 53rd Street
New York, New York 1 0022-4611
Attention: Paul M. Basta, Esq.
E-mail address: pbasta@kirkland.com
and
Aon Center
200 East Randolph Dr.
Chicago, IL 60601
Attention: Ray C. Schrock, Esq.
E-mail address: rschrock@kirkland.com
if to the Vertis Parties, to:
4775 Walnut Street
Suite 01
Boulder, CO 80301
Attention: Chief Legal Officer
E-mail address: jhoward@vertisinc.com
with copies to:
Wei!, Gotshal & Manges LLP
767 Fifth Avenue
NewYork,NewYork 10153
Attention: Gary Holtzer, Esq. and Ted S. Waksman, Esq.
NY2:\186547 I \35113Z#N35! .DOC\ 79081.0003 20
E-mail addresses: gary.holtzer@weil.com and
ted. waksman@weil.com
(3) if to a Consenting Noteholdcr (other than as
identified above) or a transferee thereof, to the addresses or telecopier numbers set forth
below following the Consenting Noteholder's signature (or as directed by any transferee
thereof), as the case may be
with copies to:
Milbank, Tweed, Hadley & ~ C l o y LLP
1 Chase Manhattan Plaza
New Y ark, NY 10005
Attention: Abhilash M. Raval, Esq. and Debra Alligood White,
Esq.
E-mail address: araval@milhank.com and dwhite@milhank.com
and
Akin Gump Strauss Hauer & Feld LLP
590 Madison Avenue
New York, New York 10022
Attention: Ira Dizengoff, Esq. and David Simonds, Esq.
E-mail address: idizengoff@akingump.com and
dsimonds@akingump.com
and
Stroock & Stroock & Lavan LLP
180 Maiden Lane
Attention: Kristopher M. Ilansen, Esq. and Jayme T. Goldstein,
Esq.
E-mail address: khansen@stroock.com and
j go ldstein@stroock.com
and
Dewey & LeBoeuf LLP
1301 A venue of the Americas
New York, New York 10019-6092
Attention: Martin Bienenstock, Esq.
E-mail address: mbienenstock@dl.com
NY2:\ 18654 71\35\ l3Z#N3 5l.DOC\7908l.0003 21
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Any notice given by delivery, mail or courier shall be effective when received. Any
notice given by telecopier shall be effective upon oral or machine confirmation of
transmission.
1 0.13. Third Party Beneficiary. The Shareholders (as defined in the
Term Sheet) ofVertis Holdings are third party beneficiaries of this Agreement solely
with respect to Section 3.06 of this Agreement.
Section 11. Disclosure; Publicity.
11.01 Obligation to Disclose Materials.
(a) Within three (3) business days after the execution of this Agreement,
and subject to the limitations set forth in Section 11.02 hereof, Vertis shall disclose to the
public (i) the Agreement and Plan of Merger and the projections anticipated at such time
to be included in the disclosure statement, to the extent that the failure to make such
information public would result in any Consenting Noteholder, based upon the advice of
such Consenting Noteholder's counsel, being prohibited (by contract, law, or otherwise)
from buying or selling any ofthe Notes, and (ii) this Agreement (including the schedules
and exhibits hereto), with such redactions (in the case of this Agreement and its schedules
and exhibits) as may be reasonably requested by any Consenting Noteholder's counsel to
maintain the confidentiality of the items identified in Section 11.02 hereof or as may be
required by Section 9 hereof. Vertis will submit to counsel for the Initial Consenting
Noteholders and ACG a draft of the form of disclosure pursuant to the immediately
preceding sentence and afford such counsel a reasonable opportunity, but in no event less
than two (2) business days, to review and comment on such proposed disclosure and
Vertis shall consider such comments in good faith. Each ofthe Vertis Parties and the
ACG Parties consent to the disclosure required by this Section 11.0 1. In the event that
Vertis fails to make the foregoing disclosures in compliance with the terms specified
herein, any of the Initial Consenting Noteholders may publicly disclose the foregoing,
including, without limitation, this Agreement and all of its exhibits and schedules (subject
to any redactions required hereby). Vertis hereby waives any claims against the Initial
Consenting Noteholders solely arising as a result of such disclosure by the Initial
Consenting Noteholders in compliance with this Agreement.
(b) Within three (3) business days after the execution ofthis
Agreement, and subject to the limitations set forth in Section 11.02 hereof, ACG shall
disclose to the public, unless otherwise disclosed by Vertis (i) the Agreement and Plan of
Merger and the projections anticipated at such time to be included in the disclosure
statement, to the extent that the failure to make such information public would result in
any Consenting Noteholder, based upon the advice of such Consenting Noteholder's
counsel, being prohibited (by contract, law, or otherwise) from buying or selling any of
the Notes, and (ii) this Agreement (including the schedules and exhibits hereto), with
such redactions (in the case of this Agreement and its schedules and exhibits) as may be
reasonably requested by any Consenting Noteholder's counsel to maintain the
NY2:\1 865471 \35\13Z#N351.DOC\ 79081.0003 22
confidentiality of the items identified in Section 11.02 hereof or as may be required by
Section 9 hereof. ACG will submit to counsel for the Initial Consenting Noteholders and
Vertis a draft of the proposed form of disclosure pursuant to the immediately preceding
sentence and afford such counsel a reasonable opportunity, but in no event less than two
(2) business days, to review and comment on such proposed disclosure and ACG shall
consider such comments in good faith. In the event that ACG fails to make the foregoing
disclosures in compliance with the terms specified herein, any of the Initial Consenting
Noteholders may publicly disclose the foregoing, including, without limitation, this
Agreement and all of its exhibits and schedules (subject to any redactions required
hereby). ACG hereby waives any claims against the Initial Consenting Noteholders
solely arising as a result of such disclosure by the Initial Consenting Noteholders in
compliance with this Agreement.
11.02 Publicity. The Vertis Parties and the ACG Parties will submit to
counsel for the Initial Consenting Noteholders all press releases and public documents
that constitute the initial disclosure of the existence or terms of this Agreement or any
amendment to the terms of this Agreement. Except as required by law (as determined by
outside counsel to the Vertis Parties and/or the ACG Parties, as applicable, and with
reasonable prior notice to the Consenting Noteholders), neither the Vettis Parties, the
ACG Parties, nor counsel to the Initial Consenting Noteholders shall (a) use the name of
any Consenting Noteholder in any public manner without such Consenting Noteholder's
prior written consent (except to the extent that the name of a Consenting Noteholder is
otherwise set forth herein or the Term Sheet, not including the signature pages hereto) or
(b) disclose to any person (including, for the avoidance of doubt, any other Consenting
Notcholdcr) other than advisors to the Vertis Parties and/or the ACG Parties the principal
amount or percentage of any Notes or any other securities of the ACG Parties, the Vertis
Parties or any of their respective subsidiaries held by any Consenting Noteholder;
provided, however, that the Vertis Parties and the ACG Parties shall be permitted to
disclose at any time the aggregate principal amount of and aggregate percentage of each
series of Notes held by Consenting Noteholders or by persons who have otherwise agreed
to patticipate in the ACG Solicitation and/or the Vertis Solicitation, as applicable, as a
group.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the day
and year first above written.
NY 2:\1865471\3 51 13Z#N3 5! .DOC\ 79081.0003 23
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Signature Page to the Agreement
by and among American Color Graphics, Inc., ACG Holdings Inc., Vertis, Inc.,
Vertis
Holdings Inc. and the Consenting Noteholders party thereto
American Color Graphics, Inc.
By:
Name:Stephen M. Dyott
Title: Chairman and Chief Executive Officer
ACG Holdings Inc.
By:
Name:Stephen M. Dyott
Title: Chairman, Chief Executive Officer and
President
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EXHIBIT A
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TERM SHEET
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N Y2:\ 1865471 \35\13Z#N35! .OOC\ 79081.0003 31
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VERTIS HOLDINGS, INC., ET AL.
ACG HOLDINGS, INC., ET AL.
RESTRUCTURING TERM SHEET
MAY22,2008
EXECUTION COPY
This restructuring term sheet, which is Exhibit A to the Restructuring and Lock-Up Agreement,
dated May 22, 2008 (the "Restructuring Agreement"), presents the material tenns of a proposed
restructuring (the "Restructuring") ofVertis Holdings, Inc. ("Vertis Holdings") and certain of its
direct and indirect subsidiaries (the "Vertis Companies") and ACG Holdings, Inc. ("ACG
Holdings") and certain of its direct and indirect subsidiaries (the "ACG Companies"), through
"pre-packaged" plans of reorganization (the "Vertis Plan" and the "ACG Plan," respectively,
and, collectively, the "Plans") under title 11 of the United States Code (the "Bankruptcy Code"),
which Restructuring shall include, and is contingent upon, the merger of Victory Merger Sub,
LLC ("Merger Sub"), a wholly owned subsidiary ofVertis, Inc., and ACG Holdings (the
"Merger") pursuant to a certain agreement and plan of merger to be executed contemporaneously
herewith (the "Merger Agreement"). The Restructuring is being considered by (a) the Vertis
Companies; (b) the ACG Companies; (c) an informal committee (the "Vertis Informal
Committee") comprised of certain holders of the Vert is Companies' 1 0-Ys % Senior Notes due
2009 (the "Vertis Senior Notes"); (d) an informal committee (the "ACG Informal Committee"
and, collectively with the Vcrtis Infonnal Committee, the "Informal Committees") comprised of
certain holders of the ACG Companies' 10% Senior Secured Notes due 2010 (the "ACG Second-
Lien Notes"); (e) an ad hoc group (the "Vertis Second-Lien Noteltolder Group") comprised of
certain holders of the Vertis Companies' 9-%% Senior Secured Second-Lien Notes due 2009 (the
"Vertis Second-Lien Notes"); and (f) certain holders of the Vertis Companies' 13-\12% Senior
Subordinated Notes due 2009 (the "Vertis Senior Subordinated Notes"). The corporate
organizational chart of the Vertis Companies and the ACG Companies after the Effective Date
(as defined below) is attached hereto as Exhibit A. The terms and conditions described herein
are part of a comprehensive compromise, each element of which is consideration for the other
elements and an integral aspect ofthe Restructuring.
This term sheet is proffered in the nature of a settlement proposal in furtherance of settlement
discussions and is entitled to protection from any use or disclosure to any party or person
pursuant to Federal Rule of Evidence 408 and any other rule of similar import. Until publicly
disclosed by the Vert is Companies and/or the ACG Companies, with the prior written consent of
each of the Informal Committees, this term sheet and the infonnation contained herein shall
remain strictly confidential and may not be shared with any person other than the Vertis
Companies, the ACG Companies, the Vertis Second-Lien Noteholder Group, the Vertis Informal
Committee and the ACG Informal Committee and their respective professional advisors.
THIS TERM SHEET DOES NOT CONSTITUTE AN OFFER OR A LEGALLY BINDING
OBLIGATION OF THE VERTIS INFORMAL COMMITTEE OR THE ACG
INFORMAL COMMITTEE, OR ANY OTHER PARTY, NOR DOES IT CONSTITUTE
AN OFFER OF SECURITIES OR A SOLICITATION OF THE ACCEPTANCE OR
RE.JECTION OF A CHAPTER 11 PLAN FOR PURPOSES OF SECTIONS 1125 AND
1126 OF THE BANKRUPTCY CODE.
685342.0001 WEST 6227110 v8
TRANSACTION
OVERVIEW
Vertis Filing Entities Vertis Holdings, Vertis, Inc. ("Vertis"), USA Direct, LLC, Vertis
Mailing, LLC, Webcraft Chemicals, LLC, Webcraft, LLC and
Enteron Group LLC (each, a "Vertis Filing Entity").
ACG Filing Entities American Color Graphics, Tnc. and ACG Holdings Inc. (each, an
"A CG Filing Entity").
Chapter 11 Cases Each Vertis Filing Entity and each ACG Filing Entity shall
commence a solicitation of votes in favor of its respective Plan
from parties entitled to vote thereon no later than twenty days
after the execution of the Restructuring Agreement. Each such
solicitation shall be concluded within 21 business days after the
commencement of each such solicitation. Each Vertis Filing
Entity and each ACG Filing Entity shall file a voluntary petition
for reorganization under chapter 11 of the Bankruptcy Code no
later than three business days after the conclusion of the
solicitation (the date of such filing being the "Filing Date"),
commencing chapter 11 cases (the "Vertis Chapter 11 Cases"
and the "ACG Chapter 11 Cases", respectively, and,
collectively, the "Chapter 11 Cases") in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). The Vertis Plan and the ACG Plan shall be filed
concurrently with the commencement of the Chapter 11 Cases.
One or more orders of the Bankruptcy Court confirming each
Plan shall be entered no later than 60 days after the Filing Date,
subject to extension, as provided in Section 8.04 of the
Restructuring Agreement. The Plans and Merger Agreement
shall be contemporaneously consummated no later than 60 days
after the Filing Date, subject to extension, as provided in Section
8.04 of the Restructuring Agreement.
The ACG Companies and the Vertis Companies shall seek, at the
outset of each of the ACG Chapter 11 Cases and the Vertis
Chapter 11 Cases, respectively, a procedural order from the
Bankruptcy Court that coordinates the administration of the
Chapter 11 Cases, including the scheduling of parallel events,
deadlines and milestones (e.g., 341 meeting, objection deadlines,
and hearing dates for disclosure statement approval and plan
confirmation and other matters); provided, however, the ACG
Chapter 11 Cases and the Vertis Chapter 11 Cases shall not be
jointly administered for procedural purposes.
Vertis Debtor-in-Possession Debtor-in-possession financing (the "Vertis Debtor-in-
Possession Financing") shall be provided by one or more
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Financing
ACG Debtor-in-Possession
Financing
institutions reasonably acceptable to each Informal Committee
and the Vertis Second-Lien Noteholder Group, in an amount of
no less than $350 million and no more than $450 million (less
any Vertis Prepetition Credit Agreement Claims (as defined
below) not repaid with the proceeds of the Vertis Debtor-in-
Possession Financing), the terms and conditions of which shall
be (i) consistent with a commitment Jetter and detailed term
sheet (the "Vertis Debtor-in-Possession Commitment Letter")
reasonably approved by each Informal Committee and the Vertis
Second-Lien Noteholder Group prior to execution by Vertis
Holdings and (ii) otherwise reasonably acceptable to each
Informal Committee and the Vertis Second-Lien Noteholder
Group. On the effective date of the Vertis Plan (the "Vert is Plan
Effective Date"), all Allowed
1
claims arising under the Vertis
Debtor-in-Possession Financing shall be paid in full in cash from
the Exit Funding (as defmed below). Vertis shall use its
commercially reasonable efforts to obtain a fully executed Vertis
Debtor-in-Possession Commitment Letter at least five days prior
to the Filing Date, but in no event later than July 8, 2008. Vertis
shall in good faith share drafts of the Vcrtis Debtor-in-Possession
Commitment Letter with the advisors to each of the ACG
Companies, each Informal Committee and the Vertis Second-
Lien Noteholder Group at least three business days in advance
of execution thereof.
Debtor-in-possession financing (the "ACG Debtor-in-Possession
Financing", together with the Vertis Debtor-in-Possession
Financing, the "Debtor-in-Possession Financing") shall be
provided by one or more institutions reasonably acceptable to
each Informal Committee and the Vcrtis Second-Lien
Noteholder Group, in an amount of no less than $125 million
and no more than $150 million (Jess any Allowed claims under
the ACG Preptition Credit Agreement, ACG 2008 Facility or
ACG Receivables Facility (each as defined below) not repaid
with the proceeds of the ACG Debtor-in-Possession Financing),
the terms and conditions of which shall be (i) consistent with a
commitment letter and detailed term sheet (the "ACG Debtor-in-
Possession Commitment Letter") reasonably approved by each
Group prior to execution by ACG Holdings and (ii) otherwise
reasonably acceptable to each Informal Committee and the
1
"Allowed" shall mean any claim that is determined to be an allowed claim in the Chapter II Cases in
accordance with section 502 and/or 506 of the Bankruptcy Code.
3
Merger of ACG Companies
and Vertis Companies
EMERGENCE
FUNDING/CURRENCIES
New Credit Facilities
Vertis Second-Lien Noteholder Group. On the effective date of
the ACG Plan (the "ACG Plan Effective Date", together with
the Vertis Plan Effective Date, the "Effective Date"), all Allowed
claims arising under the ACG Debtor-in-Possession Financing
shall be paid in full in cash from the Exit Funding (as defined
below). The ACG Companies shall use their commercially
reasonable efforts to obtain a fully executed ACG Debtor-in-
Possession Commitment Letter at least five days prior to the
Filing Date, but in no event later than July 8, 2008. The ACG
Companies shall in good faith share drafts of the ACG Debtor-
in-Possession Commitment Letter with the advisors to each of
the Vertis Companies, each Informal Committee and the Vertis
Second-Lien Noteholder Group at least three business days in
advance of execution thereof.
Contemporaneously with, and as a condition to, emergence from
the Chapter 11 Cases, Merger Sub will be merged with and into
ACG Holdings, with ACG Holdings as the surviving entity
pursuant to (a) the Plans and (b) the Merger Agreement. Upon
consummation of the Merger, ACG Holdings will be a wholly
owned subsidiary of Vertis.
On the Effective Date; Vertis shall enter into (a) a revolving
loan/letter of credit facility in an amount of up to $250 million
or otherwise reasonably acceptable to each Informal Committee
and the Vertis Second-Lien Noteholder Group, and (b) one or
more term loan facilities in an aggregate amount of no less than
$200 million and no more than $400 million or otherwise
Vertis Second-Lien Noteholder Group ((a) and (b) collectively,
and including amounts under the Vertis Prepetition Credit
Agreement to the extent not paid off prior to or on the Ef1ective
Date, the "New Credit Facilities"), which New Credit Facilities
shall be (i) in an amount of no more than $650 million, (ii) on
terms consistent with the New Credit Facilities Commitment
Letters (defined below), (iii) with lenders reasonably acceptable
to each Informal Committee and the Vertis Second-Lien
Note holder Group (it being understood that a lender that is a
Consenting Noteholder shall be reasonably acceptable to such
parties) and (iv) otherwise reasonably acceptable to the ACG
Companies, each Informal Committee and the Vertis Second-
Lien Noteholder Group. Vertis shall use its commercially
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New Second-Lien Notes
New Senior Notes
Exit Funding
reasonable efforts to obtain one or more fully executed
commitment letters (the "New Credit Facilities Commitment
Letters") and detailed term sheets (the "New Credit Facilitie.'i
Term Sheets") with regard to the New Credit Facilities
reasonably acceptable to the ACG Companies, each Informal
Committee and the Vertis Second-Lien Noteholder Group,
and/or the advisors to such parties, at least five business days
prior to the Filing Date, but in no event later than July 8, 2008.
Vertis shall in good faith share drafts of the New Credit
Facilities Commitment Letters and New Credit Facilities Term
Sheets with the advisors to each of the ACG Companies, each
Group periodically and at least three business days in advance of
execution thereof.
A summary of certain salient terms of the New Credit Facilities
is set forth on Exhibit B hereto. New Credit Facilities that do
not adhere to the terms set forth on Exhibit B shall not be
considered reasonably acceptable.
On the Effective Date, Vertis shaH issue second-lien notes (the
"New Second-Lien Notes"), having a total principal amount
equal to the total outstanding principal amount of the Vertis
Second-Lien Notes (i.e., $350 million), on terms and conditions
Vcrtis Second-Lien Noteholder Group.
A summary of certain salient terms of the New Second-Lien
Notes is set forth on Exhibit C hereto. New Second-Lien Notes
that do not adhere to the terms set forth on Exhibit C shall not be
On the Effective Date, Vertis shall issue senior unsecured notes
(the "New Senior Notes") having a total principal amount of
$200 million, on terms and conditions reasonably acceptable to
each Informal Committee and the Vertis Second-Lien
Noteholder Group.
A summary of certain salient terms of the New Senior Notes is
set forth on Exhibit D hereto. New Senior Notes that do not
adhere to the terms set forth on Exhibit D shall not be
The proceeds ofthe New Credit Facilities and the cash of the
Vertis Companies on the Effective Date shall be referred to as
the "Exit Funding." The Exit Funding shall be used for the
purpose of funding certain payment obligations under the Plans,
5
New Common Stock
New Warrants
as described herein, and funding the operations of the Vertis
Companies.
A sources and uses schedule for the Restructuring is annexed
hereto as Exhibit E.
Vertis Holdings shall issue one class of common stock (the
"New Common Stock").
Vcrtis Holdings shall issue warrants (the "New to
purchase a number of shares of New Common Stock equal to
11.5% of the number of outstanding shares of New Common
Stock as of the Effective Date at an exercise price of $0.01 per
share. The New Warrants shall only be exercisable if, at the time
of a Liquidity Event (defined below), the Trigger (defined
below) has been achieved. The "Trigger" shall be a fixed
amount at which the product of (x) fully-diluted per share equity
value of Vert is Holdings at the time of the Liquidity Event and
(y) the number of shares of New Common Stock issued to the
Vcrtis Senior Noteholders on the Effective Date exceeds (i) the
sum of (a) the Allowed Vertis Senior Noteholder Claim Amount
(as defined below) and (b) all unpaid interest and all other
Obligations (as defined in the indenture for the Vertis Senior
Notes) that accrue from the Filing Date through and including
the Effective Date, minus (ii) the face value, as of the Effective
Date of the New Senior Notes issued to the Vertis Senior
Noteholders (i.e., $107 million). The New Warrants will have
the benefit of anti-dilution protection resulting from the
issuances of any New Common Stock upon the exercise of
options granted under the New Equity Plan (defined below).
The New Warrants will participate in any cash dividends paid on
the New Common Stock on an "as if exercised" basis.
"Liquidity Event" means: (i) a sale ofVertis Holdings or all or
substantially all of the assets of Vertis Holdings and its
subsidiaries (a "Sale"), (ii) an initial public offering of the equity
securities ofVertis Holdings (an "/PO") or (iii) an Appraisal (as
defined below) if neither a Sale or an IPO has occurred prior to
the date that is nine and a half years after the Effective Date.
For purposes of clause (iii), Vertis Holdings shall hire a
nationally recognized appraisal or valuation firm to conduct an
appraisal of the equity value ofVertis Holdings as of the date
that is nine and a half years after the Effective Date (the
"Appraisaf'). The New Warrants shall expire on the earlier of
(x) thirty days after the consummation of a Liquidity Event and
(y) the tenth anniversary of the Effective Date.
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TREATMENT OF
VERTIS CLAIMS
AND INTERESTS
Vcrtis Administrative
Expense Claims
Vertis Holdings shall provide to each holder of New Common
Stock and New Warrants that has executed a "Valuation CA" (as
defined below) an annual valuation (the "Valuation") prepared
by an appraisal or valuation firm selected by Vertis Holdings, of
all the New Common Stock on a fully diluted basis. The
Valuation shall include and set forth (a) the number of shares of
New Common Stock on a fully diluted basis as of the Valuation
date, (b) a calculation of the Trigger as if a Liquidity Event had
occurred on such valuation date (the "Trigger Valuation"), and
(c) the positive or negative difference between the Trigger and
the Trigger Valuation. The Valuation shall be delivered
annually no later than 40 days after the date Vertis Holdings
completes its annual audit for such fiscal year. The Valuation
CA shall include a non-reliance acknowledgement and shall
provide that the holder will keep the Valuation confidential,
except for disclosure required by applicable law and to the
preparer of the holder's financial statements on a confidential
basis; provided, however, nothing in the Valuation CA shall
require the holder to keep its financial statements confidential
provided that such financial statements do not include the
Valuation (but such financial statements may include
information derived from the Valuation).
"Vertis Administrative Expense Claims" shall include, among
other things, (i) Allowed claims for reasonable fees and
expenses of professionals retained in the Vertis Chapter II Cases
with the approval of the Bankruptcy Court, (ii) all reasonable
fees and expenses incurred by the professional advisors to the
Vertis Informal Committee (the "Vert is Committee Advisors")
and its members, consisting of Akin Gump Strauss Hauer & Feld
LLP and Jefferies & Company, Inc., pursuant to the terms of
their respective pre-petition engagement letters, and Skadden,
Arps, Slate, Meagher & Flom LLP, in each case, without any
requirement for the filing of retention applications or fee
applications in the Vertis Chapter 11 Cases, (iii) all reasonable
Vertis Second-Lien Noteholder Group (the "Vertis Second-Lien
Noteltolder Advisors"), consisting of Stroock & Stroock &
Lavan LLP and Houlihan Lokey Howard & Zukin Capital, Inc.,
in each case, pursuant to the terms of their respective pre-
petition engagement letters, without any requirement for the
filing of retention applications or fee applications in the Vertis
7
Vertis Prepetition Secured
Lender Claims
Chapter 11 Cases, (iv) all reasonable fees and expenses after the
date hereof incurred by Dewey & LeBoeufLLP, as counsel to
certain holders ofVertis Subordinated Notes, up to a cap of
$100,000, without any requirement for the filing of retention
applications or fee applications in the Vertis Chapter 11 Cases,
(v) claims for out-of-pocket expenses incurred by the members
of the Vertis Informal Committee and the Vertis Second-Lien
Noteholder Group in connection with the Restructuring;
provided, however, the Vertis Companies shall not be required to
reimburse the members of the Vertis Informal Committee for
out-of-pocket expenses in excess of $20,000 in the aggregate
and the Vertis Companies shall not be required to reimburse the
members of the Vertis Second-Lien Noteholder Group for out-
of-pocket expenses in excess of $20,000 in the aggregate, and
(vi) claims against the Vertis Companies arising under section
503(b) of the Bankruptcy Code.
Each holder of an Allowed Vertis Administrative Expense Claim
will receive payment in full in cash of the unpaid portion of such
Allowed Vertis Administrative Expense Claim (a) in the case of
professional fees and expenses of the Vertis Committee
Advisors, the Vcrtis Second-Lien Noteholder Advisors, and
Dewey & LeBoeufLLP, in the ordinary course of business
pursuant to the terms of their respective prepetition engagement
letters, as applicable, but no later than the Effective Date, (b) in
the case of professional fees and expenses for professionals
other than the Vcrtis Committee Advisors and the Vertis Second-
Lien Noteholder Advisors, as soon as practicable after
Bankruptcy Court approval t h e r e o f ~ (c) with respect to all other
holders of Allowed Vertis Administrative Expense Claims, on
the later of (i) the Effective Date and (ii) the date on which such
payment would be made in the ordinary course of the Vertis
Companies' businesses, or (d) with respect to any claim
described in clauses (a) through (c) hereof, as otherwise agreed
by the holder of such claim and, with the reasonable consent of
each Informal Committee, the Vertis Second-Lien Noteholder
Advisors and the Vertis Companies.
On the Effective Date, each holder (each, a "Vertis Prepetition
Secured Lender") of an Allowed claim under the Secured Credit
Agreement (the "Vertis Prepetition Credit Agreement") dated
December 22, 2004, as amended, by and between Vertis as
borrower, General Electric Capital Corporation as lenders and
Vertis Holdings and certain subsidiaries ofVertis as guarantors
(with respect to Vertis and its subsidiaries, the ''Vertis
Prepetition Credit Agreement Claims" and with respect to the
guarantee claims against Vertis Holdings as guarantor, the
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Vertis Priority Tax Claims
Vertis Other Priority
Claims
Vertis Off-Balance Sheet
Receivables Facility
Vertis Senior Secured
Second-Lien Notes
"Vertis Holdings Prepetition Credit Agreement Guarantee
Claims"), at the election of the Vertis Companies, with the
reasonable consent of each Informal Committee and the Vertis
Second-Lien Noteholder Group will (a) be paid in full on the
Effective Date in cash from the Exit Funding; (b) receive
deferred cash payments, of a value, as of the Effective Date, of
at least the amount of such holder's Allowed Vertis Prepetition
Credit Agreement Claims and Allowed Vertis Holdings
Prepetition Credit Agreement Guarantee Claims with a maturity
date no later than the maturity date of the term loan portion of
the Exit Funding; or (c) be treated as otherwise agreed to by (i)
the Vertis Companies with the reasonable consent of each
Group and (ii) the holder of such claim.
The Allowed Vertis Prepetition Credit Agreement Claims may,
only if provided for in the Vertis Debtor-in-Possession
Commitment Letter, be repaid in full with proceeds from the
Vertis Debtor-in-Possession Financing.
Allowed claims against the Vertis Companies under Bankruptcy
Code section 507(a)(8) ("Vertis Priority Tax Claims") will be
treated in accordance with Bankruptcy Code section
1129(a)(9)(C).
On the Effective Date, each holder of an Allowed claim against
the Vertis Companies under Bankruptcy Code section 507(a)
other than a Vertis Administrative Expense Claim or a Vertis
Priority Tax Claim will receive payment in full in cash from the
Ex.it Funding or as otherwise agreed by (i) the Vertis Companies
with the reasonable consent of each Informal Committee and the
Vertis Second-Lien Noteholder Group, and (ii) the holder of
such claim.
To be repaid in full with proceeds from the Vertis Debtor-in-
Possession Financing.
On the Effective Date, each holder (each, a "Vertis Second-Lien
Note/wider") of an Allowed claim (the "Vert is Second-Lien
Note/wider Claims") under the Vertis Second Lien Notes, will
receive from Vertis, in exchange for such claim, its pro rata
share of New Second-Lien Notes and cash in an amount equal to
the accrued but unpaid interest under the Vertis Second-Lien
Notes as of the Effective Date.
The Vertis Second-Lien Noteholder Claims shall be Allowed in
an amount equal to (i) $350 million, plus (ii) the accrued but
9
Vertis Senior Note Claims
unpaid interest at the non-default contract rate under the Vertis
Second-Lien Notes as of the Effective Date, except to the extent
such interest is otherwise provided herein to be paid or satisfied,
plus (iii) all other Obligations (as defined in the indenture for the
Vertis Second-Lien Notes), except to the extent that claims of
the Vertis Indenture Trustee under the Vertis Second-Lien Notes
are otherwise provided to be paid or satisfied.
As "adequate protection" during the Chapter 11 Cases, the Vertis
Second-Lien Noteholders shall receive, so long as the
Restructuring Agreement has not been terminated pursuant to its
terms, (i) on the date of entry of the interim order approving the
Yertis Debtor-in-Possession Financing (the "Interim DIP
Order"), payment in cash of all accrued but unpaid interest to
such date at the non-default contract rate, together with interest
on the accrued but unpaid interest that was due and payable on
April 1, 2008 from April l, 2008 through and including such
date; (ii) subsequent to the date of approval of the Interim DIP
Order, payment in cash on a monthly basis of all interest
accruing on the Vertis Second-Lien Notes at the non-default
contract rate; (iii) payment in cash on a current basis of all
reasonable fees and expenses ofthe Vertis Second-Lien
Noteholder Advisors, in each case, pursuant to the terms of their
respective pre-petition engagement letters; (iv) superpriority
administrative expense claims with respect to the foregoing
amounts, junior in all respects to the superpriority administrative
expense claims, if any, of the Vertis Prepetition Secured Lenders
and the lenders under the Yertis Debtor-in-Possession Financing;
and (v) replacement liens, junior in all respects to the liens of the
Vertis Prepetition Secured Lenders (on the same basis as those
liens existed prior to the commeneement of the Vertis Chapter ll
Cases and only to the extent that those liens remain outstanding
after entry of the final order approving the Vertis Debtor-in-
Possession Financing) and the liens of the lenders under the
Vertis Debtor-in-Possession Financing. The foregoing shall not
be used or construed as evidence of any entitlement of the Vertis
Second-Lien Noteholders to adequate protection.
On the Effective Date, each holder (each, a "Vert is Senior
Noteholder") of an Allowed claim (the "Vert is Senior
Notelwldel' Claims") under the Vertis Senior Notes will receive
from Vertis, in exchange for such claim, its pro rata share of (i)
a number of shares of New Common Stock equal to 57.04% of
the number of shares of New Common Stock outstanding on the
Effective Date and (ii) New Senior Notes having a principal
amount equal to $107 million.
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Vertis Senior Subordinated
Note Claims
Vertis Holdings Mezzanine
Debt and Other Claims
The Vertis Senior Noteholder Claims shall be Allowed in an
amount equal to (i) $350 million, plus (ii) the accrued but unpaid
interest under the Vertis Senior Notes as of the Filing Date, plus
(iii) all other Obligations (as defined in the indenture for the
Vertis Senior Notes), except to the extent that claims of the
Vertis Indenture Trustee under the Vertis Senior Notes are
otherwise provided to be paid or satisfied (the "Allowed Vertis
Senior Noteholder Claim Amount").
On the Effective Date (or as soon thereafter as reasonably
practicable), each holder of an Allowed claim (the "Vertis Senior
Subordinated Note/wider Claims") under the Vertis Senior
Subordinated Notes will receive from Vertis, in exchange for
such claim, its pro rata share of (i) New Senior Notes having a
principal amount equal to $27 million, (ii) 10% of the number of
shares of New Common Stock outstanding on the Effective Date
and (iii) the New Warrants.
The Vertis Senior Subordinated Noteholder Claims shall be
Allowed in an amount equal to $293,495,000, plus (ii) the
accrued but unpaid interest under the Vertis Senior Subordinated
Notes as of the Filing Date, plus (iii) all other Obligations (as
defined in the indenture for the Vertis Senior Subordinated
Notes), except to the extent that claims of the Vertis Indenture
Trustee under the Vertis Subordinated Notes are otherwise
provided to be paid or satisfied.
Each holder of an Allowed claim in the class (the "Vert is
Holdings Unsecured Claims Class") consisting of (i) claims
against Vertis Holdings arising from the Mezzanine Note and
Warrant Purchase Agreement, dated as of December 7, 1999, by
and between Vertis Holdings and certain persons named therein,
as amended (the "Vertis Holdings Mezzanine Notes"), under
which approximately $240 million in mezzanine notes are
outstanding as of May I, 2008 (the "Vertis Holdings Mezzanine
Notes Claims") and (ii) any other claim against Vertis Holdings
(other than guarantee claims relating to the Vertis Prepetition
Credit Agreement) will receive from Vertis Holdings, in
exchange for and in full satisfaction of such claim, its pro rata
share ofthe Intercompany Payment (defined below). In
addition, if the Vertis Side Letter and the CLI Side Letter have
not been terminated prior to the Effective Date, each such holder
shall receive the payments described in the Vertis Side Letter
and the CLI Side Letter. Each holder of a claim in the Vertis
Holdings Unsecured Claims Class that is an accredited investor
may elect on its ballot to receive all or a portion of its recovery
II
Vertis General Unsecured
Claims
in New Common Stock instead of cash (the Holdings
Alternate Recovery"); provided, however, that the value of the
New Common Stock to be issued on account of the Vertis
Holdings Alternate Recovery (based on the reorganized equity
value set forth in the disclosure statement) shall not exceed
$400,000 in the aggregate, and if the amount of cash elected to
be foregone in respect of the Vertis Holdings Alternate Recovery
exceeds $400,000, the Vertis Holdings Alternate Recovery shall
be divided pro rata among all claims for which such election
was made; provided, further, however, that such maximum
amounts allocable directly or indirectly to THL shall not exceed
$250,000. As to the New Common Stock that a holder elects to
receive on account of the Vcrtis Holdings Alternate Recovery,
the holder shall have the right, exercisable within 30 days after
the first anniversary of the Effective Date, to sell (in whole and
not in part) the shares ofNew Common Stock to Vertis Holdings
for an amount in Cash equal to the holder's foregone cash
recovery (the "Vertis Holdings Alternate Recovery Put Right")?
For every dollar of cash recovery any holder foregoes in respect
of the Vertis Holdings Alternate Recovery, (i) it shall receive the
number of shares of New Common Stock equal to the value of
the foregone cash based on the reorganized equity value set forth
in the disclosure statement and (ii) the Intercompany Payment
shall be reduced by one dollar. The New Common Stock issued
pursuant to the Vertis Holdings Alternate Recovery shall dilute
pro rata all other recipients of New Common Stock to be issued
on the Effective Date.
Each holder of an Allowed Vertis general unsecured claim
(including claims of advisors to the Vertis Companies, claims of
the Vertis Committee Advisors, and claims of the members of
the Vertis Informal Committee and the Vertis Second-Lien
Noteholder Group for out-of-pocket expenses (as described and
limited to $20,000 per committee/group above), to the extent
that any such claims do not become Allowed Vertis
Administrative Expense Claims), will receive payment in full in
cash of the unpaid portion of such Allowed Vertis general
unsecured claim on the latest of (a) the Effective Date (or as
soon thereafter as reasonably practicable), (b) the date on which
such claim would be paid in the ordinary course of the Vertis
Companies' businesses, and (c) as otherwise agreed by (i) the
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The indentures for the New Second-Lien Notes and New Senior Notes shall not restrict payments on
account of the Vertis Holdings Alternate Recovery Put Right.
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Vertis Companies with the reasonable consent of each Informal
Committee and the Vertis Second-Lien Noteholder Group, and
(ii) the holder of such claim; provided, however, that subject to
the approval of the lenders under the Vertis Debtor-in-Possession
Financing, the Vertis Companies, with the reasonable consent of
the Vcrtis Informal Committee and the Vertis Second-Lien
Noteholder Group, may seek authority to pay certain general
unsecured claims (and miscellaneous secured claims) in advance
ofthe Effective Date in the ordinary course of business.
Vertis Indenture Trustee On the Effective Date, Vertis shall pay all reasonable fees, costs
Claims and expenses incurred by the respective indenture trustee under
the indentures (the "Prepetition Verti.Y Indentures") for the
Vertis Second-Lien Notes and the Vertis Senior Notes
(collectively, the "Vertis Indenture Trustees") in the
performance of their duties and as provided under the
Prepetition Vertis Indentures (including, but not limited to, the
rea..c;;onable fees, costs and expenses incurred by the Vertis
Indenture Trustees' professionals) prior to the Effective Date (to
the extent not paid as of such date), provided that such fees,
costs and expenses are reimbursable under the terms of the
applicable Prepetition Vertis Indenture and provided, further
that Vertis shall pay all reasonable fees, costs and expenses
incurred by the financial advisor to the indenture trustee for the
Vertis Second-Lien Notes so long as such financial advisor is
the same financial advisor retained by the Vertis Second-Lien
Noteholder Group. Vertis shall pay all reasonable fees, costs
and expenses incurred by any V ertis Indenture Trustee after the
Effective Date in connection with the distributions required
pursuant to the Plans or the implementation of any provisions of
the Plans (including, but not limited to, the reasonable fees, costs
and expenses incurred by the V ertis Indenture Trustees'
professionals).
Vertis Intercompany Claims The net intercompany claim reflected by Vertis' financial
statements as owing to Vertis Holdings from Vertis and certain
of its subsidiaries (the "Intercompany Claim") shall be Allowed
in the amount of $3.232 million and paid in full in cash (the
"Intercompany Payment") on the Effective Date, minus any
cash forgone in connection with the Ve11is Holdings Alternate
Recovery; it being understood that Vertis shall not make any
payments or other transfers to or on behalf of Vertis Holdings
from the date hereof through the Effective Date, other than on
account ofVertis Holdings' franchise or tax payments. The
Intercompany Payment shall be distributed pro rata to holders of
claims in the Vertis Holdings Unsecured Claims Class, subject to
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the Vertis Holdings Alternate Recovery.
On or after the Effective Date, all other of the V ertis
Companies' intercompany claims will be adjusted, paid,
continued, or discharged to the extent reasonably determined
appropriate by the Vertis Companies, with the reasonable
consent of each Informal Committee and the Vertis Second-Lien
Noteholder Group.
Vertis Section 510(b) Claims Any claim against the Vertis Companies that is described in
section 51 O(b) of the Bankruptcy Code shall not receive a
distribution and shall be extinguished.
Vertis Equity Interests
TREATMENT OF
ACGCLAIMS
AND INTERESTS
ACG Administrative
Expense Claims
The holders of equity interests in the Vertis Companies will
receive no distributions under the Vertis Plan on account of such
interests. All existing equity interests of any nature issued by
Vertis Holdings will be extinguished on the Effective Date.
Equity interests in direct and indirect subsidiaries ofVertis
Holdings will remain in place or, if necessary, be replaced with
new equivalent equity interests.
"ACG Administrative Expense Claims" shall include, among
other things, (i) Allowed claims for reasonable fees and
expenses of professionals retained in the ACG Chapter 11 Cases
with the approval of the Bankruptcy Court, (ii) all reasonable
ACG Informal Committee (the "ACG Committee Advisors"),
including, without limitation, the following: Milbank, Tweed,
Hadley & McCloy, L.L.P, and Perella Weinberg Partners, L.P.,
pursuant to the terms of their respective pre-petition engagement
letters, as applicable, and Wachtell, Lipton, Rosen & Katz, in
each case, without any requirement for the filing of retention
applications or fee applications in the ACG Chapter 11 Cases,
(iii) claims for out-of-pocket expenses incurred by the members
of the ACG Informal Committee in connection with the
Restructuring; provided, however, the ACG Companies shall not
be required to reimburse the members of the ACG Informal
Committee for out-of-pocket expenses in excess of $20,000 in
the aggregate, and (iv) claims against the ACG Companies under
section 503(b) of the Bankruptcy Code.
Each holder of an Allowed ACG Administrative Expense Claim
will receive payment in full in cash of the unpaid portion of such
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ACG Prepetition Secured
Lender Claims
Allowed ACG Administrative Expense Claim (a) in the case of
professional fees and expenses of the ACG Committee Advisors,
in the ordinary course of business pursuant to the terms of their
respective pre-petition engagement letters, as applicable, but no
later than the Effective Date, (b) in the case of professional fees
and expenses for professionals other than the ACG Committee
Advisors, as soon as practicable after Bankruptcy Court
approval thereof, (c) with respect to all other holders of Allowed
ACG Administrative Expense Claims, on the later of (i) the
Effective Date and (ii) the date on which such payment would be
made in the ordinary course of the ACG Companies' businesses,
or (d) with respect to any claim described in clauses (a) through
(c) hereof, as otherwise agreed by the holder of such claim and,
with the reasonable consent of each Informal Committee, the
Vertis Second-Lien Noteholder Group, the ACG Companies and
Vertis.
On the Effective Date, each holder of an Allowed claim under
(a) (each an "ACG Prepetition Secured Lender") the Amended
and Restated Credit Agreement, dated May 5, 2005, as amended,
by and between American Color Graphics, T nc. as borrower,
ACG Holdings as guarantor, Banlc of America, N .A., as
administrative agent, and certain lenders named therein (the
"A CG Prepeti(ion Credit Agreement") and (b) (each a "Bridge
Facility Lender") the Bridge Facility Agreement, dated as of
March 3, 2008, as amended, by and among ACG, Tnc. as
borrower, ACG Holdings and certain other subsidiaries as
guarantors, Special Situations Investing Group, Inc. as
administrative agent and certain lenders party thereto (the "A CG
2008 Facility")
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and (c) (each an "ACG Receivables Lender")
the ACG Receivables Facility (the "ACG Receivables Facility")
will be paid all amounts due and owing to such holder in full in
cash from the Exit Funding.
All amounts due and owing under the ACG Prepetition Credit
Agreement, ACG 2008 Facility and ACG Receivables Facility
may, only if provided for in the ACG Debtor-in-Possession
Commitment Letter, be repaid in full with proceeds from the
ACG Debtor-in-Possession Financing.
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Any additional secured financing obtained by the ACG Parties in compliance with Section 5.03(a)(vi)(C)
of the Restructuring Agreement shall receive the same treatment provided under this term sheet to the ACG 2008
Facility.
15
ACG Priority Tax Claims
Subject to the approval of the lenders under the ACG Debtor-in-
Possession Financing, as "adequate protection" during the
Chapter 11 Cases, the ACG Prepetition Secured Lenders and the
ACG Receivables Lenders (to the extent not repaid in full with
proceeds from the ACG Debtor-in-Possession Financing) shall
receive on or beginning on, as the case may be, the date of entry
of the interim order approving the ACG Debtor-in-Possession
Financing (the "ACG Interim DIP O r d e r ' ~ , (i) payment in cash
on a monthly basis of all interest accruing on such indebtedness
at the non-default contract rate, (ii) payment in cash on a current
basis of all reasonable fees and expenses of counsel, (iii)
superpriority administrative expense claims with respect to the
foregoing amounts junior in all respects to the superpriority
administrative expense claims of the lenders under the ACG
Debtor-in-Possession Financing, and (iv) replacement liens,
junior in all respects to the liens ofthe lenders under the ACG
Debtor-in-Possession Financing.
Possession Financing, as "adequate protection" during the ACG
Chapter 11 Cases, the Bridge Facility Lenders, (to the extent not
repaid in full with proceeds from the ACG Debtor-in-Possession
Financing) shall receive on or beginning on, as the case may be,
the date of entry of the ACG Interim DIP Order, (i) payment in
cash on a current basis of all reasonable fees and expenses of
counsel, (ii) superpriority administrative expense claims with
respect to the foregoing amounts junior in all respects to the
superpriority administrative expense claims of the lenders under
the ACG Debtor-in-Possession Financing, and (iii) replacement
liens, junior in all respects to the liens of the lenders under the
ACG Debtor-in-Possession Financing.
Allowed claims against the ACG Companies under Bankruptcy
Code section 507(a)(8) ("ACG Priority Tax Claims") will be
treated in accordance with Bankruptcy Code section
1129(a)(9)(C).
ACG Other Priority Claims On the Effective Date, each holder of an Allowed claim against
the ACG Companies under Bankruptcy Code section 507(a)
other than an ACG Administrative Expense Claim or an ACG
Priority Tax Claim will receive payment in full in cash from the
Exit Funding or as otherwise agreed by (i) the ACG Companies,
with the reasonable consent of the Vertis Companies, each
Informal Committee, and the Vertis Second-Lien Noteholder
Group and (ii) the holder of such claim.
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ACG Second-Lien Notes On the Effective Date, each holder (each an "ACGSecond-Lien
Noteltolder") of an Allowed claim (the "ACG Second-Lien
Noteltolder Claims") under the ACG Second-Lien Notes will
receive from Vertis, in exchange for such claim, its pro rata
share of (i) a number of shares of New Common Stock equal to
32.96% of the number of shares of New Common Stock
outstanding on the Effective Date and (ii) New Senior Notes
having a principal amount equal to $66 million.
The ACG Second-Lien Noteholder Claims shall be Allowed in
an amount equal to (i) $280 million, plus (ii) the accrued but
unpaid interest under the ACG Second-Lien Notes as of the
Filing Date, plus all other Obligations (as defined in the
indenture for the ACG Second-Lien Notes), except to the extent
that the Claims of the ACG Indenture Trustee arc otherwise
provided herein to be paid or satisfied.
Possession Financing, as "adequate protection" during the
Chapter 11 Cases, the ACG Second Lien Noteholders shall
receive on the date of entry of the ACG Interim DIP Order (i)
payment in cash on a current basis of all reasonable fees and
expenses of advisors including the ACG Committee Advisors
(ii) superpriority administrative expense claims with respect to
the foregoing amounts junior in all respects to the superpriority
administrative expense claims of the lenders under the ACG
Debtor-in-Possession Financing; and (iii) replacement liens,
junior in all respects to the liens of the lenders under the ACG
Debtor-in-Possession Financing.
ACG Secured Non-Interest On the Effective Date, the ACG secured non-interest bearing
Bearing Notes notes due 2008 will be cancelled without consideration.
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ACG General Unsecured Each holder of an Allowed ACG general unsecured claim will
Claims receive payment in full in cash of the unpaid portion of such
Allowed ACG general unsecured claim (including claims of
advisors to the ACG Companies, claims of the ACG Committee
Advisors, and claims of the members oftheACG Informal
Committee for out-of-pocket expenses (as described and limited
to $20,000 above), to the extent that any such claims do not
become Allowed ACG Administrative Expense Claims) on the
latest of(a) the Effective Date (or as soon thereafter as
reasonably practicable), (b) the date on which such payment
would be made in the ordinary course of the ACG Companies'
businesses, and (c) as otherwise agreed by (i) the ACG
Companies, with the reasonable consent of the Vertis
Companies, each informal Committee, and the Vertis Second-
Lien Noteholder Group and (ii) the holder of such claim;
provided, however, that subject to the approval of the lenders
under the ACG Debtor-in-Possession Financing, the ACG
Companies, with the reasonable consent of the ACG Informal
Committee, may seek authority to pay certain general unsecured
claims (and miscellaneous secured claims) in advance of the
Effective Date in the ordinary course of business.
ACG Indenture Trustee On the Effective Date, ACG shall pay all reasonable fees, costs
Claims and expenses incurred by the indenture trustee under the
indentures (the "Prepetition ACG Indenture") for the ACG
Second-Lien Notes (the "ACG Indenture Trustee") in the
performance of its duties and as provided under the Prepetition
ACG Indenture (including, but not limited to, the reasonable
fees, costs and expenses incurred by the ACG indenture
Trustee's professionals) prior to the Effective Date (to the extent
not paid as of such date), provided that such fees, costs and
expenses are reimbursable under the terms of the Prepetition
ACG Indenture. ACG shall pay all reasonable fees, costs and
expenses incurred by the ACG Indenture Trustee after the
Effective Date in connection with the distributions required
pursuant to the Plans or the implementation of any provisions of
the Plans (including, but not limited to, the reasonable fees, costs
and expenses incurred by the ACG Indenture Trustee's
professionals).
ACG Intercompany Claims On or after the Effective Date, all the ACG Companies'
intercompany claims will be paid, adjusted, continued, or
discharged to the extent reasonably determined appropriate by
the Vertis Companies, with the reasonable consent of each
Group.
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ACG Section 510(b) Claims Any claim against the ACG Companies that is described in
section 51 O(b) of the Bankruptcy Code shall not receive a
distribution and shall be extinguished.
ACG Equity Interests On the Effective Date, each holder of an equity interest in the
ACG Companies will receive its pro rata share of an amount of
cash equal to 0.05% of the reorganized equity value set forth in
the disclosure statement. All existing equity interests of any
nature issued by ACG Holdings will be extinguished on the
Effective Date. Equity interests in direct and indirect
subsidiaries will remain in place or, if necessary, be replaced
with new equivalent equity interests.
OTHER PROVISIONS
Employment
Agreements/Management
Incentive Plan
Appropriate employment agreements with Vertis management
shall be entered into as of the Etiective Date, subject to further
discussion with certain Vertis management and subject to the
reasonable approval of Avenue Investments, LP ("Avenue"),
upon consultation with Goldman Sachs ("Goldman") and Trust
Company of the West ("TCW'). To the extent such agreements
are not agreed upon, existing Vertis employment agreements
shall be assumed.
All other obligations ofVertis and its subsidiaries and all
obligations of ACG and its subsidiaries to officers, directors, and
employees thereof that are referred to in the Merger Agreement
shall be assumed in the Vertis Plan and ACG Plan, as applicable.
Vertis Holdings shall establish an Equity Incentive Plan (the
"New Equity Plan") providing for the issuance of equity awards
to officers and key employees of the Vertis Companies, the
ACG Companies, and their respective affiliates after the
Effective Date. Awards under the New Equity Plan shall
represent an aggregate of 10% of the New Common Stock on a
fully diluted basis (with anti-dilution protection for the issuance
of shares of New Common Stock, if any, issued upon exercise of
the New Warrants), and shall be subject to the terms and
conditions of the New Equity Plan and the applicable grant
agreement.
Vertis Holdings intends to establish a Cash Bonus Plan (the
"New Bonus Plan") providing for the issuance of cash bonuses
to officers and key employees of V crt is Companies, the ACG
Companies, and their respective affiliates, which bonuses will be
conditioned on the Effective Date and will be paid upon the
Effective Date and subject to the reasonable approval of
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Stock of Vertis Holdings
Reporting/Trading
Shareholder Agreement
Corporate Governance
Advisory Services
Agreements
Avenue, upon consultation with Goldman and TCW. Awards
under the New Bonus Plan shall represent an aggregate of no
more than $3 million.
The New Common Stock will not be publicly traded.
Any person who receives more than 5% of the New Common
Stock and/or who is referenced in the Shareholder Agreement
Term Sheet (defined herein), will have the registration rights
described in Exhibit G.
All Vertis Filing Entities and all ACG Filing Entities, upon
emergence, shall not be SEC reporting companies. Reporting
obligations applicable to the New Second-Lien Notes and the
New Senior Notes are set forth on Exhibit F hereto and as to the
holders ofNew Common Stock are set forth in the Shareholder
Agreement.
On the Effective Date, Vertis Holdings and certain holders of the
New Common Stock (including those parties referenced on
Exhibit G) shall enter into a shareholder agreement (the
"Shareholder Agreement") on terms and conditions consistent
with the Shareholder Agreement Term Sheet annexed hereto as
Exhibit G and otherwise reasonably acceptable to each Informal
Committee.
The initial board of directors ofVertis Holdings will consist of
five directors, one of whom shall be Vertis Holdings' Chief
Executive Officer, two of whom shall be selected by Avenue,
one of whom shall be selected by the Vcrtis Informal Committee
(with such selection being made by one or more members of
such committee who hold, in the aggregate, more than 50% of
the face amount of the Vertis Senior Notes held by the members
of such committee) and one of whom shall be selected by the
ACG Informal Committee.
On the Effective Date, each of the ACG Companies and Vertis
Companies will enter into an Advisory Services Agreement (the
"Avenue Advisory Services Agreement") with an affiliate of
Avenue Capital Management (the "Avenue Manager''). During
the term of the Avenue Advisory Services Agreement, the ACG
Companies and the Vertis Companies shall pay the Avenue
Manager an annual advisory fee of $750,000 per year (payable
quarterly in advance) (the "Avenue Annual Fee"). The Avenue
Annual Fcc will be accrued during the period in which the New
Second Lien Notes are outstanding and all unpaid Avenue
Annual Fees shall be outstanding and paid in full when all
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obligations under the indenture for the New Second Lien Notes,
including any premiums, fees or other charges but excluding any
contingent obligations for which no claim has been asserted
(collectively, the "Second Lien Obligations") are refinanced or
no longer outstanding. The Avenue Annual Fee will be
expressly subordinated to the prior payment in full of the Second
Lien Obligations, including any such obligation accruing after
the commencement of any subsequent insolvency proceedings
(but excluding any contingent obligations for which no claim
has been asserted). In addition, the ACG Companies and the
Vertis Companies shall reimburse on a current basis the Avenue
Manager for all reasonable out-of-pocket expenses incurred by
the Avenue Manager in connection with providing the advisory
services (e.g., expenses for travel, meals and lodging). The
Avenue Advisory Services Agreement shall terminate upon the
earlier of(w) the tenth anniversary ofthe Effective Date, (x) the
date the Avenue Manager and its affiliates collectively own less
than 5% of the then-outstanding New Common Stock and (y) the
consummation of a Sale or an IPO.
On the Effective Date, each of the ACG Companies and Vertis
Companies will enter into an Advisory Services Agreement (the
"Goldman/TCW Advisory Services Agreement") with an
affiliate of Goldman (the "Goldman Manager") and an affiliate
ofTCW (the "TCW Manager"). During the term of the
Goldman/TCW Advisory Services Agreement, the ACG
Companies and the Vertis Companies shall pay the Goldman
Manager and TCW Manager an aggregate annual advisory fcc of
$250,000 per year (payable quarterly in advance) (the
"Goldman/TCW Annual Fee"). The Goldman/TCW Annual
Fee will be accrued during the period in which the New Second
Lien Notes are outstanding and all unpaid Goldman/TCW
Annual Fees shall be outstanding and paid in full when the
Second Lien Obligations are refinanced or no longer
outstanding. The Goldman/TCW Annual Fee will be expressly
subordinated to the prior payment in full of the Second Lien
Obligations, including any such obligation accruing after the
commencement of any subsequent insolvency proceedings (but
excluding any contingent obligations for which no claim has
been asserted). In addition, the ACG Companies and the Vertis
Companies shall reimburse on a current basis the Goldman
Manager and the TCW Manager, as applicable, for all
reasonable out-of-pocket expenses incurred by such entity in
connection with providing the advisory services (e.g., expenses
for travel, meals and lodging). The Goldman/TCW Advisory
Services Agreement shall terminate upon the earlier of (w) the
tenth anniversary of the Effective Date, (x) the date the Goldman
21
Releases
Manager, the TCW Manager and their affiliates collectively own
less than 5% of the then-outstanding New Common Stock, and
(y) the consummation of a Sale or an IPO.
To the extent permitted by applicable law and approved by the
Bankruptcy Court, the Vertis Companies, the ACG Companies
and each person who, directly or indirectly, is entitled to receive
a distribution under the Plans, including, without limitation,
persons entitled to receive a distribution via an attorney, agent,
indenture trustee or securities intermediary, shall, effective upon
the Effective Date, be deemed to forever release, waive and
discharge all claims, demands, causes of action and the like,
relating to the Vertis Companies and their affiliates and the ACG
Companies and their affiliates, whether direct or derivative,
liquidated or unliquidated, fixed or contingent, matured or
unmatured, disputed or undisputed, known or unknown,
foreseen or unforeseen, then existing or thereafter arising, in law,
equity or otherwise, subject to a limited carve-out (the "Carve-
out'') solely for criminal acts and fraud (excluding, in the case of
Shareholders ofVertis Holdings, payments on account of interest
on Notes or Vertis Holdings Mezzanine Notes, management
fees, or expense reimbursements) against (I) each Consenting
Noteholder, (II) each Vertis Indenture Trustee, (III) the ACG
Indenture Trustee, (IV) each Informal Committee and its
respective members (V) the Vertis Second-Lien Noteholder
Group and its members, (VI) any Shareholders ofVertis
Holdings, (VII) any Shareholder of ACG Holdings, (VIII) the
current (as of the Effective Date) and former (as of the Effective
Date) directors, officers, and employees of the Vertis Companies
and the ACG Companies, (IX) the Vertis Companies and the
ACG Companies, (X) the lenders under the ACG 2008 Facility
and the administrative agent under the ACG 2008 Facility, (XI)
the professional advisors, sub-advisors, managers, and managing
and executive directors of the parties described in clauses (I)
through (X) hereof, and (XII) the directors, officers, partners,
members, representatives and employees of the parties described
in clauses (I) through (VII) hereof; provided, however, that
pursuant to the CLI Side Letter, CLI will only be releasing the
Vcrtis Companies, the ACG Companies (with respect to matters
relating to any of the Vertis Companies) and any current (as of
the Effective Date) or former (as ofthe Effective Date) director
or officer of any of the Vertis Companies, with such release
applying solely to acts or omissions taken or omitted in their
capacity as an officer or director of any of the Vertis Companies;
provided further, however, that to the extent any party does not
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Waiver of Avoidance
Actions
Exculpation
Indemnification Claims
provide the release provided herein to another person or entity,
that non-releasing party shall not receive a release from such
other person or entity.
Notwithstanding anything to the contrary herein, the Carve-out
shall not include claims, demands, causes of action and the like
of the ACG Companies for constructive fraudulent conveyances
or preferences, whether brought under the Bankruptcy Code or
other applicable law.
The Plan shall provide for a waiver (i) by the Vertis Companies
of any fraudulent transfer claims against the Shareholders of
Vertis Holdings relating to payments on account of interest on
Notes or Vertis Holdings Mezzanine Notes, management fees, or
expense reimbursements and (ii) by the ACG Companies of all
constructive fraudulent conveyance claims and preference
claims, in each case whether brought under the Bankruptcy
Code or other applicable law.
Bankruptcy Court, the Vertis Filing Entities (including as
reorganized), the ACG Filing Entities (including as reorganized),
each Informal Committee, the Vertis Second-Lien Noteholder
Group, the Vertis Indenture Trustees, and the ACG Indenture
Trustee, and their respective successors, predecessors, control
persons, members, officers, directors, employees and agents
(including any attorneys, financial advisors, investment bankers,
accountants, and other professionals retained by such persons)
shall have no liability to any holder of a claim or equity interest
(including, notwithstanding anything herein to the contrary, CLI)
for any act or omission in connection with, or arising out of, the
negotiation of the Restructuring Agreement, the negotiation and
the pursuit of approval of the disclosure statement, the Vertis
Plan or the ACG Plan or the solicitation of votes for, or
confirmation of, the Vertis Plan or the ACG Plan, the funding of
the Vertis Plan or the ACG Plan, the consummation of the Vertis
Plan or the ACG Plan, or the administration of the Vertis Plan or
the ACG Plan or the property to be distributed under the Vertis
Plan or the ACG Plan, except for willful misconduct or gross
negligence as determined by a final order of the Bankruptcy
Court and, in all respects, shall be entitled to rely upon the
advice of counsel with respect to their duties and responsibilities
under the Vertis Plan or the ACG Plan.
Notwithstanding anything to the contrary herein, the
indemnification rights of directors, officers and employees of the
Vertis Companies or the ACG Companies to indemnification
23
Additional Conditions
from the Vertis Companies or the ACG Companies, as
applicable, shaJJ not be released, waived or discharged and such
rights shall be reinstated pursuant to the Vertis Plan and the ACG
Plan, as applicable.
1. The Plans wiJJ contain other customary conditions to
effectiveness in form and substance to be agreed upon,
including, without limitation: (i) closing of the Exit
Funding; (ii) the Restructuring Agreement has not been
terminated; (iii) no stay ofthe confirmation order(s); (iv)
consummation of the Merger (and with the occurrence of the
Effective Date being a condition to the effectiveness of the
Merger); and (v) the conditions set forth in Sections 8.2(a)
and 8.3(a) of the Merger Agreement have been satisfied (and
not waived).
2. (a) The Vertis Plan and the ACG Plan, shaJJ provide that, as
applicable, any and all claims asserted or otherwise existing
against Vertis, Inc., ACG Holdings, Inc. and their respective
direct and indirect subsidiaries by: (i) Thomas H. Lee Equity
Fund IV, L.P., Thomas H. Lee Foreign Fund IV, L.P.,
Thomas H. Lee Foreign Fund IV-B, L.P. and Thomas H. Lee
Investors, L.P. (collectively, "THL Fund Parties"), the
shareholders ofVertis Holdings who have invested in the
securities ofVertis with the THL Fund Parties and have
signed or hereafter sign the Vertis Side Letter, Thomas H.
Lee Capital, LLC, and THL Equity Advisors IV, LLC ; (ii)
Evercore Capital Partners, L.P., Evercore Capital Partners
(NQ) L.P., Evercore Capital Offshore Partners, L.P. and
Evercore Advisors Inc., (iii) Metalmark Subadvisor LLC,
and (iv) the controlled affiliates of the entities in (i)-(iii)
(other than the "portfolio companies" controJJed or managed
by them and the Vertis Companies and ACG Companies, as
applicable) ((i)-(iv) collectively, the "Shareholders"), for
management fees or otherwise shaJJ be waived, extinguished
and/or disaJJowcd in their entirety, (b) any order confirming
the ACG Plan or the Vertis Plan shall provide that such
claims shall, as of the Effective Date, be extinguished and
disallowed in their entirety and such Shareholders shall not
be entitled to any distributions under the Plans on account
thereof, provided, however, the Shareholders may assert
Vertis Second-Lien Noteholder Claims, Vertis Senior
Subordinated Noteholder Claims, Vertis Subordinated
Noteholder Claims and ACG Second-Lien Noteholdcr
Claims, if any, which noteholder claims shall be treated in
accordance with this Term Sheet and the Shareholders may
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3.
assert any claims it has against Vertis Holdings, including for
management fees and the Vertis Holdings Mezzanine Notes
Claims, and (c) subject to the immediately preceding
proviso, any management agreement or other agreement
with any Shareholder (other than the Vertis Side Letter and
the ACG Side Letter, which shall each be assumed under the
Plan on the Effective Date unless terminated prior to the
Effective Date) shall be either rejected or terminated
pursuant to its terms as of the Effective Date, with any
rejection damage claim resulting therefrom being treated in
accordance with clauses (a) and (b) ofthis paragraph, except
for a rejection damage claim resulting from an agreement
with Vertis Holdings, which claim shall be treated in
accordance with the treatment set forth for the Vertis
Holdings Unsecured Claims Class; it is understood, however,
that notwithstanding anything herein to the contrary, the
THL/Evercore Parties (as defined in the Vertis Side Letter)
will not be releasing any claims to which the Carve-out
applies and such claims shall be treated as provided in the
Term Sheet.
The Proposed Merger and the other transactions, obligations
and agreements provided for in the Merger Agreement,
which shall be an exhibit to the Vertis Plan and the ACG
Plan, shall be a part of and implemented through such plans.
25
EXHIBIT A
Post-Effective Date Organizational Structure
: Vertis Holdings, Inc. (DE) :
:l;; t;r "' l'i "'J M IIJ q "' rl }';;, tl '' ;'l ; 1,1 1:;!.4
I
Vertis, Inc. (DE)
;p :c 1: , ; .- \ 1 i ) , : 1 :! : : r ( -: : ..., ; ; i
gH 1..t .:lc-v!t:,-1:, .t\ I '
_J_--, I
1 ACG Holdings, Inc. 1 !
I (DE) I I
:-=- I
1
Graphics, Inc. (NY) 1
1
:- i
L J :_ _____ _

Vertis Receivables II,
1
Enteron Group, LLC :
1
Webcraft, LLC (DE)
1
Laser Tech Color
LLC(DE) I (DE) I ---- r--- Mexico
-------- I 5 A. deC V
r ___ .. __ _ -."c __
1 Vertis Mailing, LLC
1
1 Webcraft Chemicals,
1
USA D1rect, LLC
1
Vertis Fragrance
I ___ ___ I 1_ - _L:: - _I -- - - - _I SARL (France)
685342.000 I WEST 6227110 v8
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EXHIBIT B
Terms of the New Credit Facilities
As indicated above, the Restructuring contemplated herein provides for Vertis to borrow funds
under the New Credit Facilities. Set forth below is a summary of certain salient terms of the New
Credit Facilities, which shall be comprised of: (i) a "New Revolving Loan Facility" and (ii)
"New Term Loan Facilities."
Facility New Revolving Loan Facility
Borrower Vertis
Guarantors All domestic subsidiaries ofVertis (the "Subsidiary Guarantors") and Vertis
Holdings.
Amount Up to $250m
Facility New Term Loan Facilities
Borrower Yertis.
Amount $200m - 400m in the aggregate
EXHIBITC
Terms of New Second-Lien Notes
As indicated above, the Restructuring contemplated herein provides for the issuance by Vcrtis of
the New Second-Lien Notes. Set forth below is a summary of cettain salient terms of the New
Second-Lien Notes:
Issuer
Guarantors
Maturity Date
Interest Rate
Call Protection
Cash Interest to Senior
Noteholders
Additional Terms
Vertis
The Subsidiary Guarantors.
Four years from the Effective Date
13% (cash)/3% (PIK).
4
Year 1 (prior to first anniversary of closing) -1 05; Year 2- 1 02; Year
3 -1 0 1 ; and thereafter - 1 00.
No cash interest payable to holders of the New Senior Notes until
New Second-Lien Notes are repaid in full.
See attached Indenture Annex.
4
Notwithstanding Section 9 of the Restructuring Agreement, it is understood that this rate can be increased
with the consent of the Vertis Companies, the ACG Companies, each Informal Committee, the Vertis Second-Lien
Noteholder Group, and/or such parties' respective advisors.
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Additional Indenture Terms for New Second-Lien Notes
Except as otherwise set forth herein, tenns of the indenture for the New Second-Lien Notes shall
be consistent with those in the indenture for the Vertis Second-Lien Notes.
Provision Existing Second-Lien Notes New Second-Lien Notes
Restricted Payments
RP basket build 50% ofCNI + 100% ofnet cash Same + 100% FMV certain non-cash
proceeds of equity issuances proceeds of equity issuances
Basket start date for RPs Issue date (2002) Start of fiscal quarter after Effective
Date
RP for corporate overhead at $5 million $5 million
Holdinf!s
RP for stock buy backs from $10 million $15 million
employees
RP basket for buyback of $500,000 $500,000
fractional shares
General RP basket $13 million $20 million
RP basket for refinancing of $50 million basket for repayment of Not applicable
subordinated debt (with senior subordinated credit facility
debt)
Debt Covenant
Incurrence ratio: Coverage test Fixed charge coverage ratio of2.25 to Fixed charge coverage ratio of2.00
1.00, stepping up to 2.50 to 1.00 on to 1.00
January I, 2005
Credit facility basket $670 million, including air facility in an $650 million aggregate, including
amount not to exceed $150 million off-balance-sheet air facility in an
amount not to exceed $175 million
Acquired debt basket $40 million (shared with capital leases) $60 million (stand-alone)
Capital/ease basket $40 million (shared) $60 million (stand-alone)
General debt basket $35 million $50 million
Permitted Investments
Loans to employees $10 million $15 million
General investment basket $20 million $30 million
Asset Sales
De minimis asset sale $2.5 million $5 million
Asset sale offer trigger $20 million $30 million
Affiliate Transactions
Thresholds $5 million for disinterested board $5 million for disinterested board
member approval; $20 million for member approval; $20 million for
fairness opinion fairness opinion
Carve out for loans to $10 million $15 million
employees
Liens
Permitted Liens: Capita/leases Liens must be junior to second liens $60 million basket for non-junior
and PMSI carveouts liens; otherwise must bejunior
Provision Existing Second-Lien Notes
Senior Secured Leveral!e Ratio 1.75x
Genera/liens basket Liens related to general debt basket as
long as liens iunior
Carve out for management fees $250,000 per quarter to THL and
$62,500 to Evercore
Events of Default
Cro.v.v default/judgment defaults $20 million
thresholds
Change of Control
Tltird Party Trigger for Clra11ge Any person or group acquires in excess
of Control of 50% of voting power
Reporting Covenant Deliver to Trustee and Holders all
infonnation required by Forms I 0-K, 10-
Q and 8-K.
Consolidated Fixed Charges Definition of Consolidated Interest
Expense includes cash and non-cash
interest
New Second-Lien Notes
2x
Liens related to general debt basket
as long as liens iunior
As provided in section ofTenn
Sheet entitled "Advisory Services
Agreement"
$30 million
Any person or group acquires in
excess of 50% of voting power;
exceptions for Pennitted Holders,
which includes A venue and/or its
affiliates/control parties
As set forth on Exhibit F
Non-cash interest to be excluded
from Consolidated Interest Expense
for purposes ofthis definition
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EXHIBIT D
Terms of New Senior Notes
As indicated above, the Restructuring contemplated herein provides for the issuance by Vertis of
the New Senior Notes. Set forth below is a summary of certain salient tenns of the New Senior
Notes:
Issuer:
Securities:
Issue Date:
Principal Amount at Issuance:
Interest:
Maturity:
Interest Payment Dates:
Use of Proceeds:
Collateral:
Guarantors:
Vertis, Tnc. (the "Company")
Senior Notes
The Effective Date
$200,000,000
13.5% per annum PIK
Five and a halfyears from Effective Date
Semi-annual
No cash proceeds.
None
All existing and future subsidiaries that
guarantee the New Credit Facilities or the New
Second-Lien Notes. Also, all existing and
future holding companies that guarantee the
New Second-Lien Notes (or any other funded
debt of the Company junior to such New
Second Lien Notes), if any.
Mandatory Offers to Purchase and Mandatory
Redemption:
Optional Redemption:
Ranking:
If a specified change of control event occurs,
subject to certain conditions, the Company
must make an offer to repurchase the New
Senior Notes at a purchase price of 101% of
the principal amount of the New Senior Notes,
plus accrued and unpaid interest. "Change of
Control" will include exceptions for certain
permitted holders (Avenue and/or its
affiliates/control parties).
Certain asset dispositions will be triggering
events that may require the Company to use
the net proceeds from those asset dispositions
to make an offer to repurchase Notes at 100%
of their principal amount, together with
accrued and unpaid interest, if such proceeds
are not otherwise used within 360 days to
repay certain specified types of indebtedness or
reinvest in "Productive Assets."
The Company may redeem the Notes at the
redemption prices (expressed as percentages of
principal amount) set forth below plus accrued
and unpaid interest to the applicable
redemption date, if redeemed during the
twelve-month period beginning on the
Effective Date and each anniversary thereof at
the redemption prices indicated below:
Percentage
2008............................ 105.000%
2009............................ 102.000%
2010 ............................ 101.000%
2011 and thereafter ........... 100.000%
The New Senior Notes and related guarantees
will be unsecured senior obligations of the
Company and the Guarantors. The New Senior
Notes and related guarantees will (1) rank pari
passu in right of payment with all secured
senior obligations ofthe Company and the
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Covenants:
Financial Maintenance Covenants:
Negative Covenants:
Events ofDefault:
Guarantors, including, without limitation, the
New Credit Facilities and the New Second-
Lien Notes and all guarantees thereof, but in
each case effectively subordinated to such
obligations to the extent of the collateral
securing such obligations, (2) rank pari passu
in right of payment with any unsecured senior
obligations ofthe Company and the
Guarantors, (3) rank senior in right of payment
to any future subordinated indebtedness of the
Company and the Guarantors, and ( 4) be
structurally subordinated to all obligations of
subsidiaries of the Company that arc not
Guarantors.
None
The indenture governing the New Senior Notes
will be based on the indenture governing the
Vertis Senior Notes, and will contain negative
covenants having a similar scope and structure.
The negative covenants will include, without
limitation, restrictions on indebtedness, liens,
restricted payments, upstream payment
restrictions, asset sales, and affiliate
transactions. The negative covenants and the
exceptions thereto will be modified from the
Vertis Senior Notes to reflect the Restructuring
transactions and the circumstances of the
Company post-Restructuring, including,
without limitation, the modifications indicated
on the attached indenture annex, and others
consistent with other post-Restructuring debt
of the Company. At the Effective Date, all
subsidiaries ofthe Company shall be
Restricted Subsidiaries.
Based on the indenture governing the Vertis
Senior Notes, with modifications to reflect the
Restructuring transactions and the
circumstances ofthe Company post-
Restructuring, including, without limitation,
the modifications indicated on the attached
Voting:
indenture annex.
The indenture governing the New Senior Notes
shall expressly provide that New Senior Notes
owned by holders that directly or indirectly
control, or are controlled by or under direct or
indirect common control with, the Company
will not be disregarded for purposes of voting
with respect to amendments, waivers,
directions and consents.
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Additional Indenture Terms for New Senior Notes
Except as otherwise set forth herein, terms of the indenture for the New Senior Notes shall be
consistent with those in the indenture for the Vertis Senior Notes.
Provision Existing Senior Notes New Senior Notes
Restricted Payments
RP basket build 50% of CNI + I 00% of net cash Same +I 00% FMV certain non-cash
proceeds of equity issuances proceeds of equity issuances
Basket start date for RPs Issue date (2002) Start of fiscal quarter after Effective
Date
RP for corporate overhead at $5 million $5 million
Holdin{!s
RP for stock buy backs from $10 million $15 million
employees
RP basket for buyback of $500,000 $500,000
fractional shares
General RP basket $13 million $20 million
RP refinancing of $50 million basket for repayment of Not applicable
subordinated debt (with senior subordinated credit facility
debt)
Debt Covenant
Incurrence ratio: Coverage test Fixed charge coverage ratio of2.25 to Fixed charge coverage ratio of2.00
1.00, stepping up to 2.50 to 1.00 on to 1.00
January 1, 2005
Credit facility basket $670 million, including air facility in an $650 million aggregate, including
amount not to exceed $150 million off-balance-sheet air facility in an
amount not to exceed $175 million
Acquired debt basket $40 million (shared with capital leases) $60 million (stand-alone)
Capital/ease basket $40 million (shared) $60 million (stand-alone)
General debt basket $35 million $50 million
Permitted Investments
Loans to employees $10 million $15 million
General investment basket $20 million $30 million
Asset Sales
De minimis asset sale $2.5 million $5 million
Asset sale offer trigger $20 million $30 million
Affiliate Transactions
Thresholds $5 million for disinterested board $5 million for disinterested board
member approval; $20 million for member approval; $20 million for
fairness opinion fairness opinion
Carve out for loa/Is to $10 million $15 million
employees
Permitted Liens Liens related to general debt basket general liens basket of $50 million
permitted
Carve outfor mana{!ementfees $250,000 per quarter to THL and As provided in section of Term
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Provision Existing Senior Notes New Senior Notes
$62,500 to Evercore Sheet entitled "Advisory Services
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Events of Default
Cross defau/t/judgmmt defaults $20 million $30 million
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thresholds
Change of Control
Third Party Trigger for Clwnge Any person or group acquires in excess Any person or group acquires in
of Control of 50% of voting power excess of 50% of voting power;
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exceptions for Permitted Holders,
which includes A venue and/or its
affiliates/control parties
Reporting Covenant Deliver to Trustee and Holders all As set forth on Exhibit F
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information required by Forms 10-K, 10-
Q and 8-K.
Consolidated Fixed Charges Definition of Consolidated Interest Non-cash interest to be excluded I
Expense includes cash and non-cash from Consolidated Interest Expense
interest for purposes of this definition
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EXHIBITE
Schedule of Estimated Sources and Uses
(as of September 30, 2008 assuming September 1, 2008 closing)
5
Sources Amount Uses Amount
$250mm ABL Revolver $125 Refinance Vertls DIP Revolver & Term Loan $312
New 1st Lien Term
Loans 350 Refinance Vertis Term Loan 50
Rollover Vertls Term
Loan 50 Exchange 9 3/4 2nd Lien Notes 350
Exchanged 2nd Lien
Notes 350 Refinance ACG Revolver/Cap leases (excl. Fees) 60
New Unsecured Sr. Refinance ACG Term
Notes 200 Loan 40
Refinance ACG Bridge Facility 8
New Sr. Notes to 10 7/8 Notes
Holders 107
New Sr. Notes to 13 1/2 Note Holders 27
New Sr. Notes to ACG 2nd Lien Note Holders 66
Accrued Interest to 9 3/4 2nd Lien
Notes 3
ACG Fees Payable at Closing 5
Vertis Professional and Financing Fees 32
Merger/Change-of Control Fees & Other
Contingencies 15
5
Sourees and uses may vary due to closing date and size of ultimate term loan.
EXHIBIT F
Reporting Obligations
Post on a confidential website (access to which shall require signature on a non-negotiable
customary confidentiality agreement established on such website as a condition to access thereof
(the "CA")) the following information, and not file it with the SEC, unless subject to the
reporting requirements of Section 13 or 15( d) of the Exchange Act:
-within 100 days of the end of the fiscal year, audited year end financial statements of the
issuer and its subsidiaries and an MD&A
-within 50 days of the end of each of the first three fiscal quarters, unaudited quarterly
financial statements of the issuer and its subsidiaries and an MD&A
-within 5 business days of the occurrence of the following events:
change in the executive officers or directors of the issuer;
any incurrence of any material long-term debt;
acceleration of any indebtedness of the issuer qr any of its restricted subsidiaries;
any issuance by the issuer of its equity interests (excluding pursuant to any equity
incentive plan in the ordinary course of business) generating net cash proceeds
greater than $1 0 million;
entry into an agreement by the issuer or any of its subsidiaries relating to a
transaction that has or may result in a change of control;
any resignation or termination of the issuer's independent accountants or any new
engagement of independent accountants;
any detennination by the issuer or the receipt of advice or notice by the issuer
from its independent accountants relating to non-reliance on previously issued
financial statements, a related audit opinion or a completed interim review; and
the completion by the issuer and any of its restricted subsidiaries of the
acquisition or disposition of a significant amount of assets,
in each case, solely to the extent such information would be required to be filed on a
Form 8-K by an SEC registrant; provided there shall be no obligation to provide
financial statement or pro fonna financial statements with respect to a business
acquired or disposed of.
The Company will provide any prospective purchaser of New Second Lien Notes or New Senior
Notes identified by an existing noteholder with access to the website if such prospective
purchaser agrees to be bound by the CA.
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Upon written request of any holder of New Second Lien Notes or New Senior Notes (which
request may be by electronic mail), the Company shall, subject to execution of a CA, provide a
copy of the Budget (as defined below) to such noteholder;provided, however, that the Company
will not be obligated to comply with any such request if it reasonably determines, in good faith,
that such noteholder is a competitor of the Company; providedfurther, however, the Company
shall not have an obligation to update any Budget previously provided to a noteholder. The
Budget shall be a summary budget prepared once a year, consisting of annual sales, adjusted
EBITDA, and free cash flow. For avoidance of doubt, the Budget shall not be required to be
posted on any website maintained by the Company.
EXIDBITG
Shareholders Agreement Term Sheet
6
Parties:
Additional Parties:
Stock Covered by Agreement
Vertis Holdings, Inc. (following the Restructuring) (the
"Company"), Avenue Capital Management II, LP (together
with its affiliates, the "Avenue Shareholder"), [Goldman
Shareholders] (together with their affiliates, the "Goldman
Shareholder"), [TCW Shareholders] (together with their
affiliates, the "TCW Shareholder" and, together with the
Goldman Shareholder, the "ACGN Shareholders") and Holders
of 5% of more of the post-restructuring common stock of the
Company. The Avenue Shareholder, the Goldman Shareholder,
the TCW Shareholder and any other shareholders that become
parties to the Shareholders Agreement after the Effective Date,
are referred to herein as a "Stockholder" and together, the
''Stockholders".
The Company may require that any person that is offered
shares of New Common Stock ("Common Stock"), options to
purchase Common Stock or other equity interests that are
convertible into or exchangeable for Common Stock become,
as a condition to the acquisition of such shares, options or other
equity interests, a party to the Shareholders Agreement and
become bound by all of the restrictions therein. All
Stockholders (other than the Avenue Shareholder) shall be
referred to herein as the "Other Stockholders."
All Common Stock of the Company owned or acquired from
and after the Effective Date by (i) the Stockholders, (ii) any
member of management who acquires stock through the
exercise of options acquired on or after the Effective Date (the
"Management Stockholders") and (iii) any other shareholder of
the Company that becomes a party to the Shareholders
Agreement following the Effective Date. All transferees
acquiring Common Stock from a Stockholder shall execute a
joinder to the Shareholders Agreement as a condition to the
effectiveness of such acquisition.
Some of the provisions herein may be incorporated into the Company's certificate of
incorporation.
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Board of Directors: The Board ofDirectors (the "Board") of the Company will
oversee the management and affairs of the Company. The
Board will consist of five directors and, commencing at the
first meeting of the shareholders to elect the Board, shall be
designated as follows: (i) subject to the following paragraph,
three directors will be designated by the Avenue Shareholder
(for so long as the Avenue Shareholder owns at least 20.0% of
the then outstanding Common Stock); (ii) one director will be
designated by the ACGN Shareholders (for so long as the
ACGN Shareholders own, in the aggregate, at least 5.0% of the
then outstanding Common Stock); and (iii) one director will be
the Chief Executive Officer ofthe Company.
If the Avenue Shareholder holds less than 20% of the then
outstanding Common Stock but 5% or more of the then
outstanding Common Stock then the Avenue Shareholder shall
be entitled to designate 1 director. The foregoing designation
reductions are hereinafter referred to as the "Reduction
Events." Any undesignated director based on the Reduction
Events shall be elected by the shareholders ofthe Company.
The Avenue Shareholder and the ACGN Shareholders shall
have the exclusive right to remove and appoint their respective
directors described above, if applicable, as well as the
exclusive right to fill vacancies created by reason of death,
removal or resignation of their respective directors described
above, if applicable.
Prior to a Reduction Event, the Avenue Shareholder shall have
the right to designate two directors to serve on each committee
of the Board. After a Reduction Event, the Avenue Shareholder
shall have the right to designate one director to serve on each
committee of the Board for so long as the Avenue Shareholder
has the right to designate a director as described above.
The ACGN Shareholders shall have the right to designate one
director to serve on each committee of the Board for so long as
the ACGN Shareholders have the right to designate a director
as described above.
The ACGN Shareholders shall have the right to designate one
observer to the Board for so long the ACGN Shareholders own
at least 1.0% of the then outstanding Common Stock.
A majority of the then existing directors will constitute a
quorum. The Board will act by a vote of a majority of the
Transfer Restrictions:
Right of First Offer:
quorum.
All Stockholders agree to vote all shares of Common Stock at
any meeting of stockholders called for the purpose of filling
positions on the Board, or in any written consent executed in
lieu of such meeting, and shall take all actions reasonably
necessary to ensure that the Board is composed of the directors
designated in accordance with the foregoing. For so long as
the Avenue Shareholder has the right to designate a director as
described above, the consent of the Avenue Shareholder shall
be required to increase or decrease the size of the Board. For
so long as the ACGN Shareholders have the right to designate a
director as described above, the consent of the ACGN
Shareholders shall be required to increase or decrease the size
of the Board.
The Avenue Shareholder may transfer shares of Common Stock
to a third party or any of its affiliates at any time.
Until the date that is 18 months after the Effective Date, the
Other Stockholders shall not have any right to transfer their
equity interests in the Company, other than (i) in connection
with transfers approved by the Avenue Shareholder, (ii)
pursuant to the exercise of the Drag-Along Right or Tag-Along
Right described below, (iii) a sale to another holder of
Common Stock (but subject to the Right of First Offer
described below) or (iv) transfers by any Other Stockholder to
an affiliate of such Other Stockholder who agrees in writing to
be bound by the terms and conditions of the Shareholders
Agreement.
Until the date that is 18 months after the Effective Date
(except with respect to transfers to affiliates of an Other
Stockholder), prior to any disposition of Common Stock
permitted by the Transfer Restrictions described above, such
Other Stockholder shall first offer the Avenue Shareholder a
right of first offer with respect to the shares of Common
Stock proposed to be sold prior to selling or otherwise
disposing of any of their shares of Common Stock.
From and after the date that is 18 months after the Effective
Date, except with respect to transfers to affiliates of an Other
Stockholder, no Other Stockholder shall sell or otherwise
dispose of any of their shares of Common Stock without first
offering the Avenue Shareholder, the Goldman Shareholder
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Tag-Along:
Preemptive Rights:
Drag-Along:
and the TCW Shareholder (for so long as such persons
individually own more than 2.5% of the outstanding
Common Stock) a pro rata right of first offer with respect to
the shares of Common Stock proposed to be sold.
In the event that at any time the Avenue Shareholder proposes
to transfer shares of Common Stock to any Person that is not an
affiliate of Avenue, then the Other Stockholders shall have the
right to sell a percentage of such party's equity interests in the
Company equal to the percentage of the Avenue Shareholder's
shares of Common Stock proposed to be sold to such third
party on the same terms and conditions (including the same
type and pro rata amount of consideration paid per security) as
the sale by the Avenue Shareholder (the "Tag-Along Right").
The Tag-Along Right shall not apply to any sale of capital
stock pursuant to a public offering of the Company's capital
stock that is registered under the Securities Act of 1933, as
amended (a "Public Offering").
If the Company issues shares of any equity or equity-linked
securities, the Stockholders (excluding Management
Stockholders who are not "accredited investors") will have the
right to purchase a pro rata portion of such offering based upon
their equity ownership (excluding any compensation based
equity acquired by the Management Stockholders on or after
the Effective Date), subject to standard exceptions (including,
but not limited to, issuances to fund acquisitions).
If the Avenue Shareholder proposes to sell, whether through a
stock sale or a merger, more than 25% of its shares of Common
Stock to a Bona Fide Third Party (or to any person, including
any affiliate of the Avenue Shareholder, if such transaction is
approved by stockholders of the Company owning a majority
of the then outstanding Common Stock and an investment bank
acceptable to the Avenue Shareholder and the Goldman
Shareholder (such acceptable investment bank, an "Acceptable
Investment Bank") issues a written fairness opinion with
respect to such transaction), the Avenue Shareholder shall have
the right, at its option, to require the Other Stockholders to join
in such sale by selling the same percentage of their equity
interests in the Company as the percentage of the Avenue
Shareholder's shares proposed to be sold by the Avenue
Shareholder to such third party on the same terms and
Limitation on Affiliate
Transactions:
conditions (including the same type and pro rata amount of
consideration paid per security) and the Avenue Shareholder
and such Other Stockholders shall vote in favor of such
transaction. As used herein "Bona Fide Third Party" means
any person in which the Avenue Shareholder holds no more
than 5% of the equity of such person or no more than 10% of
the debt of any tranche of such person.
Ifthe exercise of the Drag-Along results in any person other
than the Avenue Shareholder owning more than 50% of the
outstanding Common Stock, the approval ofthe stockholders
of the Company owning a majority of the then outstanding
Common Stock shall be required.
Notwithstanding anything to the contrary contained herein, a
Drag-Along event with an affiliate of the Avenue Shareholder
shall not be subject to the requirements of Limitation on
Affiliate Transactions.
So long as the Avenue Shareholder has the right to designate a
majority of the Board, any transaction between any affiliate of
the Avenue Shareholder and the Company or its subsidiaries
may not be consummated unless either (i) (x) an Acceptable
Investment Bank issues a written fairness opinion with respect
to such transaction and (y) the approval of the stockholders of
the Company owning 60% or more of the then outstanding
Common Stock is obtained or (ii) such transaction is approved
by a majority of the disinterested members of the Board (and,
with respect to clause (ii) only, for so long as the Board is
comprised of 5 members, of which 3 members are appointed
by the Avenue Shareholder, one is appointed by the ACGN
Shareholder and one member who is the chief executive officer
of the Company, then such transaction is approved by the
member appointed by the ACGN Shareholders and the member
who is the chief executive officer of the Company). Any
director appointed by the Avenue Shareholder shall be deemed
to be "interested" solely for the purposes of voting on any
matter described in the foregoing clause (ii). For the avoidance
of doubt, any affiliate transaction not approved by a majority of
the disinterested directors as contemplated by the foregoing
clause (ii) shall nonetheless be effected if it otherwise satisfies
the requirements of the foregoing clause (i).
As used in Drag-Along and this Limitation on Affiliate
Transactions, the term "affiliate of the Avenue Shareholder"
shall mean any person in which the Avenue Shareholder holds
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Termination:
Confidentiality and Access to
Information:
Governing Law:
Amendments:
more than 5% of the equity of such person or holds more than
15% of the debt of any tranche of such person.
The transactions contemplated by the Restmcturing Agreement
and Term Sheet and approved by the Plans shall not be subject
to the foregoing restrictions.
The Shareholders Agreement will continue until the earlier of
(i) the mutual written agreement of the Stockholders, (ii) the
consummation of an initial Public Offering and (iii) the sale of
all or substantially all of the assets or equity interests in the
Company to a Bona Fide Third Party; provided, in the case of
clause (ii), all ofthc provisions ofthe Shareholders Agreement
shall terminate except for those relating to registration rights.
In addition, any party to the agreement shall cease to be a party
to the agreement from and after the time such party ceases to
own shares of Common Stock or other securities convertible
into, or exchangeable for, shares of Common Stock.
Each Stockholder will keep confidential and not disclose,
except with prior written consent, the confidential information
of the Company, each Stockholder and their respective
affiliates, subject to customary exceptions.
The Company will provide each Stockholder and any
prospective purchaser of the debt or equity of the Company
identified by a Stockholder, in each case, who agrees to be
bound to a customary confidentiality agreement, with access to
a website containing the most recently available information
required to be provided by Exhibit F of the Restructuring
Agreement and will provide a copy of the Budget (as that term
is defined in Exhibit F of the Restructuring Agreement) upon
the terms and conditions specified in Exhibit F of the
Restructuring Agreement.
Delaware
The consent of the Avenue Shareholder (for so long as it owns
50% of the Common Stock held by it on the Effective Date),
the Goldman Shareholder (for so long as it owns 50% of the
Common Stock held by it on the Effective Date), the TCW
Shareholder (for so long as it owns 50% of the Common Stock
held by it on the Effective Date) and a majority of the Common
Stock subject to the Shareholders Agreement shall be required
to amend the Shareholders Agreement.
Deni.and Rights
Piggyback Rights
Registration Rights
Following the consummation of an initial Public Offering, (i)
for so long as the Avenue Shareholder owns at least 20.0% of
the then outstanding Common Stock, on a fully diluted basis,
the Avenue Shareholder will have unlimited demand rights; (ii)
for so long as the Avenue Shareholder owns at least 2.5% of
the then outstanding Common Stock, on a fully diluted basis,
the Avenue Shareholder will have two demand rights per 12-
month period; provided, that the offering size relating to such
demand right must be at least $3.0 million; (iii) for so long as
the Goldman Shareholder owns at least 2.5% of the then
outstanding Common Stock, on a fully diluted basis, the
Goldman Shareholder will have one demand right per 12-
month period; provided, that the offering size relating to such
demand right must be at least $3.0 million; and (iv) for so long
as the TCW Shareholder owns at least 2.5% of the then
outstanding Common Stock, on a fully diluted basis, the TCW
Shareholder will have one demand right per 12-month period;
provided, that the otiering size relating to such demand right
must be at least $3.0 million.
If the Company files a registration statement for an initial
Public Offering, the Stockholders will have pro rata rights to
sell their shares in the initial Public Offering, subject only to
the right of the Company to sell shares first and subject to a pro
rata cutback for all Stockholders and the additional cutback for
the Management Stockholders described above. The
Management Stockholders may be subject to an additional
cutback of his or her shares if the Board, in consultation with
the underwriter, determines in good faith that the participation
of such Management Stockholders would adversely affect the
marketability or offering price of the other securities to be sold.
If the A venue Shareholder exercises its demand rights, the
Goldman Shareholder, TCW Shareholder and Management
Stockholders will have piggyback rights, subject to a pro rata
cutback and the additional cutback for the Management
Stockholders described above.
If the Goldman Shareholder exercises its demand rights, the
Avenue Shareholder, TCW Shareholder and the Management
Stockholders will have piggyback rights, subject to a pro rata
cutback and the additional cutback for the Management
Stockholders described above.
lfthe TCW Shareholder exercises its demand rights, the
"
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Lockup
Avenue Shareholder, Goldman Shareholder and the
Management Stockholders will have piggyback rights, subject
to a pro rata cutback and the additional cutback for the
Management Stockholders described above.
Following the initial Public OITering, if the Company proposes
to effect a registration of shares of Common Stock (other than a
demand registration described above) for its own account, the
Stockholders will have piggyback rights, subject to the
Company's right to sell shares first and subject to a pro rata
cutback for all Stockholders and the additional cutback for the
Management Stockholders described above.
Each of the Stockholders will agree to a lockup following the
initial Public Offering of up to 180 days, depending on the
managing underwriter's requirements.
SCHEDULE I
"Material Adverse EIect" means any event, change, effect, occurrence, development,
circumstance or change offact occurring after the date hereof that has had, or would
reasonably be expected to have, a material adverse effect on the business, results of
operations, financial condition, assets or liabilities of the ACG Parties or the Vertis
Parties; provided, however, that "Material Adverse Effect" shall not include any event or
effect on, or change to, such business, results of operations, financial condition, assets or
liabilities, to the extent arising out of, resulting from or attributable to (a) conditions or
effects that generally affect the industries and markets in which the ACG Parties or the
Vertis Parties operate, (b) general economic conditions affecting the United States or
Canada, (c) effects resulting from changes generally affecting capital market conditions
in the United States or Canada (except in each of clauses (a), (b) and (c) above, if the
ACG Parties or the Vertis Parties are disproportionately affected thereby (but taking into
account for purposes of determining a Material Adverse Effect only the disproportionate
impact), but including in each of clauses (a), (b) and (c) above, any effects or conditions
resulting from an outbreak or escalation of hostilities, acts of terrorism or other similar
national or international calamity, crisis or emergency, or any governmental or other
response to any of the foregoing, in each case whether or not involving the United
States), (d) effects arising from changes in Laws or GAAP, (e) effects to the extent
resulting from or relating to the announcement or pendency of the transactions
contemplated by this Agreement and/or the Agreement and Plan of Merger (including,
without limitation, any (x) actions by clients or competitors, (y) loss of personnel or
clients, or (z) the delay or cancellation of orders for services and products, in each such
case to the extent resulting from or relating to the announcement or pendency of the
transactions contemplated by this Agreement and/or the Agreement and Plan of Merger),
or (f) effects resulting from compliance with the terms and conditions of this Agreement
and/or the Agreement and Plan of Merger by the ACG Parties or the Vertis Parties.
'IY2:\1865171 \35\13Z#N35'.DOCI 7908 I .0003 34
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In re Portola Packaging, Inc., Case No. 08-12001 (Bankr. Del. 2008).
RESTRUCTURING SUPPORT AGREEMENT
This RESTRUCTURING SUPPORT AGREEMENT is made and entered into as
of July 24, 2008 (this "Agreement") by and among (i) Portola Packaging, Inc. ("Portola")
and all of its direct and indirect foreign and domestic subsidiaries and affiliates that may
or will constitute one of the debtors in Portola's voluntary reorganization cases
(collectively, the "Company"), (ii) General Electric Capital Corporation, solely in its
capacities as agent and lender under that certain Fourth Amended and Restated Credit
Agreement, dated as of January 16, 2004 (as amended, restated, supplemented or
otherwise modified from time to time, the "First Lien Agreement") (in such capacities,
"GECC"), (iii) Wayzata Investment Partners LLC ("Wayzata") in its capacity as agent
under that certain Amended and Restated Second Lien Agreement, dated as of July 24,
2008, by and between Portola, as borrower, Wayzata, as agent, and the lenders party
thereto (the "Second Lien Agreement"), (iv) the undersigned lenders under the Second
Lien Agreement (each, a "Consenting Second Lien Lender"); and (v) the undersigned
holders or investment advisers or managers of discretionary accounts that hold the Senior
Notes (as defined below) (each, a "Consenting Noteholder") (each ofthe foregoing, a
''Party,'' and collectively, the "Parties''). Wayzata and each Consenting Second Lien
Lender and Consenting Noteholder that is an affiliate of Wayzata shall be collectively
referred to as the "Wayzata Entities." GECC, each Consenting Second Lien Lender and
each Consenting Noteholder shall be referred to herein as the "Plan Support Parties."
RECITALS
WHEREAS, the Company and the Plan Support Parties are negotiating
restructuring and recapitalization transactions (collectively, the "Transactions") with
respect to the debt of the Company, including the Company's obligations under (i) the
First Lien Agreement, (ii) the Second Lien Agreement, and (iii) the 8.25% Senior Notes
due 2012 in the aggregate original principal amount of $180 million (the "Senior Notes")
issued under that certain indenture, dated January 23, 2004, by and between Portola, as
issuer, and U.S. Bank, National Association, as trustee (the "Indenture"), pursuant to the
terms and conditions set forth in the Restructuring Term Sheet attached hereto as Exhibit
A (the "Term Sheet'') and in this Agreement;
solicitation of votes (the "Solicitation") for a prepackaged chapter II plan of
reorganization of the Company pursuant to applicable law, including., Sections 1125,
1126 and 1145 ofthe Bankruptcy Code;
WHEREAS, the Company intends to commence voluntary reorganization cases
(the ''Chapter 11 Cases") under chapter 11 oftitle 11 of the United States Code 11
U.S.C. 101-1532 (the "Bankruptcy Code") in the United States Bankruptcy Court for
either the (i) District of Delaware or (ii) Southern District of New York (the "Bankruptcy
Court") to effect the Transactions through a prepackaged chapter 11 plan of
reorganization that implements and is otherwise consistent with the terms and conditions
set forth in the Term Sheet and in this Agreement (the "Plan"); provided, however, that
8033212 \'12
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the Company shall file the Chapter 11 Cases in the venue acceptable to GECC and the
Wayzata Entities.
NOW, THEREFORE, in consideration ofthe covenants and agreements
contained herein, and for other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, each Party, intending to be legally bound hereby, agrees
as follows:
AGREEMENT
Section 1. Agreement Effective Date. This Agreement shall become
effective and binding upon each ofthe Parties at 12:01 a.m. prevailing Eastern Time on
the date on which the following conditions have been satisfied: (a) the Company shall
have executed and delivered counterpart signature pages to the Plan Support Parties, (b)
each of the Plan Support Parties shall have executed and delivered to the Company and
each other Plan Support Party counterpart signature pages ofthis Agreement, and (c) the
Bridge Financing (as defined in the Term Sheet) has closed (the "Agreement Effective
Date").
Section 2. Term Sheet. The Term Sheet is expressly incorporated herein and
is made part ofthis Agreement. The general terms and conditions ofthe Transactions are
set forth in the Term Sheet; however, the Term Sheet is supplemented by the terms and
conditions of this Agreement. In the event of any inconsistencies between the terms of
this Agreement and the Term Sheet, this Agreement shall govern.
Section 3. Commitments Regarding the Transactions.
(a) Subject to the conditions contained in Section 3.02 hereof and as long as this
Agreement has not been terminated in accordance with the terms hereof, each of the Plan
Support Parties, agrees that it shall, subject to (i) the receipt by such Plan Support Party
of a disclosure statement and other solicitation materials in respect ofthe Plan that is
subsequently approved by the Bankruptcy Court as complying with section 1126(b) of
the Bankruptcy Code (collectively, the "Consent Solicitation Materials"), and (ii) the
Plan Support Party being entitled under such Plan to vote to accept or reject the Plan:
(i) vote its claims against the Company to accept the Plan by delivering its
duly executed and completed ballot accepting such Plan on a timely basis following the
commencement of the Solicitation, provided, however, a condition precedent to the Plan
is that this Agreement has not been terminated by any Plan Support Party in accordance
with the terms hereof;
(ii) not change or withdraw (or cause to be changed or withdrawn) such
vote; and
2
(iii) not, in any material respect, (x) object to, delay, impede or take any
other action to interfere with acceptance or implementation of the Plan, or (y) propose,
file, support, or vote for any restructuring, workout or plan of reorganization for the
Company other than the Plan.
(b) For the avoidance of doubt, each Plan Support Party also agrees that, unless
this Agreement is terminated in accordance with the terms hereof, it will not take any
action that would in any material respect interfere with, delay or postpone the
confirmation or consummation of the Plan; provided, however, that, except as otherwise
expressly set forth in this Agreement, the foregoing prohibition will not limit any Plan
Support Parties' rights under any applicable indenture, credit agreement, other loan
document and/or applicable law (including the exercise of any available remedies, and its
rights under any applicable bankruptcy, insolvency, foreclosure or similar proceeding,
including, without limitation, its right to appear and participate as a party in interest in
any matter to be adjudicated in any case under the Bankruptcy Code wncerning the
Company so long as such appearance and the positions advocated in connection therewith
are not materially inconsistent with the Plan and are not for the purpose of hindering,
delaying or preventing the consummation of the Transactions).
3.02 Commitment of Company. The Company shall (i) support and
complete the Transactions embodied in the Term Sheet, (ii) do all things necessary and
appropriate in furtherance of the Transactions embodied in the Term Sheet, including,
without limitation (w) commencing the Solicitation no later than August 4, 2008, (x)
commencing the Chapter II Cases on or before September 8, 2008 (the "Outside Petition
Date" and the actual commencement date, the "Petition Date"), (y) taking all steps
necessary and desirable to obtain an order of the Bankruptcy Court confirming the Plan
within forty (40) days ofthe Petition Date (as defined in the Term Sheet), and (z) taking
all steps reasonably necessary and desirable to cause the effective date of the Plan to
occur within fifty-five (55) days of the Petition Date, (iii) obtain any and all required
regulatory and/or third-party approvals for the Transactions embodied in the Term Sheet,
and (iv) not take any action that is inconsistent with, or is intended or is likely to interfere
with consummation of, the restructuring and the Transactions embodied in the Term
Sheet. Regardless of whether the Transactions are consummated, the: Company shall
promptly pay in cash upon demand any and all reasonable accrued and unpaid out-of-
pocket expenses incurred by (i) GECC, the Wayzata Entities, and the informal committee
of noteholders of Portola Packaging, Inc.'s 8 1/4% Senior Notes due 2012 (the "Informal
Noteholders Committee") (including, without limitation, all reasonable fees and out-of-
pocket expenses of each Plan Support Party's legal counsel and financial advisors) and
(ii) individual members of the Informal Noteholders Committee up to an aggregate
amount of$25,000, in each case in connection with the negotiation, documentation and
consummation ofthis Agreement, the Term Sheet, the Consent Solicitation Materials, all
other documents related to the Plan and the Transactions. The Company shall also pay
the fees and expenses of its legal, financial and restructuring advisors in accordance with
their respective engagement letters.
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3.03. Transfer of Interests and Securities. Except as expressly provided
herein, this Agreement shall not in any way restrict the right or ability of any Consenting
Note holder to sell, use, assign, transfer or otherwise dispose of ("Transfer") any of the
Senior Notes, provided, however, that for the period commencing as of the date such
Consenting Noteholder executes this Agreement until termination of this Agreement
pursuant to the terms hereof (such period, the "Restricted Period'), no Consenting
Noteholder shall Transfer any Senior Notes, and any purported Transfer of Senior Notes
shall be void and without effect, unless (i) the transferee is a Consenting Noteholder, or
(ii) if the transferee is not a Consenting Noteholder, such transferee delivers to the
Company, GECC and Wayzata, at or prior to the time of the proposed Transfer, a written
agreement containing, among other things, a provision substantially similar to the
provision set forth in Exhibit B attached hereto pursuant to which such Transferee shall
assume all obligations of the Consenting Noteholder transferor hereunder in respect of
the Senior Notes being transferred (such transferee, if any, to also be a "Consenting
Noteholder" hereunder). This Agreement shall in no way be construed to preclude the
Consenting Noteholders from acquiring additional Senior Notes; provided, however, that
(i) any Consenting Noteholder that acquires additional Senior Notes after executing this
Agreement shall notify the Company, GECC and Wayzata of such acquisition within five
business days after the closing of such trade and (ii) additional Senior Notes shall
automatically and immediately upon acquisition by a Consenting Noteholder be deemed
subject to all of the terms ofthis Agreement whether or not notice is given to the
Company, GECC or Wayzata of such acquisition. This Section 3.03 shall not impose
any obligation on the Company to issue any ''cleansing letter" or otherwise publicly
disclose information for the purpose of enabling a Consenting Noteholder to Transfer any
Senior Notes.
3 .04. Representation of Consenting Noteholders' Holdings. Each of the
Consenting Noteholders severally and not jointly represents and warrants that, as of the
date such Consenting Noteholder executes and delivers this Agreement:
(i) it is the beneficial owner of the face amount of the Senior Notes, or is the
nominee, investment manager or advisor for beneficial holders of the Senior Notes, as
reflected in such Consenting Noteholder's signature block to this Agreement, which
amount the Company and each Consenting Noteholder understands and acknowledges is
proprietary and confidential to such Consenting Noteholder;
(ii) other than pursuant to this Agreement, such Senior Notes are free and clear of
any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction,
right of first refusal or other limitation on disposition or encumbrances of any kind, that
would adversely affect in any way such Consenting Noteholder's performance of its
obligations contained in this Agreement at the time such obligations are required to be
performed; and
(iii) it is not aware of any event that, due to any fiduciary or similar duty to any
other person, would prevent it from taking any action required of it under this Agreement.
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3.05 No Priming ofGECC Liens. Notwithstanding any provision herein or in
the Term Sheet to the contrary, in no event shall (i) any liens securing any DIP Financing
be senior to, or pari passu with, the liens ofGECC securing obligations under the First
Lien Agreement; (ii) any Party in any way support proposed DIP Financing that is
secured by liens that are or are intended to be senior to, or pari passu with, the liens of
GECC securing obligations under the First Lien Agreement; or (iii) any Party seek to, or
in any way support, the use ofGECC's cash collateral, in each case without GECC's
consent.
3.06 No Priming of Wayzata Liens. Notwithstanding any provision herein or in
the Term Sheet to the contrary, except for the GECC/Wayzata DIP Credit Facility or
otherwise permitted under the lntercreditor Agreement (as defined in the Term Sheet), in
no event shall (i) any liens securing any DIP Financing, be senior to, or pari passu with,
the liens of Wayzata securing obligations under the Second Lien Agreement; (ii) any
Party in any way support proposed DIP Financing that is secured by liens that are or are
intended to be senior to, or pari passu with, the liens of Wayzata securing obligations
under the Second Lien Agreement; or (iii) any Party seek to, or in any way support, the
use of Wayzata's cash collateral, in each case without Wayzata's consent.
Section 5. Undertakings and Representations.
5.01 Representation ofthe Company.
(a) The Company represents that, as of the date hereof, such entity (in each case
other than in connection with this Agreement) (i) has not resolved to engage in any
merger, consolidation, asset sale outside the ordinary course of business, or the purchase
or acquisition of all or a substantial part of the assets of another entity and (ii) has not
been a party to any agreement or engaged in any discussions or negotiations with any
person that is reasonably likely to lead to any merger, consolidation, asset sale outside the
ordinary course of business, or the purchase or acquisition of all or a substantial part of
the assets of another entity, in each case, which would be material to the Company.
(b) Upon information and belief, the Company further represents that, other than
as a result of filing ofthe Chapter 11 Cases, its obligations hereunder do not materially
conflict with, or result in the breach of, or constitute a default under, or result in or permit
the termination or acceleration of, any material contractual obligations of the Company
which the Company has reviewed as of the date hereof. The Company covenants that it
will use reasonable best efforts to continue its due diligence with respect to the
representation herein and shall provide Wayzata and GECC with weekly updates
regarding the results of such due diligence. For the avoidance of doubt, the contracts
listed on Exhibit C hereto shall not be deemed material contractual obligations for
purposes of this Section 5.01(b).
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(c) The Company represents that, as of the date hereof, the representations and
warranties made in this Agreement are true, correct and complete.
5.02 Certain Additional Chapter 11 Related Matters. The Company shall
provide draft copies of all "first day" motions or applications and other documents the
Company intends to file with the Bankruptcy Court to counsel for GECC and Wayzata at
least four business days prior to the date when the Company intends to file such
document and shall consult in good faith with such counsel regarding the form and
substance of any such proposed filing with the Bankruptcy Court. The Company will use
its best efforts to provide draft copies of all other pleadings the Company intends to file
with the Bankruptcy Court to counsel for GECC and Wayzata within a reasonable time
prior to filing such pleading and shall consult in good faith with such counsel regarding
the form and substance of any such proposed pleading.
Section 6. Mutual Representations, Warranties, and Covenants. Each of the
Parties represents, warrants, and covenants to each other Party, as of the date of this
Agreement, as follows (each of which is a continuing representation, warranty, and
covenant):
6.0 1. Enforceability. It is validly existing and in good standing under the
laws ofthe state of its organization, and this Agreement is a legal, valid, and binding
enforcement may be limited by applicable laws relating to or limiting creditor's rights
generally or by equitable principles relating to enforceability.
6.02. No Consent or Approval. Except as expressly provided in this
Agreement or in the Bankruptcy Code, no consent or approval is required by any other
person or entity in order for it to carry out the Transactions contemplated by, and perform
the respective obligations under, this Agreement.
6.03 Power and Authority. Except as expressly provided in this Agreement,
it has all requisite power and authority to enter into this Agreement and to carry out the
Transactions contemplated by, and perform its respective obligations under, this
Agreement.
6.04 Authorization. The execution and delivery ofthis Agreement and the
performance of its obligations hereunder have been duly authorized by all necessary
action on its part.
8.01 GECC/Wayzata Termination Events. This Agreement may be
terminated at the option of either the Wayzata Entities or GECC (unless otherwise
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provided in this Section 8.01), each in the exercise of its sole discretion, upon the
occurrence of any of the following events (each a "GECC/Wayzata Termination Event"):
(a) failure of the Company to commence the Solicitation by August 4,
2008;
(b) failure ofthe Company to commence the Chapter II Cases on or
before the Outside Petition Date;
(c) failure of the Company to file a Plan and related disclosure
statement (the "Disclosure Statement") with the Bankruptcy Court on the Petition Date,
each of which shall be consistent with this Agreement and the Term Sheet and in form
and substance acceptable to Wayzata and GECC (solely as to the provisions which in
GECC's reasonable judgment affect, or could reasonably be expected to affect, GECC's
rights, claims and/or interests);
(d) the order scheduling a hearing to approve the Consent Solicitation
Materials as the Disclosure Statement and confirm the Plan shall not have been entered
by the Bankruptcy Court within three (3) days of the Petition Date, or as soon thereafter
as the Bankruptcy Court's scheduling permits;
(e) the order confirming the Plan (the "Corifirmation Order"), which
Plan, including all exhibits, appendices, Plan supplement documents and related
documents shall each be acceptable to Wayzata and GECC (solely as to the provisions
which in GECC's reasonable judgment affect, or could reasonably be: expected to affect,
GECC's rights, claims and/or interests), shall not have been entered by the Bankruptcy
Court within forty ( 40) days of the Petition Date;
(f) the effective date of the Plan shall not have occurred within fifty-
five (55) days ofthe Petition Date (the "Outside Date");
(g) at the option ofGECC or the Wayzata Entities, the breach in any
material respect by the Company of any of the obligations, representations, warranties or
covenants of the Company set forth in this Agreement; provided, however, that GECC or
any Wayzata Entity shall transmit a notice to the Company and GECC or Wayzata, as
applicable, detailing any such breach, and the Company shall have two (2) business days
after receiving such notice to cure any breach if such breach is susceptible to cure;
(h) at the option ofGECC, the breach in any material respect by any
Wayzata Entity of any of the obligations, representations, warranties or covenants of such
Parties set forth in this Agreement; provided, however, that GECC shall transmit a notice
to the Company and such Wayzata Entity detailing any such breach, and such Wayzata
Entity shall have two (2) business days after receiving such notice to cure any breach if
such breach is susceptible to cure;
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(i) at the option of the Wayzata Entities, the breach in any material
respect by GECC of any of the obligations representations, warranties or covenants of
GECC set forth in this Agreement; provided, however, that such Wayzata Entity shall
transmit a notice to GECC detailing any such breach, and GECC shall have two (2)
business days after receiving such notice to cure any breach if such breach is susceptible
to cure;
U) the issuance by any governmental authority, including any
regulatory authority or court of competent jurisdiction, of any ruling or order enjoining
the consummation of a material portion of the Transactions in a way that cannot be
reasonably remedied by the Company; provided, however, that the Company shall have
two (2) business days after receiving such notice to cure any breach if such breach is
susceptible to cure;
(k) at the option ofGECC, the occurrence of any (i) "Event of
Default" (other than an event of default resulting from the filing of the Chapter II Cases)
under, and as defined in, the First Lien Agreement or (ii) any "Forbearance Default"
under, and as defined in, that certain Forbearance Agreement and Eleventh Amendment
to the First Lien Agreement, dated as ofthe date hereof(as amended, restated or
otherwise modified from time to time, the "GECC Forbearance Agreement"), in each
case which is not waived pursuant to the terms of, or remains uncured for the applicable
period under, the First Lien Agreement, any other applicable Loan Document (as defined
in the First Lien Agreement) or the GECC Forbearance Agreement, as applicable, other
than the events of defaults specified on Schedule I hereto;
(I) at the option ofthe Wayzata Entities, the occurrence of any (i)
event of default (other than an event of default resulting from the filing of the Chapter II
Cases) as defined in and under the Second Lien Agreement or (ii) any "Forbearance
Default" under, and as defined in, that certain Forbearance Agreement and the Second
Lien Agreement, dated as of the date hereof (as amended, restated or otherwise modified
from time to time, the "Second Lien Forbearance Agreement"), in each case which is not
waived pursuant to the terms of, or remains uncured for the applicable period under, the
Second Lien Agreement, any other applicable Loan Document (as defined in the Second
Lien Agreement) or the Second Lien Forbearance Agreement, as applicable, other than
the events of defaults specified on Schedule I hereto;
(m) since the Agreement Effective Date, the occurrence of any change,
effect, event, development, circumstance or state of facts occurs which has had or would
reasonably be expected to have within a reasonable time period a materially adverse
effect on the business, properties, prospects (financial or otherwise), operations, financial
condition or results of operations of the Company (including its subsidiaries and their
respective businesses), taken as a whole, and which would materially impair the
Company's ability to perform its obligations under this Agreement or have a materially
adverse effect on or prevent or materially delay the consummation of the Transactions
contemplated by this Agreement (a "Material Adverse Effect"); provided, however, that
in no event shall any of the following, alone or in combination, be taken into account in
8
determining whether there has been or would reasonably likely be, a Material Adverse
Effect: (i) any effect directly resulting from the public announcement of this Agreement
or the filing of the Plan or the transactions contemplated hereby or in the Term Sheet, and
(ii) any effect that results from events, circumstances, or situations affecting general
worldwide economic, industry or capital market conditions, including acts of war, acts of
terrorism, or natural disasters, so long as such effect does not disproportionately affect
the Company, and provided,further, however, that GECC or any Wayzata Entity shall
notify the Company of any such occurrence resulting in a Material Adverse Effect and
the Company shall have two (2) business days after receipt of such notice to cure to the
extent such breach is susceptible to cure;
(n) the conversion of one or more of the Chapter 11 Cases to a case
under Chapter 7 of the Bankruptcy Code, unless such conversion is made with the prior
written consent of the Wayzata Entities and GECC;
( o) the appointment of a trustee, receiver or examiner with expanded
powers in one or more of the Chapter 11 Cases unless such appointment is made with the
prior written consent of the Wayzata Entities and GECC;
(p) the amendment, modification or filing of a pleading by the
Company seeking to amend, modify or prime the DIP Financing, Plan, Disclosure
Statement or any documents related to the foregoing, including motions, notices, exhibits,
appendices and orders, in a manner not acceptable to Wayzata and GECC (solely as to
the provisions which in GECC's reasonable judgment affect, or could reasonably be
expected to effect, GECC's rights, claims and/or interests);
(q) an interim order approving the DIP Financing in form and
substance acceptable to GECC and Wayzata (the "Interim DIP Order") shall not have
been entered by the Bankruptcy Court within three (3) business days of the Petition Date,
or such Interim DIP Order shall have failed to become a final order on the eleventh day
after entry of such order;
(r) a final order approving the DIP Financing in form and substance
acceptable to GECC and Wayzata (the Final DIP Order") shall not have been entered by
the Bankruptcy Court within thirty-five (35) days ofthe Petition Date, or such Final DIP
Order shall have failed to become a final order on the eleventh day after entry of such
order;
(s) the occurrence of any event of default under the DIP Financing as
defined in and under the applicable DIP Financing credit documentation which is not
waived pursuant to the terms of, or remains uncured for any such applicable period
thereunder;
(t) the Company files any motion or pleading with the Bankruptcy
Court that is not consistent in any material respect with this Agreement or the Term Sheet
and such motion or pleading has not been withdrawn prior to the earlier of (i) two
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business days of the Company receiving notice from either GECC or Wayzata that such
motion or pleading is inconsistent with this Agreement or the Term Sheet and (ii) entry of
an order of the Bankruptcy Court approving such motion;
(u) at the option ofGECC, if the Company (i) enters into any
committment letter or seeks approval of DIP Financing (other than pursuant to any
GECC/Wayzata DIP Credit Facility (as defined in the Term Sheet)) which seeks to grant
liens which are senior to or pari passu with liens securing the First Lien Obligations
and/or any DIP Financing provided by GECC or any affiliate ofGECC, or (ii) seeks to or
in any way supports the use ofGECC's cash collateral, each without GECC's consent; or
(v) at the option ofthe Wayzata Entities, if the Company (i) enters into
any committment letter or seeks approval of DIP Financing (other than pursuant to any
GECC/Wayzata DIP Credit Facility (as defined in the Term Sheet)) which contemplates
the granting of liens which are senior to or pari passu with liens securing obligations
under the Second Lien Agreement and/or any DIP Financing provided by the Wayzata
Entities or any affiliate of Wayzata, or (ii) seeks to or in any way supports the use of the
Wayzata Entities' cash collateral, each without the Wayzata Entities' consent.
Notwithstanding any provision in this Agreement to the contrary, upon the written
consent of Wayzata and GECC, the dates set forth in this Section 8.01(a) through (f)
herein may be extended prior to or upon each such date and such later dates agreed to in
lieu thereof and shall be ofthe same force and effect as the dates provided herein. lfthis
Agreement is terminated by GECC or Wayzata pursuant to this Section 8.01, this
Agreement shall be automatically and simultaneously terminated as to any other Party
that is a signatory to this Agreement. No Party shall terminate this Agreement if such
Party is in breach of any provision hereof.
8.02 Company Termination Events. The Company may terminate this
Agreement as to all Parties upon three business days' prior written notice, delivered in
accordance with Section 10.11 hereof, upon the occurrence of any of the following
events (each, a "Company Termination Event"): (a) the breach by any of the Plan
Support Parties of any of the representations, warranties or covenants of such Plan
Support Parties set forth in this Agreement that would have a material adverse impact on
the Company, or the consummation of the Transactions, that remains uncured for a
period of three business days after the receipt by the Plan Support Parties of notice of
such breach; (b) the board of directors of the Company reasonably determines based upon
the advice of counsel that proceeding with the Transactions would be inconsistent with
the exercise of its fiduciary duties, or (c) the issuance by any governmental authority,
including any regulatory authority or court of competent jurisdiction, of any ruling or
order enjoining the consummation of a material portion of the Transactions.
8.03 Mutual Termination. This Agreement, and the obligations of all Parties
hereunder, may be terminated by mutual agreement among (a) the Company, and (b)
each of the Plan Support Parties.
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8.04 Effect ofTermination. Upon termination of this Agreement under
Section 8.01 or Section 8.02, this Agreement shall be of no further force and effect and
each Party hereto shall be released from its commitments, undertakings and agreements
under or related to this Agreement and shall have the rights and remedies that it would
have had it not entered into this Agreement, and shall be entitled to take all actions,
whether with respect to the Transactions or otherwise, that it would have been entitled to
take had it not entered into this Agreement. Upon the occurrence of any termination of
this Agreement, any and all consents tendered by the Plan Support Parties prior to such
termination shall be deemed, for all purposes, to be null and void from the first instance
and shall not be considered or otherwise used in any manner by the Parties in connection
with the Transactions and this Agreement or otherwise.
8.05 Termination Upon Effective Date of Plan. This Agreement shall
terminate automatically without any further required action or notice on the date that the
Plan becomes effective (immediately following the effectiveness of the Plan).
8.06 Automatic Stay. The Company acknowledges that after the
commencement ofthe Chapter 11 Cases, the act of termination by any Party pursuant to
this Agreement shall not be a violation of the automatic stay of section 362 of the
Bankruptcy Code; provided, however, nothing herein shall prejudice any Party's rights to
argue that the termination was not proper under the terms of this Agn;:ement.
Section 9. Effectiveness; Amendments. This Agreement, including the Term
Sheet, may not be modified, amended, or supplemented (except as expressly provided
herein or therein) except in writing signed by the Company and each of the Plan Support
Parties.
10.0 1. Further Assurances. Subject to the other terms of this Agreement, the
Parties agree to execute and deliver such other instruments and perform such acts, in
addition to the matters herein specified, as may be reasonably appropriate or necessary,
from time to time, to effectuate the Solicitation and/or the Plan, as applicable.
10.02. Complete Agreement. This Agreement is the entire agreement
between the Parties with respect to the subject matter hereof and all prior
agreements, oral or written, between the Parties with respect thereto. No claim of waiver,
modification, consent or acquiescence with respect to any provision of this Agreement
shall be made against any Party, except on the basis of a written instrument executed by
or on behalf of such Party.
l 0.03. Parties. This Agreement shall be binding upon, and inure to the
benefit of, the Parties. No rights or obligations of any Party under this Agreement may
be assigned or transferred to any other person or entity except as provided in Section 3.03
hereof Nothing in this Agreement, express or implied, shall give to any person or entity,
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other than the Parties, any benefit or any legal or equitable right, remedy or claim under
this Agreement.
1 0.04. Headings. The headings of all sections of this Agreement are inserted
solely for the convenience of reference and are not a part of and are not intended to
govern, limit or aid in the construction or interpretation of any term or provision hereof.
10.05. GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM; WAIVER OF TRIAL BY JURY. THIS AGREEMENT IS
TO BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO
BE PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF. Each Party hereto agrees that it shall
bring any action or proceeding in respect of any claim arising out of or related to this
Agreement or the transactions contained in or contemplated by this Agreement, to the
extent possible, in either the United States District Court for the Southern District of New
York or any New York State court sitting in New York City (the "Chosen Courts"), and
solely in connection with claims arising under this Agreement or the Transactions that are
the subject of this Agreement (i) irrevocably submits to the exclusive jurisdiction of the
Chosen Courts, (ii) waives any objection to laying venue in any such action or
proceeding in the Chosen Courts and (iii) waives any objection that the Chosen Courts
are an inconvenient forum or do not have jurisdiction over any Party hereto; provided,
however, that if the Company files the Plan, then the Bankruptcy Court shall be the sole
Chosen Court. Each party hereto irrevocably waives any and all right to trial by jury in
any legal proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
I 0.06. Execution of Agreement. This Agreement may be executed and
delivered (by facsimile, electronic mail or otherwise) in any number of counterparts, each
of which, when executed and delivered, shall be deemed an original, and all of which
together shall constitute the same agreement. Except as expressly provided in this
Agreement, each individual executing this Agreement on behalf of a Party has been duly
authorized and empowered to execute and deliver this Agreement on behalfofsaid Party.
10.07. Interpretation. This Agreement is the product of negotiations between
the Company, Wayzata, GECC and the Consenting Noteholders, and in the enforcement
or interpretation hereof, is to be interpreted in a neutral manner, and any presumption
with regard to interpretation for or against any Party by reason of that Party having
drafted or caused to be drafted this Agreement, or any portion hereof, shall not be
1 0.08. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit ofthe Parties and their respective successors, assigns, heirs, executors,
administrators and representatives, other than a trustee or similar representative appointed
in a bankruptcy case. The agreements, representations and obligations ofthe Consenting
Noteholders under this Agreement are, in all respects, several and not joint.
12
I 0.09. Creditors' Committee. Notwithstanding anything herein to the
contrary, if any Consenting Noteholder is appointed to and serves on an official
committee of creditors in the Chapter II Cases, the terms of this Agreement shall not be
construed so as to limit such Consenting Noteholder's exercise (in its sole discretion) of
its fiduciary duties to any person arising from its service on such committee, and any
such exercise (in the sole discretion of such Consenting Noteholder) of such fiduciary
duties shall not be deemed to constitute a breach ofthe terms of this Agreement;
provided, further, that nothing in this Agreement shall be construed as requiring any
Consenting Noteholder to serve on any official committee in any such chapter II case.
10.1 0. Relationship Among Parties. It is understood and agreed that no Plan
Support Party has any fiduciary duty or other duty of trust or confidence in any form with
any other Plan Support Party, and, except as provided in this Agreement, there are no
commitments among or between them. In this regard, it is understood and agreed that
any Consenting Noteholder may trade in the Notes or other debt or equity securities of
the Company without the consent of the Company or any other Plan Support Party,
subject to applicable securities laws and the terms of this Agreement; provided further
that no Plan Support Party shall have any responsibility for any such trading by any other
entity by virtue of this Agreement. No prior history, pattern or practice of sharing
confidences among or between the Plan Support Parties shall in any way affect or negate
this understanding and agreement.
10.11. Notices. All notices hereunder shall be deemed given if in writing and
delivered, if sent by telecopy, e-mail, courier or by registered or certified mail (return
receipt requested) to the following addresses and telecopier numbers (or at such other
addresses or telecopier numbers as shall be specified by like notice):
(1) ifto the Company, to:
Portola Packaging, Inc.
951 Douglas Road
Batavia, IL 60510
Attention: Chief Legal Officer
E-mail address: kwehrenberg(ii)portpack.com
with copies (which shall not constitute notice) to:
200 East Randolph Drive
Chicago, IL 60601-6636
Attention: Jeffrey W. Gettleman, Esq. and David A. Agay, Esq.
E-mail addresses: dagav(cpkirkland.com and
jgettlem<m(ii)kirkland.cqm
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(2) if to the GECC, to:
General Electric Capital Corporation
500 West Monroe, 1 ih Floor
Chicago, IL 60661
Attention: Kathleen Bird
Telephone: (312) 441-6754
Facsimile: (312) 441-7920
Latham & Watkins LLP
Sears Tower, Suite 5800
Attention: Peter P. Knight, Esq.
E-mail address: peter.knight(Ullw.com
and
20 1 Merritt 7
Norwalk, CT 06851
Attention: Douglas Taber, Esq.
E-mail address:
Facsimile: (203) 956-4259
(3) if to a Wayzata or a Consenting Noteholder or a transferee thereof,
to the addresses or telecopier numbers set forth below following the Consenting
Noteholder's signature (or as directed by any transferee thereof), as the case may be
Akin Gump Strauss Hauer & Feld LLP
590 Madison A venue
Attention: Ira Dizengoff, Esq.
E-mail address: idizcngofflii),akingump.com
Any notice given by delivery, mail or courier shall be effective when received. Any
notice given by telecopier shall be effective upon oral or machine confirmation of
transmission.
10.12 Access. The Company will afford the Plan Support Parties and their
respective attorneys, consultants, accountants and other authorized representatives
reasonable access, upon reasonable notice during normal business hours, and at other
reasonable times, to all properties, books, contracts, commitments, records, management
14
personnel, lenders and advisors of the Company; provided, however, the Company's
obligation hereunder shall be conditioned upon such Plan Support Party being party to an
executed confidentiality agreement approved by and with the Company. The Company
acknowledges and agrees that GECC and the members of the Informal Noteholders
Committee have complied with the requirements of this Section 10.12 by virtue of their
existing confidentiality arrangements with the Company.
I 0.13 Waiver. If the Transactions contemplated herein are or are not
consummated, or following the occurrence of the Plan Support Party Termination Date or
Company Termination Date, if applicable, nothing shall be construed herein as a waiver
by any Party of any or all of such Party's rights and the Parties expressly reserve any and
all of their respective rights. Pursuant to Federal Rule of Evidence 408 and any other
applicable rules of evidence, this Agreement and all negotiations relating hereto shall not
be admissible into evidence in any proceeding other than a proceeding to enforce its
terms.
I 0.14 Specific Performance. It is understood and agreed by the Parties that
money damages would be an insufficient remedy for any breach of this Agreement by
any Party and each non-breaching Party shall be entitled to specific performance and
injunctive or other equitable relief as a remedy of any such breach, including, without
limitation, an order ofthe Bankruptcy Court or other court of competent jurisdiction
requiring any Party to comply promptly with any of its obligations
I 0.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall constitute
one and the same Agreement. Delivery of an executed signature page of this Agreement
by facsimile or electronic mail shall be as effective as delivery of a manually executed
signature page ofthis Agreement.
I 0.16 Several, Not Joint, Obligations. The agreements, representations, and
obligations of the Parties under this Agreement are, in all respects, several and not joint.
I 0.17 Remedies Cumulative. All rights, powers, and remedies provided
under this Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any right, power, or remedy thereof by
any Party shall not preclude the simultaneous or later exercise of any other such right,
power, or remedy by such Party.
I 0.18 No Third-Party Beneficiaries. Unless expressly stated herein, this
Agreement shall be solely for the benefit of the Parties, and no other person or entity
shall be a third party beneficiary hereof.
Section 11. Disclosure. The Company shall publicly disclose (i) the
existence of this Agreement and the material terms ofthe Term Sheet on the Agreement
Effective Date, and (ii) any material amendment to this Agreement and the Term Sheet
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on the effective date of such amendment, each in form and substance acceptable to
Wayzata and GECC. The Company will submit to Wayzata and GECC all press releases
and public filings relating to this Agreement, the Term Sheet or the transactions
contemplated hereby and thereby and any amendments thereof. To the extent that the
Company fails to make such initial disclosure within two (2) business days following the
Agreement Effective Date or any amendment hereto, Wayazta and GECC shall each have
the right but not the obligation to publicly disclose such terms. The Company shall not
(a) use the name of any Plan Support Party in any press release without such Plan
Support Party's prior written consent or (b) disclose to any person other than legal and
financial advisors to the Company and GECC the principal amount or percentage of any
Notes or any other securities of the Company or any of their respective subsidiaries held
by any Consenting Noteholder; provided, however, that the Company shall be permitted
to disclose at any time the aggregate principal amount of and aggregate percentage of
Senior Notes held by Consenting Noteholders or by persons who have otherwise agreed
to participate in the Solicitation as a group.
{signature pages follow]
16
Signature Page to the Agreement
by and among, Portola Packaging, Inc., Wayzata Investment Partners LLC,
Wayzata Recovery Fund LLC, Wayzata Opportunities Fund II,, L.P., Wayzata
Opportunities Fund Offshore II, L.P., TCW Shared Opportunity Fund IV, LP,
TCW Shared Opportunity Fund IVB, LP,, TCW Shared Opportunity Fund V, LP
and General Electric Capital Corporation
PORTOLA PACKAGING, INC.
By:
Name:
Title:
[Signature Page to Restructuring Support Agreement]
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EXHIBIT A
TERM SHEET
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PORTOLA PACKAGING, INC.
RESTRUCTURING TERM SHEET
JULY 24, 2008
The terms and conditions described herein are part of a comprehensive compromise, each
element of which is consideration for the other elements and an integral aspect of the proposed
restructuring. This term sheet does not constitute an offer or a legally binding obligation of the
Wayzata Entities, GECC, the Informal Noteholders Committee, the Company (each as defined
below), or any other party in interest, nor does it constitute an offer or a solicitation
of the acceptance or rejection of a chapter 11 plan for the Company. The transactions
contemplated by this term sheet are subject to conditions to be set forth in definitive documents
("Definitive Documents") acceptable in form and substance to the Company (except as noted
below), Wayzata and GECC. This term sheet is proffered in the nature of a settlement proposal
in furtherance of settlement discussions and is entitled to protection from any use or disclosure to
any party or person pursuant to Federal Rule of Evidence 408 and any other rule of similar
import. Until publicly disclosed by the Company, with the prior written consent of Wayzata and
GECC, this term sheet and the information contained herein is strictly confidential and may not
be shared with any person. Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in the RSA (as defined below).
THIS TERM SHEET DOES NOT CONSTITUTE A SOLICITATION OF VOTES FOR A
PLAN OF REORGANIZATION FOR PURPOSES OF SECTIONS 1125 AND 1126 OF THE
BANKRUPTCY CODE OR AN OFFER WITH RESPECT TO ANY SECURITIES. SUCH
OFFER OR SOLICITATION WILL BE MADE IN COMPLIANCE WITH ALL APPLICABLE
LAW.
Proposed Parties
803H03
Transaction Overview
Portola Packaging, Inc. ("Portola" or the "Company") and all of
its direct and indirect foreign and domestic subsidiaries and
affiliates, each a guarantor of the First Lie:n Obligations (defined
below), Second Lien Obligations (defined below), and the Senior
Notes (defined below) (collectively, the "!:ompanies").
General Electric Capital Corporation, soldy in its capacities as
agent and lender under that certain Fourth Amended and Restated
Credit Agreement, dated as of January 16., 2004 (as amended,
restated, supplemented or otherwise modified from time to time,
the "First Lien Agreement") (in such capacities, "GECC").
Wayzata Investment Partners LLC ("Wayzata"), as agent under
that certain Amended and Restated Credit Agreement, dated July
24, 2008 (as amended, restated, supplemented or otherwise
modified from time to time, the "Second Lien Agreement") for
certain funds and/or accounts managed or advised by Wayzata
(collectively referred to, with Wayzata, as the "Wayzata Entities")
who are lenders under the Second Lien Agreement and/or holders
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Transaction Summary
Bridge Financing
8033403
of the 8 1/4% Senior Notes due 2012 issued under that certain
indenture, dated January 23, 2004, by and between Portola, as
issuer, and U.S. Bank, National Association, as trustee (as
amended, restated, supplemented or otherwise modified from
time to time, the "Indenture") (collectively, the ''Senior Notes").
Members of the informal committee of noteholders of Portola
Packaging, Inc.'s 8 I/4% Senior Notes due 20I2 (the "Informal
Noteholders Committee"), each a party to the RSA, that are
holders or investment advisers or managers of discretionary
accounts that hold the Senior Notes.
Subject to the terms of this Term Sheet and the certain
Restructuring Support Agreement to which this Term Sheet is
attached (the "RSA"), the Company shall pursue a prepetition
solicitation of votes for a pre-packaged chapter 11 plan of
reorganization (the "Plan") in accordance with applicable law. It
is currently contemplated that the Plan (together with
supplemental documents, the "Consent Solicitation Materials"),
will be solicited prepetition (the "Solicitation") in accordance
with applicable law.
The Company and such other subsidiaries or affiliates ofthe
Company (with the consent of the Plan Support Parties, which
consent shall not be unreasonably withheld) shall file, following
the termination of the Solicitation, voluntary petitions for relief
under chapter 1I ofthe Bankruptcy Code in the United States
Bankruptcy Court for the (i) District of Delaware or (ii) Southern
District ofNew York (the "Bankruptcy Court"), no later than
September 8, 2008 (the "Chapter II Cases"). The Company shall
file the Chapter II Cases in the venue acceptable to GECC and
the Wayzata Entities. The material terms and conditions of the
Plan are set forth in this Term Sheet and the RSA. The Plan and
related disclosure statement shall be filed contemporaneously
with the filing ofthe chapter II petitions.
Up to $I 0,000,000 in principal amount of secured financing (the
"Bridge Financing") will be provided to the Company by the
Wayzata Entities through additional term loans under the Second
Lien Agreement pursuant to an approved budget and on such
terms and conditions acceptable to Wayzata and GECC. The
proceeds ofthe Bridge Financing shall be used to finance the
working capital needs ofthe Company from the date the RSA
becomes effective through the Petition Date. The Bridge
Financing shall comply in all respects with, and be subject to, that
certain Intercreditor Agreement, dated as of April 14, 2008, by
and between Wayzata, as agent under the Second Lien
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Forbearance Agreements
80D40l
Agreement, and GECC, as agent under the First Lien Agreement
(as amended, restated or otherwise modified from time to time,
the ''Intercreditor Agreement"), as amended or otherwise
modified by agreement ofGECC and Wayzata in connection with
the restructuring transactions contemplated hereby.
To the extent necessary to permit the Bridge Financing and any
other aspects of the restructuring transactions contemplated
hereby, (i) GECC shall enter into any amc:ndments and/or
consents under the First Lien Agreement and the Intercreditor
Agreement, in each case acceptable to GECC in its sole
discretion, and (ii) the Wayzata Entities shall (A) enter into any
amendments to the Second Lien Agreement and the Intercreditor
Agreement, and (B) direct the Indenture Trustee to enter into any
amendments to the Indenture, in each acceptable to the
applicable Wayzata Entities in their sole discretion.
The closing of the Bridge Financing shall be a condition
precedent to the effectiveness of the RSA.
Concurrently with the execution ofthe RSA, GECC and the
Company shall enter into a forbearance agreement and eleventh
amendment under the First Lien Agreement, in form and
substance acceptable to GECC and Wayzata (as amended, restated
or otherwise modified from time to time, the "GECC Forbearance
Agreement"), pursuant to which GECC shall, subject to the terms
and conditions set forth therein, temporarily forbear from
exercising certain default-related rights and remedies against the
Company or any other Loan Party (as defined in the First Lien
Agreement) solely with respect to current and anticipated events
of default under the First Lien Agreement that are listed in
Schedule I to the RSA. Provided that the RSA has not been
terminated in accordance with the terms thereof, the Wayzata
Entities shall not challenge or contest, or join in any challenge or
contest of, ( i) the allowance as a fully secured claim of any of the
amounts of the First Lien Obligations acknowledged by the
Company in the GECC Forbearance Agreement; or (ii) the
treatment of default interest and forbearance/amendment fees set
forth in the GECC Forbearance Agreement.
Concurrently with the execution of the RSA, the Wayzata Entities
and the Company shall enter into a forbearance agreement in
respect of the Second Lien Agreement, in form and substance
acceptable to GECC and Wayzata (as restated or
otherwise modified from time to time, "Second Lien
Forbearance Agreement"), pursuant to which the Wayzata Entities
shall, subject to the terms and conditions set forth therein,
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DIP Financing
8033403
temporarily forbear from exercising certain default-related rights
and remedies against the Company or any other Loan Party (as
defined in the Second Lien Agreement) solely with respect to
current and anticipated events of default under the Second Lien
Agreement that are listed in Schedule I to the RSA.
To the extent necessary, the Consenting Noteholders shall, and
shall direct the Indenture Trustee in respect of the Senior Notes to,
enter into a forbearance agreement with respect to the Indenture
and Senior Notes, in form and substance acceptable to GECC and
Wayzata (as amended, restated or otherwise modified from time
to time, the "Senior Note Forbearance Agreement," and together
with the GECC Forbearance Agreement and the Second Lien
Forbearance Agreement, the "Forbearance Agreements"),
pursuant to which the Indenture Trustee and holders of the Senior
Notes shall, subject to the terms and conditions set forth therein,
temporarily forbear from exercising certain default-related rights
and remedies against the Company or any other Loan Party (as
defined in the Indenture) solely with respect to current and
anticipated events of default under the Indenture and Senior Notes
that are listed in Schedule I to the RSA.
DIP Financing in an amount no less than $1 0,000,000 and no
more than $75,000,000 shall be used to finance the working
capital needs of the Company from the Petition Date through the
Outside Date (defined below) (the "DIP Credit Facility"). The
DIP Credit Facility shall be provided by either: (i) GECC and the
Wayzata Entities through (A) a roll-up of the outstanding
obligations owed to GECC under the First Lien Agreement,
including, without limitation, payment of principal, default and
non-default interest, accrued unpaid fees and other amounts, if
any (the "First Lien Obligations") (such portion ofthe DIP
Financing described in clause (A) hereof, the "Senior Tranche"),
(B) a roll-up of the outstanding obligations owed to the Wayzata
Entities under the Second Lien Agreement, including the Bridge
Financing (to be funded exclusively by the Wayzata Entities)
(such portion ofthe DIP Financing described in clause (B) hereof,
the "Junior Tranche") secured by liens and superpriority claims
junior in priority to the Senior Tranche obligations, and (C)
incremental liquidity in a principal amount not to exceed
$10,000,000 to be funded by the Wayzata Entities through loans
and advances under the Junior Tranche, or by purchasing last-out
participations under the First Lien Agreement, in each case on
such terms and conditions acceptable to the Wayzata Entities and
GECC (the DIP Financing described in clause (i) hereof, a
"GECC/Wayzata DIP Credit Facility"); or (ii) by a third party
(which may be any of the Wayzata Entities) that repays all First
4
8011403
Lien Obligations and all obligations owed to the Wayzata Entities
under the Second Lien Agreement, in each case in full in cash no
later than entry of a final order approving the DIP Credit Facility
(a "Third-Party DIP Credit Facility"). Notwithstanding the
previous sentence, the Company shall use its best efforts to obtain
approval of, and effectuate, the rollup or refinance, as applicable,
of the First Lien Obligations in connection with entry of an
interim order approving the DIP Credit Facility. The terms and
conditions of the Third-Party DIP Credit Facility shall be (i) set
forth in a commitment letter and detailed term sheet acceptable to
the Wayzata Entities and (ii) otherwise acceptable to the Wayzata
Entities; provided, however, that nothing contained in this Term
Sheet is or shall be deemed to be a waiver by GECC to object to
entry of an order by the Bankruptcy Court approving the Third-
Party DIP Credit Facility and any DIP Financing shall be subject
to the limitations set forth in Sections 3.05 and 3.06 ofthe RSA.
The Company shall stipulate, as ofthe closing ofthe DIP
Financing, to the allowed amount on account of (y) the First Lien
Obligations and (z) all obligations due and owing under the
Second Lien Agreement, including, without limitation, principal,
default and non-default interest, payment of any prepayment
premiums or fees, default interest, or other amounts, if any (the
"Second Lien Obligations"), each in accordance with the
applicable documents.
None of the obligations owing to the Wayzata Entities under any
of the Second Lien Agreement, any last-out participations under
the First Lien Agreement purchased by any Wayzata Entities or
any Senior Notes shall be rolled-up, refinanced or otherwise
satisfied by any DIP Financing unless and until all First Lien
Obligations are rolled up, refinanced or otherwise satisfied in full
by such DIP Financing.
The DIP Financing shall comply in all respects with, and be
subject to, the Intercreditor Agreement, as amended or otherwise
modified by agreement ofGECC and Wayzata in connection with
the restructuring transactions contemplated hereby.
Any interim or final order approving the DIP Financing and/or
authorizing the use of cash collateral shall (i) provide the Wayzata
Entities and GECC adequate protection acceptable to such parties
and (ii) otherwise be acceptable to the Wayzata Entities and
GECC (with the consent rights ofthe Wayzata Entities referenced
in clauses (i) and (ii) hereof remaining subject to the to the terms
of the Intercreditor Agreement). In no e v 1 ~ n t shall any Wayzata
Entity receive more favorable bankruptcy protections (including,
without limitation, post-petition liens, ade:quate protection and
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super-priority administrative claims) on account of its prepetition
claims/interests than GECC receives on account of its prepetition
claims/interests, in each case in connection with any DIP
Financing and/or cash collateral usage.
To the extent necessary to effectuate the DIP Financing, the
Wayzata Entities shall (i) enter into any amendments to the
Second Lien Agreement and the Intercreditor Agreement and (ii)
direct the Indenture Trustee to enter into any amendments to the
Indenture necessary to permit the DIP Financing and any other
aspects of the restructuring transactions contemplated hereby.
Classification and Treatment of Claims and Interests
Administrative, Priority
Tax, and Other Priority
Claims:
DIP Credit Facility:
Second Lien Claims:
8033403
On or as soon as practicable after the Effective Date, each holder
of an administrative, priority tax or other priority claim shall
receive treatment of such claim consistent with the provisions of
Section 1129( a )(9) of the Bankruptcy Code.
If the DIP Financing is a GECC/Wayzata DIP Credit Facility, (a)
the Senior Tranche obligations shall be repaid in full in cash
from the proceeds of an exit credit facility (the "Exit Facility")
on the effective date ofthe Plan (the "Effective Date"), and the
Junior Tranche obligations shall either be (b )(i) repaid in full in
cash from the proceeds of the Exit Facility or (ii) afforded such
other treatment as may be acceptable to the Wayzata Entities. If
the DIP Financing is provided by a Third-Party DIP Credit
Facility, on or as soon as practicable after the Effective Date,
such DIP Financing shall at the election of the lenders under the
terms of the Third-Party DIP Credit Facility with the consent of
Wayzata, which consent shall not be unreasonably withheld, (a)
be converted into the Exit Facility upon such terms and
conditions similar to those under the First Lien Agreement, and
such other terms and conditions as acceptable to Wayzata, or (b)
be repaid in full in cash from the proceeds ofthe Exit Facility.
In all cases, all First Lien Obligations and, if applicable, the
GECC/Wayzata DIP Credit Facility, shall be repaid in full in
cash on or prior to the Effective Date.
On or as soon as practicable after the Effective Date, all Second
Lien Obligations shall (i) be paid in full in cash from the
proceeds ofthe Exit Facility, or (ii) afforded such other
treatment as acceptable to the Wayzata Entities (provided, that
all obligations owed to GECC under the First Lien Agreement
and any GECC/Wayzata DIP Credit Facility must be repaid in
full prior to the repayment of any outstanding Second Lien
Obligations). Nothing in this Term Sheet or in the RSA shall be
construed to amend, restate or otherwise modify the lntercreditor
6
Senior Note Claims:
General Unsecured Claims:
Intercompany Claims
Section 510(b) Claims
Existing Equity:
803)403
Agreement, which shall remain in full force and effect from and
after the execution of the RSA.
On or as soon as reasonably practicable after the Effective Date,
in exchange for their allowed Senior Notes claims against the
Company (inclusive of principal and accrued through the
petition date of the Chapter 11 Cases) (the "Senior Note
Claims"), the holders ofthe Senior Notes shall receive, on a pro
rata basis, 100% of the 10,000,000 newly issued shares of
common stock of the reorganized Portola (the "New Common
Stock"), subject to dilution on account of the Management
Incentive Program (as defined below) and New Warrants (as
defined below).
in exchange for their allowed unsecured claims against the
Company (the "Allowed Unsecured Claims"), each ofthe
holders thereof shall receive treatment in a manner acceptable to
the Company (with the consent of the Wayzata Entities),
provided, however, that trade payables incurred in the ordinary
course ofthe Company's business shall be unimpaired. The
Company reserves the right to confirm the Plan with respect to
any unsecured claim under section 112 9(b) of the Bankruptcy
Code with the consent of the Wayzata Entities, which consent
shall not be unreasonably withheld.
Subject to the requirements of section 1129(b) ofthe Bankruptcy
Code (if applicable), all of the Company's Intercompany Claims
will be reinstated accept as otherwise agreed to by the Company
with the consent of Wayzata, which consent shall not be
unreasonably withheld.
Subject to the requirements of section 1129(b) of the Bankruptcy
Code (if applicable), any claim against the Company that is
described in section 51 O(b) of the Bankruptcy Code shall not
receive a distribution and shall be extinguished.
Subject to the requirements of section 1129(b) ofthe Bankruptcy
Code (if applicable), on or as soon as reasonably practicable
after the Effective Date, the holders of the existing Company
common stock and the holders of any options, warrants or rights
to acquire any equity securities ofthe Company will receive, on
a pro rata basis, five year warrants for 526,000 shares of the
New Common Stock on a fully diluted basis at a strike price of
$18.75 (the "New Warrants"), said price being equal to a
par plus accrued recovery on each allowed Senior Note Claim.
The Company's existing common equity shares as well as any
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Executory Contracts and
Unexpired Leases:
Management Incentive
Program:
Restructuring Expenses:
Corporate Governance:
Releases
8033403
preferred shares or holders of options, warrants or similar
instruments derived from or relating to any such common or
preferred shares will be cancelled upon the issuance ofthe New
Common Stock. Equity interests in direct or indirect
subsidiaries of Portola will not be cancelled.
Other Principal Plan Terms
Pursuant to the terms and conditions of the Plan, on the Effective
Date, the Companies shall assume all of its unexpired leases and
customer, employment, and vendor executory contracts (except
those previously rejected) and put in place customary
Bankruptcy Court approved procedures to establish cure
amounts with respect to all unexpired leases and executory
contracts.
a management incentive program (the "Management Incentive
Program") shall be implemented to provide designated members
of senior management of reorganized Portola with New
Common Stock and/or options to purchase shares of New
Common Stock approved by the initial new board of directors
(the "New Board") of reorganized Portola in its discretion.
The Company shall pay all reasonable fees and expenses
(including, without limitation, the fees and expenses oftheir
legal and financial advisors in accordance with their applicable
engagement letters) incurred by each ofthe Company, the
Wayzata Entities (in their capacity as lenders under the Second
Lien Agreement), the Informal Noteholders Committee, and
GECC in connection with the Chapter II Cases and the
negotiation, documentation and consummation ofthis Term
Sheet, the RSA, the Consent Solicitation Materials, the Plan, all
other documents related to the Plan and the restructuring
transactions contemplated hereby and thereby (collectively, the
"Restructuring Expenses").
The New Board shall initially consist of seven members selected
by the Informal Noteholders Committee. The corporate
governance documents ofthe reorganized Companies shall be in
form and substance acceptable to the Informal Noteholders
Committee in its sole discretion. Any holder of shares of
reorganized Portola in an amount greater than five (5) percent of
the outstanding number of shares shall be subject to a
shareholder agreement or similar agreement.
Upon closing ofthe Bridge Financing, the Company shall
8
8033403
release GECC (in all of its capacities under the First Lien
Agreement and, if applicable, the GECC/Wayzata DIP Credit
Facility) and the Wayzata Entities (in all of their capacities
under the Second Lien Agreement, Indenture and, if applicable,
the GECC/Wayzata DIP Credit Facility), and their respective
directors, officers, agents, professionals and financial and legal
advisors, and employees from any and aH claims, interests,
obligations, rights, suits, damages, causes of action, remedies,
and liabilities whatsoever, whether known or unknown, foreseen
or unforeseen, existing or hereafter arising, in law, equity or
otherwise, that the Company would have been legally entitled to
assert (whether individually or collectivdy), relating to any act,
omission, transaction, event or other occurrence taking place on
or prior to the closing of the Bridge Financing.
Upon the occurrence ofthe Effective Date, the Company shall
release GECC (in all of its capacities under the First Lien
Agreement and, if applicable, the GECC/Wayzata DIP Credit
Facility) and the Wayzata Entities (in all of their capacities
under the Second Lien Agreement, Indenture and, if applicable,
the GECC/Wayzata DIP Credit Facility), and their respective
directors, officers, agents, professionals and financial and legal
advisors, and employees from any and all claims, interests,
and liabilities whatsoever, whether known or unknown, foreseen
or unforeseen, existing or hereafter arising, in law, equity or
otherwise, that the Company would hav{: been legally entitled to
assert (whether individually or collectivdy), relating to any act,
omission, transaction, event or other occurrence taking place on
or prior to the Effective Date.
Upon the occurrence of the Effective Date, the members of the
Informal Noteholders Committee shall rdease the Company's
existing directors, officers, agents, professionals and financial
and legal advisors, and employees from any and all claims,
interests, obligations, rights, suits, damages, causes of action,
remedies, and liabilities whatsoever relating to the Company,
whether known or unknown, foreseen or unforeseen, existing or
hereafter arising, in law, equity or otherwise, that members of
the Informal Noteholders Committee would have been legally
entitled to assert (whether individually or collectively), relating
to any act, omission, transaction, event or other occurrence
taking place on or prior to the Effective Date solely in their
capacity, as the case may be, as a director, officer, agent,
professional or financial and legal advisor, or employee of the
Company; provided, however, that nothing herein shall be
construed to release any person or entity from fraud, willful
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Exculpation
8033403
misconduct, or criminal misconduct.
Upon the occurrence of the Effective Date, if (a) all First Lien
Obligations and, if applicable all obligations under any
GECC/Wayzata DIP Credit Facility, have been indefeasibly paid
in full in cash, and (ii) the Bankruptcy Court has finally allowed
all ofGECC's claims as a fully secured claim, then GECC
(solely in its capacities as agent and lender under the First Lien
Agreement) shall release the Company's existing directors,
officers, agents, professionals and financial and legal advisors,
and employees from any and all claims, interests, obligations,
rights, suits, damages, causes of action, remedies, and liabilities
whatsoever relating to the Company, whether known or
unknown, foreseen or unforeseen, existing or hereafter arising,
in law, equity or otherwise, that GECC would have been legally
entitled to assert (whether individually or collectively), relating
to any act, omission, transaction, event or other occurrence
taking place on or prior to the Effective Date solely in their
capacity, as the case may be, as a director, officer, agent,
professional or financial and legal advisor, or employee of the
Company; provided, however, that nothing herein shall be
construed to release any person or entity from fraud, willful
misconduct, or criminal misconduct. Nothing in this Term Sheet
shall be construed as a release by GECC of the Company or any
other "Loan Party" (as defined in the First Lien Agreement).
Bankruptcy Court, the Company, GECC, the Wayzata Entities,
the members ofthe Informal Noteholders' Committee and their
respective successors, predecessors, control persons, members,
officers, directors, employees and agents solely in such
capacities (including any attorneys, financial advisors,
restructuring advisors, investment bankers, accountants, and
other professionals retained by such persons) shall have no
liability to any holder of a claim or equity interest for any act or
omission in connection with, or arising out of, the negotiation of
the RSA, the negotiation and the pursuit of approval of the
disclosure statement, the Plan or the solicitation of votes for, or
confirmation of, the Plan, the funding of the Plan, the
consummation of the Plan, or the administration of the Plan or
the property to be distributed under the Plan, provided, however,
that nothing herein shall be construed to exculpate any person or
entity from fraud, willful misconduct, or criminal misconduct.
10
EXHIBITB
PROVISION FOR TRANSFER AGREEMENT
The undersigned ("Transferee") hereby acknowledges that it has read and understands
the Restructuring Support Agreement, dated L], 2008 (the "Agreement"), by and among
Portola Packaging, Inc. and its affiliates and subsidiaries bound thereto, General Electric
Capital Corporation, Wayzata Investment Partners LLC, Wayzata Recovery Fund LLC,
Wayzata Opportunities Fund II, L.P., Wayzata Opportunities Fund Offshore II, L.P. and
certain other noteholders, and agrees to be bound by the terms and conditions thereof to
the extent Transferor was thereby bound, and shall be deemed a "Consenting
Noteholder") under the terms of the Agreement.
The Transferee specifically agrees (i) to be bound by the terms and conditions of the
Senior Notes, (ii) to be bound by the vote of its Consenting Noteholder transferor, and
(iii) not to attempt to renegotiate the terms of this Agreement.
Date Executed: , 2008
---
Print name of Transferee
Name:
Title:
Address:
Attention:
----------------------------
Telephone:
----------------------------
Facsimile:
----------------------------
Aggregate principal amount ofl"otes
beneficially owned or managed on behalf of
accounts that hold or beneficially own such
Notes:
26
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EXHIBIT C
AGREEMENTS UNDER SECTION 5.0l(b)
1
1. Agreement for Purchase and Sale of Plastic Fitments, effective as
of May 1, 2008, between PPI and Nestle USA
2. Supply Agreement effective as of October I, 2007 between PPI
and Parmalat Canada
3. 28mm NXT Closure Contract, May 2007-April 2009, between
PPI and Coca Cola
4. Supply Agreement dated June 1, 2007 between Portola Packaging
Ltd. and Tetra Park International S.A.
1
Due diligence continues, further agreements may be added.
27
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(SPECIFIED EVENTS OF DEFAULT)
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First Lien Agreement
Specified Defaults
Current Defaults
1.
2.
3.
4.
5.
6.
The Events of Default arising under Section 6.1 (C) of the Financing
Agreement as a result of the Borrower's failure to timely deliver
financial statements for May 2008 in violation of Section 4.5(A) of the
Financing Agreement.
Agreement as a result of the delivery of materially misstated financial
statements for the periods ended November 30, 2006, February 28,
2007, May 31, 2007, for the Fiscal Year ended August 31, 2007, and
for the periods ended November 30, 2007 and February 29, 2008 in
violation of Section 4.2 and Section 4.5 ofthe Financing Agreement.
The Events of Default arising under Section 5 of the Tenth
Amendment as a result of the Borrower's failure to deliver to Agent
bank account control agreements in favor of Agent, in form and
substance reasonably satisfactory to Agent, relating to accounts
maintained by the Loan Parties at Union Bank of California within the
time period specified therein.
Amendment as a result of the Borrower's failure to deliver to Agent
bank account control agreements in favor of Agent, in form and
substance reasonably satisfactory to Agent, relating to accounts
maintained by the Loan Parties at FirstMerit Bank.
Amendment as a result of the Borrower's failure to deliver to Agent a
landlord waiver in favor of Agent, in form and substance reasonably
satisfactory to Agent, relating to the premises located at 7301 Tellier
Montreal.
Amendment as a result of the Borrower's failure to deliver to Agent,
for the benefit of the Lender Parties, a Lien against all of its property
to secure the Obligations (including, without limitation, a pledge of
100% of the capital stock of China Restricted Subsidiary) in
accordance with applicable law and pursuant to documentation
reasonably requested by Agent.
29
7.
8.
9.
10.
11.
12.
13.
14.
Amendment as a result of the Borrower's failure to cause Czech
Restricted Subsidiary to guaranty the Obligations and to grant to
Agent, for the benefit of the Lender Parties, a Lien against all of its
property to secure the Obligations, in accordance with applicable law
and pursuant to documentation reasonably requested by Agent.
Amendment as a result of the Borrower's failure to cause New
Zealand Restricted Subsidiary to guaranty the Obligations and to grant
to Agent, for the benefit of the Lender Parties, a Lien against all of its
property to secure the Obligations, in accordance with applicable law
and pursuant to documentation reasonably requested by Agent.
The Events of Default arising under 6.1(E) of the Financing
Agreement as result of Borrower's failure to deliver to Agent duly
endorsed replacement stock certificates for Mexican Restricted
Subsidiary certificate numbers 8 and 10, in form and substance
reasonably satisfactory to Agent in violation of Section 2.5(A) of the
Financing Agreement.
The Events of Default arising under Section 6.1 (D) of the Financing
Agreement as a result of the Material Adverse Effect arising from
those erroneous accounting entries relating to t h ~ ~ China Subsidiary's
accounts receivables, accounts payable, inventory and costs of sale
which were disclosed in an 8-K filed with the SEC on June 27, 2008 in
violation of Section 5.2 of the Financing Agreement.
The Events of Default arising under Section 6.1 (D) and Section 6.1 (K)
of the Financing Agreement as a result of Borrower's failure to be
solvent and Borrower's inability to pay its debts as they become due.
The Events of Default arising under Section 6.1 (C) arising from the
Borrower's failure to deliver a schedule of the outstanding
intercompany Indebtedness and Investments of Borrower and its
Subsidiaries to Agent as required under Section 4.5(d).
Borrower's failure to deliver the report required under Section 4.5(f)
for the period ending June 2008.
The Events of Default arising under Section 6.1(E) resulting from the
Borrower's failure to file a 10-Q with the SEC fl::>r the quarter ending
May 30, 2008 in violation of Section 2.1
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II. Anticipated Defaults
I.
2.
The Events of Default that are expected to arise under Section 6.1 (B)
of the Financing Agreement as a result of the occurrence of an Event
of Default under Section 6.1 (1) of the Senior Note Indenture due to
Borrower's failure to make required interest payments under the
Senior Note Indenture pursuant to Section 2.13 of the Senior Note
Indenture, including such payment on August 1, 2008.
Agreement as a result of Borrower's failure to comply with the
financial testing under Section 4.2 with respect to any future report
date during the Forbearance Period.
31
Second Lien Agreement
Specified Defaults
I. Current Defaults
1.
2.
3.
4.
5.
6.
Agreement as a result of the delivery of materially misstated financial
statements for the periods ended November 30, 2006, February 28,
2007, May 31, 2007, for the Fiscal Year ended August 31, 2007, and
for the periods ended November 30, 2007 and February 29, 2008 in
violation of Section 4.2 and Section 4.5 of the Financing Agreement.
The Events of Default arising under the Post-Closing Obligations
Letter dated as of April 14, 2008 among Portola Packaging, Inc. and
Wayzata Investment Partners LLC (the "Post-Closing Letter'') as a
result of the Borrower's failure to deliver to Agent bank account
control agreements in favor of Agent, in form and substance
reasonably satisfactory to Agent, relating to accounts maintained by
the Loan Parties at Union Bank of California wiithin the time period
specified therein.
The Events of Default arising under the Post-Closing Letter as a result
of the Borrower's failure to deliver to Agent bank account control
agreements in favor of Agent, in form and substance reasonably
satisfactory to Agent, relating to accounts maintained by the Loan
Parties at FirstMerit Bank.
of the Borrower's failure to deliver to Agent bank account control
agreements in favor of Agent, in form and substance reasonably
satisfactory to Agent, relating to accounts maintained by the Loan
Parties at CIBC.
of the Borrower's failure to deliver to Agent a landlord waiver in favor
of Agent, in form and substance reasonably satisfactory to Agent,
relating to the premises located at 7301 Tellier, Montreal, Quebec,
Canada.
relating to the premises located at 16230 11th Avenue, Edmonton,
Alberta, Canada.
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II.
7.
8.
9.
10.
11.
12.
13.
14.
relating to the premises located at 12431 Horseshoe Way, Richmond,
British Columbia, Canada.
of the Borrower's failure to have title insurance issued, in form and
substance reasonably satisfactory to Agent, with respect to real
property located in Clifton Park, NY.
of the Borrower's failure to have title insurance issued, in form and
substance reasonably satisfactory to Agent, with respect to real
property located in Shenango Township, PA.
The Events of Default arising under the Post-Closing Letter as result
of Borrower's failure to place an endorsement on the original stock
certificates of the Mexican Restricted Subsidiary.
of Borrower's failure to have Mexican counsel issue an opinion with
respect to the Mexican Restricted Subsidiary.
The Events of Default arising under Section 6.1 (E) of the Financing
Agreement as a result of the Material Adverse Effect arising from
erroneous accounting entries relating to the China Restricted
Subsidiary's accounts receivables, accounts payable, inventory and
costs of sale which were disclosed in an 8-K filed with the SEC on
June 27, 2008 in violation of Section 5.2 of the Financing Agreement.
The Events of Default arising under Section 6.1 (D) and 6.1 (K) of the
Financing Agreement as a result of Borrower's failure to be solvent
and Borrower's inability to pay its debts as they become due.
Borrower's failure to deliver a schedule of the outstanding
intercompany Indebtedness and Investments of Borrower and its
Subsidiaries to Agent as required under Section 4.5( d).
15. The Events of Default resulting from the Borrower's failure to file a
I 0-Q with the SEC for the quarter ended May 30, 2008 in violation of
Section 2.1.
Anticipated Defaults
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1.
2.
The Events of Default that are expected to arise under Section 6.1 (B)
of the Financing Agreement as a result of the occurrence of an Event
of Default under Section 6.1 ( 1) of the Senior Note Indenture due to
Borrower's failure to make required interest payments under the
Senior Note Indenture pursuant to Section 2.13 of the Senior Note
Indenture, including such payment on August 1, 2008.
Agreement as a result of Borrower's failure to comply with the
financial testing under Section 4.2 with respect to any future report
date during the Forbearance Period.
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Senior Notes
Specified Defaults
I. Anticipated Defaults
The Events of Default that are expected to arise under Section 6.1 (I) of the Senior Note
Indenture due to Borrower's failure to make required interest payments under the Senior
Note Indenture pursuant to Section 2.13 of the Senior Note Indenture, including such
payment on August I, 2008.
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In re Citadel Broadcasting Corp., Case No. 09-17442 (Bankr. S.D.N.Y. 2009).
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To the Holders of Lender Claims
Referred to Below
EXECUTION COPY
December 16, 2009
This letter agreement (the "Agreement") sets forth certain terms and conditions
pursuant to which Citadel Broadcasting Corporation ("Citadel") and certain of its domestic
subsidiaries (together with Citadel, collectively the "Debtors") will propose a joint chapter 11
plan of reorganization (a "Plan") on a consensual basis with the support of the undersigned,
which are lenders (the "Lenders") party to that certain Credit Agreement dated as of June 12,
2007 (as amended, modified or otherwise supplemented from time to time, the "Credit
Agreement"), among Citadel, the Lenders, JPMorgan Chase Bank, N.A., as administrative agent
thereunder (in such capacity, the "Agent"), and the other parties signatory thereto.
Capitalized terms not defined herein shall have the meaning ascribed to such
terms in the Restructuring Term Sheet (as defined below).
The parties hereto hereby agree as follows:
1. Proposed Plan of Reorganization
Each ofthe Debtors proposes to commence voluntary, "pre-arranged" cases
(collectively, the "Chapter II Cases") under chapter 11 oftitle II of the United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New
York (the "Bankruptcy Court"), which Chapter 11 Cases the Debtors will seek to have jointly
administered. As part of the Chapter 11 Cases, the Debtors intend to file a disclosure statement
and related Plan, which will provide for, among other things, certain distributions on account of
the claims of the Lenders under the Pre-Petition Senior Obligations (the "Lender Claims").
2. Representations and Warranties ofthe Participating Lenders
Each Lender identified as a holder of Lender Claims on the signature pages hereto
(such Lenders, the "Participating Lenders") represents and warrants to the Debtors that, as of the
date hereof:
509265-0806-00421-Active.l I 758144.25
2
(a) Such Participating Lender (i) either (A) is the sole beneficial owner of the
principal amount of Lender Claims set forth below under its signature hereto, or (B) has sole
investment or voting discretion with respect to the principal amount of Lender Claims set forth
below under its signature and has the power and authority to bind the bene:ficial owner(s) of such
Lender Claims to the terms of this Agreement and (ii) has full power and authority to act on
behalf of, vote and consent to matters concerning such Lender Claims and to dispose of,
exchange, assign and transfer such Lender Claims. For the purposes of this Agreement,
"Participating Lenders" shall not include (A) a holder of Lender Claims signatory hereto in its
capacity or to the extent of its holdings as a broker, dealer or market maker of Lender Claims or
any other claim against or security in the Debtors or (B) any subsidiary or affiliate of a holder of
Lender Claims signatory hereto (x) over which the holder of Lender Claims does not have
corporate authority or control or (y) whose credit decisions, including credit decisions to be
bound by agreements such as this Agreement, under the internal policies or rules of such
subsidiary or holder, are not subject to control by such holder.
(b) Such Participating Lender has made no prior assignment, sale,
participation, grant, conveyance, or other transfer of, and has not entered into any other
agreement to assign, sell, participate, grant, convey or otherwise transfer, in whole or in part, any
portion of its right, title, or interests in any Lender Claims that are subject to this Agreement that
are inconsistent with the representations and warranties of such Participating Lender herein or
would render such Participating Lender otherwise unable to comply with this Agreement and
perform its obligations hereunder.
(c) Such Participating Lender (i) has such knowledge and experience in
financial and business matters of this type that it is capable of evaluating the merits and risks of
entering into this Agreement and of making an informed investment decision, and has conducted
an independent review and analysis of the business and affairs of the Debtors that it considers
sufficient and reasonable for purposes of entering into this Agreement and (ii) is an "accredited
investor" (as defined by Rule 501 of the Securities Act of 1933, as amende:d).
3. Support for a Qualified Plan
Subject to the terms and conditions hereof and for so long a.s no Support
Termination Event (as hereinafter defined) shall have occurred, and except as Citadel may
expressly release the Participating Lenders in writing from any of the following obligations, each
Participating Lender shall and shall cause each of its affiliates, subsidiaries, managed funds,
representatives, agents and employees set forth on the signature page attached hereto for such
Participating Lender (in each case, except to the extent such affiliates, subsidiaries, managed
funds, representatives, agents and employees would be excluded from the definition of
"Participating Lender" under the last sentence of clause (a) of Section 2 above) to: (a) (i) (A)
vote its Lender Claims to accept any Plan proposed by the Debtors incorporating the terms and
conditions set forth on the term sheet annexed hereto as Exhibit 1 (which term sheet is expressly
incorporated by reference herein and made a part of this Agreement as if fhlly set forth herein (as
such term sheet may be modified in accordance with Section 9 hereof, the "Restructuring Term
Sheet")), which Plan shall be consistent in all material respects with this Agreement and the
Restructuring Term Sheet and contain no other provisions materially adverse to the Lenders
509265-0806-00421-Active. I 1758144.25
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except as the Agent and the Requisite Participating Lenders may expressly consent in writing (a
"Qualified Plan") and (B) deliver its duly executed and completed ballot accepting such
Qualified Plan on a timely basis following commencement ofthe solicitation of acceptances of
such Qualified Plan in accordance with sections 1125 and 1126 of the Bankruptcy Code and (ii)
not change or withdraw such vote (or cause or direct such vote to be changed or withdrawn)
provided that such vote may be revoked or withdrawn immediately upon occurrence of a Support
Termination Event, (b) support, and take all reasonable actions necessary or reasonably
requested by the Debtors to facilitate, the solicitation, confirmation and consummation of a
Qualified Plan and the transactions contemplated thereby, provided that no Participating Lender
shall be obligated to incur material out of pocket expenses pursuant to this paragraph 3, (c) not
object to, or vote any of its Lender Claims to reject, a Qualified Plan, support directly or
indirectly any such objection or otherwise take any action or commence any proceeding to
oppose or to seek any modification of a Qualified Plan, the related disclosure statement (which
disclosure statement shall be in form and substance reasonably satisfactory to the Debtors and
consistent in all material respects with this Agreement and the Restructuring Term Sheet (the
"Disclosure Statement")) or any other reorganization documents filed by any of the Debtors in
connection with the Chapter 11 Cases and the confirmation of a Qualified Plan, (d) not directly
or indirectly seek, solicit, support, encourage, vote its Lender Claims for, consent to, encourage,
or participate in any discussions regarding or the negotiation or formulation of (i) any plan of
reorganization, proposal, offer, dissolution, winding up, liquidation, reorganization, merger,
consolidation, business combination, joint venture, partnership, sale of assets or restructuring for
any of the Debtors (each, an "Alternative Proposal") other than a Qualified Plan or (ii) any other
action that is inconsistent with, or that would delay or obstruct the proposal, solicitation,
confirmation, or consummation of, a Qualified Plan, and (e) support the release provisions in
favor of the Debtors and its agents, including their respective officers, directors and employees,
as reflected in the Restructuring Term Sheet.
Each Participating Lender agrees to permit disclosure in the Disclosure Statement
and any filings by the Debtors with the Securities and Exchange Commission and any other
regulatory agency to which the Debtors may be subject of the contents of this Agreement,
including, but not limited to, the aggregate Lender Claims held by all Participating Lenders;
provided that (i) the Debtors shall provide a draft of such disclosure to the Agent (on behalf of
the Participating Lenders) and a reasonable amount of time to review such draft prior to such
disclosure being made and (ii) the Debtors shall not disclose the amount of any individual
Lender Claim, except as otherwise required by applicable law.
4. Transfer of Lender Claims
Each Participating Lender agrees that so long as this Agreement has not been
terminated in accordance with its terms it shall not directly or indirectly (a) grant any proxies to
any person in connection with its Lender Claims to vote on the Plan, or (b) sell, pledge,
hypothecate or otherwise transfer or dispose of, or grant, issue or sell any option, right to acquire,
voting, participation or other interest in ("Transfer") any Lender Claims, except, in each case, (i)
in accordance with the terms of the Credit Agreement and the Restructuring Term Sheet and (ii)
to a party that agrees in writing to be subject to the terms and conditions of this Agreement as a
"Participating Lender", which writing shall be in form and substance reasonably satisfactory to
509265-0BOb-0042 I Active. I I 758144 25
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the Agent and the Debtors.
1
Each Participating Lender agrees to notify the Debtors and the
Agent of any Transfer of its Lender Claims and to provide the Debtors and the Agent with a
signed agreement ofthe transferee agreeing to be subject to the terms and conditions of this
Agreement before such Transfer becomes effective. Any Transfer of any Lender Claim that does
not comply with the foregoing shall be deemed void ab initio. This Agreement shall in no way
be construed to preclude any Lender from acquiring additional Lender Claims or any other
interests in any Debtors; provided, however, that any such additional Lender Claims or other
interests in such Debtor shall, upon acquisition, automatically be deemed to be subject to all the
terms of this Agreement.
5. The Debtors' Covenants
As long as a Support Termination Event has not occurred, or has occurred but has
been duly waived in accordance with the terms hereof, the Debtors shall, to the extent not
inconsistent with the fiduciary obligations of any of the Debtors or any of their respective
subsidiaries, use their commercially reasonable efforts to:
(a) file the Disclosure Statement and prosecute its approval by the Bankruptcy
Court within the time frame set forth herein;
(b) obtain from the Bankruptcy Court an order confirming a Qualified Plan
(the "Confirmation Order") within the time frame set forth herein, which Confirmation Order
shall be in form and substance reasonably satisfactory to the Agent and the: Debtors and
consistent in all material respects with this Agreement and the Restructuring Term Sheet; and
(c) effectuate and consummate a Qualified Plan within the timeframe set forth
herein.
6. Termination of Obligations
(a) This Agreement shall terminate and, except as otherwise provided herein,
all obligations of the parties hereto shall immediately terminate and be of no further force and
effect as follows (each, a "Support Termination Event"),
See attached joinder.
S09265-0806-00421Active.II758144.2S
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(i) upon termination of this Agreement by the mutual written consent of
Citadel and Participating Lenders holding more than 75% in amount of the Lender
Claims bound under this Agreement (the "Requisite Participating Lenders");
(ii) on the date that is five (5) business days following the occurrence of
any of the events listed below, unless any such Support Termination Event is waived by
the Requisite Participating Lenders within such five (5) business day period:
(A) the Chapter II Cases shall not have been filed by December 2I,
2009 (or such later date as may be agreed by Citadel and the Requisite Participating
Lenders);
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(B) a Qualified Plan and the Disclosure Statement shall not have been
filed within 45 days after the filing date of the Chapter 11 Cases (the "Petition Date")
(or such later date as may be agreed by Citadel and the Requisite Participating
Lenders);
(C) an order, in form and substance reasonably satisfactory to the Agent,
shall not have been entered approving the adequacy ofthe Disclosure Statement
within 90 days after the Petition Date (or such later date as may be agreed by Citadel
and the Requisite Participating Lenders);
(D) the Confirmation Order shall not have been entered within 180 days
after the Petition Date (or such later date as may be agreed by Citadel and the
Requisite Participating Lenders);
(E) a Qualified Plan shall not have been consummated within 300 days
after the Petition Date (or such later date as may be agreed by Citadel and the
Requisite Participating Lenders);
(F) the Debtors shall have ( 1) materially breached the Debtors'
covenants set forth in Section 5 above, (2) publicly announced their intention not to
pursue a Qualified Plan, or (3) proposed, accepted or filed a motion with the
Bankruptcy Court seeking approval of an Alternative Proposal;
(G) (1) an examiner with expanded powers or a trustee shall have been
appointed in any of the Chapter 11 Cases, or (2) any ofthe Chapter 11 Cases shall
have been converted to cases under Chapter 7;
(H) the Chapter 11 Case of any Debtor that is an obligor or guarantor
under the Credit Agreement shall have been dismissed;
(I) the Bankruptcy Court shall not have entered the Interim Cash
Collateral Order within 7 days after the Petition Date, or the Final Cash Collateral
Order within 75 days after the date of entry of the Interim Cash Collateral Order;
509265-0806-00421 -Active. I I 758144.25
(J) there shall have occurred a force majeure event (to be defined as a
significant global disruption in the financial markets caused by outbreak of war,
terrorism, or other incidents, but not changes in the financial, banking or capital
markets generally);
(K) any court (including the Bankruptcy Court) shall declare, in a final,
non-appealable order, this Agreement or a material part thereof to be unenforceable;
or
(L) the entry of an order by the Bankruptcy Court invalidating,
disallowing, subordinating, or limiting, in any respect, as applicable, the
enforceability, priority, or validity of the Lender Claims or liens securing them.
(iii) upon delivery of written notice of termination to the Agent by Citadel
following any material breach, in the aggregate, of the Participating Lenders'
representations, warranties, covenants or agreements set forth in this Agreement if such
breach would have a material adverse effect on Citadel's ability to obtain confirmation
of, and achieve consummation of, a Qualified Plan.
(b) Upon occurrence of a Support Termination Event, this Agreement shall
forthwith become void and of no further force or effect, each party hereto shall be released from
its commitments, undertakings and agreements under or related to this Agreement, and there
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shall be no liability or obligation on the part of any party hereto; provided, however, that in no
event shall any such termination relieve a party hereto from (i) liability for its breach or non-
performance of its obligations hereunder prior to the date of such termination and (ii) obligations
under this Agreement which by their terms expressly survive any such termination; and
provided, further that, notwithstanding anything to the contrary herein, any Support Termination
Event may be waived in accordance with the procedures established by Section 9 hereof, in
which case the Support Termination Event so waived shall be deemed not to have occurred, this
Agreement shall be deemed to continue in full force and effect, and the rights and obligations of
the parties hereto shall be restored, subject to any modification set forth in such waiver. Upon
tennination of this Agreement, any and all votes delivered by a Participating Lender prior to such
tennination shall be deemed, for all purposes, to be null and void from the first instance and shall
not be considered or otherwise used in any manner by the Debtors.
7. Specific Performance
It is understood and agreed by the parties that money damages would not be a
sufficient remedy for any breach of this Agreement by any party and each non-breaching party
shall be entitled to seek specific performance and injunctive or other equitable relief, including
attorneys fees and costs, as a remedy of any such breach, and each party agrees to waive any
requirement for the securing or posting of a bond in connection with such remedy, in addition to
any other remedy to which such non-breaching party may be entitled, at law or in equity.
8. Prior Negotiations
509265-0806-0042l-Active.ll758144.25
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This Agreement supersedes all prior negotiations, and documents reflecting such
prior negotiations, between and among the Debtors and the Lenders (and their respective
advisors), with respect to the subject matter hereof.
9. Amendments
7
No amendment, modification, waiver or other supplement ofthe terms of this
Agreement or the Restructuring Term Sheet shall be valid unless such amendment, modification,
waiver or other supplement is in writing and has been signed by the Debtors, the Agent and the
Requisite Participating Lenders; provided, however, that the written consent of the Agent and
each Participating Lender shall be required for any amendment, modification, waiver or other
supplement of this Agreement that amends or modifies in any way this Section 9 or the definition
of Requisite Participating Lenders as used in this Agreement; provided, further that no
amendment, waiver, modification or other supplement of this Agreement or the Restructuring
Term Sheet may impose Jess favorable treatment of any Participating Lender's Lender Claims or
its rights and obligations hereunder and under the Restructuring Term Sheet compared to those
of the Participating Lenders generally, without such Participating Lender's express written
consent.
For the purposes hereof, immaterial changes to the Restructuring Term Sheet shall
not constitute a modification or amendment thereof or of this Agreement and may be made upon
agreement by the Debtors and the Agent.
10. Independent Analysis
Each Participating Lender hereby confirms that it has made its own decision to
execute this Agreement based upon its own independent assessment of documents and
information available to it, as it has deemed appropriate.
II. Governing Law
This Agreement shall be governed by, and construed in accordance with, the
internal laws ofthe State ofNew York. By its execution and delivery ofthis Agreement, each of
the parties hereto hereby irrevocably and unconditionally agrees for itself that any legal action,
suit or proceeding against it with respect to any matter under or arising out of or in connection
with this Agreement or for recognition or enforcement of any judgment rendered in any such
action, suit or proceeding, may be brought in either a state or federal court of competent
jurisdiction in the State ofNew York. By execution and delivery ofthis Agreement, each of the
parties hereto hereby irrevocably accepts and submits itself to the nonexclusive jurisdiction of
each such court, generally and unconditionally, with respect to any such action, suit or
proceeding. Notwithstanding the foregoing consent to jurisdiction in either a state or federal
court of competent jurisdiction in the State of New York, upon the commencement of the
Chapter II Cases, each ofthe parties hereto hereby agrees that, ifthe petitions have been filed
and the Chapter II Cases are pending, the Bankruptcy Court shall have exclusive jurisdiction of
all matters arising out of or in connection with this Agreement. EACH PARTY HERETO
509265-0806-00421-Active.ll758144. 25
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING REFERRED TO ABOVE.
12. Effective Date
8
Upon delivery of its duly executed counterpart signature page, each Participating
Lender shall be bound to the terms of this Agreement, and this Agreement shall become effective
upon the Debtors giving notice to the Agent and such Participating Lender of effectiveness (the
date on which such notice is provided, the "Effective Date"); provided, that if, as of the
commencement of the Chapter 11 Cases, the Debtors have not received signature pages to this
Agreement from Lenders holding more than 50% of the aggregate principal amount of the Pre-
Petition Senior Obligations, this Agreement shall become null and void.
Upon the Effective Date, the Restructuring Term Sheet shall be deemed effective
for the purposes of this Agreement and thereafter the terms and conditions therein may only be
amended, modified, waived or otherwise supplemented as set forth in Section 10 above.
13. Third-Party Beneficiary
This Agreement is intended for the benefit of the parties hereto and no other
person shall have any rights hereunder.
14. Counterparts
This Agreement may be executed in several counterparts, each of which shall be
deemed to be an original, and all of which together shall be deemed to be one and the same
agreement. Execution copies of this agreement may be delivered by facsimile, electronic mail or
otherwise, each of which shall be deemed to be an original for the purposes of this paragraph.
15. Headings
The section headings of this Agreement are for convenience of reference only and
shall not, for any purpose, be deemed a part of this Agreement.
16. Acknowledgment
This Agreement is not and shall not be deemed to be a solicitation of consents to
the Plan. The acceptance of the Lenders will not be solicited until the Lenders have received the
Disclosure Statement and related ballot, as approved by the Bankruptcy Court.
17. Settlement Discussions
This Agreement and the Restructuring Term Sheet are part of a proposed
settlement of matters that could otherwise be the subject of litigation among the parties hereto.
Nothing herein shall be deemed an admission of any kind. Pursuant to Federal Rule of Evidence
408 and any applicable state rules of evidence, this Agreement and all negotiations relating
thereto shall not be admissible into evidence in any proceeding other than to prove the existence
S09265-0806-00421-Active.ll758144.25
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9
of this Agreement or in a proceeding to enforce the terms of this Agreement or to enforce a Cash
Collateral Order.
18. No Waiver of Participation and Preservation ofRights
Except as expressly provided in this Agreement, nothing herein is intended to,
does or shall be deemed in any manner to waive, limit, impair or restrict the ability of each of the
Lenders to protect and preserve its rights, remedies and interests, including, but not limited to, its
claims against any of the Debtors or other parties, any liens or security interests it may have in
any assets of any of the Debtors or other parties, or its full participation in the Chapter 11 Cases.
Without limiting the foregoing sentence in any way, after a Support Termination Event, the
parties hereto each fully reserve any and all of their respective rights, remedies and interests,
subject to Section 6(b) in the case of any claim for breach of this Agreement, arising prior to
termination.
[Remainder of page intentionally left blank]
509265-0806-00421-Active.ll758144.25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective duly authorized officers, solely in their respective
capacity as officers of the undersigned and not in any other capacity, as of the date first set forth
above.
CITADEL BROADCASTING CORPORATION

Title: t!-ro
[OTHER DEBTORS]
By: __________ _
AGREED BY EACH OF THE FOLLOWING
LENDERS
Name:
Title:
[Signature Page Plan Support Agreement]
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ANNEX I
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Plan Support Agreement
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[Annex I to Joinder]
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EXHIBIT 1
CITADEL BROADCASTING CORPORATION
PLAN TERM SHEET
DECEMBER 16, 2009
THIS TERM SHEET DOES NOT CONSTITUTE (NOR SHALL IT BE CONSTRUED AS) AN OFFER WITH RESPECT TO
ANY SECURITIES OR A SOLICITATION OF ACCEPTANCES OR REJECTIONS AS TO ANY PLAN OF
REORGANIZATION, IT BEING UNDERSTOOD THAT SUCH A SOLICITATION, IF ANY, ONLY WILL BE MADE IN
COMPLIANCE WITH APPLICABLE PROVISIONS OF SECURITIES, BANKRUPTCY AND/OR OTHER APPLICABLE
LAWS. THIS TERM SHEET DOES NOT ADDRESS ALL MATERIAL TERMS THAT WOULD BE REQUIRED IN
CONNECTION WITH ANY POTENTIAL FINANCIAL RESTRUCTURING AND ANY DEFINITIVE AGREEMENT IS
SUBJECT TO THE EXECUTION OF DEFINITIVE DOCUMENTATION IN FORM AND SUBSTANCE CONSISTENT
WITH THIS TERM SHEET AND OTHERWISE ACCEPTABLE TO THE COMPANY, THE AGENT AND TilE
PARTICIPATING LENDERS (EACH AS DEFINED BELOW). THIS TERM SHEET HAS BEEN PRODUCED FOR
DISCUSSION AND SETTLEMENT PURPOSES ONLY AND IS SUBJECT TO THE PROVISIONS OF RULE 408 OF THE
FEDERAL RULES OF EVIDENCE AND OTHER SIMILAR APPLICABLE STATE AND FEDERAL RULES. THIS TERM
SHEET AND THE INFORMATION CONTAINED HEREIN IS STRICTLY CONFIDENTIAL AND SHALL NOT BE
SHARED WITH ANY OTHER PARTY ABSENT THE PRIOR WRITTEN CONSENT OF THE COMPANY.
This term sheet (the "Term Sheet") sets forth the principal terms of a proposed financial
restructuring (the "Restructuring") for the existing debt and other obligations of Citadel
Broadcasting Corporation ("Citadel" or the "Company") and each subsidiary of Citadel which
files on or about the date hereof (the "Petition Date") a case under chapter II ("Chapter 11
Case(s)") of title 11 of the United States Code (the "Bankruptcy Code'') in the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") to pursue a
pre-negotiated chapter II plan of reorganization containing the terms set forth herein ("Plan") to
be supported by the Agent and the Participating Lenders (each as defined in the Plan Support
Agreement to which this Term Sheet is attached ("Plan Support Agreemenf').
509265-0806-00421-ACTI VE.11760814 JO
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Debtors:
Creditors:
Transaction Overview
Citadel and its subsidiaries identified in the footnote below
(collectively, "Debtors").
1
Senior Secured Claims: of the (i) approximately
$2,010,680,710 in unpaid principal, plus accrued interest
and fees
2
, arising under or in connection with that certain
Credit Agreement, dated as of June 12, 2007, among
Citadel, the Agent, the lenders from time to time party
thereto, and the other agents party thereto (as amended,
restated, supplemented or otherwise modified from time to
time) (the "Pre-Petition Credit Facility"), (which includes
$136,000,000 in principal amount outstanding under the
Revolving Credit Facility (which amount does not include
the Letters of Credit); $2,927,541 in letters of credit (the
"Letters of Credit"); $527,156,222 in principal amount
outstanding under the Tranche A Term Loan;
$1,347,524,488 in principal amount outstanding under the
Tranche B Term Loan); and (ii) claims arising upon
termination of (a) the Interest Rate Swap Transaction
Agreement between JPMorgan Chase Bank, N .A. and
Citadel Broadcasting Corporation, dated June 27, 2007 and
(b) the ISDA 2002 Master Agreement between JPMorgan
Chase Bank, N.A. and Citadel, dated June 26, 2007, in the
notional amount of $970.0 million (the "Pre-Petition
Hedges"; together with the Pre-Petition Credit Facility, the
"Pre-Petition Senior Obligations" (it being understood that
all Pre-Petition Hedges between Citadel and any signatory
(or any affiliate of a signatory) to the Plan Support
The Debtors will include the following entities: Alphabet Acquisition Corp.; Atlanta Radio, LLC;
Aviation I, LLC; Chicago FM Radio Assets, LLC; Chicago License, LLC; Chicago Radio Assets, LLC;
Chicago Radio Holding, LLC; Chicago Radio, LLC; Citadel Broadcasting Company; Citadel Broadcasting
Corporation; DC Radio Assets, LLC; DC Radio, LLC; Detroit Radio, LLC; International Radio, Inc.; KLOS
Radio, LLC; KLOS Syndications Assets, LLC; KLOS-FM Radio Assets, LLC; LA License, LLC; LA Radio,
LLC; Minneapolis Radio Assets, LLC; Minneapolis Radio, LLC; Network License, LLC; NY License, LLC;
NY Radio Assets, LLC; NY Radio, LLC; Oklahoma Radio Partners, LLC; Radio Assets, LLC; Radio License
Holding I, LLC; Radio License Holding II, LLC; Radio License Holding III, LLC; Radio License Holding IV,
LLC; Radio License Holding V, LLC; Radio License Holding VI, LLC; Radio License Holding VII, LLC;
Radio License Holding VIII, LLC; Radio License Holding IX, LLC; Radio License Holding X, LLC; Radio
License Holding XI, LLC; Radio License Holding XII, LLC; Radio Networks, LLC; Radio Today
Entertainment, Inc.; Radio Watermark, Inc.; San Francisco Radio Assets, LLC; San Francisco Radio, LLC; SF
License, LLC; WBAP-KSCS Acquisition Partner, LLC; WBAP-KSCS Assets, LLC; WBAP-KSCS Radio
Acquisition, LLC; WBAP-KSCS Radio Group, Ltd.; and WPLJ Radio, LLC.
Note: Due to the fact that the amount of accrued interest and fees changes on a daily basis, exact figures for
these items are not provided herein.
509265-0806-00421-ACTI VE.117608 14.30
2
Transaction Summary:
Agreement shall be terminated promptly following the
Petition Date)) (which termination elaims were estimated
as of November 18, 2009 to be approximately
$90,000,000)
3
, approximately $1,100,000,000
4
shall be
deemed, pursuant to section 506(a) of the Bankruptcy Code
and solely for purposes o( and in the context of, the
expeditious confirmation of the Plan, to be the amount
supported by the value of the collateral securing such
obligations, which value shall be allocated pro rata across
all such obligations (the "Senior Secured Obligations").
Each holder of Senior Secured Obligations is referred to
herein as a "Secured Lender."
Unsecured Claims: all remaining pre-petition claims -
(approximately $1,000,000,000
5
of Pre-Petition Senior
Obligations; 8% Convertible Subordinated Notes due
February 15, 2011 ($47,835,000); 1.875% Convertible
Subordinated Notes due February 15, 2011 ($475,000);
claims under leases and executory contracts that are
rejected in the Chapter 11 Cases; and outstanding trade and
other obligations related to the day to day operations ofthe
Company ("Ordinary Course Obligations"), to the extent
such Ordinary Course Obligations are not otherwise
satisfied pursuant to an order of the Bankruptcy Court,
including, without limitation, any appropriate "first-day"
order.
It is expected that, pursuant to the Plan, Citadel will directly or
indirectly transfer all of its assets to one or more entities, the
stock of which, after the Effective Date, will be controlled by
the Lenders ("Reorganized Citadel"), or another structure
agreeable to the Agent and the Requisite Participating Lenders;
provided that the entity issuing stock under the Plan shall be a
C corporation for U.S. income tax purposes.
Note: An exact amount cannot be determined until the swap is terminated and the termination calculation is
prepared.
Note: This number is an estimate for illustrative purposes only and shall be adjusted to conform to the
valuation being prepared by the Debtors' financial advisor, which valuation shall ultimately be included in
the Debtors' Disclosure Statement.
Note: This number is an estimate for illustrative purposes only and shall be adjusted to conform to the
valuation being prepared by the Debtors' financial advisor, which valuation shall ultimately be included in
the Debtors' Disclosure Statement.
509265-0806-00421-ACTIVE 11760814 30
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The Senior Secured Obligations will be exchanged on a pro
rata
6
basis for (i) a new senior secured term loan to
Reorganized Citadel in the initial principal amount of $762.5
million and having the other terms and subject to the conditions
precedent specified in Annex A hereto (the ''New Term Loan"),
and (ii) a combination of shares of Class A Common Stock in
Reorganized Citadel, par value $.00 I per share, and limited-
voting Class B Common Stock in Reorganized Citadel, par
value $.001 per share, which shall have the limited voting
rights and other material terms set forth in Annex 8 hereto (the
Class A Common Stock and Class B Common Stock,
collectively, the "New Common Stock") and/or warrants
("Special Warrants") to purchase shares ("Warrant Shares") of
Class 8 Common Stock, which New Common Stock (inclusive
of such Warrant Shares) will constitute, in the aggregate, 90%
of the New Common Stock of Reorganized Citadel issued on
the Effective Date (together with the Special Warrants
corresponding to such Warrant Shares, the "Secured Claim
Equity Distribution"), with the remaining 1 0% of the New
Common Stock (also inclusive of Warrant Shares) issued on the
Effective Date to be allocated to the holders of unsecured
claims (together with the Special Warrants corresponding to
such Warrant Shares, the "Unsecured Claim Equity
Distribution"; together with the Secured Claim Equity
Distribution, the "Equity Distribution"), in each case subject to
(x) the allocation mechanism described on Annex I hereto and
(y) dilution for the Equity Incentive Program described herein.
The "Special Warrants" shall have the material terms and
conditions specified in Annex C hereto.
The Debtors' use of cash collateral pursuant to Section 363 of
the Bankruptcy Code shall be under the condition that such use
shall be consistent with (i) a 13-week rolling cash flow
projection acceptable to the Agent in consultation with the
Participating Lenders (the "Forecast"), (ii) with a budget based
on the Forecast acceptable to the Agent in consultation with the
Participating Lenders, and (iii) with an interim cash collateral
order (the "Interim Cash Collateral Order") and a final cash
collateral order (the "Final Cash Collateral Order"; together
with the Interim Cash Collateral Order, the "Cash Collateral
Order") (a) providing for customary replacement liens and for
adequate protection payments in the form of (I) current cash
As used herein "pro rata" is the ratio ofthe principal amount of any holder's claim to the aggregate
principal amount of all claims in such class.
5092650806-00421-ACTJVE.I I 760814.30
4
509265-0806-00421-ACTI VE I1760R 14.JO
payment of interest on the Pre-Petition Senior Obligations at
the non-default rate applicable to the Tranche B Term Loan (for
the avoidance of doubt, the Facility Fee shall not be paid during
the chapter 11 cases) and of the reasonable fees and costs of
legal and financial advisors to the Agent under the Pre-Petition
Credit Facility and (II) payments to the Agent and the Lenders
of all funds on deposit in the Excess Cash Account under the
Pre-Petition Credit Facility, and (b) otherwise in form and
substance acceptable to the Agent in consultation with the
Participating Lenders.
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Classification and Treatment of Claims and Interests
Administrative, Priority Tax,
and Other Priority Claims:
Senior Secured Claims:
Other Secured Claims:
509265-0806-00421-ACT! VE.l!760814.30
On or as soon as practicable after the Plan has been
consummated (the "Effective Date"), each holder of an
administrative, priority tax or other priority claim shall be paid
in full in cash or otherwise receive treatment consistent with
the provisions of section 1129(a)(9) of the Bankruptcy Code.
On or as soon as practicable after the Effective Date, in full
satisfaction of and in exchange for the Senior Secured
Obligations, each holder of Senior Secured Obligations shall
receive its pro rata share of the New Term Loan and the
Secured Claim Equity Distribution; provided that for any
Secured Lender to receive New Common Stock, it must deliver
to the Debtors and the Agent a completed FCC worksheet by a
date certain to be specified by the Agent (but no earlier than the
deadline fixed by the Bankruptcy Court for creditors to vote to
accept or reject the Plan and no later than 30 days before the
anticipated Effective Date of the Plan); provided that individual
holders of Senior Secured Claims may transfer their Secured
Claim Equity Distributions to affiliates, subsidiaries and/or
trusts for tax, compliance or internal policy reasons.
The definitive documents for the New Term Loan shall also
provide for the maintenance of the Letters of Credit on a fully
cash collateralized basis, as well as participating interests
therein and reimbursement obligations in respect thereof
All reasonable expenses, compensation and other such amounts
owing to the Agent in respect of the Pre-Petition Credit Facility
(including all reasonable fees and expenses of outside
professionals) shall be paid in a timely fashion under the Cash
Collateral Order and, to the extent accrued but unpaid as of the
Effective Date, shall be paid in full by the Company, in cash,
on the Effective Date.
Notwithstanding the foregoing, nothing shall prevent holders of
Senior Secured Obligations from transferring as between
themselves some or all of their respective shares of the Secured
Equity Claims Distributions or New Term Loan obligations or
the rights to receive such securities or indebtedness.
To the extent that any other secured claims exist, on or as soon
as practicable after the Effective Date, all such secured claims
of the Debtors allowed as of the Effective Date, if not
previously, shall be satisfied by either (i) payment in full in
cash, (i i) reinstatement pursuant to section 1124 of the
6
Unsecured Claims:
Intercompany Claims:
509265-0806-00421-ACTI VE.II 76081430
Bankruptcy Code, or (iii) such other recovery necessary to
satisfY section 1129 ofthe Bankruptcy Code.
On or as soon as reasonably practicable after the Effective
Date, each holder of Unsecured Claims will receive at its
option, subject to the Cash Cap as hereinafter defined, (x) its
pro rata share of New Common Stock or Special Warrants
exercisable for Warrant Shares, with such New Common Stock
and Warrant Shares constituting I 0% of the New Common
Stock of Reorganized Citadel issued on the Effective Date,
subject to the allocation mechanism described on Annex I
hereto and dilution for the Equity Incentive Program described
herein; provided that for any holder of an Unsecured Claim to
receive New Common Stock, it must deliver to the Debtors and
the Agent a completed FCC Worksheet by a date certain to be
specified by the Agent (but no earlier than the deadline fixed by
the Bankruptcy Court for creditors to vote to accept or reject
the Plan and no later than 30 days before the anticipated
Effective Date of the Plan); or (y) cash in an amount equal to
5% of the allowed amount of its Unsecured Claim, provided
that the aggregate amount of cash distributed pursuant to this
clause (y) shall not exceed $2,000,000 the ("Cash Cap") and
such cash shall be distributed among eleeting holders in inverse
order of the respective dollar amounts of their allowed claims
(i.e., first to the smallest in dollar amount of any such claim
and last to the largest in dollar amount of any such claim);
provided, further, that once the Cash Cap is exhausted, any
electing holders that did not receive cash shall be treated like
all non-electing holders and receive their pro rata share of the
Unsecured Claims Equity Distribution pursuant to clause (x)
above. If the holders of Convertible Subordinated Notes vote
to accept the Plan and do not object to, or otherwise oppose,
confirmation of the Plan, the Agent and the Lenders will not
enforce their contractual rights to compel Debtors to turn the
distribution to such holders over to the Agent for pro rata
distribution to the Lenders.
All intercompany claims will be paid, adjusted, reinstated or
discharged to the extent reasonably determined to be
appropriate by the Company, subject to the consent of the
Agent and the Requisite Participating Lenders.
7
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Section SIO(b) Claims:
Equity Interests:
Executory Contracts and
Unexpired Leases:
Management Agreements:
Equity Incentive Programs
for Directors and
Management:
509265-0806-00421-ACTI VE.JJ760814.30
Any holder of a claim against any of the Debtors that is
described in section 51 O(b) of the Bankruptcy Code shall not
receive a distribution under the Plan and such section 51 O(b)
claims shall be extinguished.
On the Effective Date, all equity interests in the Debtors,
including common stock, preferred stock and any options,
warrants or rights to acquire any equity interests, shall be
cancelled and extinguished and the holders thereof shall not
receive a distribution on account of such equity interests under
the Plan.
Other Principal Plan Terms
The Company intends to reject those executory contracts and
unexpired leases identified on Annex D hereto, on or soon after
the Petition Date. All talent and affiliate contracts not
otherwise rejected on the Petition Date shall be honored in the
ordinary course of business. Executory contracts and
unexpired leases not otherwise addressed on the Petition Date
(or otherwise rejected postpetition), including affiliate and
talent contracts not otherwise rejected during the course of the
Chapter 11 Cases, shall be assumed at the time of confirmation
ofthe Plan.
The Agent, on behalf of, but subject to approval of, the
Requisite Participating Lenders, will negotiate in good faith
new agreements with the members of the current management
team, with the form of all such agreements to be included in the
Plan Supplement (to be filed at least 1 0 days before the hearing
on confirmation of the Plan) and acceptable to the Agent. No
change-in-control provisions under existing employment
agreements shall be honored in respect of the transfer of control
to the Lenders under the Plan, without express written consent
ofthe Agent, which shall only be given with the approval of the
Requisite Participating Lenders.
On or promptly after the Effective Date, no less than 7.5% and
no more than 10.0% of the New Common Stock (on a fully
diluted basis) shall be reserved for issuance as options in
connection with the reorganized Debtors' management equity
incentive program and/or director equity incentive program
(each, an "Equity Incentive Program"). Three-quarters of such
options shall have a per share exercise price equal to the fair
market value of a share of New Common Stock on the
Effective Date (which is expected to be equal to the Plan Share
Value (as defined below)), and shall vest ratably over a three-
8
Director and Officer
Liability Policy:
509265-0806-00421-ACTI VE.I17608 14 30
year period; the remaining quarter shall have a strike price set
by the New Board (as hereinafter defined) at a significant
premium to such Effective Date value, and shall vest over a
three year period. The other material terms of each Equity
Incentive Program may be negotiated with the Agent and the
Requisite Participating Lenders prior to filing the Plan
Supplement (and included therein) or may be left to the
discretion of the New Board.
As used herein "Plan Share Value" means the value of
Reorganized Citadel as prepared by the Debtors' financial
advisor and included in the Debtors' Disclosure Statement
minus the aggregate principal amount of the New Term Loans,
with such difference being divided bY. the total number of
shares ofNew Common Stock.
As of the Effective Date, the Debtors shall assume (and assign
to the Reorganized Debtors if necessary to continue all
insurance policies for directors', managers', and officers'
liability maintained by the Debtors as of the Petition Date (the
"D&O Liability Insurance Policies") in full force) pursuant to
section 365(a) of the Bankruptcy Code. Entry of the
Confirmation Order shall constitute the Bankruptcy Court's
approval of the Debtors' foregoing assumption of each of the
D&O Liability Insurance Policies. Notwithstanding anything
to the contrary contained herein, Confirmation of the Plan shall
not discharge, impair, or otherwise modify any obligations
assumed by the foregoing assumption of the 0&0 Liability
Insurance Policies, and each such obligation shall be deemed
and treated as an Executory Contract that has been assumed by
the Debtors under the Plan as to which no Proof of Claim need
be Filed.
To the extent, if any, the Company plans to extend existing
insurance coverage or purchase new insurance coverage
covering the Company, Reorganized Citadel, the Estates, and
the Company's current and former officers and directors from
claims and causes of action of any third party (including
without limitation any holder of a claim) that remain
unreleased as of the Effective Date, such extended or newly
purchased insurance shall be in such amounts, for such terms or
periods of time, and placed with such insurers as are
determined by the Agent to be reasonable under the
circumstances or as specified and ordered by the Bankruptcy
Court in the Confirmation Order.
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Board of Directors:
Charter; Bylaws:
Company as a Public
Reporting Company:
FCC Matters:
Reorganized Citadel shall have a seven-person board of
directors (the "New Board"), which shall consist of six
independent directors recommended by the Requisite
Participating Lenders and Reorganized Citadel's Chairman &
Chief Executive Officer. The Agent shall retain a nationally
recognized executive search firm (at the expense of the
Debtors) to assist in the identification of qualified candidates.
7
Current directors will be included among the candidates to be
considered for the New Board.
No individual person or entity receiving an Equity Distribution
under the Plan shall have the right to appoint any director to the
New Board.
All directors of the New Board shall meet the criteria set forth
in the NYSE or Nasdaq, as applicable, listing requirements and
FCC requirements.
The charter and bylaws of each of the Debtors shall have been
restated in a manner reasonably satisfactory to the Agent and
the Requisite Participating Lenders and consistent with section
1123(a)(6) of the Bankruptcy Code.
For certain purposes, including requiring Reorganized Citadel
to become a public reporting company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the
Plan shall require Reorganized Citadel as promptly as
practicable following the Effective Date to file with the SEC a
registration statement on Form I 0 under the Exchange Act
registering its Class A Common Stock under the Exchange Act
(the "Form I 0"), and Reorganized Citadel shall use reasonable
best efforts to have such registration statement declared
effective by the SEC as promptly as reasonably practicable.
The Plan shall provide for Reorganized Citadel to use its
reasonable best efforts to obtain a listing for the Class A
Common Stock on NYSE or Nasdaq as soon as reasonably
practicable following the effectiveness of the Form 10 (e.g.,
after listing requirements are satisfied).
The Company shall file with the FCC as soon as practicable the
requisite applications seeking FCC consent to the transfer of
control of the subsidiaries of the Company that hold FCC
This retention will be effectuated pre-petition and a retainer provided to the search firm before the filing.
509265-080&-00421-ACTI VE.I1760814.30
10
Cancellation of Notes,
Instruments, Certificates and
Other Documents:
Vesting of Assets:
Compromise and Settlement:
Releases:
509265-0806-00421-ACTIVE.II760814 30
licenses ("FCC Applications"). After such filing is made, any
person who thereafter acquires Senior Secured Claims or
Unsecured Claims may be treated, in the judgment of the
Company, as an alien owner for purposes of the distribution of
equity under the Plan, in which case such person shall be
classified in Group 2 (as defined in Annex I hereto). In
addition, the Company may, subject to the consent of the
Agent, in consultation with the Participating Lenders but
otherwise in its sole discretion, request the Bankruptcy Court to
implement restrictions on trading of claims that might
adversely affect the FCC approval process. The Company shall
diligently prosecute the FCC Applications seeking the FCC
approval and shall promptly provide such additional documents
or information requested or needed by the FCC in connection
with its review of the FCC Applications. In the event that
Citadel and the Agent determine that the FCC approval process
of the transfer of control to the Lenders is causing unwanted
delay in consummation of the Plan, they shall, subject to the
consent of the Requisite Participating Lenders, promptly
establish and pursue diligently approval of, an interim voting
trust to hold the New Common Stock, of which the trustees
shall be the persons currently serving on Citadel's existing
Board of Directors.
On the Effective Date, all notes, instruments, certificates, and
other documents evidencing debt to, or equity interests in, the
Company shall be cancelled and obligations of the Company
thereunder shall be discharged.
On the Effective Date, pursuant to sections 114l(b) and (c) of
the Bankruptcy Code, all operating assets of the Company's
estates shall vest in Reorganized Citadel free and clear of all
claims, liens, encumbrances, charges and other interests, except
as otherwise provided in the Plan.
The Plan shall contain customary prov1s1ons for the
compromise and settlement of claims stating that,
notwithstanding anything in the Plan to the contrary, the
allowance, classification and treatment of allowed claims and
equity interests and their respective distributions take into
account and conform to the relative priority and rights of such
claims and interests.
The Plan will contain language substantially to the effect ofthe
following:
"Released Party" means each of: (a) the Secured Lenders; (b)
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509265-0806-00421-ACTIYE.11760814.30
the Agent, (c), such entities' subsidiaries, affiliates, managed
accounts or funds, officers, directors, principals, shareholders
employees, agents, financial advisors, attorneys, accountants,
investment bankers, consultants, representatives, management
companies, fund advisors and other Professionals; and (d) the
Debtors' and the Reorganized Debtors' subsidiaries, affiliates,
managed accounts or funds, officers, directors, principals,
shareholders, employees, agents, financial advisors, attorneys,
accountants, investment bankers, consultants, representatives,
management companies, fund advisors and other Professionals.
Releases by the Debtors. Pursuant to section 1123(b) of the
Bankruptcy Code, and except as otherwise specifically
provided in the Plan or the Plan Supplement, for good and
valuable consideration, including the service of the
Released Parties to facilitate the expeditious reorganization of
the Debtors and the implementation of the restructuring
contemplated by the Plan, on and after the Effective Date, the
Released Parties and the Debtors' former officers and directors
are deemed released and discharged by the Debtors, the
Reorganized Debtors, and their estates from any and all claims,
and liabilities whatsoever, including any derivative claims,
asserted or assertable on behalf of the Debtors, whether known
or unknown, foreseen or unforeseen, existing or hereinafter
arising, in law, equity, or otherwise, that the Debtors, the
Reorganized Debtors, their estates, or their affiliates would
have been legally entitled to assert in their own right (whether
individually or collectively) or on behalf of the holder of any
claim or interest or other entity, based on or relating to, or in
any manner arising from, in whole or in part, the Debtors, the
Chapter 11 Cases, the purchase, sale, or rescission of the
Debtors' restructuring, the purchase or sale of any security of
the Debtors or the Reorganized Debtors, the subject matter of,
or the transactions or events giving rise to, any Claim or
Interest that is treated in the Plan, the business or contractual
arrangements between any Debtor and any Released Party, the
restructuring of claims and interests before or during the
Chapter II Cases, the negotiation, formulation, or preparation
of the Plan and Disclosure Statement, or related agreements,
instruments, or other documents, upon any other act or
omission, transaction, agreement, event, or other occurrence
taking place on or before the Confirmation Date, other than
claims or liabilities arising out of or relating to any act or
omission of a Released Party or a former officer or director of
the Debtors that constitutes willful misconduct (including
12
Exculpation:
fraud) or gross negligence.
8
Releases by Holders of Claims and Interests. As of the
Effective Date, each holder of a claim or an interest shall be
deemed to have conclusively, absolutely, unconditionally,
irrevocably, and forever, released and discharged the Debtors,
the Reorganized Debtors, and the Released Parties from any
and all claims, interests, obligations, rights, suits, damages,
causes of action, remedies, and liabilities whatsoever, including
any derivative claims, asserted on behalf of a Debtor, whether
known or unknown, foreseen or unforeseen, existing or
hereafter arising, in law, equity or otherwise, that such entity
would have been legally entitled to assert (whether individually
or collectively), based on or relating to, or in any manner
arising from, in whole or in part, the Debtors, the Debtors'
restructuring, the Debtors' Chapter 11 Cases, the purchase, sale,
or rescission of the purchase or sale of any security of the
Debtors or the Reorganized Debtors, the subject matter of, or
the transactions or events giving rise to, any claim or interest
that is treated in the Plan, the business or contractual
arrangements between any Debtor and any Released Party, the
restructuring of claims and interests before or during the
Chapter 11 Cases, the negotiation, formulation, or preparation
of the Plan, the Disclosure Statement, the Plan Supplement, or
related agreements, instruments, or other documents, upon any
other act or omission, transaction, agreement, event, or other
occurrence relating to the Debtors taking place on or before the
Confirmation Date, other than claims or liabilities arising out of
or relating to any act or omission of a Released Party that
constitutes willful misconduct (including fraud) or gross
negligence. Notwithstanding anything to the contrary in the
foregoing, the release set forth above does not release any post-
Effective Date obligations of any party under the Plan or any
document, instrument, or agreement (including those set forth
in the Plan Supplement) executed to implement the Plan.
The Plan will contain language substantially to the effect of the
following:
"Exculpated Party" means each of: (a) the Debtors, the
Reorganized Debtors and their Affiliates, (b) the Secured
Lenders; (c) the Agent; and (d) with respect to each of the
foregoing entities in clauses (a) through (c), such entities'
Capitalized tenns used but not otherwise defined shall have the meanings commonly associated with such terms
in chapter II plans of reorganization.
509265-0806-00421 -ACTIVE 11760814 30
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509265-0806-00421-AC'TIVE I I 760814 30
subsidiaries, affiliates, managed accounts or funds, officers,
directors, principals, shareholders employees, agents, financial
advisors, attorneys, accountants, investment bankers,
consultants, representatives, management companies, fund
advisors and other Professionals.
Exculpation. Except as otherwise specifically provided in the
Plan or Plan Supplement, no Exculpated Party shall have or
incur, and each Exculpated Party is hereby released and
exculpated from any claim, obligation, cause of action, or
liability for any claim, except for gross negligence or willful
misconduct, but in all respects such entities shall be entitled to
reasonably rely upon the advice of counsel with respect to their
duties and responsibilities pursuant to the Plan. The Debtors
and the Reorganized Debtors (and each of their respective
affiliates, agents, directors, officers, employees, advisors, and
attorneys) have participated in compliance with the applicable
provisions of the Bankruptcy Code with regard to the
solicitation and distribution of the securities pursuant to the
Plan, and, therefore, are not, and on account of such
distributions shall not be, liable at any time for the violation of
any applicable law, rule, or regulation governing the
solicitation of acceptances or rejections of the Plan or such
distributions made pursuant to the Plan, including the issuance
of securities thereunder.
14
Discharge of Debtors:
Injunction:
Definitive Documents and
Due Diligence:
509265-0806-00421-AC'TIVE.II760814.30
Except as otherwise provided and effective as of the Effective
Date: (i) the rights afforded in the Plan and the treatment of all
claims and interests shall be in exchange for and in complete
satisfaction, discharge, and release of all claims and interests of
any nature whatsoever, including any interest accrued on such
claims from and after the Petition Date, against the Debtors or
any of their assets, property, or estates; (ii) the Plan shall bind
all holders of claims and interests, notwithstanding whether any
such holders failed to vote to accept or reject the Plan or voted
to reject the Plan; (iii) all claims and interests shall be satisfied,
discharged, and released in full, and the Debtors' liability with
respect thereto shall be extinguished completely, including any
liability of the kind specified under section 502(g) of the
Bankruptcy Code; and (iv) all entities shall be precluded from
asserting against the Debtors, the Debtors' estates, the
reorganized Debtors, their successors and assigns, and their
assets and properties any other claims or interests based upon
any documents, instruments, or any act or omission,
transaction, or other activity of any kind or nature that occurred
prior to the Effective Date.
From and after the Effective Date, all entities are permanently
enjoined from commencing or continuing in any manner, any
suit, action, or other proceeding, on account of or respecting
any claim, demand, liability, obligation, debt, right, cause of
action, interest, or remedy released or to be released pursuant to
the Plan or the Confirmation Order.
This Term Sheet is indicative, and any final agreement shall be
subject to definitive agreements, pleadings, court submissions,
offering memoranda and other documents ("Definitive
Documents"), which Definitive Documents shall be
substantially consistent with the terms of this Term Sheet and
the Plan Support Agreement and otherwise in form and
substance acceptable to the Agent and the Requisite
Participating Lenders (as defined in the Plan Support
Agreement) in their sole discretion, except as otherwise
provided herein. The Definitive Documents shall contain
terms, conditions, representations, warranties, and covenants,
each customary for the transactions described herein consistent
with the terms of this Term Sheet and otherwise acceptable to
the Agent and the Requisite Participating Lenders, except as
otherwise provided herein.
15
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Tax Structure:
Avoidance Actions:
Retention of Jurisdiction:
Resolution of Disputed
Claims:
509265-0806-00421-ACTIVE 11760814.30
The Company shall consult with the Agent and the Requisite
Participating Lenders on tax issues and matters of tax structure
relating to the Restructuring, and such matters shall be
consistent herewith and otherwise reasonably satisfactory to the
Agent and the Requisite Participating Lenders.
Reorganized Citadel shall retain all rights to commence and
pursue any causes of action that are expressly preserved and
not released under the Plan.
The Plan shall provide for a broad retention of jurisdiction by
the Bankruptcy Court including for (a) resolution of Claims,
(b) allowance of compensation and expenses for pre-Effective
Date services, (c) resolution of motions, adversary proceedings,
or other contested matters, (d) entering such orders as
necessary to implement or consummate the Plan and any
related documents or agreements, (e) entering and
implementing such orders as are necessary or appropriate to
sell, dispose of, liquidate or abandon any assets or properties of
the FCC trust, to the extent applicable and subject to the
provisions ofthe New Term Loan documentation and (f) other
purposes.
The Plan shall provide customary terms for the resolution of
disputed claims and any reserves therefor.
16
Mechanics of Allocation of New Common Stock and
Special Warrants on the Effective Date
Annex I to Exhibit I
The allocation ofNew Common Stock and Special Warrants among the Secured
Lenders and holders of Unsecured Claims on the Effective Date shall be based on the results of
the following exercise:
1. First, the Secured Claim Equity Distribution shall be deemed made
pro rata among the holders of Senior Secured Obligations and the Unsecured
Claim Equity Distribution shall be deemed made pro rata among the holders of
Unsecured Claims; provided that each Equity Distribution shall be deemed to
have been made initially in the form of Special Warrants ..
2. Second, all deemed holders of Special Warrants that (i) have
timely provided an FCC Worksheet, and (ii) have provided therewith certification
to the Debtors and the Agent that their respective alien ownership, as calculated in
accordance with FCC rules, is at or below 20% ("Group I") shall be deemed to
have exercised their Special Warrants to the fullest extent possible for the
corresponding number of shares of Class B Common Stock; provided that any
holder who has not requested in writing at least 30 days prior to the Effective
Date to receive Class 8 Common Stock (the "Class 8 Election Notice") shall be
further deemed to have immediately exchanged such shares of Class B Common
Stock for a like number of shares of Class A Common Stock, and provided,
further, that, for any holder that would be entitled to shares constituting more than
4.99% ofthe outstanding Class A Common Stock, the number of shares
exchanged by such holder shall be limited so that such holder receives shares of
Class A Common Stock constituting no more than 4.99% of the outstanding Class
A Common Stock. The alien ownership certification requirement may result in a
non-pro rata distribution ofNew Common Stock.
3. Third, the aggregate alien ownership percentage ofNew Common
Stock after such deemed exercises shall be determined by the Debtors and the
Agent. To the extent such percentage is less than 20%, all holders of Special
Warrants not in Group I ("Group 2") who timely provided an FCC Worksheet
("Eligible Group 2 Holders") shall be deemed to exercise their Special Warrants,
pro rata among all such Eligible Group 2 Holders, to receive Class 8 Common
Stock, up to the number of shares that causes the aggregate alien ownership
percentage of New Common Stock to equal 20%; provided that any holder who
has not timely provided a Class B Election Notice shall be further deemed to have
immediately exchanged such shares of Class B Common Stock for a like number
of shares of Class A Common Stock, and provided, further, that, for any holder
that would be entitled to shares constituting more than 4.99% of the outstanding
Class A Common Stock, the number of shares exchanged by such holder shall be
509265-0806-00421-ACTIYE.ll760814.30
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limited so that such holder receives shares of Class A Common Stock constituting
no more than 4.99% of the outstanding Class A Common Stock. Each member of
Group 2 shall provide to Citadel and the Agent such in format ion as requested by
Citadel or the Agent in order to evaluate alien ownership.
4. Steps 2 and 3 shall be repeated until the number of shares being
issued becomes de minimis in the judgment of Citadel and the Agent.
Notwithstanding anything to the contrary herein, a creditor may, by written notice
to the Company and the Agent at least 30 days prior to the Effective Date, receive
its Equity Distribution entirely in the form of Special Warrants and shall not be
deemed to have exercised any Special Warrants. Any such notice shall be binding
upon any transferee of the claims held by such creditor.
5. The distribution of Class A Common Stock, Class B Common
Stock and Special Warrants that results from the foregoing steps shall be the
distribution made on and as of the Effective Date.
6. Nothing in the above shall permit any holder to acquire more than
4.99% of the outstanding Class A Common Stock nor shall cause Reorganized
Citadel to exceed an aggregate alien ownership percentage of 20% in either the
Class A Common Stock or in the New Common Stock. Any distribution in
contravention of the preceding sentence shall be adjusted to the minimum extent
necessary to comply with these limitations; such adjustments shall be pro rata
among Eligible Group 2 Holders to the extent legally permissible. In determining
whether any holder would hold more than 4.99% of the outstanding Class A
Common Stock, such holder will be attributed with any stock held by another
holder under common management or that otherwise would be aggregated under
the FCC's ownership attribution rules.
509265-0806-00421-ACTIVE.I1760814.30
2
In re DBSD North America, Inc., Case No. 09-13061 (Bankr. S.D.N.Y. 2009).
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SUBJECT TO FRE 408
SUPPORT AGREEMENT
This SUPPORT AGREEMENT (the "Agreement") is made and entered into as of
May 14, 2009 by and among the following parties:
(a) DBSD North America, Inc., a Delaware corporation (formerly known as
ICO North America, Inc., "DBSD");
(b)
(c)
(d)
ICO Global Communications (Holdings) Limited, a Delaware corporation
("ICO Global" and together with DBSD and the Guarantors (as defined
below), the "ICO Parties");
each of the guarantors (the "Guarantors") party to the Indenture dated
August 15, 2005 (as amended to date, the "Indenture"), among DBSD, the
Guarantors and The Bank ofNew York (now known as The Bank of New
York Mellon), as Trustee (the "Trustee"); and
each of the undersigned holders (together the "Participating Holders", and
together with the ICO Parties, the "Parties"), which entities are beneficial
owners (each, a "Holder") of the 7.5% Convertible Senior Secured Notes
due 2009 (the "Notes"), issued by DBSD pursuant to the Indenture.
RECITALS
WHEREAS, DBSD has determined that a prompt restructuring of its existing
working capital facility and the outstanding Notes would be in the best interests of its creditors
and stockholders;
WHEREAS, DBSD and the Participating Holders have engaged in good faith
negotiations with the objective of reaching an agreement for a financial restructuring of DBSD,
including the indebtedness outstanding under the Notes;
WHEREAS, DBSD and certain of the Participating Holders have entered into the
Forbearance Agreement, dated as of April30, 2009 (the "Forbearance Agreement");
WHEREAS, DBSD, the Guarantors, certain Lenders named therein, Jefferies
Finance LLC and The Bank of New York Mellon have entered into the Second Forbearance
Agreement, dated as of April 30, 2009 (the "Second Forbearance Agreement" and together with
the Forbearance Agreement, the "Forbearance Agreements");
WHEREAS, DBSD, ICO Global and the Participating Holders now desire to
implement a financial restructuring of DBSD (the "Restructuring") on the terms and conditions
set forth herein and in the term sheet attached hereto as Exhibit A, (the "Term Sheet");
WHEREAS, each Party has reviewed, or has had the opportunity to review, the
Term Sheet and this Agreement with the assistance of professional legal advisors of its own
choosing;
2
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DWT 12847612v12 0069251-000010
SUBJECT TO FRE 408
WHEREAS, the Parties intend to consummate the Restructuring on the terms and
conditions set forth in this Agreement and in the Term Sheet through a chapter 11 plan of
reorganization (the "Pre-Arranged Plan") which will be filed on or as soon as practicable after
the date that the chapter 11 cases (the "Chapter 11 Cases") of DBSD and the Guarantors are
commenced under chapter 11 of title 11 of the United States Code, 11 U.S.C. 101-1532 (as
amended, the "Bankruptcy Code"), and the solicitation for acceptances thereof will commence as
soon as practicable following the commencement of the Chapter 11 Cases; and
WHEREAS, to expedite and support the implementation of the Restructuring,
each of the Participating Holders is prepared to commit, on the terms and subject to the
conditions of this Agreement and applicable law, if and when lawfully solicited, to vote, or cause
to be voted, all of its Notes and any additional Notes of which such Participating Holder (or a
client account over which such Participating Holder has discretion) is or at any time on or prior
to the Outside Date (as defined below) becomes, the record or beneficial holder of (collectively,
the "Held Notes"), to accept the Pre-Arranged Plan.
NOW THEREFORE, in consideration of the promises and the mutual covenants
sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
1. Term Sheet. The Term Sheet is incorporated by reference herein and is made part of this
Agreement as if fully set forth herein. The general terms and conditions of the Restructuring are
set forth in the Term Sheet; provided, however, that (i) the Term Sheet is supplemented by the
terms and conditions of this Agreement, (ii) to the extent there is a conflict between the Term
Sheet and this Agreement, the terms and provisions of this Agreement will govern, and (iii) to
the extent there is a conflict between the Term Sheet or this Agreement and the Restructuring
Documents (as defined below), the terms and provisions of the Restructuring Documents shall
govern.
2. Means for Effectuating the Restructuring. DBSD shall effectuate the Restructuring
through commencement of the Chapter 11 Cases and seek confirmation of the Pre-Arranged
Plan. DBSD shall file petitions for relief under chapter 11 of the Bankruptcy Code (collectively,
the "Petitions") for DBSD and the Guarantors (collectively, the "Debtors") commencing the
Chapter 11 Cases no later than 11:00 a.m. (prevailing New York City Time) on May 15, 2009
(such date and time, the "Petition Date"). The Pre-Arranged Plan and a disclosure statement that
complies with section 1125 of the Bankruptcy Code (the "Disclosure Statement") shall be filed
as soon as practicable, but in no event later than fifteen (15) days, after the commencement of the
Chapter 11 Cases. The Debtors shall use their reasonable best efforts to ensure that (i) approval
of the Disclosure Statement will occur within fifty (50) days of the Petition Date, (ii)
confirmation of the Pre-Arranged Plan will occur within ninety (90) days after the Petition Date,
and (iii) the effective date of the Pre-Arranged Plan will be no later than the earlier of (x) one
hundred and five (105) days after the Petition Date and (y) the thirteenth (13th) day following the
entry of an order confirming the Pre-Arranged Plan; provided, that if any FCC Approval is
required, the deadline for such effective date shall be extended to the date that is three (3)
business days after receipt of the FCC Approval, but not later than the Outside Date (as defined
below). For purposes of this Agreement, (i) the "Outside Date" shall mean the date that is the
3
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SUBJECT TO FRE 408
four (4) month anniversary of the date of the FCC Filing (as defined below); provided, however,
that such date may be extended by the Participating Holders if the FCC Filing is still pending
review at the FCC; and (ii) "FCC Approval" shall mean such regulatory approvals or consents
required to be obtained from the Federal Communications Commission (the "FCC") or any other
federal regulatory entity, the failure of which to obtain would have a material adverse effect on
DBSD.
3. Preparation of Restructuring Documents. Promptly upon execution of this Agreement,
representatives of DBSD, ICO Global and the Participating Holders, together with their
respective counsel, shall negotiate in good faith to prepare all definitive documentation related to
the Restructuring, including, without limitation, the Registration Rights Agreement, the
Stockholders Agreement, the Charter Documents and the Releases (each as described in the
Term Sheet), all of which shall contain provisions consistent with the Term Sheet and this
Agreement and such other provisions as are mutually acceptable to DBSD, ICO Global and the
Participating Holders (collectively, the "Restructuring Documents").
4. DBSD and ICO Global Undertakings. DBSD and ICO Global each hereby agrees to use
its reasonable best efforts to, as applicable, take all actions reasonably necessary to effectuate
and consummate the Restructuring and implement all steps necessary to obtain an order of the
Bankruptcy Court confirming the Pre-Arranged Plan and not take any actions inconsistent with
the Restructuring, in each case, as expeditiously as practicable; provided, however, that nothing
in this Agreement or the Term Sheet shall obligate ICO Global or its affiliates (other than DBSD
and the Guarantors) to advance cash, working capital or other assets to DBSD or any
Participating Holder.
5. Third Party Approvals. The Parties shall use their reasonable best efforts to obtain all
regulatory, governmental, administrative, and third party approvals of the Restructuring,
including, without limitation, if required under applicable law, the approval from the FCC to the
application for consent to the change of control of the FCC licenses issued to DBSD.
6. Participating Holder Undertaking. Each of the Participating Holders agrees that unless
and until such time as this Agreement has expired and subject to the conditions that (a) the terms
of any applicable agreements implementing the Restructuring embody the terms set forth in the
Term Sheet and this Agreement and such other additional provisions, not inconsistent with the
terms hereof and thereof, as are mutually agreed upon by the Participating Holders, ICO Global
and DBSD, (b) all pertinent documents, including, without limitation, all the Restructuring
Documents are in form and substance reasonably satisfactory to the Participating Holders, (c) no
Agreement Termination Event shall have occurred that has not been waived in writing by each
Participating Holder, and (d) no Company Termination Event shall have occurred that has not
been waived by an ICO Waiver (as defined below), it shall: (x) use its reasonable best efforts to,
as applicable, take all actions relating to itself reasonably necessary to effectuate and
consummate the Restructuring and not take any acts inconsistent with the Restructuring, in each
case, as expeditiously as practicable; and (y) when lawfully solicited, vote, or cause to be voted
the Held Notes to accept the Pre-Arranged Plan. For the avoidance of doubt, it is noted that any
reference herein to a consent, approval, agreement or any similar action with respect to or on
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behalf of the Participating Holders shall mean the consent, approval, agreement or similar action
of each Participating Holder.
7. Expiration of Agreement.
(a) This Agreement shall expire automatically without any further required action or
notice upon the occurrence of any Company Termination Event (but only, in the case of an event
described in clauses (i) or (ii) of the definition of "Company Termination Event", with respect to
the Participating Holder or Participating Holders who have breached any material covenant or
provision as set forth in such clause (i) or as to which any representation or warranty is untrue as
set forth in such clause (ii) until such time as this Agreement ceases to remain in effect with
respect to Participating Holders representing less than fifty percent (50%) of the outstanding
principal amount of Held Notes, until which time it shall apply to the remaining Participating
Holders) or any Agreement Termination Event, unless the occurrence of such Agreement
Termination Event is waived in writing by each Participating Holder or the occurrence of such
Company Termination Event is waived in writing by the ICO Party or ICO Parties, as the case
may be, directly affected by the event (an "ICO Waiver"). Upon the expiration of this
Agreement (except in connection with the occurrence of a Company Termination Event) any and
all acceptances in favor of the Pre-Arranged Plan by the Participating Holders prior to such
expiration shall be deemed, for all purposes, to be null and void and shall not be considered or
otherwise used in any manner by DBSD in connection with this Agreement and the Term Sheet.
(b) An "Agreement Termination Event" shall mean any of the following:
(i) Participating Holders shall not have entered into this Agreement prior to
the Petition Date representing, or this Agreement ceases to remain in effect at such date with
respect to Participating Holders representing, more than fifty percent (SO%) of the outstanding
principal amount of Notes;
(ii) (A) Either of the ICO Parties shall have breached any material covenant or
provision of this Agreement, (B) the Participating Holders shall have delivered written notice to
DBSD of any such breach, and (C) such breach remains uncured for a period of five (5) business
days;
(iii) (A) Any representation or warranty in this Agreement made by an ICO
Party shall have been untrue in any material respect when made or shall have become untrue in
any material respect, (B) the Participating Holders shall have delivered written notice to DBSD
of any such breach, and (C) such breach remains uncured for a period of five (5) business days;
(iv) (A) Any material term or condition of any of the Restructuring Documents
shall be (whether due to an order of the Bankruptcy Court or otherwise) materially different and
adverse to the Participating Holders than as agreed by the Participating Holders and the ICO
Parties except to the extent such materially different and adverse term or condition is agreed by
each Participating Holder, (B) the Participating Holders shall have delivered written notice to
DBSD of any such event, and (C) such event remains uncured for a period of five (5) business
days;
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(v) There shall have been issued or reinstated any suspension order or similar
order by a court or other governmental body of competent jurisdiction that materially adversely
affects the benefits intended to be received by the Participating Holders hereunder, or prevents
DBSD from consummating the transactions contemplated by this Agreement, and (A) such
proceeding or order was issued or reinstated at the request or with the acquiescence of DBSD or
any of its affiliates or (B) in all other circumstances, such order is not stayed, reversed, or
vacated within fifteen ( 15) days after such issuance or reinstatement;
(vi) There shall have been issued any order, decree, or ruling by any court or
governmental body having jurisdiction restraining or enjoining the consummation of or
rendering illegal the transactions contemplated by this Agreement and (A) such proceeding or
order was issued at the request or with the acquiescence of DBSD or its affiliates or (B) in all
other circumstances, such order is not stayed, reversed, or vacated within fifteen ( 15) days after
such issuance;
(vii) ICO Global shall have failed to file by 8:00 a.m. (prevailing New York
City Time) on the fourth (4
1
h) business day after ICO Global's counsel's receipt of executed
signature pages to this Agreement from Holders representing, in the aggregate, more than fifty
percent (50%) of the principal amount of Notes outstanding, a Form 8-K with the Securities and
Exchange Commission to which this Agreement (including all exhibits) (with such redactions as
may be reasonably requested by counsel to the Participating Holders) and the Term Sheet are
attached. The Parties agree that, in the event that ICO Global fails to file the Form 8-K in
accordance with this provision, one or more of the Participating Holders may publicly disclose
this Agreement and all of its exhibits; provided, however, that such disclosure shall be limited to
disclosing the text of this Agreement and all exhibits and no such disclosure by the Participating
Holders shall cure or waive such failure of ICO Global to make such filing. ICO Global hereby
(a) waives any claims against any such Participating Holder and (b) agrees to hold all such
Participating Holders harmless against any claims, in each case, solely arising as a result of such
disclosure by such Participating Holders in compliance with this Agreement;
(viii) Unless DBSD and the Participating Holders agree otherwise:
A. The Restructuring has not been approved by DBSD's Board of
Directors prior to the filing of the Petitions;
B. The Petitions shall not have been filed on or before the Petition
Date;
C. An application to obtain the FCC Approval for the transfer of
control to the Holders (the "FCC Filing") shall not have been filed with the FCC within
three (3) business days after the Pre-Arranged Plan has been confirmed; provided,
however, that if the Holders have not provided DBSD all information about the Holders
reasonably requested by DBSD to be included in the FCC Filing at that time, such time
period shall be extended by an additional ten (10) days;
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D. The Pre-Arranged Plan and the Disclosure Statement shall not
have been filed within fifteen ( 15) days after the Petition Date;
E. The Disclosure Statement shall not have: been approved within
fifty (50) days after the Petition Date;
F. The Pre-Arranged Plan shall not have been confirmed within
ninety (90) days after the Petition Date;
G. The Pre-Arranged Plan and the transactions contemplated therein
shall not have been consummated on or before one hundred and five (105) days after the
Petition Date; provided, that if any FCC Approval is required, such date shall be extended
to the earlier of three (3) business date following receipt of the FCC Approval and the
Outside Date; and
H. Upon the written consent of ICO Global, DBSD, and the
Participating Holders;
(ix) The Bankruptcy Court shall have granted relief that is inconsistent with
the Pre-Arranged Plan and adverse, in any material respect, to the Participating Holders,
including, without limitation, the termination, annulment, or modification of the automatic stay
(as set forth in section 362 of the Bankruptcy Code) with regard to any material assets ofDBSD;
(x) A trustee or examiner with enlarged powers shall have been appointed
under sections 1104 or 1105 of the Bankruptcy Code for service in the Chapter 11 Cases; and
(xi) One or more of the Chapter 11 Cases shall have been converted to a case
under chapter 7 of the Bankruptcy Code or otherwise dismissed.
(c) A "Company Termination Event" shall mean any of the following:
(i) (A) A Participating Holder shall have breached any material covenant or
provision of this Agreement; (B) DBSD shall have delivered written notice to the Participating
Holders of any such breach; and (C) any such breach remains uncured for a period of five (5)
business days;
(ii) (A) Any representation or warranty in this Agreement made by a
Participating Holder shall have been untrue in any material respect when made or shall have
become untrue in any material respect, (B) DBSD shall have delivered written notice to the
Participating Holders of any such breach, and (C) such breach remains uncured for a period of
five (5) business days;
(iii) (A) Any material term or condition of any of the Restructuring Documents
shall be (whether due to an order of the Bankruptcy Court or otherwise) materially different and
adverse to ICO Global or DBSD than as agreed by the Participating Holders, ICO Global and
DBSD except to the extent such materially different and adverse term or condition is agreed by
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ICO Global and DBSD, (B) DBSD shall have delivered written notice to the Participating Holder
of any such event, and (C) such event remains uncured for a period of five (5) business days; and
(iv) There shall have been issued any order, decree, or ruling by any court or
governmental body having jurisdiction restraining or enjoining the consummation of or
rendering illegal the transactions contemplated by this Agreement.
8. Representations and Warranties.
(a) Each Party represents and warrants to the other Parties that (a) it is duly
organized, validly existing, and in good standing under the laws of the jurisdiction of its
formation; (b) its execution, delivery, and performance of this Agreement are within the power
and authority of such party and have been duly authorized by such party and that no other
approval or authorization is required; (c) this Agreement has been duly executed and delivered
by it and constitutes its legal, valid and binding obligation, enforceable in accordance with the
terms hereof, subject to bankruptcy, insolvency, fraudulent conveyance, and similar laws
affecting the rights or remedies of creditors generally; and (d) none of the execution and delivery
of this Agreement or compliance with the terms and provisions hereof will violate, conflict with,
or result in a breach of, its certificate of incorporation or bylaws or other constitutive document,
any applicable law or regulation, any order, writ, injunction, or decree of any court or
governmental authority or agency, or any agreement or instrument to which it is a party or by
which it is bound or to which it is subject.
(b) Each of the Participating Holders further represents and warrants to DBSD, as to
itself, that, as of the date hereof, the amounts set forth next to its name on Schedule 1 attached
hereto constitute the amounts of all Held Notes with respect to such Participating Holder.
9. Restriction on Transfer.
(a) The Participating Holders may sell, transfer, or dispose of any of their Notes as
provided for in the Indenture; provided, however, that the transferee thereof (each such
transferee, a "Transferee") must, as an acknowledgment to be bound to the terms hereof and the
Term Sheet, simultaneously with the transfer execute a counterpart signature page to this
Agreement and deliver such counterpart signature to DBSD, in which case it shall be deemed to
be a Participating Holder for all purposes herein from and after the date on which such
counterpart signature page is executed. Any transfer of Notes that is not done in compliance
with this Section 9(a) shall be deemed void ab initio.
(b) Notwithstanding anything to the contrary herein, the Participating Holders shall
be entitled to take any action necessary to consummate a transfer of the Held Notes; provided,
that it shall obtain the Transferee's acknowledgment of the terms hereof, as described in
Section 9(a) hereof.
10. Public Disclosures. Each ICO Party will submit to counsel for the Participating Holders
for prior review all press releases and public filings regarding, in any way, the Restructuring, this
Agreement, and any amendment to the terms of the Restructuring and/or this Agreement. Except
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as required by law (as determined by outside counsel to such ICO Party), no ICO Party shall
(a) use the name of any Participating Holder in any public manner without such Participating
Holder's prior written consent or (b) disclose to any person (including, for the avoidance of
doubt, any other Participating Holder but specifically excluding legal, accounting and financial
advisors to the ICO Parties who have a need to know such information in order to render their
advisory services to the ICO Parties and who are bound by confidentiality restrictions regarding
the disclosure and use of such information) the principal amount or percentage of any Notes or
any other securities of DBSD or any of their respective subsidiaries held by any Participating
Holder; provided, however, that the ICO Parties shall be permitted to disclose at any time the
aggregate principal amount of and aggregate percentage of Notes that are Held Notes.
Notwithstanding anything to the contrary herein, the terms and conditions set forth in this
Section shall survive any termination of this Agreement.
11. Impact of Appointment to Creditors' Committee. Notwithstanding anything herein to the
contrary, if any Participating Holder is appointed to and serves on an official committee of
creditors in the Chapter 11 Cases, (a) the terms of this Agreement shall not be construed so as to
limit such Participating Holder's exercise (in its sole discretion) of its fiduciary duties to any
person arising from its service on such committee, and any such exercise (in the sole discretion
of such Participating Holder) of such fiduciary duties shall not be deemed to constitute a breach
of the terms of this Agreement, and (b) if such appointment to the official committee of creditors
is on account of the Held Notes, such holder may at its discretion terminate this Agreement as to
itself by providing written notice to DBSD and counsel to the Participating Holders.
12. Governing Law; Jurisdiction.
(a) This Agreement shall be governed by and construed in accordance with the laws
of the State of New York, without regard to any conflicts of law provision which would require
the application of the law of any other jurisdiction (except for Sections 5-1401 and 5-1402 of the
General Obligations Law of the State of New York). By its execution and delivery of this
Agreement, each of the parties hereto hereby irrevocably and unconditionally agrees for itself
that any legal action, suit, or proceeding against it with respect to any matter under or arising out
of or in connection with this Agreement or for recognition or enforcement of any judgment
rendered in any such action, suit or proceeding, may be brought in any federal or state court of
competent jurisdiction in the District of New York.
(b) By execution and delivery of this Agreement, each of the Parties irrevocably
accepts and submits itself to the nonexclusive jurisdiction of such court, generally and
unconditionally, with respect to any such action, suit or proceeding. Notwithstanding the
foregoing consent to New York jurisdiction, upon the commencement of the Chapter 11 Cases,
each of the Parties hereby agrees that the Bankruptcy Court shall have exclusive jurisdiction of
all matters arising out of or in connection with this Agreement.
13. Specific Performance. It is understood and agreed by each of the Parties hereto that
money damages would not be a sufficient remedy for any breach of this Agreement by any Party
and each non-breaching Party shall be entitled to specific performance and injunctive or other
equitable relief as a remedy of any such breach.
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14. Reservation of Rights. This Agreement and all transactions contemplated herein are part
of a proposed settlement of disputes among the Parties hereto. Except as expressly provided in
this Agreement, nothing herein is intended to, or does, in any manner waive, limit, impair, or
restrict the ability of each of the Participating Holders to protect and preserve its rights, remedies
and interests, including, without limitation, its claims against DBSD or its full participation in
the Chapter 11 Cases. If the transactions contemplated herein are not consummated, or if this
Agreement is terminated, the Parties fully reserve any and all of their rights. Pursuant to Rule
408 of the Federal Rules of Evidence and any applicable state rules of evidence, this Agreement
shall not be admitted into evidence in any proceeding other than a proceeding to enforce its
terms.
15. Fees and Expenses. DBSD shall pay the fees and expenses of the Participating Holders
in connection with the Restructuring, including the advisors to the Participating Holders, who
shall be selected by the Participating Holders. Upon the commencement of the Chapter 11
Cases, DBSD shall, in advance of the filing or filings therefore, pay all accrued and unpaid fees
and expenses of UBS Securities LLC and Milbank, Tweed, Hadley & McCloy LLP through the
date immediately preceding the anticipated filing date, and provide a customary retainer to such
advisors.
16. Headings. The headings of the sections, paragraphs, and subsections of this Agreement
are inserted for convenience only and shall not affect the interpretation hereto.
17. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of
the parties and their respective successors, assigns, heirs, executors, administrators, and
representatives; provided, however, that nothing in this Section 17 shall be deemed to permit
sales, assignments, or transfers other than in accordance with Section 9 hereof. The agreements,
representations and obligations of the Parties are, in all respects, ratable and several and neither
joint nor joint and several.
18. Notice. Notices given under this agreement shall be to:
NY! :#351 0156
lfto DBSD:
DBSD North America, Inc.
11700 Plaza America Drive, Suite 1010
Reston, Virginia 20190
Attention: John L. Flynn, General Counsel
Telephone: (703) 964-1400
Facsimile: (703) 964-1401
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NYI#3510156
With a copy (which copy shall not constitute notice) to:
300 North LaSalle
Attention: James H.M. Sprayregen
Marc J. Carmel
Telephone: (312) 862-2000
Facsimile: (312) 862-2200
and:
Davis Wright Tremaine LLP
120 1 Third A venue
Seattle, Washington 98101
Attention: Julie Weston
Sarah English Tune
Telephone: (206) 622-3150
Facsimile: (206) 757-7161
If to ICO Global:
SUBJECT TO FRE 408
ICO Global Communications (Holdings) Limited
11700 Plaza America Drive, Suite 1010
Reston, Virginia 20 190
Attention:
Telephone: (703) 964-1400
Facsimile: (703) 964-1401
Morrison & Foerster LLP
425 Market Street
San Francisco, California, 94105
Attention: Robert Townsend
Telephone: (415) 268-7080
Facsimile: (415) 268-7522
If to Any Participating Holder:
To the names and addresses set forth on the signature pages hereto.
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Milbank, Tweed, Hadley & M"Cloy LLP
1 Chase Manhattan Plaza
Attention: Thomas C. Janson
Telephone: (212) 530-5000
Facsimile: (212) 530-5219
SUBJECT TO FRE 408
19. Prior Negotiations. Except as set forth in the Forbearance Agreement and those certain
Confidentiality Agreements entered into by DBSD and certain Holders on April 24, 2009, this
Agreement and Exhibit A supersede all prior negotiations with respect to the subject matter
hereof.
20. Consideration. It is hereby acknowledged by the Parties that, other than the agreements,
covenants, representations, and warranties set forth herein and in the Term Sheet and to be
included in the Restructuring Documents, no consideration shall be due or paid to the Holders for
their agreement to vote to accept the Pre-Arranged Plan in accordance with the terms and
conditions of this Agreement.
21. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which shall constitute one and the same Agreement.
22. No Third Party Beneficiaries. Unless expressly stated herein, this Agreement shall be
solely for the benefit of the parties hereto and no other person or entity.
23. No Solicitation; Representation by Counsel. This Agreement is not and shall not be
deemed to be a solicitation for votes in favor of the Pre-Arranged Plan in the Chapter 11 Cases.
Each of the Participating Holders' votes with respect to the Pre-Arranged Plan will not be
solicited until such Participating Holder has received the Disclosure Statement. Each Party
acknowledges that it has had an opportunity to receive information from DBSD, and that it has
been represented by counsel in connection with this Agreement and the transactions
contemplated hereby. The provisions of this Agreement shall be interpreted in a reasonable
manner to effectuate the intent of the Parties.
24. Severability. Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or affecting the validity or
enforceability without invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. The provisions of this Agreement shall
be interpreted in a reasonable manner to effect the intent of the Parties hereto.
25. Amendment, Waiver or Modification. Except as otherwise expressly set forth herein, this
Agreement (including all of its exhibits) and each of its terms and conditions may not be
amended, waived or modified in any aspect except in a writing executed by DBSD and the
Participating Holders.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed and delivered by its duly authorized officer as of the date first above written.
ICO GLOBAL COMMUNICATIONS
(HOLDINGS) , INC.
By:
N.ame. A<fi.'ttJit'$"./P. JfPj
Tttle: : cfi:.-;J
J '
DBSD NORTH AMERICA, INC.
By:
Name: Michael P. Co ery
Title: Acting Chief Exe e Officer, Executive
Vice President & Chief Financial Officer
DBSD SATELLITE MANAGEMENT LLC
By: DBSD North Americ
DBSD SATELLITE NORTH AMERICA
LIMITED
By:
Name: Stephen M. DeWees
Title: Director
DBSD SATELLITE SERVICES G.P.
By: DBSD Services Limited, a general partner
By: @L #'!!" ,,'-d_;.2.._
Title: Director
[Support Agreement]
NEWDBSD SATELLITE SERVICES G.P.
By: DBSD Satellite Services G.P., a general partner
By: DBSD Services Limited, a general partner
By: h:!... /'_...;;iJR' .:::::>
Title: Director
DBSD SERVICES LIMITED
By:
Title: Director
DBSD SA TEL LITE SERVICES LIMITED
By: j?;?/ ..;0--
Title: Director
SSG UK LIMITED
By:
Title: Director
3421554 CANADA INC.
By:
Title: Director
[Support Agreement]
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For Settlement Purposes Only- Subject to FRE Rule 408
Exhibit A
THIS TERM SHEET IS FOR DISCUSSION PURPOSES ONLY AND IS NOT A
SOLICITATION OF ACCEPTANCES OR REJECTIONS WITH RESPECT TO ANY
RESTRUCTURING OR PLAN OF REORGANIZATION OR AN OFFER OR
SOLICITATION FOR THE SALE OF SECURITIES OF ANY KIND.
PRELIMINARY INDICATION OF TERMS
FOR PROPOSED RESTRUCTURING OF DBSD NORTH AMERICA, INC.
May 14,2009
This term sheet ("Term Sheet") describes certain of the principal terms of a
proposed restructuring (the "Restructuring") for DBSD North America, Inc. (formerly known as
ICO North America, Inc., "DBSD"). DBSD is currently a 99.84% owned subsidiary of ICO
Global Communications (Holdings) Limited ("ICO Global" or the "Existing Stockholder"). As
described in greater detail herein, the Restructuring shall be consummated through a "Pre-
Arranged" chapter 11 Plan of Reorganization (the "Pre-Arranged Plan") pursuant to voluntary
chapter 11 petitions for relief to be filed with the United States Bankruptcy Court of the Southern
District of New York (the "Bankruptcy Court"). This Term Sheet has been produced for
discussion and settlement purposes only. It is subject to the parties' agreement that it shall not be
used as evidence in any litigation and is subject to the provisions of Rule 408 of the Federal
Rules of Evidence and other similar applicable rules under federal and state law.
This Term Sheet and the proposals contained herein are subject to, among other
conditions, the completion of appropriate legal, financial and other due diligence by the Principal
Holders (as defined below) and their legal and financial advisors. As used herein, the term
"Holders" refers to holders of DBSD's outstanding 7.5% Convertible Senior Secured Notes due
2009 (the "Notes"), and the term "Principal Holders" refers to those Holders set forth on
Attachment 1, who have engaged in discussions with DBSD and ICO Global with respect to the
Restructuring over time, which discussions are reflected in this Term Sheet.
DWT 12847612v12 0069251-000010
The Restructuring
Implementation of the
Restructuring
Other Equity Interests
in DBSD
SUBJECT TO FRE 408
The Restructuring set forth in this Term Sheet is intended to be
effected through the Pre-Arranged Plan, pursuant to which the
Holders, as a class, shall receive shares of common stock of the
restructured DBSD (the "Common Stock") representing, in the
aggregate, 94.9919% of the Common Stock to be outstanding
immediately following the Restructuring, subject only to dilution by
the issuance of the Warrants (as defined below).
DBSD, ICO Global and the Principal Holders shall mutually agree
upon the definitive documentation required for the Restructuring (the
"Definitive Restructuring Documents"), which shall reflect the terms
and conditions set forth herein and such other terms and conditions as
shall be acceptable to the Principal Holders, ICO Global and DBSD.
DBSD shall solicit acceptances of a Plan of Reorganization on the
terms set forth herein and such other terms as are mutually acceptable
to the Principal Holders, ICO Global and DBSD. Such Pre-Arranged
Plan shall be approved pursuant to section 1129 of the Bankruptcy
Code with respect to all classes of claims and interests.
All options, warrants, and other agreements or rights to acquire DBSD
equity interests (including any arising under or in connection with any
employment agreement or any incentive plan or any benefit plan or
the like) existing prior to the consummation of the Restructuring, shall
be cancelled upon the consummation of the Restructuring without any
further action or the payment of any consideration.
In connection with the Restructuring, the Existing Stockholder shall
receive (i) shares of Common Stock equal to 5.0% of the shares of
Common Stock in DBSD to be outstanding immediately following the
Restructuring, and (ii) warrants (the "Warrants") to acquire 10.00% of
the Common Stock (after taking into account the Common Stock
outstanding immediately following the Restructuring). The other
shareholders in DBSD shall hold shares of Common Stock following
the Restructuring equal to 0.0081% of the Common Stock.
The Warrants shall have an exercise price of$0.01 per share, and shall
be exercisable only upon a Valuation Event. The Warrants shall be
issued in three tranches and shall be identical except as set forth
below:
(i) Warrants representing 5.00% of the Common Stock
shall be exercisable if the aggregate Equity
Valuation upon a Valuation Event is equal to or
greater than $1.0 billion; plus
DWT 12847612vl2 0069251-000010
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(ii) Warrants representing 2.50% of the Common Stock
greater than $1.5 billion; plus
(iii) Warrants representing 2.50% of the Common Stock
greater than $2.0 billion.
In the event that the Warrants are extended as described below so that
they are exercisable after the second anniversary of the consummation
of the Restructuring, the relevant valuation thresholds set forth above
shall be increased at the rate of 30% per annum (or portion thereof)
beginning on the second anniversary of the consummation of the
Restructuring.
The Warrants shall expire on the second anniversary of the
consummation of the Restructuring (the "Warrant Term"); provided,
that:
DWT 12847612vl2 0069251-000010
(i) if DBSD enters into binding definitive documents
(which have been approved by the new board) for
the consummation of a Valuation Event prior to the
second anniversary of the consummation of the
Restructuring, then the Warrant Term shall be
extended until the earlier of (a) the closing of such
Valuation Event and (b) the termination or
abandonment of such Valuation Event (but only with
respect to such Valuation Event);
(ii) if DBSD shall have entered into a binding definitive
agreement for the consummation of a business
combination (which has been approved by the new
board of DBSD) with the company that has been
identified to the Principal Holders in writing on the
date hereof (the "Identified Company") within
twelve months of the consummation of the
Restructuring, then the Warrant Term shall be
extended until the later of (a) the third anniversary of
the consummation of the Restructuring, (b) the
closing of the transaction with the Identified
Company, and (c) the termination or abandonment
of the transaction with the Identified Company (but
only with respect to such transaction if the event in
SUBJECT TO FRE 408
clauses (b) or (c) is after such third anniversary);
(iii) if the Warrant Term has been extended until the third
anniversary of the consummation of the
Restructuring and DBSD enters into binding
definitive documents with respect to a Valuation
Event during such time, then the Warrant Term shall
be extended until the earlier of (a) the closing of
such Valuation Event and (b) the termination or
abandonment of such Valuation Event (but only with
respect to such Valuation Event).
The Warrants shall provide for appropriate adjustments in the event of
stock splits, stock recombination, conversion of the Common Stock
into other securities or other similar events. The Warrants shall be
non-transferable and shall contain terms and conditions acceptable to
the Principal Holders, ICO Global and DBSD.
"Valuation Event" means a Sale Event, a Public Merger Event, a
Qualified Offering, a Liquidation Event or an Asset Sale Event.
"Sale Event" means the cash acquisition by any person of a
controlling interest in DBSD.
"Public Merger Event" means any merger, business combination or
acquisition involving DBSD, or all or substantially all of the assets of
DBSD, where the surviving company or acquiror is a public reporting
company and the consideration paid to the stockholders of DBSD
consists of equity securities that are listed on a United States national
securities exchange.
"Qualified Offering" means a bona fide underwritten public offering
by a nationally recognized investment banking firm registered under
the Securities Act (i) that results in gross proceeds to DBSD of not
less than $150 million; and ( ii) following which the Common Stack is
listed on a United States national securities exchange.
"Liquidation Event" means the dissolution or liquidation of DBSD.
"Asset Sale Event" means the sale, for cash, of all or substantially all
of the assets of DBSD and its subsidiaries, on a consolidated basis.
"Equity Valuation" means the aggregate value for the number of
shares of Common Stock outstanding immediately following the
Restructuring (appropriately adjusted for stock splits, recombinations
and similar events) (the "Original Shares") based on (i) in the case of
a Sale Event, the actual value per share received in respect of the
Original Shares as a result of the Sale Event; (ii) in the case of a
Public Merger Event, the per share VW AP of the equity securities
received in such transaction in respect of the Original Shares during
DWT 1284 7612v 12 0069251-0000 I 0
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Treatment of Other
Classes of Claims
SUBJECT TO FRE 408
any Reference Period following such Public Merger Event and ending
prior to the expiration date of the Warrants; (iii) in the case of a
Qualified Offering, the per share VW AP of the Original Shares during
any Reference Period following the Qualified Offering and ending
prior to the expiration date of the Warrants; (iv) in the case of an Asset
Sale Event, the per share value of the Original Shares, after reduction
for all liabilities (including contingent liabilities) of DBSD, of the
consideration received by DBSD as a result of the sale; and (v) in the
case of a Liquidation Event, the per share value of the consideration
received by DBSD Stockholders in respect of the Original Shares as a
result of the Liquidation Event; in each case increased by the
aggregate value of any dividends or distributions made to DBSD
stockholders from the date of the consummation of the Restructuring
until the Valuation Event.
"Reference Period" means, any period of 40 consecutive trading days
during which (a) the equity securities in question during each such day
have a daily trading volume not Jess than $13 million, (b) no Holder is
subject to any Jock-up or similar agreement which has not fully
expired or been terminated, (c) no holder is subject to any "black out"
or other trading restriction imposed by the issuer (including as a result
of being affiliated with any director or having received any
information from DBSD) and (d) the issuer has maintained the
effectiveness of a shelf registration enabling all of the Holders to
freely transfer shares of Common Stock under the Securities Act of
1933, as amended (the "Securities Act").
The obligations owed to other creditors of DBSD not specifically
addressed herein ("Other Creditors") will remain outstanding under
their current terms; provided, that DBSD and the Principal Holders
shall mutually agree upon the treatment for the Other Creditors.
Treatment of Auction DBSD shall not sell, transfer, liquidate or otherwise monetize
Rate Securities (collectively, a "Sale") any Auction Rate Security (as defined in the
Forbearance Agreement) without the prior consent of the Principal
Holders unless such Sale results in gross proceeds to DBSD of not Jess
than the par or stated value of such Auction Rate Security, provided,
however, that DBSD may pledge any Auction Rate Security issued by
UBS as collateral to UBS pursuant to the terms of the UBS Facility
(as defined in the Forbearance Agreement), and the Principal Holders
agree to take such other action reasonably necessary to effect their
consent to the action set forth in the foregoing proviso.
DWT 12847612vl2 0069251-000010
Working Capital
Board of Directors of
Restructured DBSD
Transition Services
Registration Rights
Agreement
Stockholders'
Agreement
SUBJECT TO FRE 408
DBSD's working capital needs are to be met based on best market
option/capital raising options. The existing working capital facility
may be refinanced in whole or in part by an affiliate of ICO Global,
but (i) the terms and conditions of any such refinancing must be
acceptable to the Principal Holders and (ii) all Holders must be
offered a pro rata right to participate in any such refinanced working
capital facility.
The Board of Directors of DBSD shall be comprised of five to ten
members, with one member being designated by the Existing
Stockholder, and the remaining members being designated by the
Holders in their sole discretion on terms to be negotiated among the
Holders.
Each new Board member shall be entitled to execute a 0&0
Indemnification Agreement in form reasonably acceptable to such
member and DBSD upon his or her appointment.
The provision of transition services by DBSD to ICO Global and vice
versa to be formalized in a transition services agreement. The
agreement shall provide for appropriate transition periods and that all
third party services shall be passed through at cost.
DBSD shall execute a registration rights agreement in form and
substance mutually acceptable to the Principal Holders and the
Existing Stockholder upon consummation of the Restructuring.
A Stockholders' Agreement in form and substance mutually
acceptable to the Principal Holders and the Existing Stockholder shall
have been executed by DBSD, the Holders and the Existing
Stockholder on or prior to the consummation of the Restructuring.
The Stockholder Agreement will provide that the Holders will agree to
vote their respective shares against any proposed reverse stock split,
merger or recapitalization that results in a "squeeze out" or
cancellation of any Warrants or Common Stock held by the Existing
Stockholder unless such transaction provides for the receipt of
consideration of the same type and amount, on a per share basis, by all
outstanding shares of Common Stock of DBSD (it being understood
that any such transaction may provide for per share consideration
below any of the valuation thresholds for the exercise for the
Warrants, in which case the holders of the Warrants would not be
entitled to exercise the Warrants in connection with any such
transaction).
DWT 12847612v 12 0069251-0000 I 0
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Agreements with
"Insiders"
Drag/Tag
Rights/Preemptive
Rights in the
Stockholders
Agreement
Charter Documents
Mechanics
Documentation
Releases
Tax Issues
SUBJECT TO FRE 408
Any and all agreements with any insider, except for those specifically
agreed to in writing by the Principal Holders, shall be terminated on or
before the consummation of the Restructuring and all accrued but
unpaid amounts owing to them (except for unpaid salary and amounts
owing pursuant to any then existing employment agreements) shall be
waived upon consummation of the Restructuring.
The Existing Stockholder will have customary tag-along rights with
respect to certain sales by the Holders. The Holders will have
customary drag-along right to cause the Existing Stockholder to
participate in certain sales by the Holders.
The Holders and the Existing Stockholder will have preemptive rights
with respect to the issuance of new equity securities of DBSD (subject
to customary carve-outs).
All charter documents for DBSD to be satisfactory to DBSD, ICO
Global and the Principal Holders.
The parties shall agree upon the precise mechanics for implementing
each of the transactions contemplated by the Restructuring and the
Pre-Arranged Plan.
All documentation prepared in connection with the Restructuring,
including without limitation, the Definitive Restructuring Documents,
and any documents, motions, pleadings, orders or the like prepared or
filed in connection with the chapter 11 cases shall be in form and
substance satisfactory to the Principal Holders, ICO Global and
DBSD.
The Holders shall provide a release to the Existing Stockholder and
existing directors and officers and their respective affiliates and
advisors. DBSD and its affiliates, including ICO Global, shall execute
a release of any claims they may have against the Holders, their
respective officers and directors and their respective affiliates and
advisors.
Parties to discuss methods to preserve value of available NOLs and
other tax considerations.
DWT 12847612vl2 0069251-000010
Fees & Expenses
Strategic Discussions
No Waiver
SUBJECT TO FRE 408
DBSD shall pay the fees and expenses of the Holders in connection
with the Restructuring, including the advisors to the Holders, who
shall be selected by the Principal Holders. DBSD shall, in advance of
any chapter 11 filings, pay all invoiced accrued and unpaid fees and
expenses of UBS and Milbank Tweed through the date immediately
preceding the anticipated filing date, and provide a customary retainer
to such advisors.
To the extent that DBSD or ICO Global have discussions with any
third party concerning any business combination or other strategic
transaction involving DBSD or any significant portion of its assets (a
"Strategic Transaction"), the Principal Holders' advisors, specifically
UBS and Milbank Tweed, shall be entitled to participate in any such
discussions, subject to required confidentiality arrangements (which
shall provide that the advisors may receive information and participate
in such discussions if they enter into a customary confidentiality
arrangement). Neither DBSD nor ICO Global shall enter into any
binding agreement or commitment with respect to any Strategic
Transaction, including any agreement or commitment obligating
DBSD to pay or reimburse expenses, break-up fees or other fees
without the prior consent of the Principal Holders.
Nothing herein shall affect in any way, nor be deemed a waiver of,
any of the rights of DBSD or any Holder under the indenture for the
Notes or any other document or under applicable law. Nothing herein
is intended to waive, limit, or restrict the ability of any of the
foregoing parties, in whatever capacity, to protect and preserve their
rights, remedies and interests against DBSD or any third party,
whether under the indenture for the Notes, any other document or
applicable law.
DWT 12847612vl2 0069251-000010
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Attachment 1
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Principal Holders
GOLD ENTREE
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GOLDMAN SACHS & CO
OCH-ZIFF CAPITAL MANAGEMENT GROUP
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PLAINFIELD ASSET MANAGEMENT
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RAPTOR GROUP
HIGHLAND CAPITAL MANAGEMENT
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DWT 12847612v12 0069251-000010
l
In re Lear Corporation, Case No. 09-14326 (Bankr. S.D.N.Y. 2009).
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To the Holders of Lender Claims
Referred to Below
LEAR CORPORATION
2I557 Telegraph Road
Southfield, Michigan 48033
July 6, 2009
This letter agreement (the "Agreement") sets forth certain terms and conditions
pursuant to which Lear Corporation ("Lear") and certain of its domestic and Canadian
subsidiaries (together with Lear, collectively the "Debtors") will propose their jointly filed
chapter II plan of reorganization (a "Plan") on a consensual basis with the support of the lenders
(the "Lenders") party to that certain Amended and Restated Credit and Guarantee Agreement
dated as of April25, 2006 (as amended, modified or otherwise supplemented from time to time,
the "Credit Agreement"), among Lear, certain of its subsidiaries party thereto, the Lenders,
JPMorgan Chase Bank, N.A., as general administrative agent thereunder (in such capacity, the
"Administrative Agent"), and the other parties signatory thereto.
Capitalized terms not defined herein shall have the meaning ascribed to such
terms in the Restructuring Term Sheet (as defined below).
1. Proposed Plan of Reorganization
Each of the Debtors proposes to commence voluntary, pre-arranged cases
(collectively, the "Chapter 11 Cases") under chapter 11 of title II ofthe United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New
York (the "Bankruptcy Court") to be jointly administered. Certain Canadian subsidiary Debtors
(the "Canadian Debtors") propose to commence parallel cases under section I8.6 of the
Companies' Creditors Arrangement Act (the "CCAA Cases") in the Ontario Superior Courts
Commercial List (the "Canadian Court"), in which such Canadian Debtors will seek relief
consistent with the relief sought by the Debtors in the Chapter 11 Cases. As part of the Chapter
1I Cases, the Debtors intend to file a disclosure statement and related Plan, which will provide
for, among other things, certain distributions on account of the claims of the Lenders under the
Credit Agreement (the "Lender Claims").
2. Representations and Warranties of the Participating Lenders
Each Lender identified as a holder of Lender Claims on the signature pages hereto
(such Lenders, the "Participating Lenders") represents and warrants to the Debtors that, as of the
date hereof:
(a) Such Participating Lender (i) either (A) is the sole beneficial owner of the
principal amount of Lender Claims set forth below under its signature hereto, or (B) has sole
investment or voting discretion with respect to the principal amount of Lender Claims set forth
below under its signature and has the power and authority to bind the beneficial owner(s) of such
Lender Claims to the terms of this Agreement and (ii) has full power and authority to act on
behalf of, vote and consent to matters concerning such Lender Claims and to dispose of,
exchange, assign and transfer such Lender Claims. For the purposes ofthis Agreement,
"Participating Lenders" shall not include a holder of Lender Claims signatory hereto in its
capacity or to the extent of its holdings as a public-side broker or market maker of Lender
Claims or any other claim against or security in the Debtors.
(b) Such Participating Lender has made no prior assignment, sale,
agreement to assign, sell, participate, grant, convey or otherwise transfer, in whole or in part, any
portion of its right, title, or interests in any Lender Claims that are subject to this Agreement that
are inconsistent with the representations and warranties of such Participating Lender herein or
would render such Participating Lender otherwise unable to comply with this Agreement and
perform its obligations hereunder.
(c) Such Participating Lender (i) has such knowledge and experience in
financial and business matters of this type that it is capable of evaluating the merits and risks of
entering into this Agreement and of making an informed investment decision, and has conducted
an independent review and analysis of the business and affairs of the Debtors that it considers
sufficient and reasonable for purposes of entering into this Agreement and (ii) is an "accredited
investor" (as defined by Rule 501 of the Securities Act of 1933, as amended).
3. Support for a Qualified Plan
Subject to the terms and conditions hereof and for so long this Agreement has not
been terminated as provided herein, and except as otherwise specifically requested in writing by
Lear, each Participating Lender shall (and, in the case of the following clauses (a), (b), (c), (d)
and (e), shall cause each of its affiliates, subsidiaries, representatives, agents and employees to)
(a) (i) vote its Lender Claims to accept any Plan proposed by the Debtors incorporating the terms
and conditions set forth on the term sheet annexed hereto as Exhibit 1, which term sheet is
expressly incorporated by reference herein and made a part of this Agreement as if fully set
forth herein (as such term sheet may be modified in accordance with Section 9 hereof, the
"Restructuring Term Sheet"), consistent in all material respects with this Agreement and the
Restructuring Term Sheet, and in form and substance reasonably satisfactory to the Debtors (a
"Qualified Plan") by delivering its duly executed and completed ballot accepting such Qualified
Plan on a timely basis following commencement ofthe solicitation of acceptances of such
Qualified Plan in accordance with sections 1125 and 1126 of the Bankruptcy Code and (ii) not
change or withdraw such vote (or cause or direct such vote to be changed or withdrawn),
(b) support, and take all reasonable actions necessary or reasonably requested by the Debtors to
facilitate, the solicitation, confirmation and consummation of a Qualified Plan and the
transactions contemplated thereby, (c) not object to, or vote any of its Lender Claims to reject, a
Qualified Plan or otherwise take any action or commence any proceeding to oppose or to seek
any modification of a Qualified Plan, the related disclosure statement, in form and substance
reasonably satisfactory to the Debtors and consistent in all material respects with this Agreement
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and the Restructuring Term Sheet (the "Disclosure Statement"), or any other reorganization
documents filed by any of the Debtors in connection with the Chapter II Cases and the
confirmation of a Qualified Plan, (d) not directly or indirectly seek, solicit, support, encourage,
vote its Lender Claims for, consent to, encourage, or participate in any discussions regarding or
the negotiation or formulation of(i) any plan ofreorganization, proposal, offer, dissolution,
winding up, liquidation, reorganization, merger, consolidation, business combination, joint
venture, partnership, sale of assets or restructuring for any ofthe Debtors (each, an "Alternative
Proposal") other than a Qualified Plan or (ii) any other action that is inconsistent with, or that
would delay or obstruct the proposal, solicitation, confirmation, or consummation of, a Qualified
Plan, and (e) support customary release provisions contained in any Qualified Plan in favor of
the Debtors and its agents, including their respective officers, directors and employees.
Each Participating Lender agrees to permit disclosure in the Disclosure Statement
and any filings by the Debtors with the Securities and Exchange Commission and any other
regulatory agency to which the Debtors may be subject ofthe contents of this Agreement,
including, but not limited to, the aggregate Lender Claims held by all Lenders; provided that
(i) the Debtors shall provide a draft of such disclosure to the Administrative Agent (on behalf of
the Participating Lenders) and a reasonable amount of time to review such draft prior to such
disclosure being made and (ii) the Debtors shall not disclose the amount of any individual
Lender Claim, except as otherwise required by applicable law.
4. Transfer of Lender Claims
Each Participating Lender agrees that so long as this Agreement has not been
terminated in accordance with its terms it shall not directly or indirectly (a) grant any proxies to
any person in connection with its Lender Claims to vote on the Plan, or (b) sell, pledge,
hypothecate or otherwise transfer or dispose of, or grant, issue or sell any option, right to acquire,
voting, participation or other interest in ("Transfer") any Lender Claims, except in accordance
with the terms of the Credit Agreement and to a party that agrees in writing to be subject to the
terms and conditions of this Agreement as a "Participating Lender", which writing shall be in
form and substance reasonably satisfactory to the Administrative Agent and the Debtors. Each
Participating Lender agrees to notifY the Debtors in writing before the close of two (2) business
days after such Transfer of its Lender Claims and to provide the Debtors with a signed agreement
of the transferee agreeing to be subject to the terms and conditions of this Agreement before the
close oftwo (2) business days after such Transfer. Any Transfer of any Lender Claim that does
not comply with the foregoing shall be deemed void ab initio. This Agreement shall in no way
be construed to preclude any Lender from acquiring additional Lender Claims or any other
interests in any Debtors; provided, however. that any such additional Lender Claims or other
interests in such Debtor shall, upon acquisition, automatically be deemed to be subject to all the
terms of this Agreement.
As long as a Termination Event (as defined below) has not occurred, or has
occurred but has been duly waived in accordance with the terms hereof, the Debtors shall, to the
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extent not inconsistent with the fiduciary obligations of any ofthe Debtors or any oftheir
respective subsidiaries under applicable law, use their commercially reasonable efforts to:
(a) file the Disclosure Statement and prosecute its approval by the Bankruptcy
Court within the time frame set forth herein;
(b) obtain from the Bankruptcy Court an order confirming a Qualified Plan
(the "Confirmation Order") within the time frame set forth herein, which Confirmation Order
shall be in form and substance reasonably satisfactory to the Administrative Agent and the
Debtors and consistent in all material respects with this Agreement and the Restructuring Term
Sheet; and
(c) effectuate and consummate a Qualified Plan within the timeframe set forth
herein.
6. Termination ofObligations
(a) This Agreement shall terminate and all obligations of the parties hereto
shall immediately terminate and be of no further force and effect as follows:
(i) by the mutual written consent of Lear and Participating Lenders
holding more than 66 2/3% of the Lender Claims bound under this Agreement (the
"Requisite Participating Lenders");
(ii) on the date that is five (5) business days following the occurrence of
any ofthe events listed below (each, a "Termination Event"), unless such Termination
Event is waived by the Requisite Participating Lenders within such five (5) business day
period:
(A)the Chapter II Cases shall not have been filed by July 9, 2009 (or such
later date as may be agreed by Lear and the Requisite Participating Lenders);
(B) a Qualified Plan and the Disclosure Statement shall not have been filed
within 60 days after the filing date of the Chapter II Cases (the "Petition Date") (or
such later date as may be agreed by Lear and the Requisite Participating Lenders);
(C) the Bankruptcy Court shall not have entered an order, in form and
substance reasonably satisfactory to the Administrative Agent, approving the
adequacy of the Disclosure Statement within ISO days after the Petition Date (or such
later date as may be agreed by Lear and the Requisite Participating Lenders);
(D) the Bankruptcy Court shall not have entered the Confirmation Order
within 270 days after the Petition Date (or such later date as may be agreed by Lear
and the Requisite Participating Lenders);
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(E) a Qualified Plan shall not have been consummated within 300 days
after the Petition Date (or such later date as may be agreed by Lear and the Requisite
Participating Lenders);
(F) the Debtors shall (I) materially breach the Debtors' covenants set forth
in Section 5 above, (2) publicly announce their intention not to pursue a Qualified
Plan, or (3) propose, accept or file a motion with the Bankruptcy Court seeking
approval of an Alternative Proposal;
(G)(I) an examiner with expanded powers or a trustee shall have been
appointed in any ofthe Chapter II Cases, or (2) any ofthe Chapter II Cases shall
have been converted to cases under Chapter 7;
(H) the Chapter II Case of any Debtor that is a obligor or guarantor under
the Credit Agreement is involuntarily dismissed;
(I) the Bankruptcy Court does not enter, within I 0 days after the Petition
Date, an order governing the use by the Debtors of the Lenders' cash collateral and
granting adequate protection to the Lenders, substantially in the form annexed hereto
as Exhibit 2;
(J) the Bankruptcy Court does not enter, within 60 days after the Petition
Date, a debtor in possession financing order, in form and substance reasonably
satisfactory to the Administrative Agent and approving the DIP Facility (as defined in
the Restructuring Term Sheet);
(K)an event of default shall have occurred and be continuing under the
Debtors' debtor in possession financing facility and the obligations under such
facility shall have been accelerated and declared due and payable;
(L) a "Termination Event" shall have occurred under the Noteholder Plan
Support Agreement (as defined in the Restructuring Term Sheet); or
(M) there shall have occurred a force majeure event (to be defined as a
significant global disruption in the financial markets caused by outbreak of war,
terrorism, or other incidents, but not adverse changes in the financial, banking or
capital markets generally);
provided that the Administrative Agent shall promptly provide notice of any Termination
Event to Lear (it being understood that failure to provide such notice shall not constitute a
waiver of such Termination Event); or
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(iii) upon delivery of written notice ofterrnination to the Administrative
Agent by Lear following any material breach of any of the Participating Lenders'
representations, warranties, covenants or agreements set forth in this Agreement.
(b) Upon termination ofthis Agreement in accordance with the terms herein,
this Agreement shall forthwith become void and of no further force or effect, each party hereto
shall be released from its commitments, undertakings and agreements under or related to this
Agreement, and there shall be no liability or obligation on the part of any party hereto; provided,
however, that in no event shall any such termination relieve a party hereto from liability for its
breach or non-performance of its obligations hereunder prior to the date of such termination.
Upon the occurrence of any termination ofthis Agreement, any and all votes delivered by a
Participating Lender prior to such termination shall be deemed, for all purposes, to be null and
void from the first instance and shall not be considered or otherwise used in any manner by the
Debtors.
It is understood and agreed by the parties that money damages would not be a
sufficient remedy for any breach ofthis Agreement by any party and each non-breaching party
shall be entitled to seek specific performance and injunctive or other equitable relief, including
attorneys fees and costs, as a remedy of any such breach, and each party agrees to waive any
requirement for the securing or posting of a bond in connection with such remedy, in addition to
any other remedy to which such non-breaching party may be entitled, at law or in equity.
This Agreement supersedes all prior negotiations, and documents reflecting such
prior negotiations, between and among the Debtors and the Lenders (and their respective
advisors), with respect to the subject matter hereof.
9. Amendments
No amendment, modification, waiver or other supplement of the terms of this
Agreement or the Restructuring Term Sheet shall be valid unless such amendment, modification,
waiver or other supplement is in writing and has been signed by the Debtors and the Requisite
Participating Lenders, provided, however, (a) the written consent of each Participating Lender
shall be required for any amendment, modification, waiver or other supplement of this
Agreement that (i) amends or modifies in any way the definition of Conflicted Lender (as
defined below)as used in this Agreement or (ii) amends or modifies in any way the definition of
Requisite Participating Lenders as used in this Agreement, (b) the written consent of
Participating Lenders holding at least 66 2/3% of the aggregate Lender Claims or, if the
Participating Lenders hold in the aggregate less than such percentage of the aggregate Lender
Claims, then the written consent of each Participating Lender, shall be required for any
amendment, modification, waiver or other supplement of this Agreement that effects a material
change to the treatment of the Class 3A- Prepetition Credit Agreement Secured Claims or the
Class 5A- Other Unsecured Claims (each as defined in the Restructuring Term Sheet) from that
reflected in the Restructuring Term Sheet as of the date hereof, and (c) a Conflicted Lender shall
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have no vote on any matter herein and its Lender Claims will not count for any purposes in
calculating Requisite Participating Lenders.
"Conflicted Lender" shall be any Lender that, as of any date of determination, (a)
objects in any respect to any ofthe relief requested by the Debtors in their motion for approval of
the DIP Facility filed with the Bankruptcy Court or (b) holds nominal unsecured senior notes
claims against the Debtors that (determined on a percentage basis of the total unsecured senior
notes claims against the Debtors) exceed 50% of its nominal Lender Claims (determined on a
percentage basis of the total Lender Claims of all Lenders). By way of example with respect to
clause (b) in the immediately preceding sentence, if a Lender held 30% ofthe aggregate Lender
Claims, it would be a Conflicted Lender if it held more than 15% ofthe aggregate unsecured
senior notes claims against the Debtors.
For the purposes hereof, immaterial changes to the Restructuring Term Sheet shall
not constitute a modification or amendment thereof or ofthis Agreement and may be made by
the Debtors and the Administrative Agent.
Each Participating Lender hereby confirms that it has made its own decision to
execute this Agreement based upon its own independent assessment of documents and
information available to it, as it deemed appropriate.
11. Governing Law
This Agreement shall be governed by, and construed in accordance with, the
interna1Iaws ofthe State ofNew York. By its execution and delivery ofthis Agreement, each of
the parties hereto hereby irrevocably and unconditionally agrees for itself that any legal action,
suit or proceeding against it with respect to any matter under or arising out of or in connection
with this Agreement or for recognition or enforcement of any judgment rendered in any such
action, suit or proceeding, may be brought in either a state or federal court of competent
jurisdiction in the State ofNew York. By execution and delivery ofthis Agreement, each ofthe
parties hereto hereby irrevocably accepts and submits itselfto the nonexclusive jurisdiction of
each such court, generally and unconditionally, with respect to any such action, suit or
proceeding. Notwithstanding the foregoing consent to jurisdiction in either a state or federal
court of competent jurisdiction in the State ofNew York, upon the commencement ofthe
Chapter 11 Cases, each of the parties hereto hereby agrees that, if the petitions have been filed
and the Chapter 11 Cases are pending, the Bankruptcy Court shall have exclusive jurisdiction of
12. Effective Date
Upon delivery of its duly executed counterpart signature page, each Participating
Lender shall be bound to the terms of this Agreement, and this Agreement shall become effective
as between the Debtors and such Participating Lender (the "Effective Date"); provided, that if as
ofthe commencement of the Chapter II Cases, the Debtors have not received (a) signature pages
to this Agreement from Lenders holding more than 50% of the aggregate amount of Lender
7
Claims and (b) signatures to the Noteholder Plan Support Agreement from holders ofUnsecured
Note Claims (as defined in the Restructuring Term Sheet) holding more than 50% of the
aggregate amount of Unsecured Notes Claims, this Agreement shall become null and void.
Upon the Effective Date, the Restructuring Term Sheet shall be deemed effective
for the purposes of this Agreement and thereafter the terms and conditions therein may only be
amended, modified, waived or otherwise supplemented as set forth in Section 9 above.
This Agreement is intended for the benefit of the parties hereto and no other
person shall have any rights hereunder.
14. Counterparts
This Agreement may be executed in several counterparts, each of which shall be
deemed to be an original, and all of which together shall be deemed to be one and the same
agreement. Execution copies of this agreement may be delivered by facsimile or otherwise,
which shall be deemed to be an original for the purposes of this paragraph.
15. Headings
The section headings ofthis Agreement are for convenience of reference only and
shall not, for any purpose, be deemed a part of this Agreement.
16. Acknowledgment
This Agreement is not and shall not be deemed to be a solicitation of consents to
the Plan. The acceptance of the Lenders will not be solicited until the Lenders have received the
Disclosure Statement and related ballot, as approved by the Bankruptcy Court.
settlement of matters that could otherwise be the subject of litigation among the parties hereto.
Nothing herein shall be deemed an admission of any kind. Pursuant to Federal Rule ofEvidence
408 and any applicable state rules of evidence, this Agreement and all negotiations relating
thereto shall not be admissible into evidence in any proceeding other than a proceeding to
enforce the terms of this Agreement.
18. No Waiver of Participation and Preservation ofRights
Except as provided in this Agreement, nothing herein is intended to, does or shall
be deemed in any manner to waive, limit, impair or restrict the ability of each of the Lenders to
protect and preserve its rights, remedies and interests, including, but not limited to, its claims
against any of the Debtors, any liens or security interests it may have in any assets of any of the
Debtors, or its full participation in the Chapter 11 Cases. Without limiting the foregoing sentence
8
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in any way, ifthis Agreement is terminated in accordance with its terms for any reason, the
parties hereto each fully reserve any and all oftheir respective rights, remedies and interests,
subject to Section 6(b) in the case of any claim for breach of Agreement arising prior to
termination.
9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective duly authorized officers, solely in their respective
capacity as officers of the undersigned and not in any other capacity, as of the date flrst set forth
above.
LEAR CORPORATION (on behalfofitselfand
z)
B: &:\. lJ.

LENDERS
Tttle: t'tutsJ
... ,'4Y'r
[Signature Page Plan Support Agreement]
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EXIDBIT 1
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Restructuring Term Sheet
(please see attached)
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LEAR CORPORATION
JOINT PLAN OF REORGANIZATION TERM SHEET
(Exhibit 1 to the Plan Support Agreement)
THIS TERM SHEET DESCRIBES A PROPOSED RESTRUCTURING (THE
"RESTRUCTURING") FOR LEAR CORPORATION ("LEAR") AND CERTAIN OF ITS
DOMESTIC AND CANADIAN SUBSIDIARIES PURSUANT TO A JOINT PLAN OF
REORGANIZATION (THE "PLAN OF REORGANIZATION") WHICH WOULD BE FILED BY
THE DEBTORS (AS DEFINED BELOW) IN CONNECTION WITH A CONTEMPLATED
CHAPTER 11 FILING IN THE UNITED STATES BANKRUPTCY COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK (THE "BANKRUPTCY COURT").
THIS TERM SHEET IS NOT AN OFFER OR A SOLICITATION WITH RESPECT TO
ANY SECURITIES OF LEAR OR ITS SUBSIDIARIES. ANY SUCH OFFER OR
SOLICITATION SHALL COMPLY WITH ALL APPLICABLE SECURITIES LAWS
AND/OR PROVISIONS OF THE BANKRUPTCY CODE.
OVERVIEW
...
Restructuring Summary Prior to the commencement of the Debtors' chapter 11 cases, (a) certain of
the Prepetition Credit Agreement Lenders listed therein and the Debtors
will have executed a Plan Support Agreement (the "Lender Plan Support
Agreement") pursuant to which the Debtors agree to pursue and implement
a Plan of Reorganization consistent in form and substance in all material
respects with this Term Sheet and (b) certain of the holders of the
Unsecured Note Claims (as defined herein) listed therein, including those
noteholders constituting a steering committee of noteholders (the
"Noteholder Steering Committee"), and the Debtors will have executed a
Plan Support Agreement (the "Noteholder Plan Support Agreement,"
and together with the Lender Plan Support Agreement, the "Plan Support
Agreements") pursuant to which the Debtors agree to pursue and
implement a Plan of Reorganization consistent in form and substance in all
material respects with this Term Sheet. This Term Sheet does not include a
description of all of the terms, conditions and other provisions that are to be
contained in the Plan of Reorganization and the related definitive
documentation governing the Restructuring.
S0926S-002.f-02208-Actlve 11681162 1 S
In conjunction with the Restructuring, a group of Prepetition Credit
Agreement Lenders has agreed to provide a debtor-in-possession financing
facility (such facility, the "DIP Facility") which, upon satisfaction of
certain conditions, will convert into the Exit Facility (as defined below)
upon the Debtors' exit from chapter 11. A detailed description of the DIP
Facility, including pricing terms, conditions and covenants, is set forth in
the debtor in possession financing credit agreement agreed to by the
Debtors and the Prepetition Credit Agreement Lenders party thereto
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Debt to be Repaid/
Restructured
Securities to be Issued
under the Plan of
Reorganization
509265-0024-02208-Acllve.JI681162.15
attached hereto as Annex I (the "DIP Credit Agreement").
Indebtedness to be treated under the Plan of Reorganization will include:
(i) approximately $2.3 billion outstanding (together with the Swap Claims
referred to below, the "Prepetition Credit Agreement Obligations")
under that certain Amended and Restated Credit Agreement dated as of
April 25, 2006 (the "Prepetition Credit Agreement") among Lear, certain
of its subsidiaries, JPMorgan Chase Bank, N.A., as administrative agent
and collateral agent (in such capacity, the "Prepetition Administrative
Agent") and the lenders party thereto (including as holders of termination
claims under certain hedging arrangements (the "Swap Claims"), the
"Prepetition Credit Agreement Lenders"); and
(ii) approximately $1.3 billion aggregate principal amount of senior
unsecured notes (plus accrued and unpaid interest) (the "Unsecured Note
Claims"), comprised of (a) the unsecured 8.50% senior notes due 2013 and
the unsecured 8.75% senior notes due 2016 issued pursuant to that certain
Indenture dated as of November 24, 2006, among Lear, certain subsidiary
guarantors and The Bank of New York Trust Company, N.A. as Trustee,
(b) the unsecured 5.75% senior notes due 2014 issued pursuant to that
certain Indenture dated as of August 3, 2004 among Lear, certain
subsidiary guarantors and BNY Midwest Trust Company as Trustee, and
(c) the unsecured zero-coupon convertible senior notes due 2022 issued
pursuant to that certain Indenture dated as of February 20, 2002, among
Lear, certain subsidiary guarantors and The Bank of New York Trust
Company, N .A. as Trustee.
Debt. The (i) $500 million first lien term Joan Exit Facility described in
the exit credit agreement attached hereto as Annex 2 (the "Exit Facility")
and (ii) $600 million second lien term loan with the terms and conditions
set forth on Exhibit I (the "New Term Loans").
Preferred Stock. Reorganized Lear shall issue up to $500 million in
Series A Preferred Stock (the "Series A Preferred Stock") with the terms
and conditions set forth on Exhibit 2.
New Common Stock. Subject to the right of the stockholders to amend the
certificate of incorporation, reorganized Lear ("Reorganized Lear") shall
issue a single class of common stock (the "New Common Stock") on the
effective date of the Plan of Reorganization (the "Effective Date"), which
stock shall be deemed fully paid and non-assessable.
Management Equity Plan. There shall be allocated sufficient shares of
New Common Stock to provide a Management Equity Plan (as defined
below) with a reserve for equity awards of New Common Stock, as
provided in Exhibit 4 hereto.
Warrants:
(A). To the extent the Exit Facility fee is not paid in cash, Reorganized
2
Lear will issue warrants to purchase shares of New Common Stock with an
Effective Date value of up to $25 million, all as set forth in the DIP
Facility, and representing a percentage of the New Common Stock, as
reflected on Exhibit 7 hereto.
(B). Reorganized Lear shall issue warrants to holders of Class SA Claims,
with such warrants to have the tenns and conditions set forth in Exhibit 3
hereto.
Proposed Filing Entities Lear expects that voluntary chapter II cases will be commenced by Lear
and certain of its domestic and Canadian subsidiaries (the "Debtors"). For
purposes of the Plan of Reorganization, the Debtors will be further
classified into Group A Debtors, consisting of those Debtors liable for
Prepetition Credit Agreement Obligations, the Swap Claims and the
Unsecured Note Claims (the "Group A Debtors") and the Group B
Debtors
1
, consisting of all Debtors who are not Group A Debtors (the
"Group B Debtors").
s;;LASSiinC:ATION .
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Unclassified Claims
DIP Facility Claims The DIP Facility shall, on the Effective Date, be repaid by the Exit Facility
or paid in full in cash. In addition, Reorganized Lear will issue Warrants to
the lenders under the DIP Facility on the Effective Date to the extent
required under the tenns of the DIP Facility.
Not classified; non-voting.
Administrative Claims Each holder of an allowed administrative claim, including claims of the
type described in section 503(b)(9) (to the extent not already paid during
the chapter II cases), of the Bankruptcy Code, shall receive payment in
full (in cash) of the unpaid portion of its allowed administrative claim on
the Effective Date or as soon thereafter as practicable (or, if payment is not
then due, shall be paid in accordance with its tenns) or pursuant to such
other tenns as may be agreed to by the holder of such claim and the
Debtors.
Priority Tax Claims Priority tax claims shall be treated in accordance with section
1129(a)(9)(C) of the Bankruptcy Code.
Intercompany Claims There shall be no distributions on account oflntercompany Claims.
Notwithstanding the foregoing, Lear, in its sole discretion, may (or may
cause each applicable Debtor to), reinstate or compromise, as the case may
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To the extent required, the Plan of Reorganization could be structured to incorporate separate plans of
reorganization for each Debtor, with each such plan reflecting substantive treatment of claims consistent
with the tenns hereof.
3
S0926S-0024-0220I-Ac:tive.II6B 1162.15
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be, intercompany claims between and among the Debtors and their
subsidiaries.
Classified Claims and Interests
Groul! A Debtors
Class lA-Other Priority All claims accorded priority in right of payment under section 507(a) of the
Claims Bankruptcy Code, other than Priority Tax Claims against the Group A
Debtors, shall be paid in full in cash on the later of the Effective Date or the
allowance ofthe claim; provided, that, subject to Bankruptcy Court
approval, priority wage claims against the Group A Debtors may be paid in
full in the ordinary course of business.
Unimpaired; not entitled to vote - deemed to accept.
Class 2A-Other Secured Each holder of an Other Secured Claim against the Group A Debtors shall
Claims receive the following treatment, at the option of the Group A Debtors: (a)
payment in full (in cash) on the Effective Date or as soon thereafter as
practicable to the extent secured; (b) delivery of collateral securing any
such claim and payment of any interest required under section 506(b) of the
Bankruptcy Code; or (c) other treatment rendering such claim unimpaired.
Unimpaired; not entitled to vote - deemed to accept.
Class 3A-Prepetition For purposes ofthe Plan of Reorganization and in settlement and
Credit Agreement compromise of all issues relating to the amount ofthe secured portion of
Secured Claims the Prepetition Credit Agreement Obligations, the Prepetition Credit
Agreement Lenders will have allowed secured claims against the Group A
Debtors in an aggregate amount equal to $1.6 billion
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(the "Prel!etition
Credit Agreement Secured Claims"). Each holder of a Prepetition Credit
Agreement Secured Claim shall receive its pro rata share of: (i) $600
million of New Term Loans; (ii) $500 million in Series A Preferred Stock
to be convertible into a percentage of the New Common Stock, as provided
in Exhibit 7 hereto; and (iii) a percentage of the New Common Stock, as
provided in Exhibit 7 hereto. To the extent Reorganized Lear has
Minimum Liquidity (as defined below) determined on a normalized basis
consistent with the financial analysis provided to the ?repetition
Administrative Agent and the advisors to the Noteholder Steering
Committee by Lear, in excess of $1.0 billion on the Effective Date, the
amount of such excess shall be utilized to prepay, without premium or
penalty, first, the Series A Preferred Stock, in an aggregate stated value of
up to $50 million, then the New Term Loans, in an aggregate principal
amount of up to $50 million, and thereafter, the Exit Facility; provided
further that any payments of the New Term Loans made with the Debtors'
excess cash within the first 30 days after the Effective Date shall not be
subject to any prepayment penalty or premium.
"Minimum Liquidity" shall mean cash and cash equivalents, plus
availability under working capital facilities, if any, plus a working capital
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Inclusive of the Swap Claims.
4
llm6l-DOl4-022DB-Aoove.l 161 1162.JS
adjustment to be agreed upon the Debtors, the Prepetition Administrative
Agent and the Noteholder Steering Committee, less any accrued but unpaid
professional fees and other chapter 11 costs not paid prior to the Effective
Date, and cash financing costs to the extent not previously paid; provided,
that at least $800 million of such aggregate amount consists of cash and
cash equivalents; andprovided,further that Minimum Liquidity shall be
determined on or prior to the date that is 30 days after the Effective Date.
Impaired - entitled to vote.
Class 4A-Unsecured "Unsecured Ongoing O(!erations Claims" shall consist of all general
Ongoing Operations unsecured claims relating to the provision of goods or services to the Group
Claims A Debtors arising with, or held by, persons or entities with whom the
Debtors are conducting business as of the date of commencement of the
Debtors' chapter 11 cases, but excluding any claims arising from the
rejection by the Debtors of any contracts and leases and all other Class 5A
or 6A Claims. Each holder of an Unsecured Ongoing Operations Claim
that is due and payable on or before the Effective Date shall be paid in full
(in cash) on the Effective Date on account of such claim or otherwise
receive such treatment as to render such holder unimpaired. An allowed
Unsecured Ongoing Operations Claim that is not due and payable on or
before the Effective Date shall be paid thereafter (i) in the ordinary course
of business in accordance with the terms of any agreement that governs
such allowed Unsecured Ongoing Operations Claim or (ii) in accordance
with the course of practice between the Group A Debtors and such holder
with respect to such allowed Unsecured Ongoing Operations Claim.
Holders of Unsecured Ongoing Operations Claims who received
payment(s) from the Group A Debtors during the chapter II cases pursuant
to any Bankruptcy Court order shall not be excluded from receiving
distributions under the Plan of Reorganization on account of such claims
unless such claims were fully satisfied by any prior payments from the
Group A Debtors. The Group A Debtors shall reserve all rights to
challenge the legal basis and amount of any Unsecured Ongoing Operations
Claim.
Unimpaired; not entitled to vote- deemed to accept.
Class SA-Other "Other General Unsecured Claims" against the Group A Debtors shall
Unsecured Claims
3
consist of all general unsecured claims against the Group A Debtors that
are not otherwise classified in Class 4A or 6A, including without limitation,
(i) the Unsecured Note Claims, (ii) the Prepetition Credit Agreement
Lenders' unsecured deficiency claim in the amount of approximately $73 7
million (the "Pre(!etition Credit Deficient! Claims"), (iii)
claims arising upon rejection of leases and executory contracts to which a
Group A Debtor is party; (iv) claims relating to the provision of goods or
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Includes Unsecured Note Claims, the Prepetition Credit Agreement Deficiency Claims and all other
claims against the Group A Debtors that are not alan (a) Administrative Claim, (b) Priority Tax Claim,
(c) Convenience Claim, (d) Other Secured Claim, (e) Prepetition Credit Agreement Secured Claim, (t)
Priority Wage Claim, (g) Intercompany Claim, (h) Unsecured Ongoing Operations Claim or (i)
Convenience Claim, but excludes Class lA Claims and other employee-related claims otherwise
provided for in this Tenn Sheet.
509265-0024-02208-Activo 11681162.15
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Class 6A-Convenience
Claims
Class 7 A-Existing
Equity and 510(b) Claims
Class 1 B-Other Priority
Claims
S0926SDDl4-0llD8Acuve.ll611162.15
services to the Group A Debtors that are not classified as Administrative
Claims or Class 4A or 6A Claims and (v) claims arising from litigation
damages entered against the Group A Debtors (collectively, the "2!!!.!:
General Unsecured Claims").
Each holder of an allowed General Unsecured Claim against a Group A
Debtor shall receive its pro rata share of(i) a percentage of the New
Common Stock, as provided in Exhibit 7 hereto, that remains after giving
effect to the distribution of New Common Stock to holders of Class 3A
Claims and subject to dilution from the Series A Preferred Stock, the
Warrants and the Management Equity Plan; and (ii) Warrants representing
15% of Reorganized Lear's outstanding New Common Stock, with the
terms and conditions set forth in Exhibit 3 hereto.
Subject to Bankruptcy Court approval, claims below a threshold to be
agreed between the Debtors, the Noteholder Steering Committee and the
Prepetition Administrative Agent against the Group A Debtors shall be paid
an amount equal to 25% of such claim in cash on the later of the Effective
Date or the allowance of the claim.
Class 7A-l-Equity interest in Lear
Holders ofthe existing equity in Lear shall receive no recovery. Class 7A-
l interests include the common stock of Lear and options, warrants or other
agreements to acquire the same (whether or not arising under or in
connection with any employment agreement), including without limitation,
any claim against the Debtors that is subordinated pursuant to section
510(b) ofthe Bankruptcy Code, which shall include any claim arising from
the recission of a purchase or sale of any equity interest, any claim for
damages arising from the purchase or sale of any equity interest, or any
claim for reimbursement, contribution or indemnification for such claim.
Impaired; not entitled to vote - deemed to reject.
Class 7A-2-Existing equity interest in Debtor subsidiaries of Lear
All equity interests of Lear's Group A Debtor subsidiaries shall continue to
be held by Lear and the subsidiaries of Lear holding such equity interests
prior to the commencement of the Cases.
Group B Debtors
All claims accorded priority in right of payment under section 507(a) of the
Bankruptcy Code, other than Priority Tax Claims against the Group B
allowance ofthe claim; provided, that subject to Bankruptcy Court
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Class 28-0ther Secured
Claims
Class 3B--Unsecured
Claims
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Class 4B--Existing
Equity
Management Equity Plan
Employment
Agreements/Other
Incentive Plans
approval, priority wage claims against the Group B Debtors may be paid in
Unimpaired; not entitled to vote- deemed to accept
Each holder of an Other Secured Claim against the Group B Debtors shall
receive the following treatment, at the option of the Group B Debtors: (a)
All general unsecured claims of the Group B Debtors' creditors set forth or
otherwise described in the disclosure statement, including claims under
contracts and unexpired leases assumed by the Group B Debtors under the
Plan of Reorganization and trade payables owed by any Group B Debtor or
non-debtor subsidiary of Lear to any third party creditor, but excluding the
Intercompany Claims, will be paid in the ordinary course as such claims
become due. The Group B Debtors shall reserve all rights to challenge the
legal basis and amount of any general unsecured claims.
All equity interests of Lear's Group 8 Debtor subsidiaries shall continue to
prior to the commencement ofthe Cases.
GENERAL PROVISiONS
' '
On the Effective Date, Lear shall implement the Management Equity Plan
(the "Management Equity Plan") for the benefit of certain continuing
employees of the Debtors and non-management members of the Board (as
defined below). The Management Equity Plan shall have the terms set
forth on Exhibit 4 hereto.
The Plan of Reorganization shall provide for the adoption or assumption, as
applicable, of the agreements between the Debtors and those executive
officers of the Debtors who are parties to employment agreements with the
Debtors as of the Petition Date (as defined below), which agreements shall
(i) provide severance benefits to such executive officers equal to the
severance benefits such executive officers are entitled to receive under their
prepetition employment agreements with the Debtors and (ii) be in the form
provided to the Prepetition Administrative Agent and the Noteholder
Steering Committee by Lear. To the extent assumed, and as applicable,
any such prepetition agreement shall be amended to eliminate provisions
therein providing for the issuance of equity interests in Lear, with such
4
Includes all other claims against the Group B Debtors that are not alan (a) Administrative Claim, (b)
Priority Tax Claim, (c) Other Secured Claim, (d) Priority Wage Claim, or (e) Intercompany Claim.
7
1162. 1,5
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I interests being treated as Class 7 A-1 equity interest as set forth above.
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The Plan of Reorganization shall provide for the adoption or assumption of
the key management incentive plan, the valued employees plan and the
remaining non-equity obligations under the outside director compensation
plan, the long term stock incentive plan, and the management stock
purchase plan, substantially consistent with the summaries provided to the
Prepetition Administrative Agent and the Noteholder Steering Committee
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prior to the Petition Date (as defined below); provided that all incentive
plan provisions covering insiders are approved by the Bankruptcy Court.
Unless otherwise rejected or terminated by the Debtors in their sole
discretion on or before confirmation of the Plan of Reorganization, the Plan
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of Reorganization shall provide that the reorganized Debtors shall assume
or reinstate all employee and retiree health, welfare and qualified and non-
qualified pension plans. The restructuring contemplated by this Term
Sheet will not constitute a "change in control" or "change of control" (as
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those terms are defined in the respective plans to be assumed). The key
management incentive plan shall have the terms set forth in Exhibit 5
hereto. I
After the Effective Date, Reorganized Lear shall continue or enter into any
benefit, compensation, incentive or similar plans and agreements as
approved by the Board.
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For purposes of clarity, a list of the U.S. plans and their treatment under the
Plan of Reorganization is attached as Exhibit 6 hereto.
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Cancellation of On the Effective Date, except to the extent otherwise provided above, all
Instruments, Certificates instruments, certificates and other documents evidencing debt or equity
and Other Documents interests in Lear or the other Debtors shall be cancelled, and the obligations
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of the Debtors thereunder, or in any way related thereto, shall be
discharged.
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Executory Contracts and Executory contracts and unexpired leases shall be assumed or rejected, as
Unexpired Leases the case may be, in the Debtors' discretion, in the Plan of Reorganization to
the extent that any such executory contracts and unexpired leases have not
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been assumed or rejected by the Debtors in their discretion during the
pendency of the chapter 11 reorganization.
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Ad Hoc Committee The Debtors shall pay the reasonable fees and expenses of the Ad Hoc
Advisor Fees Committee Advisors (as defined in the Noteholder Support Agreement) as
set forth in the Noteholder Plan Support Agreement, incurred in connection
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with the Debtors' chapter II cases without the need for any application to
the Bankruptcy Court unless other required by applicable bankruptcy law
or any order of the Bankruptcy Court.
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Retention of Jurisdiction The Bankruptcy Court shall retain jurisdiction for customary matters.
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5092650024-02208A<ti".ll68116215
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CORPORATE GOVERNANCE/CHARTERPROVISIONS/CAPITAL STOCK/REPORTING.
COMPANY/1145'EXEMPTION. . . . . . . . . . . . '
.. . .. ' . '. .. . . ;:
Board of Directors of Reorganized Lear shall have a nine-person board of directors (the
Lear "Board"), which shall consist of eight directors and Reorganized Lear's
Chairman & Chief Executive Officer. Of the eight directors: (a) no fewer
than five shall be appointed by the Prepetition Administrative Agent in
consultation with the Prepetition Credit Agreement Lenders party to the
Plan Support Agreement and with the assistance of a nationally recognized
executive search finn to be retained by the Prepetition Administrative
Agent (at the expense of the Debtors); and (b) three members shall be
appointed by the Noteholder Steering Committee in consultation with the
other holders of Unsecured Note Claims who are parties to the Noteholder
Plan Support Agreement and the creditors' committee in the Debtors'
chapter II cases. Current directors will be included among the candidates
to be considered for the new Board.
Charter; Bylaws
Company as a Public
Reporting Company
Exemption from SEC
Registration
Debtor Releases
50926S-0024-02201Aclive 11681162.1S
All directors of the Board shall meet the criteria set forth in the NYSE or
Nasdaq, as applicable, listing requirements.
The charter and by laws of each of the Debtors shall have been restated in a
manner reasonably satisfactory to the Prepetition Administrative Agent and
the Noteholder Steering Committee and consistent with section 1123(a)(6)
of the Bankruptcy Code.
For certain purposes, including requiring Lear to become a public reporting
company under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Plan of Reorganization shall require Lear as
promptly as practicable following the Effective Date to file with the SEC a
registration statement on Form 10 under the Exchange Act registering all
securities issued under the Plan of Reorganization under the Exchange Act
(the "Form 10"), and Lear shall use reasonable best efforts to have such
registration statement declared effective by the SEC as promptly as
reasonably practicable.
The Plan of Reorganization shall provide for Lear to use its reasonable best
efforts to obtain a listing for the New Common Stock on NYSE or Nasdaq
as soon as reasonably practicable following the effectiveness of the Form
10 (e.g., after listing requirements are satisfied).
Demand registration rights with respect to the Series A Preferred Stock and
the New Common Stock to be discussed based upon the anticipated
composition of holders of Series A Preferred Stock and New Common
Stock on and after the Effective Date.
The issuance of all securities under the Plan of Reorganization will be
exempt from SEC registration under section 1145 of the Bankruptcy Code.
Full release, to the maximum extent permitted by law, by Debtors and their
estates in favor of lenders under the DIP Facilities, the Prepetition
Administrative Agent, the Prepetition Credit Agreement Lenders holders
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I of Unsecured Note Claims and current and former officers, directors,
employees, advisors, attorneys, professionals, accountants, investment
bankers, consultants, agents and other representatives (including their
respective officers, directors, employees, members and professionals) of
the Debtors and such lenders, noteholders and investors from any claims
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and causes of action based on or relating to, or in any manner arising from,
in whole or in part, the Debtors, the chapter 11 cases, the Plan of
Reorganization and the subject matter of, or the transactions or events
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giving rise to, any claim or interest that is treated in the Plan of
Reorganization (other than claims based on gross negligence or willful
misconduct) arising on or prior to the Effective Date.
Releases Among Released Plan shall provide that each of the parties released by the Debtors shall
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Parties release each other and the Debtors for pre-Effective Date matters based on
or relating to, or in any manner arising from, in whole or in part, the
Debtors, the chapter 11 cases, the Plan of Reorganization and the subject
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matter of, or the transactions or events giving rise to, any claim or interest
that is treated in the Plan of Reorganization.
Indemnification/ Customary indemnification and exculpation provisions. I
Exculpation
Discharge Customary discharge provisions.
Injunction Customary injunction provisions. I
Indemnification of Under the Plan of Reorganization, all indemnification provisions currently
Prepetition Officers and in place (whether in the by-Jaws, certificates of incorporation, board
Directors resolutions, indemnification agreements or employment contracts) for the
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current and former directors, officers, employees, attorneys, accountants,
investment bankers and other professionals of the Debtors shall be assumed
and irrevocable and shall survive the effectiveness of the Plan of
Reorganization.
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Tax Issues The terms of the Plan of Reorganization and the restructuring contemplated
by this Term Sheet shall be structured to preserve favorable tax attributes of
the Debtors to the extent practicable. The Debtors shall consult with the
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advisors to the Prepetition Administrative Agent and the advisors to the
Noteholder Steering Committee on tax issues and matters of tax structure
relating to the Plan of Reorganization and the restructuring contemplated
by this Term Sheet.
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PLAN IMPLEMENTATION AND PROPOSED SCHEDULE
Plan Support Agreement Prior to the commencement of the Debtors' chapter I I cases, the
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Prepetition Credit Agreement Lenders and the Debtors shall execute and
deliver the Lender Plan Support Agreement, and certain holders of the
Unsecured Notes and the Debtors shall execute and deliver the Noteholder
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Timeline (i) The Plan of Reorganization and related disclosure statement shall
be filed within 60 days of the filing date of these chapter II cases
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(the "Petition Date");
(ii) The Debtors shall obtain an order, in form and substance
reasonably satisfactory to the Requisite Participating Lenders (as
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Conditions Precedent to
Plan Confirmation
Plan Consummation
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(iii)
(iv)
(i)
(ii)
defined in the Lender Plan Support Agreement) and the Requisite
Participating Noteholders (as defined in the Noteholder Plan
Support Agreement), approving the adequacy of the disclosure
statement no later than 150 days after the Petition Date;
The Debtors shall obtain entry by the Bankruptcy Court of an
order, in fonn and substance reasonably satisfactory to the
Requisite Participating Lenders and the Requisite Participating
Noteholders, confinning the Plan of Reorganization no later than
270 days after the Petition Date; and
The Debtors shall cause the Effective Date of the Plan of
Reorganization to occur no later than 300 days after the Petition
Date.
The Plan Support Agreements shall be in full force and effect and
shall not have been terminated;
The disclosure statement shall have been approved;
(iii) The Prepetition Administrative Agent and the Noteholder Steering
Committee shall be reasonably satisfied with all material tax
matters and positions relating to the Debtors and the reorganized
Debtors;
(iv) Except as provided in this Term Sheet, including Exhibit 5 and
Exhibit 6 hereof, all employment arrangements of senior
management for the post-Effective Date period shall be reasonably
satisfactory to the Prepetition Administrative Agent and the
Noteholder Steering Committee;
(v) The Plan of Reorganization, including any amendments,
modifications or supplements thereto, and all documentation
contemplated by this Term Sheet or the Plan of Reorganization,
shall be in form and substance reasonably satisfactory to the
Noteholders;
(vi) There shall not have occurred a force majeure event (to be defined
as a significant global disruption in the financial markets caused by
outbreak of war, terrorism, or other incidents, but not adverse
changes in the financial, banking or capital markets generally); and
(vii) The Bankruptcy Court shall have entered an order confirming the
Plan of Reorganization, which order shall be in form and substance
reasonably satisfactory to the Debtors and the Requisite
Participating Lenders and the Requisite Participating Noteholders.
(i)
(ii)
Contemporaneous effectiveness of the Exit Facility or an
alternative exit financing facility provided that with respect to such
alternative exit financing facility the DIP Facility shall be repaid in
cash in full on the Effective Date; and
No modification or stay of confirmation order or entry of other
court order prohibitil!g_ Plan of Reorganization transactions from
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being consummated.
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Exhibit I
TERMS OF NEW TERM LOANS
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Borrower: Reorganized Lear.
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Guarantors: Reorganized Lear's domestic subsidiaries which
guarantee the Exit Facility.
Principal: $600 million.
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Maturity: 3 years from the Effective Date
Interest Rate: For the first 18-month period commencing with the
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consummation of the Plan of Reorganization (the
"Initial Perjod"), L+550 bps with a LIBOR floor
of 3. 5%; for the 12-month period commencing after
the Initial Period, L+650 bps with a LIBOR floor I
of 3.5%; and thereafter through maturity, L+750
bps with a LIBOR floor of3.5%.
Interest rate margin will be further increased by
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1.00% per annum on interest paid in PIK.
Call Premium: Call premium of2% of the principal amount of any
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voluntary prepayment under, or refinancing of, the
New Term Loans after the second anniversary of
the Effective Date, payable at the time of
prepayment/ refinancing.
Financial Covenants: Financial covenants to piggyback off of covenants
in the Exit Facility, but to be set off of wider
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cushions; debt-incurrence covenant TBD.
Collateral: The obligations under the New Term Loans will be
secured on a silent second priority basis by a
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perfected security interest in the Collateral under
the Exit Facility. Silent second priority security
interest in the Collateral, payment subordination,
lien priority, relative rights and other creditors'
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rights issues in respect of the New Term Loans and
the Exit Facility (and any debt refinancing or
replacing such debt) to be set forth in a customary
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intercreditor agreement, in a form reasonably
satisfactory to the parties.
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5()')265-U024-U220K-Acbve l1681162.ll
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Exhibit 2
TERMS OF SERlES A PARTICIPATING PREFERRED STOCK
Issuer: Reorganized Lear.
Initial Face Amount: Up to $500 million (the "Stated Value"), which shall be
distributed pro rata to the holders ofthe Prepetition Credit
Agreement Secured Claim in satisfaction and discharge of
claims thereunder on a dollar for dollar basis.
Liquidation Preference: The greater of (i) the initial Stated Value plus any accrued but
unpaid dividends as of the relevant determination date (such
aggregate amount, as of such date, the "Accrued Value"), and
(ii) the amount that would then be received upon the
liquidation, dissolution, or winding up of Reorganized Lear by
a holder of the number of shares ofNew Common Stock
issuable upon conversion of the Series A Preferred Stock (and
assuming all of the Series A Preferred Stock were so
converted) held by such holder (the "Liguidation Value").
Dividends: The Series A Preferred Stock shall not bear any mandatory
dividends. No dividend shall be declared on the Series A
Preferred Stock unless so authorized by a vote of at least six
out ofthe eight non-management directors of Reorganized
Lear.
The holders of Series A Preferred Stock will participate in any
dividends or distributions declared on New Common Stock (other than
a dividend payable solely in additional shares of New Common Stock,
which is addressed under the anti-dilution protections below) based on
the number of shares of New Common Stock into which Series A
Preferred Stock is convertible as of the applicable record date for such
New Common Stock dividend or distribution.
Reorganized Lear may not declare dividends on or repurchase any
junior securities (including New Common Stock) unless dividends on
Series A Preferred Stock, if any, have been paid in full in cash through
the most recent dividend payment date.
Mandatory Redemption: Upon liquidation of Reorganized Lear.
If Reorganized Lear enters into a transaction constituting a
consolidation or merger, a reclassification of its New Common Stock
into securities other than New Common Stock or any statutory
exchange of the outstanding shares ofNew Common Stock for
securities of another entity (each, a "Reorganization Event"), each
share of Series A Preferred Stock outstanding immediately prior to
such Reorganization Event will remain outstanding but will become
convertible, at the option of the holder, into the kind of securities, cash
S0926S-0024Dl20BJ,ctivo.II6Bi 162.1 s
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and other property receivable in such Reorganization Event by a I
holder of the number of shares of New Common Stock into which
each share of Series A Preferred Stock would then be convertible. In
the event of a sale of all or substantially all of the assets of
Reorganized Lear, proper provision shall be made such that the
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holders of the Series A Preferred Stock shall receive an equivalent
security in the entity acquiring such assets.
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Optional Redemption: Subject to any applicable contractual restrictions, at the option
of Reorganized Lear, at any time or from time to time, in whole
or in part, at a redemption price, payable in cash, equal to the
greater of(i) the Accrued Value and (ii) the Liquidation Value.
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Mandatory Conversion Three (3) years following the Effective Date, provided that the
Date: Mandatory Conversion Date shall also mean any earlier date
after the first anniversary of the Effective Date, iffor 20
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trading days within any period of 30 consecutive trading days,
the closing price of the New Common Stock exceeds 135% of
the then-applicable conversion price for the Series A Preferred
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Stock. The initial conversion price shall be equal to the per
share Plan of Reorganization value of New Common Stock as
of the Effective Date.
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Optional Conversion: Each share of Series A Preferred Stock may be converted at the
option of the holder at any time into a number of shares ofNew
Common Stock equal to the Accrued Value as of the
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conversion date (including any increase in Stated Value as a
result of dividend payments that are paid in-kind) divided by
the then applicable conversion price. The initial conversion
price shall be equal to the per share Plan of Reorganization
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value of New Common Stock as of the Effective Date.
Anti-Dilution: The conversion price will be subject to proportional adjustment
for any stock split, stock recombination, or stock dividend
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(other than the pay in-kind dividends to holders of the Series A
Preferred Stock) or any distribution of rights, options, warrants
or any distribution of shares of capital stock, evidences of
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indebtedness or other property or assets by Reorganized Lear
or any of its subsidiaries in which the holders of Series A
Preferred Stock do not participate on a pro rata as converted
basis.
Ranking: Senior to all other capital stock of Reorganized Lear with
respect to dividends and liquidation.
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Voting:
Series A Preferred Stock will vote together with the New Common
Stock on all matters and not as a separate class, on an as-converted
basis. Notwithstanding the foregoing, the consent of the holders of a
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majority of the outstanding shares of Series A Preferred Stock, voting
as a separate class, is required to:
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S0926S002402208Active.ll68116l IS
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(a) amend Reorganized Lear's certificate of incorporation in a way
that would alter, modify or change the rights, designations or
preferences of the holders of Series A Preferred Stock;
(b) authorize or issue any other capital stock that will be senior to
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Series A Preferred Stock; and
(c) increase or decrease the authorized number of shares of Series A
Preferred Stock.
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Registration Rights: Registration rights for the Series A Preferred Stock to be discussed
based on size of issue and composition of holders of Series A
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Preferred Stock.
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Transferability: Freely transferable.
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Exhibit 3
TERMS OF WARRANTS FOR CLASS SA CLAIMS
Warrants The Warrants will entitle the holders thereof to acquire shares ofNew
Common Stock representing 15% of the New Common Stock, on a fully-
diluted basis, as of the Effective Date (but subject to dilution for awards
under the Management Equity Plan).
Exercise Price per Exercisable at any time during the Exercise Period at a price equal to $.01
Warrant: per Warrant.
"Exercise Period" means the period (a) commencing on the business day
following a period of 30 consecutive trading days during which the closing
price of the New Common Stock on at least 20 of the trading days within
such period implies a total distributable value of the Company equal to or
greater than $3.3 billion and (b) ending on the Expiration Date.
Expiration: The fifth anniversary of the Effective Date (the "Exgiration Date").
Exercise Date: Exercisable at any time, during the Exercise Period.
Voting Rights: None.
Anti-Dilution The Exercise Price per Warrant and the number of shares of common stock
Provisions: issuable upon exercise of the Warrants shall be subject to customary
adjustment upon the occurrence of common stock splits and reverse
common stock splits.
Reorganization Except as provided in the next sentence, upon a Reorganization Event that
Event: is consummated during the Exercise Period, each Warrant will be
exercisable into the right to receive the kind and amount of consideration to
which such holder would have been entitled as a result of such
Reorganization Event had the Warrant been exercised immediately prior
thereto. In the event of a Reorganization Event consummated during the
Exercise Period in which the only consideration payable to holders of New
Common Stock is cash, each Warrant shall be entitled to receive the cash
consideration to which such holder would have been entitled as a result of
such Reorganization Event, less the Exercise Price, had the Warrant been
exercised immediately prior thereto. The Warrants shall expire and be
cancelled following a Reorganization Event, subject to receipt of any
consideration to which holders thereof are entitled as provided above. A
"Reorganization Event" shall mean any transaction in which Reorganized
Lear enters into a transaction constituting (i) a consolidation or merger in
which its New Common Stock is exchanged for securities of another entity,
(ii) a reclassification of its New Common Stock into securities other than
New Common Stock or (iii) any statutory exchange of the outstanding
shares of New Common Stock for securities of another entity.
Transferability: The Warrants will not be subject to any contractual restrictions on transfer
other than such as are necessary to ensure compliance with U.S. federal and
state securities Jaws. Reorganized Lear will undertake to file a registration
statement covering the Warrants and the New Common Stock underlying
the Warrants and to maintain the effectiveness of the registration statement.

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Exhibit 4
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TERMS OF MANAGEMENT EQUITY PLAN
Number of Shares Equivalent to up to 10% of the New Common Stock.
Types of Awards Initial awards of restricted stock granted as set forth in the section
entitled "Grants" herein. Future awards, excluding the awards
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described herein, to be determined by the Board of Reorganized Lear,
and may include, without limitation, restricted stock, restricted stock
units, performance shares, performance units, stock appreciation
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rights, stock options, etc.
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Pricing Awards (other than restricted stock and restricted stock units) will have
an exercise price per share equal to the fair market value on the date of
grant.
Grants Upon emergence, restricted stock grants equal to 2.7% of the New
Common Stock, on a fully-diluted basis after giving effect to all
securities exercisable or convertible into New Common Stock.
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Future awards will be granted at such time(s) as the Board of
Reorganized Lear shall determine. I
Participants Participation in the determination of the Board, provided that
participation for emergence grants limited to 150 to 200 employees
determined as follows:
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(a) E3 and higher (approximately 100 participants), including the
participants listed on Schedule A hereto in the percentage of the total
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award on emergence, as set forth next to such participant's title
therein; and
(b) 50-I 00 additional participants based on performance, position
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criticality and other relevant factors.
Vesting Emergence grants shall vest in three equal annual installments on each
of the first three anniversaries of the Effective Date. Vesting of
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emergence grants for a particular employee shall be accelerated, in
full, in the event of termination of employment of such employee by
Lear without Cause or by such employee with Good Reason. I
Future awards, excluding the emergence awards described herein, shall
be subject to such vesting schedules and in such form as determined by
the Board.
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Expiration of A wards Earlier of (i) ten years after grant, (ii) 30 days after termination of
employment other than for death, disability or cause, (iii) one year
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after termination of employment by death or disability or (iv)
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immediately upon termination for cause.
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Schedule A I
T 29 E
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OP xecutJVes
Band ($000) Title # ofEEs %of Total
Emergence Grant Per
Individual EE
Insider CEO 1 18.25%
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Insider Division 1 4.73%
President
Insider Division 1 4.73%
President
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Insider CFO 1 4.73%
Insider SVP, General 1 4.73%
Counsel
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E1 2 1.69%
E2 22 0.92%
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0 h 171 p t er artlcloants
Band ($000) Title # ofEEs %of Total
Emergence Grant Per
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Individual EE
E2 2 0.92%
E3 67 0.38%
6 102 0.11%
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Exhibit 5
TERMS OF KEY MANAGEMENT INCENTIVE PLAN
Participants
Perfonnance measures and
weightings
A ward opportunity
Payout timing
S0926S0024-0220&-Activc.ll6&ll6l.l S
29 senior executives
Filing a Plan of Reorganization confonning to the Tenn
Sheet or any other plan that the Board determines, in the
exercise of its fiduciary duties, is in the best interests of
the Debtors (such plans, a "Satisfactory Plan"), within 60
days after filing the petition: 25% of award opportunity
Emergence within 300 days from filing the petition: 50%
of award opportunity
Quarterly opportunity for Adjusted Operating Earnings
results: 25% of award opportunity (6.25% per quarter)
Market competitive award opportunities set based on
position responsibilities, criticality, business impact and
other factors
Specified as a dollar amount which is equal to the
market-based multiple of salary times an executive's
current base salary
Award opportunity for filing a Satisfactory Plan and
Emergence are binary. For the Adjusted Operating
Earnings award opportunity, payouts can range up to
140% of target for the particular quarter based on actual
results (8.75% per quarter)
Within 10 days following the occurrence ofthe event or,
for the Adjusted Operating Earnings award opportunity,
within 30 days of completion ofthe quarter
If emergence is during a quarter, the Adjusted Operating
Earnings opportunity will be prorated assuming target
perfonnance
For the CEO, payout of all earned amounts will be as
follows:
o Upon emergence: 50%
o 1 year anniversary from emergence: 50%
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Exhibit 6
TREATMENT OF U.S. BENEFIT PLANS
Plans to be Assumed/ Adopted
Outside Directors Compensation Plan (interest accounts totaling approximately $346,000)
Valued Employee Plan
Key Management Incentive Plan
Long-Term Stock Incentive Plan (cash dividend portion totaling approximately $375,000)
Management Stock Purchase Plan (notional cash accounts totaling approximately $160,000)
Qualified Plans (including 40 I (k) and pension plans)
Welfare Plans (including Estate Preservation Plan)
Executive Supplemental Savings Plan
PSP Excess Plan
Supplemental Employee Retirement Program (Pension Equalization Program and pension portion
of Executive Supplemental Savings Plan)
Severance Policy
Plans Not to be Assumed
Annual Incentive Compensation Plan
Key Employee Recognition Plan
Long-Term Incentive Plan (equity portion and performance awards)
Management Stock Purchase Plan (equity portion)
Outside Directors Compensation Plan (equity portion)
509265-0024-02201Active.l161116l.ll
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Exhibit 7
%of Fully Diluted
Common Equity
Series A Preferred Stock for ?repetition Credit Agreement Secured
Claims( I)
26.2%
New Common Stock for ?repetition Credit Agreement Secured 26.2%
Claims( I)
DIP Facility WarrantsCl> 1.3%
?repetition Credit Agreement Deficiency Claims(
2
J 16.4%
Unsecured Notes ClaimlZJ 29.9%
TOTAL 100.0%
(I) Subject to dilution from warrants representing 15% of Reorganized Lear's outstanding New Common
Stock as set forth in Exhibit 3 and Management Equity Plan.
(2) Subject to dilution from warrants representing 15% of Reorganized Lear's outstanding New Common
Stock as set forth in Exhibit 3, Management Equity Plan, and Other General Unsecured Claims not
included above.
ve. 11681 I 62.15
LEAR CORPORATION
21557 Telegraph Road
Michigan 48033
To the Holders ofNoteholder Claims
Referred to Below
EXECUTION VERSION
July 6, 2009
This letter agreement (the "Agreement") sets forth certain terms and
conditions pursuant to which Lear Corporation ("!&!!:") and certain of its domestic and
Canadian subsidiaries (together with Lear, collectively the "Debtors'') will propose their
jointly filed chapter 11 plan of reorganization (a "Plan'') on a consensual basis with the
support of certain of the holders (the ''Noteholders'') of (i) 8.50% senior notes due 2013,
(ii) 5.75% senior notes due 2014, (iii) 8.75% senior notes due 2016, and/or (iv) zero-
coupon convertible senior notes due 2022 (collectively, the ''Notes") issued by Lear.
Capitalized terms not defined herein shall have the meaning ascribed to
such terms in the Restructuring Term Sheet (as defined below).
I. Proposed Plan of Reorganization
Each of the Debtors proposes to commence voluntary, pre-arranged cases
(collectively, the "Chapter 11 Cases") under chapter 11 oftitle 11 ofthe United States
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court") to be jointly administered. Certain
Canadian subsidiary Debtors (the "Canadian Debtors'') propose to commence parallel
cases Wlder section 18.6 of the Companies' Creditors Arrangement Act (the "CCAA
Cases") in the Ontario Superior Courts Commercial List (the "Canadian Court"), in
which such Canadian Debtors will seek relief consistent with the relief sought by the
Debtors in the Chapter 11 Cases. As part of the Chapter 11 Cases, the Debtors intend to
file a disclosme statement and related Plan, which will provide for, among other things,
certain distributions on account of the claims of the Noteholders under the Notes
(together with all related claims, rights and causes of action arising out of or in
cormection with or otherwise relating to such Notes, the ''Noteholder Claims").
2. Representations and Warranties of the Participating Noteholders
Each Noteholder identified as a holder ofNoteholder Claims on the
signature pages hereto (such the "Participating Noteholders'') (for the
avoidance of doubt if the Noteholder is specified on the relevant signature as a particular
group or business within an entity, "Participating Noteholder" shall mean such group or
NY 72178171v7
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business and shall not mean the entity or its affiliates, or any other desk or business
thereof, or any third party funds advised thereby) represents and warrants to the Debtors
that, as of the date hereof:
(a) Such Participating Noteholder (i) either (A) is the beneficial owner
of the principal amount ofNotes set forth below under its signature hereto, or (B) has
investment or voting discretion (other than ordinary course pledges and/or swaps) with
respect to the principal amount of Notes set forth below under its signature and has the
power and authority to bind the beneficial owner(s) of such Notes and Notebolder Claims
to the tenns of this Agreement and (ii) has full power and authority to act on behalf of,
vote and consent to matters concerning such Notes and Noteholder Claims and to dispose
of, exchange, assign and transfer such Notes and Noteholder Claims.
(b) Such Participating Noteholder has made no prior assignment, sale,
agreement to assign, sell, participate, grant, convey or otherwise transfer, in whole or in
part, any portion of its right, title, or interests in any Notes or Noteholder Claims that are
subject to this Agreement (other than ordinary course pledges and/or swaps) that are
inconsistent with the representations and warranties of such Participating Noteholder
herein or would render such Participating Noteholder otherwise unable to comply with
this Agreement and perform its obligations hereunder.
(c) Such Participating Noteholder (i) has such knowledge and
experience in financial and business matters of this type that it is capable of evaluating
the merits and risks of entering into this Agreement and of making an informed
investment decision, and has conducted an independent review and analysis of the
business and affairs of the Debtors that it considers sufficient and reasonable for purposes
of entering into this Agreement and (ii) is an "accredited investor" (as defined by Rule
501 ofthe Securities Act of 1933, as amended).
For the purposes of this Agreement, ''Participating Noteholders" shall not
include a holder of Notes or Noteholder Claims signatory hereto in its capacity or to the
extent of its holdings as a public-side broker, dealer or market ~ a k e r of Notes or
Noteholder Claims or any other claim against or security in the Debtors.
3. SUl)port for a Qualified Plan
Subject to the terms and conditions hereof and for so long this Agreement
has not been terminated as provided herein, each Participating Noteholder shall, with
respect to the Noteholder Claims that it beneficially owns or has investment or voting
discretion with respect to at such time, (a) (i) vote its Noteholder Claims to accept any
Plan proposed by the Debtors incorporating the tenns and conditions set forth on the term
sheet annexed hereto as Exhibit 1 , which term sheet is expressly incorporated by
reference herein and made a part of this Agreement as if fully set forth herein (as such
term sheet may be modified in accordance with Section 1 0 hereof, the "Restructm:ing
2
NY 72178171v7
Tenn Sheet"), materially consistent in all respects with this Agreement and the
Restructuring Term Sheet, and in fonn and substance reasonably satisfactory to the
Debtors and the Requisite Participating Noteholders (as defined below) (a "Qualified
Plan") by delivering its duly executed and completed ballot accepting such Qualified Plan
on a timely basis following commencement of the solicitation of acceptances of such
Qualified Plan in accordance with sections 1125 and 1126 ofthe Bankruptcy Code and
(ii) not change or withdraw such vote (or cause or direct such vote to be changed or
withdrawn) (subject to the provisions of Section 6(b) hereof); (b) support the
confinnation and consummation of a Qualified Plan and the transactions contemplated
thereby, (c) not object to, or vote any of its Noteholder Claims to reject, a Qualified Plan
or otherwise take any action or commence any proceeding to oppose or to seek any
modification of a Qualified Plan, the related disclosure statement, in form and substance
reasonably satisfactory to the Debtors and the Requisite Participating Noteholders and
materially consistent in all respects with this Agreement and the Restructuring Tenn
Sheet (the "Disclosure Statement"), or any other reorganization docwnents filed by any
of the Debtors in connection with the Chapter 11 Cases and the confirmation of a
Qualified Plan that, in each case, are materially consistent in all respects with this
Agreement and the Qualified Plan, and (d) not directly or indirectly seek, solicit, support,
encourage, vote its Noteholder Claims for, or consent to, encourage, or participate in any
negotiations regarding, (i) any plan of reorganization, proposal, offer, dissolution,
winding up, liquidation, reorganization, merger, consolidation, business combination,
joint venture, partnership, sale of assets or restructuring for any of the Debtors (each, an
"Alternative Proposal'') other than a Qualified Plan or (ii) any other action that is
inconsistent with, or that would delay or obstruct the proposal, solicitation, confirmation,
or consummation of, a Qualified Plan.
Provided, however, unless expressly limited herein, nothing contained
herein shall limit: (i) the ability of a Participating Noteholder to consult with other
Participating Noteholders or the Debtors; (ii) the rights of a Participating Noteholder
under any applicable bankruptcy, insolvency, foreclosure or similar proceeding,
including, without limitation, appearing as a party in interest in any matter to be
adjudicated to appear and be heard, concerning any matter arising in the Chapter 11
Cases or the CCAA Cases so long as such consultation or appearance is not inconsistent
with the Participating Noteholder's obligations hereunder and the tenns of the Qualified
Plan; (iii) the ability of a Participating Noteholder to sell or enter into any transactions in
connection with the Notes or any other claims against or interests in the Debtors, subject
to Section 4 hereof; or (iv) the rights of any Participating Noteholder under the indentures
governing the Notes or constitute a waiver or amendment of any provision of the
indentures governing the Notes.
The Noteholders party to this Agreement shall support the DIP Facility (as
defmed in the Restructuring Term Sheet).
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4. Transfer ofNoteholder Claims
Each Participating Noteholder agrees that so long as this Agreement has
not been terminated in accordance with its terms it shall not directly or indirectly sell,
pledge, hypothecate or otherwise transfer or dispose of, or grant, issue or sell any option,
right to acquire, voting, participation or other interest in ("Transfer") any Noteholder
Claims, except to a party that (i) is a Participating Noteholder or (ii) agrees in writing to
be subject to the tenns and conditions of this Agreement as a "Participating Noteholder",
by executing the Joinder attached hereto as Exhibit A by three business days following
such transfer, a copy of which shall be provided to both Stroock & Stroock & Lavan LLP
as counsel to the Ad Hoc Group ("Stroock;", and together with Moelis & Company, as
financial advisors to the Ad Hoc Group and Canadian counsel to the Ad Hoc Group, the
"Ad Hoc Group Advisors") and Kirkland & Ellis LLP as counsel to the Debtors. Any
Transfer of any Noteholder Claim that does not comply with the foregoing shall be
deemed void ab initio. This Agreement shall in no way be construed to preclude any
Noteholder from acquiring additional Noteholder Claims or any other interests in any
Debtors; provided, however, that any such additional Noteholder Claims or other
interests in such Debtor shall, upon acquisition, automatically be deemed to be subject to
all the tenns of this Agreement; except to the extent that such additional Notes and
Noteholder Claims are acquired by a Qualified Marketmaker in accordance with the
following proviso.
Provided, however, that the foregoing shall not limit transactions by any
Qualified Marke1maker (as defmed below) in respect of Notes and Noteholder Claims not
otherwise subject to this Agreement (as identified on the signature pages hereto or
acquired pursuant to the last sentence of the immediately preceding paragraph and not
subject to the exception in such sentence, which such exception does not in any way
apply to Notes or Notebolder Claims transferred or delivered in IIDY m1100er to or from a
Qualified Marketmaker that were at the time of transfer subject to this Agreement) (i)
conducted in the ordinary course of its broker/dealer, market maker or flow trading
business, and (ii) not entered into with a view towards establishing and holding
directionally biased positions (including without limitation engaging in arbitrage
positions with respect to Notes) for the proprietary account of such Qualified
Marketmaker, whether in a proprietary trading unit or otherwise. For the avoidance of
doubt, the accumulation of an inventory ofNotes by a Qualified Market Maker in the
ordinary course of its broker/dealer, market maker or flow trading business shall not be
deemed to be establishing or holding a directionally biased position for purposes of
clause (ii) of the immediately preceding sentence. Notwithstanding anything to the
contrary in this paragraph or otherwise, to the extent any Notes or Noteholder Claims that
are subject to this Agreement (as identified on the signature pages hereto or acquired
pursuant to the last sentence of the immediately preceding paragraph and not subject to
the exception in such sentence, which such exception does not in IIDY way apply to Notes
or Noteholder Claims transferred or delivered in any manner to or from a Qualified
Marketmaker that were at the time of transfer subject to this Agreement) are sold,
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purchased or otherwise transferred to or from any Qualified Marketrnaker, any such
Noteholder Claim shall at all times and in all respects remain subject to this Agreement.
Notwithstanding anything to the contrary in the immediately preceding
two paragraphs, the definition of Participating Noteholders herein, or otherwise, the full
amount of the Noteholders Claims set forth on each Noteholder's signature page to this
Agreement is subject at all times and in all respects to the provisions of this Agreement,
and each such amount shall not be reduced in any respect by invocation or application of
the preceding two paragraphs of this Agreement, the defmition of Participating
Noteholders herein, or any other provisions of this Agreement or otherwise.
"Qualified Marketmaker" means an entity that (i) holds itself out to the
public as standing ready in the ordinary course of its business to purchase from and sell
Notes to or on behalf of customers (or to enter with customers into long and short
positions in derivative contracts that reference Notes), in its capacity as a dealer or
market maker in such Notes, (ii) in fact regularly makes a two-way market in such Notes
or regularly engages in flow trading with or on behalf of customers, and (iii) consistently
has filed its U.S. federal income tax returns on the basis that such business constituted a
securities dealer business within the scope of section 475(a) of the Internal Revenue Code
of 1986, as amended. An entity that is under common control with or controlled by a
Qualified Marketmaker shall be considered a Qualified Marketmaker to the extent it
satisfies conditions (i) and (ii) of the preceding sentence.
As long as a Termination Event (as defined below) has not occurred, or
has occurred but has been duly waived in accordance with the terms hereof, the Debtors
shall, subject to Section 23 herein, use their reasonable best efforts to:
(a) file the Disclosure Statement and prosecute its approval by the
Bankruptcy Court within the time frame set forth herein;
(b) obtain from the Bankruptcy Court an order confirming a Qualified
Plan (the "Confirmation Order") within the time frame set forth herein, which
Confinnation Order shall be in form and substance reasonably satisfactory to the
Requisite Participating Noteholders and the Debtors and materially consistent in all
respects with this Agreement and the Restructuring Term Sheet;
(c) effectuate and consummate a Qualified Plan within the timeframe
set forth herein; and
(d) continue payment of the fees and expenses of the Ad Hoc Group
Advisors upon the terms of the engagement letters executed by the Company and each
professional, subject to modification as reasonably acceptable to Stroock, Moelis and the
Ad Hoc Steering Committee and pursuant to applicable bankruptcy law, including but not
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limited to supporting an application by the Ad Hoc Group for reimbursement of fees and
expenses of the Ad Hoc Group Advisors under section S03(b) of the Bankruptcy Code
and payment of such fees and expenses pursuant to the Qualified Plan under section
1129(a)(4) of the Bankruptcy Code.
6. Termination of Obligations
(a) This Agreement shall terminate and all obligations of the parties
hereto shall immediately terminate and be of no further force and effect as follows:
(i) by the mutual written consent of Lear and Participating
Noteholders holding more than 66 2/3% of the Noteholder Claims bound under
this Agreement held by Participating Noteholders who are not then in breach of
their obligations under this Agreement (the "Requisite Participating
Noteholders'');
(ii) upon two (2) business days prior written notice of termination
delivered to Lear by the Requisite Participating Notcholders following the
occurrence of any of the events listed below (each, a "Termination Event"), unless
waived in accordance with Section 10 hereof:
NY 72J78171v7
(A)the Chapter 11 Cases shall not have been filed by July 9, 2009
(or such later date as may be agreed by Lear and the Requisite Participating
Noteholders);
(B) a Qualified Plan and the Disclosure Statement shall not have
been filed within 60 days after the filing date of the Chapter 11 Cases (the
"Petition Date") (or such later date as may be agreed by Lear and the
Requisite Participating Noteholders);
(C) the Bankruptcy Court shall not have entered an order, in fonn
and substance reasonably satisfactory to the Requisite Participating
Noteholders, approving the adequacy ofthe Disclosure Statement within 150
days after the Petition Date (or such later date as may be agreed by Lear and
the Requisite Participating Noteholders);
(D) the Bankruptcy Court shall not have entered the Confinnation
Order within 270 days after the Petition Date (or such later date as may be
agreed by Lear and the Requisite Participating Noteholders);
(E) a Qualified Plan shall not have been consummated within 300
days after the Petition Date (or such later date as may be agreed by Lear and
the Requisite Participating Noteholders);
(F) the Debtors shall have materially breached their covenants,
representations, warranties or obligations under this Agreement;
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(G) the Debtors (1) withdraw or revoke the Qualified Plan or
publicly announce their intention not to pursue the Qualified Plan or (2)
propose, accept or file a motion with the Bankruptcy Court seeking approval
of an Alternative Proposal;
(H)(l) an examiner with expanded powers or a trustee shall have
been appointed in any of the Chapter 11 Cases or (2) any of the Chapter II
Cases shall have been converted to cases under Chapter 7;
(I) the Chapter 11 Case of any Debtor that is an obligor or
guarantor under any indenture governing the Notes is involuntarily dismissed;
(J) the CCAA Cases shall have been converted to Canadian
bankruptcy proceedings or the CCAA Cases shall have been involuntarily
dismissed by the Canadian Court;
(K)the Qualified Plan is modified or replaced such that it (or any
such replacement) at any time is not in whole or in part consistent in any
material respect with the Restructuring Term Sheet;
(L) the termination of, or occurrence of an event of default (as
defined in the applicable agreement) under, any order or agreement permitting
the use of cash collateral or to provide post-petition debtor-in-possession
financing or exit financing to the Debtors which shall not have been cured
within any applicable grace periods or waived pursuant to the terms of the
agreement governing such facility; or
(M) there shall have occurred a force majeure event (to be
defined as a significant global disruption in the fmancial markets caused by
outbreak of war, terrorism, or other incidents, but not adverse changes in the
financial, banking or capital markets generally); or
(N) a "Tennination Event" shall have occurred under the Lender
Plan Support Agreement (as defined in the Restructuring Term Sheet).
(iii) upon delivery of written notice of termination to the
Participating Noteholders by Lear following any material breach of any oftbe
Participating Notcholders' representations, warranties, covenants, obligations or
agreements set forth in this Agreement
(b) Upon termination of this Agreement in accordance with the terms
herein, this Agreement shall forthwith become void and of no further force or effect, each
party hereto shall be released from its commitments, undertakings and agreements under
or related to this Agreement, and there shall be no liability or obligation on the part of
any party hereto; provided, however. that in no event shall any such termination relieve a
party hereto from liability from its breach or non-performance of its obligations
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hereunder prior to the date of such tennination. Upon the occurrence of any tennination
of this Agreement, any and all votes delivered by a Participating Noteholder prior to such
termination shall be deemed, for all purposes, to be null and void from the first instance
and shall not be considered or otherwise used in any manner by the Debtors. If this
Agreement has been terminated at a time when permission of the Bankruptcy Court shall
be required for the Participating Noteholder to change or withdraw (or cause to change or
withdraw) its vote to accept the Plan, the Debtors shall not oppose any attempt by the
Participating Noteholder to change or withdraw (or cause to change or withdraw) such
vote at such time Wlless the Debtors dispute the effectiveness oftermination of this
Agreement. The Participating Noteholders shall have no liability to the Debtors or to
each other in respect of any termination of this Agreement following the occurrence of a
Tennination Event.
7. Good Faith Cooperation; Further Assurances; Acknowledgment
The parties hereto shall cooperate and negotiate with each other in good
faith and shall coordinate their activities (to the extent practicable and subject to the terms
hereof) in respect of(a) all material matters relating to their rights in respect of the
Debtors or otherwise in connection with their relationship with the Debtors, (b) all
material matters concerning the implementation of the Qualified Plan, including the
definitive documents implementing and achieving the Qualified Plan (including the order
of the Bankruptcy Court order of the Bankruptcy Court confirming the Qualified Plan,
the order of the Canadian Court recognizing the order confinning the Qualified Plan and
other related docwnents, each of which are more specifically described in the
Restructuring Tenn Sheet (the "I>!ffmitive Documents")) and (c) the pursuit and support
of the restructuring transaction contemplated herein. Furthennore, subject to the tenns
hereof, each of the parties shall take such action as may be re1150nably necessary, in their
discretion, to carry out the purposes and intent of this Agreement, including making and
filing any required regulatory filings. The Company agrees to provide drafts of all
Definitive Documents to the Ad Hoc Group Advisors and shall afford them a reasonable
opportWlity to comment on such documents and disclosures. The consent or approval of
the Requisite Participating Noteholders to the Definitive Documents, or any other
documents provided for Wlder this Agreement, may be communicated to the Debtors by
Stroock.
It is Wlderstood and agreed by the parties that money damages would not
be a sufficient remedy for any breach of this Agreement by any party and each non-
breaching party shall be entitled to seek specific performance and injWlctive or other
equitable relief, including attorneys fees and costs, as a remedy of any such breach, and
each party agrees to waive any requirement for the securing or posting of a bond in
connection with such remedy, in addition to any other remedy to which such non-
breaching party may be entitled, at law or in equity.
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This Agreement supersedes all prior negotiations, and documents
reflecting such prior negotiations, between and among the Debtors and the Noteholders
(and their respective advisors), with respect to the subject matter hereof.
10. Amendments
No amendment, modification, waiver or other supplement of the tenns of
this Agreement or the Restructuring Tenn Sheet shall be valid unless such amendment,
modification, waiver or other supplement is in writing and has been signed by the
Debtors and the Requisite Participating Noteholders, provided, however, (a) the written
consent of each Participating Noteholder shall be required for any amendment,
modification, waiver or other supplement of this Section I 0 or the definition of Requisite
Participating Noteholders as used in this Agreement, and (b) the written consent of
Participating Noteholders holding at least 66 213% of the aggregate Noteholder Claims
or, if the Participating Noteholders hold in the aggregate less than such percentage of the
aggregate Noteholder Claims, then the written consent of each Participating Noteholder,
shall be required for any amendment, modification, waiver or other supplement of this
Agreement that effects a material change to the treatment of the Class SA- Other
Unsecured Claims (as defined in the Restructuring Tenn Sheet) from that reflected in the
Restructuring Term Sheet as of the date hereof.
For the purposes hereof, immaterial changes to the Restructuring Tenn
Sheet shall not constitute a modification or amendment thereof or of this Agreement and
may be made by the Debtors and the Ad Hoc Group Advisors.
Each Participating Noteholder hereby confinns that it has made its own
decision to execute this Agreement based upon its own independent assessment of
documents and information available to it, as it deemed appropriate.
12. Governing Law
'This Agreement and all matters arising out of or related to this Agreement
shall be governed by, and construed in accordance with, the internal laws ofthe State of
New York without regard to conflicts of laws (other than Section 5-140 l of the General
Obligations Laws of the State ofNew York). By its execution and delivery of this
Agreement, each of the parties hereto hereby irrevocably and Wlconditionally agrees for
itself that any legal action, suit or proceeding against it with respect to any matter under
or arising out of or in connection with this Agreement or for recognition or enforcement
of any judgment rendered in any such action, suit or proceeding, may be brought in either
a state or federal court of competent jurisdiction in the State ofNew York. By execution
and delivery of this Agreement, each of the parties hereto hereby irrevocably accepts and
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submits itself to the exclusive jurisdiction of each such court, generally and
unconditionally, with respect to any such action, suit or proceeding. Notwithstanding the
foregoing consent to jurisdiction in either a state or federal court of competent
jurisdiction in the State ofNew York, upon the commencement of the Chapter 11 Cases,
each of the parties hereto hereby agrees that, if the petitions have been filed and the
Chapter 11 Cases are pending, the Bankruptcy Court shall have exclusive jurisdiction of
13. Effective
This Agreement shall become effective when counterparts hereof have
been duly executed and delivered by the Debtors and Participating Noteholders holding
more than 50% of all Noteholder Claims (the ''Effective Date"); provided. however, that
signature pages executed by Participating Noteholders shall be delivered to (a) other
Participating Noteholders in a redacted form that removes such Participating
Noteholders' holdings of the Notes and (b) the Debtors and advisors to the Participating
Noteholders in an unredacted form; that if as of the commencement of
the Chapter 11 Cases, the Debtors have not received (a) signatw'e pages to this
Agreement from Noteholders holding more than 50% of the aggregate amount of
Noteholder Claims and (b) signatures to the Lender Plan Support Agreement from
Prepetition Credit Agreement Lenders (as defined in the Restructuring Term Sheet)
holding more than 50% of the aggregate amount of the claims under the Prepetition
Credit Agreement (as defined in the Restructuring Term Sheet), this Agreement shall
become null and void.
Upon the Effective Date, the Restructuring Term Sheet shall be deemed
effective for the purposes of this Agreement and thereafter the terms and conditions
therein may only be amended, modified, waived or otherwise supplemented as set forth
in Section 1 0 above.
This Agreement is intended for the benefit of the parties hereto and no
other person shall have any rights hereunder.
15. Countemarts
This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, and all of which together shall be deemed to be one
and the same agreement. Execution copies of this agreement may be delivered by
facsimile or otherwise, which shall be deemed to be an original for the purposes of this
paragraph.
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16. Headings
The section headings of this Agreement are for convenience of reference
only and shall not, for any purpose, be deemed a part of this Agreement.
17. Acknowledgment
This Agreement is not and shall not be deemed to be a solicitation of
consents to the Plan. The acceptance of the Noteholders will not be solicited until the
Noteholders have received the Disclosure Statement and related ballot, as approved by
the Bankruptcy Court.
settlement of matters that could otherwise be the subject of litigation amount the parties
hereto. Nothing herein shall be deemed an admission of any kind. Pursuant to Federal
Rule of Evidence 408 and any applicable state rules of evidence, this Agreement and all
negotiations relating thereto shall not be admissible into evidence in any proceeding other
than a proceeding to enforce the terms of this Agreement.
19. No Waiver ofParticipation and Preservation of Rights
Except as provided in this Agreement, nothing herein is intended to, does
or shall be deemed in any manner to waive, limit, impair or restrict the ability of each of
the Noteholders to protect and preserve its rights, remedies and interests, including, but
not limited to, its claims against any of the Debtors, any liens or security interests it may
have in any assets of any of the Debtors, or its full participation in the Chapter 11 Cases.
Without limiting the foregoing sentence in any way, if this Agreement is terminated in
accordance with its terms for any reason, the parties hereto each fully reserve any and all
of their respective rights, remedies and interests, subject to Section 6(b) in the case of any
claim for breach of Agreement arising prior to termination.
20. Successors and Assigns; Severability: Several Obligations.
This Agreement is intended to bind and inure to the benefit of the parties
and their respective successors, assigns, heirs, executors, administrators and
representatives. The invalidity or unenforceability at any time of any provision hereof
shall not affect or diminish in any way the continuing validity and enforceability of the
remaining provisions hereof. The agreements, representations and obligations of the
Participating Noteholders under this Agreement are, in all respects, several and not joint.
21. Relationship Among Parties.
It is understood and agreed that no Participating N oteholder has any duty
of trust or confidence in any form with any other Participating Noteholder, and, except as
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provided in this Agreement, there are no commitments among or between them. In this
regard, it is understood and agreed that any Participating Noteholder may trade in the
Notes or other debt or equity securities of the Debtors without the consent of the Debtors
or any other Participating Noteholder, subject to applicable securities laws and the tenns
of this Agreement; provided further that no Participating Noteholder shall have any
responsibility for any such trading by any other entity by virtue of this Agreement. No
prior history, pattern or practice of sharing confidences among or between the
Participating Noteholders shall in any way affect or negate this understanding and
agreement.
22. Disclosure; Publicitv.
(a) Not later than two business days after commencement of the Chapter
11 Cases, subject to the provisions set forth in Section 22M hereof, the Debtors shall
either file with the Securities and Exchange Commission a Report on Form 8-K or
disseminate a press release disclosing the existence of this Agreement and the tenns
hereof(including the schedules and exhibits hereto), with such redactions as may be
requested by any Participating Noteholder's counsel solely with respect to maintaining
the confidentiality of the items identified in Section 22(b) hereof, except as otherwise
required by law. Jn the event that the Debtors fail, in the reasonable judgment of a
Participating Noteholder, to make the foregoing disclosures in compliance with the terms
specified herein, any such Participating Noteholder may publicly disclose the foregoing,
including, without limitation, this Agreement and all of its exhibits and schedules (subject
to the redactions called for by Section 13 hereof), and the Company hereby waives any
claims against the Consenting Holders arising as a result of such disclosure by a
Consenting Holder; provided that such disclosure fully complies with this Agreement and
any other applicable agreement among the parties.
(b) The Debtors will submit drafts to the Ad Hoc Group Advisors of any
press releases and public docwnents that constitute disclosure of the existence or terms of
this Agreement or any amendment to the terms of this Agreement at least one (I)
business day prior to making any such disclosure, and shall afford them a reasonable
opportunity to conunent on such documents and disclosures. Except as required by law
or otherwise permitted under the terms of any other agreement between the Debtors and
any Participating Noteholder, no party or its advisors shall (i) use the name of any
Participating Noteholder in any public manner or (ii) disclose to any person (including,
for the avoidance of doubt, any other Participating Noteholder), other than advisors to the
Debtors, the principal amount or percentage of any Notes or any other securities of the
Debtors held by any Participating Noteholder, in each case, without such Participating
Noteholder's prior written consent; provided, however, that (i) if such disclosure is
required by law or regulation, the disclosing party shall use reasonable best efforts to
afford the relevant Participating Noteholder a reasonable opportunity to review and
comment in advance of such disclosure and shall take all reasonable measures to limit
such disclosure and (ii) the foregoing shall not prohibit the disclosure of the aggregate
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percentage or aggregate principal amount of Notes held by all the Participating
Noteholders collectively.
23. Fiduciary Duties.
Notwithstanding anything to the contrary herein, nothing in this
Agreement shall require (a) the Debtors or any directors or officers of the Debtors (in
such person's capacity as a director or officer of the Debtors) to take any action, or to
refrain from taking any action, to the extent required to comply with its or their fiduciary
obligations under applicable law, or (b) any Participating Noteholder or representative of
a Participating Noteholder that is a member of a statutory committee established in the
Chapter 11 Cases to take any action, or to refrain from taking any action, in such person's
capacity as a statutory committee member to the extent required to comply with fiduciary
obligations applicable under the Bankruptcy Code; provided however, that nothing in this
Agreement shall be construed as requiring any Participating Noteholder to serve on any
statutory committee in the Chapter 11 Case. Nothing herein will limit or affect, or give
rise to any liability, to the extent required for the discharge of the fiduciary obligations
described in this Section 23.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered by their respective duly authorized officers, solely in their
respective capacity as officers of the wtdersigned and not in any other capacity, as of the
date first set forth above.
LEAR CORPORATION (on behalf of
itself and other Debtors)
NOTEHOLDERS
EXIDBITA
JOINDER
This Joinder to the Restructuring & Lockup Agreement, dated as of July 1,
2009, by and among Lear Corporation and the Participating Noteholders signatory thereto
(the "Agreement"), is executed and delivered by (the "Joining
f!!l:ti") as of [ ], 2009. Each capitalized term used herein but not otherwise
defined shall have the meaning set forth in the Agreement.
I. Agreement to be Bound. The Joining Party hereby agrees to be
bound by all of the terms ofthe Agreement, attached to this Joinder as Annex I (as the
same may be hereafter amended, restated or otherwise modified from time to time). The
Joining Party shall hereafter be deemed to be a "Participating Noteholder" and a party for
all purposes under the Agreement.
2. Representations and Warranties. With respect to the aggregate
principal amount ofNotes set forth below its name on the signature page hereof and all
related claims, rights and causes of action arising out of or in connection with or
otherwise relating to such Notes, the Joining Party hereby makes the representations and
warranties of the Participating Noteholders set forth in the Agreement to each other party
to the Agreement.
3. Governing Law. This Joinder shall be governed by and construed
in accordance with the internal laws ofthe State of New York, without regard to any
conflicts of law provisions which would require the application of the law of any other
jurisdiction.
NY 72178171v7
* * * * *
[TilE REMAINDER OF TillS PAGE IS
INTENTIONALLY LEFT BLANK]
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IN WllNESS WHEREOF, the Joining Party has caused this Joinder to be
executed as of the date first written above.
[CONSENTING HOLDER)
By:
Name: ________________________ _
Title:
PI incip d i\lllcillllt elf N".""' llclL!
s ~ u r l t y Amount
8.5% Senior Notes due 2013
Zero Coupon Senior Notes due
2022
Notice Address:
Fu: ______________ __
Attention: ____________ _
With a copy to:
A-2
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F ~ : ____________ __
Attention:----------
A-3
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Acknowledged:
LEAR CORPORATION
By:
Name:
Title:
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EXHffiiTl
Restructuring Term Sbeet
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(please see attached)
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LEAR CORPORATION
(Exhibit 1 to the Plan Support Agreement)
THIS TERM SHEET DESCRIBES A PROPOSED RESTRUCTURING (THE
"RESTRUCTURING") FOR LEAR CORPORATION ("!&AR") AND CERTAIN OF ITS
DOMESTIC AND CANADIAN SUBSIDIARIES PURSUANT TO A JOINT PLAN OF
REORGANIZATION (THE "PLAN OF REORGANIZATION") WIDCH WOULD BE FILED BY
THE DEBTORS (AS DEFINED BELOW) IN CONNECTION WITH A CONTEMPLATED
CHAPTER 11 FILING IN THE UNITED STATES BANKRUPTCY COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK (THE "BANKRUPTCY COURT").
TillS TERM SHEET IS NOT AN OFFER OR A SOLICITATION WITH RESPECT TO
ANY SECURITIES OF LEAR OR ITS SUBSIDIARIES. ANY SUCH OFFER OR
SOLICITATION SHALL COMPLY WITH ALL APPLICABLE SECURITIES LAWS
AND/OR PROVISIONS OF THE BANKRUPTCY CODE.
Restructuring Summary Prior to the commencement of the Debtors' chapter 11 cases, (a) certain of
the Prepetition Credit Agreement Lenders listed therein and the Debtors
will have executed a Plan Support Agreement (the "Lender Plan Support
Agreement") pursuant to which the Debtors agree to pursue and implement
a Plan of Reorganization consistent in form and substance in all material
respects with this Term Sheet and (b) certain of the holders of the
Unsecured Note Claims (as defined herein) listed therein, including those
noteholders constituting a steering committee of noteholders (the
"Noteholder Steering Committee"), and the Debtors will have executed a
Plan Support Agreement (the "Noteholder Plan Support Agreement,"
and together with the Lender Plan Support Agreement, the "Plan Support
Agreements") pursuant to which the Debtors agree to pursue and
description of all of the terms, conditions and other provisions that are to be
contained in the Plan of Reorganization and the related definitive
$09ll6-00l4.02201A<IIyt.ll6lll6l."
In conjunction with the Restructuring, a group of Prepetition Credit
Agreement Lenders has agreed to provide a debtor-in-possession financing
facility (such facility, the "DIP Facility") which, upon satisfaction of
certain conditions, will convert into the Exit Facility (as defined below)
upon the Debtors' exit from chapter II. A detailed description of the DIP
Facility, including pricing terms, conditions and covenants, is set forth in
the debtor in possession financing credit agreement agreed to by the
Debtors and the Credit Lenders thereto
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Debt to be Repaid/
Restructured
under the Plan of
Reorganization
attached hereto as Annex I (the "DIP Credit Agreement").
Indebtedness to be treated under the Plan of Reorganization will include:
(i) approximately $2.3 billion outstanding (together with the Swap Claims
referred to below, the "Prepetition Credit Agreement Obligations")
under that certain Amended and Restated Credit Agreement dated as of
April 25, 2006 (the "Prepetitiop Credit Agreement") among Lear, certain
of its subsidiaries, JPMorgan Chase Bank, N.A., as administrative agent
and collateral agent (in such capacity, the "Prepetition Administrative
Agent") and the lenders party thereto (including as holders of termination
claims under certain hedging arrangements (the "Swap Claims"), the
"Prepetition Credit Agreement Lenders"); and
(ii) approximately $1.3 billion aggregate principaJ amount of senior
unsecured notes (plus accrued and unpaid interest) (the "Unsecured Note
Claims"), comprised of(a) the unsecured 8.50% senior notes due 2013 and
the unsecured 8.75% senior notes due 2016 issued pursuant to that certain
Indenture dated as of November 24, 2006, among Lear, certain subsidiary
guarantors and The Bank of New York Trust Company, N.A. as Trustee,
(b) the unsecured 5. 75% senior notes due 2014 issued pursuant to that
certain Indenture dated as of August 3, 2004 among Lear, certain
subsidiary guarantors and BNY Midwest Trust Company as Trustee, and
(c) the unsecured zero-coupon convertible senior notes due 2022 issued
pursuant to that certain Indenture dated as of February 20, 2002, among
Lear, certain subsidiary guarantors and The Bank of New York Trust
Company, N.A. as Trustee.
Debt. The (i) $500 million first lien term loan Exit Facility described in
the exit credit agreement attached hereto as Annex 2 (the "Exit Facility")
and (ii) $600 million second lien term loan with the terms and conditions
set forth on Exhibit I (the "New Term Loans").
Preferred Stock. Reorganized Lear shall issue up to $500 million in
Series A Preferred Stock (the "Series A Preferred Stock") with the terms
and conditions set forth on Exhibit 2.
New Common Stock. Subject to the right of the stockholders to amend the
certificate of incozporation, reorganized Lear ("Reorganized Learj shall
issue a single class of common stock (the "New Common Stock") on the
effective date of the Plan of Reorganization (the "Effective Date"), which
stock shall be deemed fully paid and non-assessable.
Management Equity Plan. There shall be allocated sufficient shares of
New Common Stock to provide a Management Equity Plan (as defined
below) with a reserve for equity awards of New Common Stock, as
provided in Exhibit 4 hereto.
Warrants:
(A). To the extent the Exit Facility fee is not paid in cash Reorganized
2
Proposed Filing Entities
DIP Facility Claims
Administrative Claims
Priority Tax Claims
Intercompany Claims
Lear will issue warrants to purchase shares of New Common Stock with an
Effective Date value of up to $25 million, all as set forth in the DIP
Facility, and representing a percentage of the New Common Stock, as
reflected on Exhibit 7 hereto.
(B). Reorganized Lear shall issue warrants to holders of Class 5A Claims,
with such warrants to have the terms and conditions set forth in Exhibit 3
hereto.
Lear expects that voluntary chapter 11 cases will be commenced by Lear
and certain of its domestic and Canadian subsidiaries (the "Debtors"). For
purposes of the Plan of Reorganization, the Debtors will be further
classified into Group A Debtors, consisting of those Debtors liable for
Prepetition Credit Agreement Obligations, the Swap Claims and the
Unsecured Note Claims (the "Group A Debtors") and the Group B
Debtors
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, consisting of all Debtors who are not Group A Debtors (the
"SJroup B Debtors").
The DIP Facility shall, on the Effective Date, be repaid by the Exit Facility
or paid in full in cash. In addition, Reorganized Lear will issue Warrants to
the lenders under the DIP Facility on the Effective Date to the extent
required under the terms of the DIP Facility.
Each holder of an allowed administrative claim, including claims of the
type described in section 503(b}(9) (to the extent not already paid during
the chapter 11 cases), of the Bankruptcy Code, shall receive payment in
full (in cash) of the unpaid portion of its allowed administrative claim on
the Effective Date or as soon thereafter as practicable (or, if payment is not
then due, shall be paid in accordance with its terms) or pursuant to such
other terms as may be agreed to by the holder of such claim and the
Debtors.
Priority tax claims shall be treated in accordance with section
ll29(a)(9)(C) ofthe Bankruptcy Code.
shall be no distributions on account oflntercompany Claims.
Notwithstanding the foregoing, Lear, in its sole discretion, may (or may
cause each as the case
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To the extent required, the Plan of Reorganization could be structured to incorporate separate plans of
reorganization for each Debtor, with each such plan reflecting substantive treatment of claims consistent
with the terms hereof.
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S09?-M-OD24-02208-Adive.J 1681162.15
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be, intercompany claims between and among the Debtors and their
subsidiaries.
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G[OYI! da )2el!t!!r!
Class lA-Other Priority All claims accorded priority in right of payment under section 507(a) of the
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Claims Bankruptcy Code, other than Priority Tax Claims against the Group A
allowance of the claim; provided, that, subject to Bankruptcy Court
approval, priority wage claims against the Group A Debtors may be paid in
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Class 2A-Other Secured Each holder of an Other Secured Claim against the Group A Debtors shall
Claims receive the following treatment, at the option of the Group A Debtors: (a)
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Class 3A-Prepetition For purposes of the Plan of Reorganization and in settlement and
Credit Agreement compromise of all issues relating to the amount of the secured portion of
Secured Claims the Prepetition Credit Agreement Obligations, the Prepetition Credit
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Agreement Lenders will have allowed secured claims against the Group A
Debtors in an aggregate amount equal to $1.6 billion
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(the "Prepetition
Credit Agreement Secured Claims"). Each holder of a Prepetition Credit
Agreement Secured Claim shall receive its pro rata share of: (i) $600
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million of New Term Loans; (ii) $500 million in Series A Preferred Stock
to be convertible into a percentage of the New Common Stock, as provided
in Exhibit 1 hereto; and (iii) a percentage of the New Conunon Stock, as
provided in Exhibit 1 hereto. To the extent Reorganized Lear has
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Minimum Liquidity (as defined below) determined on a normalized basis
consistent with the financial analysis provided to the Prepetition
Administrative Agent and the advisors to the Noteholder Steering
Committee by Lear, in excess of $1.0 billion on the Effective Date, the
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amount of such excess shall be utilized to prepay, without premium or
penalty, first, the Series A Preferred Stock, in an aggregate stated value of
up to $50 million, then the New Term Loans, in an aggregate principal
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amount of up to $50 million, and thereafter, the Exit Facility; provided
further that any payments of the New Term Loans made with the Debtors'
excess cash within the fust 30 days after the Effective Date shall not be
subject to any prepayment penalty or premium. I
"Minimum Liguiditv" shall mean cash and cash equivalents, plus
availability under working capital facilities, if any, plus a working capital
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Inclusive of the Swap Claims.
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adjustment to be agreed upon the Debtors, the Prepetition Administrative
Agent and the Noteholder Steering Committee, Jess any accrued but unpaid
professional fees and other chapter 11 costs not paid prior to the Effective
Date, and cash financing costs to the extent not previously paid; provided,
that at least $800 million of such aggregate amount consists of cash and
cash equivalents; and provided, fUrther that Minimum Liquidity shall be
determined on or prior to the date that is 30 days after the Effective Date.
Class 4A-Unsecured Qngoing O(!erations Claim" shall consist of all general
Ongoing Operations unsecured claims relating to the provision of goods or services to the Group
Claims A Debtors arising with, or held by, persons or entities with whom the
Debtors are conducting business as of the date of commencement of the
Debtors' chapter II cases, but excluding any claims arising from the
rejection by the Debtors of any contracts and leases and all other Class 5A
or 6A Claims. Each holder of an Unsecured Ongoing Operations Claim
that is due and payable on or before the Effective Date shall be paid in full
(in cash) on the Effective Date on account of such claim or otherwise
receive such treatment as to render such holder unimpaired. An allowed
Unsecured Ongoing Operations Claim that is not due and payable on or
before the Effective Date shall be paid thereafter (i) in the ordinary course
ofbusiness in accordance with the terms of any agreement that governs
such allowed Unsecured Ongoing Operations Claim or (ii) in accordance
with the course of practice between the Group A Debtors and such holder
with respect to such allowed Unsecured Ongoing Operations Claim.
Holders of Unsecured Ongoing Operations Claims who received
payment(s) from the Group A Debtors during the chapter II cases pursuant
to any Bankruptcy Court order shall not be excluded from receiving
distributions under the Plan of Reorganization on account of such claims
unless such claims were fully satisfied by any prior payments from the
Group A Debtors. The Group A Debtors shall reserve all rights to
challenge the legal basis and amount of any Unsecured Ongoing Operations
Claim.
Class SA-Other "Other General Unsecured Claims" against the Group A Debtors shall
Unsecured Claims
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consist of all general unsecured claims against the Group A Debtors that
are not otherwise classified in Class 4A or 6A, including without limitation,
(i) the Unsecured Note Claims, (ii) the Prepetition Credit Agreement
Lenders' unsecured deficiency claim in the amount of approximately $737
million (the "Pre(!etition Credit Agreement Defic:ien! (iii)
claims arising upon rejection of leases and executory contracts to which a
Group A Debtor is Pllrty; (iv) claims relating to the provision of goods or
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Includes Unsecured Note Claims, the Prepetition Credit Agreement Deficiency Claims and all other
claims against the Group A Debtors that are not alan (a) Administrative Claim, (b) Priority Tax Claim,
(c) Convenience Claim, (d) Other Secured Claim, (e) Prepetition Credit Agreement Secured Claim, (f)
Priority Wage Claim, (g) Intercompany Claim, (h) Unsecured Ongoing Operations Claim or (i)
Convenience Claim, but excludes Class 1 A Claims and other employee-related claims otherwise
provided for in this Term Sheet.
l0926l.0024.()2208Adive.l1681162.1
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Class 6A-Convenience
Claims
Class 7 A-Existing
Equity and SIO(b) Claims
Class IB--Other Priority
Claims
SO!r.!65-0024-!l2201A<Iivo.ll681162.1S
services to the Group A Debtors that are not classified as Administrative
Claims or Class 4A or 6A Claims and (v) claims arising from litigation
damages entered against the Group A Debtors (collectively, the "Other
General Unsecured Claims").
Each holder of an allowed General Unsecured Claim against a Group A
Debtor shall receive its pro rata share of(i) a percentage of the New
Common Stock, as provided in Exhibit 7 hereto, that remains after giving
effect to the distribution of New Common Stock to holders of Class 3A
Claims and subject to dilution from the Series A Preferred Stock, the
Warrants and the Management Equity Plan; and (ii) Warrants representing
15% of Reorganized Lear's outstanding New Common Stock, with the
terms and conditions set forth in Exhibit 3 hereto.
Subject to Bankruptcy Court approval, claims below a threshold to be
agreed between the Debtors, the Noteholder Steering Committee and the
?repetition Administrative Agent against the Group A Debtors shaH be paid
an amount equal to 25% of such claim in cash on the later of the Effective
Date or the allowance of the claim.
Class 7A-l-Equity interest in Lear
Holders of the existing equity in Lear shall receive no recovery. Class 7A-
l interests include the common stock of Lear and options, warrants or other
agreements to acquire the same (whether or not arising under or in
connection with any employment agreement), including without limitation,
any claim against the Debtors that is subordinated pursuant to section
51 O(b) of the Bankruptcy Code, which shall include any claim arising from
the recission of a purchase or sale of any equity interest, any claim for
damages arising from the purchase or sale of any equity interest, or any
claim for reimbursement, contribution or indemnification for such claim.
Impaired; not entitled to vote - deemed to reject.
Class 7A-2-Existing equity interest in Debtor subsidiaries ofLear
All equity interests of Lear's Group A Debtor subsidiaries shall continue to
Group B Debtors
AJI claims accorded priority in right of payment under section 507(a) of the
Bankruptcy Code, other than Priority Tax Claims against the Group B
allowance of the claim. provided that, subject to Bankruptcy Court
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Class 2B-Other Secured
Claims
Class 3D-Unsecured
Claims
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Class 4B-Existing
Equity
Employment
Agreements/Other
Incentive Plans
approval, priority wage claims against the Group B Debtors may be paid in
Unimpaired; not entitled to vote - deemed to accept
Each holder of an Other Secured Claim against the Group B Debtors shall
receive the following treatment, at the option of the Group B Debtors: (a)
All general unsecured claims of the Group B Debtors' creditors set forth or
otherwise described in the disclosure statement, including claims under
contracts and unexpired leases assumed by the Group B Debtors under the
Plan of Reorganization and trade payables owed by any Group B Debtor or
non-debtor subsidiary of Lear to any third party creditor, but excluding the
Intercompany Claims, will be paid in the ordinary course as such claims
become due. The Group B Debtors shall reserve all rights to challenge the
legal basis and amount of any general unsecured claims.
All equity interests of Lear's Group B Debtor subsidiaries continue to
Unimpaired; not entitled to vote -deemed to accept.
On the Effective Date, Lear shall implement the Management Equity Plan
(the "Management Equity Plan") for the benefit of certain continuing
employees of the Debtors and non-management members of the Board (as
defined below). The Management Equity Plan shall have the terms set
forth on Exhibit 4 hereto.
The Plan shall provide for the adoption or assumption, as
applicable, of the agreements between the Debtors and those executive
officers of the Debtors who are parties to employment agreements with the
Debtors as of the Petition Date (as defined below), which agreements shall
(i) provide severance benefits to such executive officers equal to the
severance benefits such executive officers are entitled to receive under their
prepetition employment agreements with the Debtors and (ii) be in the form
provided to the Prepetition Administrative Agent and the Noteholder
Steering Committee by Lear. To the extent assumed, and as applicable,
any such prepetition agreement shall be amended to eliminate provisions
therein for the issuance of interests in with such
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Includes all other claims against the Group B Debtors that are not alan (a) Administrative Claim, (b)
Priority Tax Claim, (c) Other Secured Claim, (d) Priority Wage Claim, or (e) Intercompany Claim.
7

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interests being treated as Class 7 A-1 equity interest as set forth above.
The Plan of Reorganization shall provide for the adoption or asswnption of
the key management incentive plan, the valued employees plan and the
remaining non-equity obligations Wlder the outside director compensation
plan, the long term stock incentive plan, and the management stock
purchase plan, substantially consistent with the summaries provided to the
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Prepetition Administrative Agent and the Noteholder Steering Committee
prior to the Petition Date (as defined below); provided that all incentive
plan provisions covering insiders are approved by the Bankruptcy Court.
Unless otherwise rejected or terminated by the Debtors in their sole
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discretion on or before confinnation of the Plan of Reorganization, the Plan
of Reorganization shall provide that the reorganized Debtors shall assume
or reinstate all employee and retiree health, welfare and qualified and non-
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qualified pension plans. The restructuring contemplated by this Tenn
Sheet will not constitute a "change in control" or "change of control" (as
those terms are defmed in the respective plans to be assumed). The key
management incentive plan shall have the terms set forth in Exhibit 5 I
hereto.
After the Effective Date, Reorganized Lear shall continue or enter into any
benefit, compensation, incentive or similar plans and agreements as I
approved by the Board.
For purposes of clarity, a list of the U.S. plans and their treatment Wlder the
Plan of Reorganization is attached as Exhibit 6 hereto.
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Cancellation of On the Effective Date, except to the extent otherwise provided above, all
Instruments, Certfflcates instruments, certificates and other documents evidencing debt or equity
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and Other Documents interests in Lear or the other Debtors shall be cancelled, and the obligations
of the Debtors thereunder, or in any way related thereto, shaH be
discharged.
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Executory Contracts and Executory contracts and unexpired leases shall be assumed or rejected, as
Unexpired Leases the case may be, in the Debtors' discretion, in the Plan of Reorganization to
the extent that any such executory contracts and unexpired leases have not I
been assumed or rejected by the Debtors in their discretion during the
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pendency of the chapter 11 reorganization.
Ad Hoc Committee The Debtors shall pay the reasonable fees and expenses of the Ad Hoc
Advisor Fees Committee Advisors (as defined in the Noteholder Support Agreement) as
set forth in the Noteholder Plan Support Agreement, incurred in connection
with the Debtors' chapter 11 cases without the need for any application to
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the Bankruptcy Court unless other required by applicable bankruptcy law
or any order of the Bankruptcy Court.
Retention of Jurisdiction The Bankruptcy Court shall retain jurisdiction for customary matters. I
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S09265-CI02402201AoliYD.II681162.15
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Lear
Charter; Bylaws
Company as a Public:
Reporting Company
Exemption from SEC
Registration
Debtor Releases
S092650024.o2201-Acti ve.I168\J62. 1.5
Reorganized Lear shall have a nine-person board of directors (the
which shall consist of eight directors and Reorganized Lear's
Chainnan & Chief Executive Officer. Of the eight directors: (a) no fewer
than five shall be appointed by the Prepetition Administrative Agent in
consultation with the Prepetition Credit Agreement Lenders party to the
Plan Support Agreement and with the assistance of a nationally recognized
executive search finn to be retained by the Prepetition Administrative
Agent (at the expense of the Debtors); and (b) three members shall be
appointed by the Noteholder Steering Committee in consultation with the
other holders of Unsecured Note Claims who are parties to the Noteholder
Plan Support Agreement and the creditors' committee in the Debtors'
chapter 11 cases. Current directors will be included among the candidates
to be considered for the new Board.
All directors of the Board shall meet the criteria set forth in the NYSE or
Nasdaq, as applicable, listing requirements.
The charter and bylaws of each of the Debtors shall have been restated
manner reasonably satisfactory to the Prepetition Administrative Agent and
the Noteholder Steering Committee and consistent with section ll23(a)(6)
For certain purposes, including requiring Lear to become a public reporting
company under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Plan of Reorganization shall require Lear as
promptly as practicable following the Effective Date to file with the SEC a
registration statement on Fonn 10 under the Exchange Act registering all
securities issued under the Plan of Reorganization under the Exchange Act
(the "Form 10"), and Lear shall use reasonable best efforts to have such
registration statement declared effective by the SEC as promptly as
reasonably practicable.
The Plan of Reorganization shall provide for Lear to use its reasonable best
efforts to obtain a listing for the New Common Stock on NYSE or Nasdaq
as soon as reasonably practicable following the effectiveness of the Fonn
10 (e.g., after listing requirements are satisfied).
Demand registration rights with respect to the Series A Preferred Stock and
the New Common Stock to be discussed based upon the anticipated
composition of holders of Series A Preferred Stock and New Common
Stock on and after the Effective Date.
The issuance of all under the Plan of Reorganizatton will be
Full release, to maximum extent pennitted by Debtors and their
estates in favor of lenders under the DIP Facilities, the Prepetition
Administrative the Credit holders
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Releases Among Released
Parties
Indemnification/
Exculpation
Discharge
Injunction
Indemnification of
Prepetition Officers and
Directors
Tax Issues
of Unsecured Note Claims and current and former officers, directors,
employees, advisors, attorneys, professionals, accountants, investment
bankers, consultants, agents and other representatives (including their
respective officers, directors, employees, members and professionals) of
the Debtors and such lenders, noteholders and investors from any claims
and causes of action based on or relating to, or in any manner arising from,
in whole or in part, the Debtors, the chapter 11 cases, the Plan of
Reorganization and the subject matter of, or the transactions or events
giving rise to, any claim or interest that is treated in the Plan of
Reorganization (other than claims based on gross negligence or willful
misconduct) arising on or prior to the Effective Date.
Plan shall provide that each of the parties released by the Debtors shall
release each other and the Debtors for pre-Effective Date matters based on
or relating to, or in any manner arising from, in whole or in part, the
Debtors, the chapter 11 cases, the Plan of Reorganization and the subject
matter of, or the transactions or events giving rise to, any claim or interest
that is treated in the Plan of Reorganization.
Customary indemnification and exculpation provisions.
Customary discharge provisions.
Customary injunction provisions.
Under the Plan of Reorganization, all indemnification provisions currently
in place {whether in the by-laws, certificates of incorporation, board
resolutions, indemnification agreements or employment contracts) for the
investment bankers and other professionals of the Debtors shall be assumed
and irrevocable and shall survive the effectiveness of the Plan of
Reorganization.
The tenns of the Plan of Reorganization and the restructuring contemplated
by this Term Sheet shall be structured to preserve favorable tax attributes of
the Debtors to the extent practicable. The Debtors shall consult with the
advisors to the Prepetition Administrative Agent and the advisors to the
Noteholder Steering Committee on tax issues and matters of tax structure
relating to the Plan of Reorganization and the restructuring contemplated
by this Term Sheet.
I? .. .. ::.: .. .
l.< ! " :. < . : . . ; . .-'. ..:; _: \;:< ,: );:: :: >:::>. .-:':. ::;r /.:\ ::
Plan Support Agreement Prior to the commencement of the Debtors' chapter 11 cases, the
Prepetition Credit Agreement Lenders and the Debtors shall execute and
deliver the Lender Plan Support Agreement, and certain holders of the
Unsecured Notes and the Debtors shall execute and deliver the Noteholder
Timellne (i)
(ii)
W'l265-0004.0Zl011-ACIIY& 11611162.15
The Plan of Reorganization and related disclosure statement shall
be filed within 60 days of the filing date of these chapter 11 cases
(the "Petition Date");
The Debtors shall obtain an order, in form and substance
reasonably satisfactory to the Requisite Participating Lenders (as
10
Plan Confirmation
Plan Consummation
1161116l.IS
(iii)
(iv)
(i)
(ii)
(iii)
(iv)
(v)
defined in the Lender Plan Support Agreement) and the Requisite
Participating Noteholders (as defmed in the Noteholder Plan
Support Agreement), approving the adequacy of the disclosure
statement no later than 150 days after the Petition Date;
The Debtors shall obtain entry by the Bankruptcy Court of an
order, in form and substance reasonably satisfactory to the
Noteholders, confmning the Plan of Reorganization no later than
270 days after the Petition Date; and
The Debtors shall cause the Effective Date of the Plan of
Reorganization to occur no later than 300 days after the Petition
Date.
The Plan Support Agreements shall be in full force and effect and
shall not have been terminated;
The disclosure statement shall have been approved;
The Prepetition Administrative Agent and the Noteholder Steering
Committee shall be reasonably satisfied with all material tax
matters and positions relating to the Debtors and the reorganized
Debtors;
Except as provided in this Term Sheet, including Exhibit 5 and
Exhibit 6 hereof, all employment arrangements of senior
management for the post-Effective Date period shall be reasonably
satisfactory to the Prepetition Administrative Agent and the
Noteholder Steering Committee;
The Plan of Reorganization, including any amendments,
modifications or supplements thereto, and all documentation
contemplated by this Term Sheet or the Plan of Reorganization,
shall be in form and substance reasonably satisfactory to the
Noteholders;
(vi) There shall not have occurred a force majeure event (to be defined
as a significant global disruption in the fmancial markets caused by
outbreak of war, terrorism, or other incidents, but not adverse
changes in the financial, banking or capital markets generally); and
(vii) The Bankruptcy Court shall have entered an order confmning the
Plan of Reorganization, which order shall be in form and substance
reasonably satisfactory to the Debtors and the Requisite
Participating Lenders and the Requisite Participating Noteholders.
(i) Contemporaneous effectiveness of the Exit Facility or an
alternative exit financing facility provided that with respect to such
alternative exit financing facility the DIP Facility shall be repaid in
cash in full on the Effective Date; and
(ii) No modification or stay of confirmation order or entry of other
court order prohibiting Plan of Reorganization transactions from
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being consununated.
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12
509165-00l402208-Ac;tivc.11681162.1'
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Exhibit 1
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TERMS OF NEW TERM LOANS
Borrower: Reorganized Lear.
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Guarantors: Reorganized Lear's domestic subsidiaries which
guarantee the Exit Facility.
Principal: $600 million.
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Maturity: 3 years from the Effective Date
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Interest Rate: For the first 18-month period commencing with the
consummation of the Plan of Reorganization (the
"Initial Period"), L+550 bps with a LIBOR floor
of3.5%; for the 12-month period commencing after I
the Initial Period, L+650 bps with a LIBOR floor
of3.5%; and thereafter through maturity, L+750
bps with a LIBOR floor of3.5%.
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Interest rate margin will be further increased by
1.00% per annum on interest paid in PIK.
Call Premium: Call premium of 2% of the principal amount of any
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voluntary prepayment under, or refinancing of, the
New Tenn Loans after the second anniversary of
the Effective Date, payable at the time of
prepayment/ refinancing.
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Financial Covenants: Financial covenants to piggyback off of covenants
in the Exit Facility, but to be set off of wider
cushions; debt-incurrence covenant TBD.
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Collateral: The obligations under the New Term Loans will be
secured on a silent second priority basis by a
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perfected security interest in the Collateral under
the Exit Facility. Silent second priority security
interest in the Collateral, payment subordination,
lien priority, relative rights and other creditors' I
rights issues in respect of the New Term Loans and
the Exit Facility (and any debt refinancing or
replacing such debt) to be set forth in a customary
intercreditor agreement, in a form reasonably
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satisfactory to the parties.
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m26l-0024-02201-Activc.JI681162 .15
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Exhibit 2
TERMS OF SERIES A PARTICIPATING PREFERRED STOCK
Issuer: Reorganized Lear.
Initial Face Amount: Up to $500 million (the "Stated Value"), which shall be I
distributed pro rata to the holders of the Prepetition Credit
Agreement Secured Claim in satisfaction and discharge of
claims thereunder on a dollar for dollar basis.
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Liquidation Preference: The greater of (i) the initial Stated Value plus any accrued but
unpaid dividends as of the relevant determination date (such
aggregate amount, as of such date, the "Accrued Value"), and
(ii) the amount that would then be received upon the
liquidation, dissolution, or winding up of Reorganized Lear by
a holder of the number of shares of New Common Stock
issuable upon conversion of the Series A Preferred Stock (and I
assuming all of the Series A Preferred Stock were so
converted) held by such holder (the "Liguidatlon Value").
Dividends: The Series A Preferred Stock shall not bear any mandatory
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dividends. No dividend shall be declared on the Series A
Preferred Stock unless so authorized by a vote of at least six
out of the eight non-management directors of Reorganized
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Lear.
The holders of Series A Preferred Stock will participate in any
dividends or distributions declared on New Common Stock (other than
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a dividend payable solely in additional shares of New Common Stock,
which is addressed under the anti-dilution protections below) based on
the number of shares of New Common Stock into which Series A
Preferred Stock is convertible as of the applicable record date for such I
New Common Stock dividend or distribution.
Reorganized Lear may not declare dividends on or repurchase any
junior securities (including New Common Stock) unless dividends on I
Series A Preferred Stock, if any, have been paid in full in cash through
the most recent dividend payment date.
Mandatory Redemption: Upon liquidation of Reorganized Lear.
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If Reorganized Lear enters into a transaction constituting a
consolidation or merger, a reclassification of its New Common Stock
into securities other than New Common Stock or any statutory
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exchange of the outstanding shares ofNew Common Stock for
securities of another entity (each, a "Reorganization Event"), each
share of Series A Preferred Stock outstanding immediately prior to
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such Reorganization Event will remain outstanding but will become
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convertible at the option of the holder into the kind of securities cash
50926500240221)8.Acoi,..ll681162, 1 S
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and other property receivable in such Reorganization Event by a
holder of the number of shares of New Common Stock into which
each share of Series A Preferred Stock would then be convertible. In I
the event of a sale of all or substantially all of the assets of
Reorganized Lear, proper provision shall be made such that the
holders of the Series A Preferred Stock shall receive an equivalent
security in the entity acquiring such assets.
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Optional Redemption: Subject to any applicable contractual restrictions, at the option
of Reorganized Lear, at any time or from time to time, in whole
or in part, at a redemption price, payable in cash, equal to the
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greater of (i) the Accrued Value and (ii) the Liquidation Value.
Mandatory Conversion Three (3) years following the Effective Date, provided that the
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Date: Mandatory Conversion Date shall also mean any earlier date
after the first anniversary of the Effective Date, if for 20
trading days within any period of 3 0 consecutive trading days,
the closing price of the New Common Stock exceeds 135% of
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the then-applicable conversion price for the Series A Preferred
Stock. The initial conversion price shall be equal to the per
share Plan of Reorganization value of New Common Stock as
of the Effective Date. I
Optional Conversion: Each share of Series A Preferred Stock may be converted at the
option of the holder at any time into a number of shares of New
Common Stock equal to the Accrued Value as of the
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conversion date (including any increase in Stated Value as a
result of dividend payments that are paid in-kind) divided by
the then applicable conversion price. The initial conversion
price shall be equal to the per share Plan of Reorganization
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value of New Common Stock as of the Effective Date.
Anti-Dilution: The conversion price will be subject to proportional adjustment
for any stock split, stock recombination, or stock dividend
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(other than the pay in-kind dividends to holders of the Series A
Preferred Stock) or any distribution of rights, options, warrants
or any distribution of shares of capital stock, evidences of
indebtedness or other property or assets by Reorganized Lear
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or any of its subsidiaries in which the holders of Series A
Preferred Stock do not participate on a pro rata as converted
basis.
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Ranking: Senior to all other capital stock of Reorganized Lear with
respect to dividends and liquidation.
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Voting:
Series A Preferred Stock will vote together with the New Common
Stock on all matters and not as a separate class, on an as-converted
basis. Notwithstanding the foregoing, the consent of the holders of a
majority of the outstanding shares of Series A Preferred Stock, voting
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as a separate class is required to:
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11681162.1 S
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(a) amend Reorganized Lear's certificate of incorporation in a way
that would alter, modify or change the rights, designations or
preferences of the holders of Series A Preferred Stock;
(b) authorize or issue any other capital stock that will be senior to
Series A Preferred Stock; and
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(c) increase or decrease the authorized number of shares of Series A
Preferred Stock.
Registration Rights: Registration rights for the Series A Preferred Stock to be discussed
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based on size of issue and composition of holders of Series A
Preferred Stock.
Transferability: Freely transferable.
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S0926.'-0024-02201ACI;, . 11611161.15
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Exhibit 3
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TERMS OF WARRANTS FOR CLASS SA CLAIMS
Warrants The Warrants will entitle the holders thereof to acquire shares of New
Common Stock representing 15% ofthe New Common Stock, on a fully-
diluted basis, as of the Effective Date (but subject to dilution for awards I
under the Management Equity Plan).
Exercise Price per Exercisable at any time during the Exercise Period at a price equal to $.01
Warrant: per Warrant.
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"Exercise Period" means the period (a) commencing on the business day
following a period of30 consecutive trading days during which the closing
price of the New Common Stock on at least 20 of the trading days within
such period implies a total distributable value of the Company equal to or
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greater than $3.3 billion and (b) ending on the Expiration Date.
Expiration: The fifth anniversary of the Effective Date (the "ExRiration Date").
Exercise Date: Exercisable at any time, during the Exercise Period.
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Voting Rights: None.
Anti-Dilution The Exercise Price per Warrant and the number of shares of common stock
Provisions: issuable upon exercise of the Warrants shall be subject to customary
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adjustment upon the occurrence of common stock splits and reverse
common stock splits.
Reorganization Except as provided in the next sentence, upon a Reorganization Event that
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Event: is consummated during the Exercise Period, each Warrant will be
exercisable into the right to receive the kind and amount of consideration to
which such holder would have been entitled as a result of such
Reorganization Event had the Warrant been exercised immediately prior
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thereto. In the event of a Reorganization Event consummated during the
Exercise Period in which the only consideration payable to holders of New
Common Stock is cash, each Warrant shall be entitled to receive the cash
consideration to which such holder would have been entitled as a result of
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such Reorganization Event, less the Exercise Price, had the Warrant been
exercised immediately prior thereto. The Warrants shall expire and be
cancelled following a Reorganization Event, subject to receipt of any
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consideration to which holders thereof are entitled as provided above. A
"Reorganization Event" shall mean any transaction in which Reorganized
Lear enters into a transaction constituting (i) a consolidation or merger in
which its New Common Stock is exchanged for securities of another entity, I
(ii) a reclassification of its New Common Stock into securities other than
New Common Stock or (iii) any statutory exchange of the outstanding
shares of New Common Stock for securities of another entity.
Transferability: The Warrants will not be subject to any contractual restrictions on transfer
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other than such as are necessary to ensure compliance with U.S. federal and
state securities laws. Reorganized Lear will undertake to file a registration
statement covering the Warrants and the New Common Stock underlying
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the Warrants and to maintain the effectiveness of the registration statement.
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11611162.1.5
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Exhibit 4
TERMS OF MANAGEMENT EQUITY PLAN
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Number of Shares Equivalent to up to 10% of the New Common Stock.
Types of A wards Initial awards of restricted stock granted as set forth in the section
entitled "Grants" herein. Future awards, excluding the awards
described herein, to be determined by the Board of Reorganized Lear,
and may include, without limitation, restricted stock, restricted stock I
units, performance shares, performance units, stock appreciation
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rights, stock options, etc.
Pricing Awards (other than restricted stock and restricted stock Wlits) will have
an exercise price per share equal to the fair market value on the date of
grant.
Grants Upon emergence, restricted stock grants equal to 2.7% of the New
Common Stock, on a fully-diluted basis after giving effect to an
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securities exercisable or convertible into New Common Stock.
Future awards will be granted at such time(s) as the Board of
Reorganized Lear shall determine.
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Participants Participation in the determination of the Board, provided that
participation for emergence grants limited to 150 to 200 employees
determined as follows:
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(a) E3 and higher (approximately 100 participants), including the
participants listed on Schedule A hereto in the percentage of the total
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award on emergence, as set forth next to such participant's title
therein; and
(b) 50-100 additional participants based on performance, position I
criticality and other relevant factors.
Vesting Emergence grants shall vest in three equal annual installments on each
of the fmt three anniversaries of the Effective Date. Vesting of
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emergence grants for a particular employee shall be accelerated, in
full, in the event of termination of employment of such employee by
Lear without Cause or by such employee with Good Reason.
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Future awards, excluding the emergence awards described herein, shall
be subject to such vesting schedules and in such form as determined by
the Board.
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Expiration of A wards Earlier of (i) ten years after grant, (ii) 30 days after termination of
employment other than for death, disability or cause, (iii) one year
after termination of employment by death or disability or (iv)
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immediately upon termination for cause.
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Schedule A
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Exhibit 5
TERMS OF KEY MANAGEMENT INCENTIVE PLAN
Participants
Performance measures and
weightings
A ward opportunity
Payout timing
509265--00:!402208Ac::lh1t. 11681162.15
29 senior executives
Filing a Plan of Reorganization confonning to the Term
Sheet or any other plan that the Board determines, in the
exercise of its fiduciary duties, is in the best interests of
the Debtors (such plans, a "Satisfactory Plan"), within 60
days after filing the petition: 25% of award opportunity
Emergence within 300 days from filing the petition: 50%
of award opportunity
Quarterly opportunity for Adjusted Operating Earnings
results: 25% of award opportunity (6.25% per quarter)
Market competitive award opportunities set based on
position responsibilities, criticality, business impact and
other factors
Specified as a dollar amount which is equal to the
market-based multiple of salary times an executive's
current base salary
Award opportunity for filing a Satisfactory Plan and
Emergence are binary. For the Adjusted Operating
Earnings award opportunity, payouts can range up to
140% of target for the particular quarter based on actual
results (8.75% per quarter)
Within 10 days following the occurrence of the event or,
for the Adjusted Operating Earnings award opportunity,
within 30 days of completion of the quarter
If emergence is during a quarter, the Adjusted Operating
Earnings opportunity will be prorated assuming target
performance
For the CEO, payout of all earned amounts will be as
follows:
o Upon emergence: 50%
o l year anniversary from emergence: 50%
l.

2.

Exhibit 6
TREATMENT OF U.S. BENEFIT PLANS
Plans to be Assumed! Adopted
Outside Directors Compensation Plan (interest accounts totaling approximately $346,000)
Valued Employee Plan
Key Management Incentive Plan
Long-Term Stock Incentive Plan (cash dividend portion totaling approximately $375,000)
Management Stock Purchase Plan (notional cash accounts totaling approximately $160,000)
Qualified Plans (including 40l(k) and pension plans)
Welfare Plans (including Estate Preservation Plan)
Executive Supplemental Savings Plan
PSP Excess Plan
Supplemental Employee Retirement Program (Pension Equalization Program and pension portion
of Executive Supplemental Savings Plan}
Severance Policy
Plans Not to be Assumed
Annual Incentive Compensation Plan
Key Employee Recognition Plan
Long-Term Incentive Plan (equity portion and performance awards}
Management Stock Purchase Plan (equity portion)
Outside Directors Compensation Plan (equity portion)
15
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Exhibit 7
(I) Subject to dilution from warrants representing 15% of Reorganized Lear's outstanding New Common
Stock as set forth in Exhibit 3 and Management Equity Plan.
(2) Subject to dilution from warrants representing 15% of Reorganized Lear's outstanding New Common
Stock as set forth in Exhibit 3, Management Equity Plan, and Other General Unsecured Claims not
included above.
509265-D0:!402208Acrivc.ll681162.1)
In re Masonite Corporation, Case No. 09-10844 (Bankr. Del. 2009).
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EXECUTION VERSION
This RESTRUCTURING AND LOCK-UP AGREEMENT is made and entered into as of
March 11, 2009 (this "Agreement") by and among (i) Masonite International Inc., Masonite
Internat.ional Corporation, Masonite Corporation, Premdor Finance LLC, Eger Properties,
WMW, Inc., Woodlands Millwork I, Ltd., Masonite Primeboard, Inc., Florida Made Door Co.,
Cutting Edge Tooling, Inc., Pintu Acquisition Company, Inc., Masonite Air LLC, Door
Installation Specialist Corporation, Masonite Mexico S.A. de C.V., Premdor U.K. Holdings
Limited, Premdor Crosby Limited, Bonlea Limited, Masonite Chile Holdings S.A., Masonite
Ireland, Masonite Europe, Masonite Europe Limited, Masonite Components, Crown Door
Corporation, Castlegate Entry Systems Inc., 3061275 Nova Scotia Company, and Rochman
Universal Doors Inc. (collectively, the "Company''); (ii) the undersigned lenders under the Credit
Agreement (each, a "Consenting Lender"); and (iii) the undersigned holders or investment
advisers or managers of discretionary accounts that hold the Senior Subordinated Notes (as
defined below) (each, a "Consenting Noteholder") (each of the foregoing, a "Party," and
collectively, the "Parties"). Each Consenting Lender and each Consenting Noteholder sha11 be
referred to herein as the "Plan Support Parties."
RECITALS
WHEREAS, the Company and the Plan Support Parties are negotiating restructuring and
recapitalization transactions (collectively, the "Transactions") with respect to the capital
structure of the Company, including the Company's obligations under: (i) that certain Credit
Agreement, dated as of April 6, 2005 (as amended, restated, supplemented, or otherwise
modified from time to time, the "Credit Agreement"), by and among Masonite Corporation, as
the U.S. borrower, Masonite International Corporation, as the Canadian borrower, and certain of
their affiliates, as guarantors, The Bank of Nova Scotia, as administrative agent (the
"Administrative Agent"), and certain financial institutions and lender parties thereto (together
with all Obligations (as defined in the Credit Agreement), the "Credit Agreement Obligations");
(ii) the $412 million in ll% senior subordinated notes due April 6, 2015 (the "U.S. Senior
Subordinated Notes") issued by Masonite Corporation pursuant to that certain Exchange Note
Indenture, dated as of October 6, 2006 (as amended, restated, supplemented, or otherwise
modified from time to time, the "U.S. Indenture"), by and among Masonite Corporation, as the
issuer, and certain of its affiliates, as guarantors, and The Bank of New York, as trustee (in such
capacity, the "Trustee"); and (iii) the $357.9 million in ll% senior subordinated notes due April
6, 2015 (the "Canadian Senior Subordinated Notes," and together with the U.S. Senior
Subordinated Notes, the "Senior Subordinated Notes") issued by Masonite International
Corporation pursuant to that certain Exchange Note Indenture, dated as of October 6, 2006 (as
amended, restated, supplemented, or otherwise modified from time to time, the "Canadian
Indenture," and together with the U.S. Indenture, the "Indentures"), by and among Masonite
International Corporation, as issuer, and certain of its affiliates, as guarantors, and the Trustee,
pursuant to the terms and conditions set forth in the Restructuring Term Sheet attached hereto as
Exhibit A (the "Term Sheet") and in this Agreement;
WHEREAS, Masonite Holding Corporation, Masonite International Inc., Masonite
International Corporation, Masonite Corporation, and certain of their affiliates (collectively, the
"U.S. Debtors") intend to commence voluntary reorganization cases (the "Chapter 1 I Cases")
K&E 1427&672.27
EXECUTION VERSION
under chapter 11 oftitle t I ofthe United States Code, 11 U.S.C. 101-1532 (the "Bankruptcy
Code"), in the United States Bankruptcy Court (the "Bankruptcy Court") to effect the
Transactions through a prearranged chapter 11 plan of reorganization that implements and is
otherwise materially consistent with the terms and conditions set forth in the Term Sheet and in
this Agreement (the "Plan of Reorganization"); and
WHEREAS, Masonite Holding Corporation, Masonite International Inc., Masonite
International Corporation, and certain of their affiliates (the "CCAA Applicants," and together
with the U.S. Debtors, the "Masonite Debtors") intend to commence voluntary reorganization
cases (the "CCAA Proceedings") under the Companies' Creditors Arrangement Act (the
"CCAA") in the Ontario Superior Court of Justice (the "Canadian Court") in Toronto, Ontario,
Canada to effect the Transactions through a plan of arrangement that implements and is
this Agreement, which may include a plan of arrangement under the Canada Business
Corporations Act (collectively, the "Plan of Arrangement," and together with the Plan of
Reorganization, the "Plans");
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, and for other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Party, intending to be legally bound hereby, agrees as follows:
AGREEMENT
Section 1. Agreement Effective Date. This Agreement shall become effective and binding
upon each of the Parties at 12:01 a.m. prevailing Eastern Time on the date on which: (a) the
following conditions have been satisfied (i) the Company shall have executed and delivered
counterpart signature pages of this Agreement to counsel to the Administrative Agent and
counsel to the Informal Noteholder Committee (as defined below), (ii) holders of at least
two-thirds of the outstanding principal amount of the Credit Agreement Obligations shall have
executed and delivered to the Company counterpart signature pages of this Agreement, and
(iii) holders of at least two-thirds of the outstanding principal amount of the Senior Subordinated
Notes shall have executed and delivered to the Company counterpart signature pages of this
Agreement and (b) the Company has given notice to the Administrative Agent and the Informal
Noteholder Committee (as defined below) in accordance with Section 8.11 hereof that the
conditions in (a)(i) through (iii) have been satisfied and this Agreement is effective (the
"Agreement Effective Date").
Section 2. Term Sheet. The Term Sheet is expressly incorporated herein and is made part of
this Agreement. The general terms and conditions of the Transactions are set forth in the Term
Sheet; provided, however, that the Term Sheet is supplemented by the terms and conditions of
this Agreement. In the event of any inconsistencies between the terms of this Agreement and the
Term Sheet, this Agreement shall govern.
2
K&E 1427&672.27
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EXECUTION VERSION
(a) As long as this Agreement has not been terminated in accordance with the terms
hereof, each of the Plan Support Parties, agrees that it shall, subject to (i) the receipt by such Plan
Support Party of a disclosure statement and other solicitation materials in respect of the Plans,
which disclosure statement and solicitation materials reflect the agreement set forth in the Term
Sheet and have been approved by the Bankruptcy Court pursuant to section 1125 of the
Bankruptcy Code and the Canadian Court in the CCAA Proceedings and are in all material
respects reasonably satisfactory to the Plan Support Parties (collectively, the "Solicitation
Materials"), and (ii) the Plan Support Party being entitled under such Plans to vote to accept or
reject the Plans:
(i) vote its claims against the Company to accept the Plans by delivering its
duly executed and completed ballot accepting such Plans on a timely basis following the
commencement ofthe solicitation and its actual receipt of the Solicitation Materials and ballot;
(ii) not change or withdraw (or cause to be changed or withdrawn) such vote;
and
(iii) not, in any material respect, (A) object to, delay, impede, or take any other
action to interfere with acceptance or implementation of the Plans or (B) propose, file, support,
or vote for any restructuring, workout, plan of arrangement, or plan of reorganization for the
Company other than the Plans and shall, in the case of the Consenting Lenders, direct the
Administrative Agent not to take any action contemplated in (A) and (B) of this Section
3.01 (a)(iii).
(b) For the avoidance of doubt, each Plan Support Party also agrees that, (i) unless
this Agreement is terminated in accordance with the terms hereof, it will not take any action,
and, in the case of the Consenting Lenders, it will direct the Administrative Agent not to take any
action, that would in any material respect interfere with, delay, or postpone the confirmation or
consummation of the Plans and implementation of the Transactions and (ii) upon the
commencement by the Company ofthe Chapter 11 Cases, the automatic stay is invoked and each
Plan Support Party agrees that it will not, and, in the case of the Consenting Lenders, it will
direct the Administrative Agent not to exercise any right or remedy for the enforcement,
collection, or recovery of any of the Credit Agreement Obligations or the Senior Subordinated
Notes against the Company or any direct or indirect subsidiaries of Masonite International Inc.
that are not Masonite Debtors; provided, however, that, except as otherwise set forth in this
Agreement, the foregoing prohibition will not limit any Plan Support Parties' rights under any
applicable indenture, credit agreement, other loan document, and/or applicable Jaw to: (A)
terminate or close out any swap agreement, repurchase agreement, or similar transaction with the
Company to the extent the underlying agreement permits such termination or close-out or (B) to
appear and participate as a party in interest in any matter to be adjudicated in any case under the
Bankruptcy Code or CCAA concerning the Company, so long as such appearance and the
positions advocated in connection therewith are not materially inconsistent with the Plans and do
not hinder, delay, or prevent consummation of the Transactions.
3
K&E l427B67Z.27
EXECUTION VERSION
3.02. Commitment of Company. The Company shall (a) support and complete the
Transactions embodied in the Term Sheet, (b) do all things necessary and appropriate in
furtherance of the Transactions embodied in the Term Sheet, including, without limitation
(i) commencing the Chapter 11 Cases and the CCAA Proceedings on or before March 16, 2009
(the "Outside Petition Date," and the actual commencement date, the "Petition Date"), (ii) taking
all steps necessary and desirable to obtain an order of the Bankruptcy Court, reasonably
acceptable in all material respects to the Administrative Agent and counsel for the Informal
Noteholder Committee, confirming the Plan of Reorganization and an order of the Canadian
Court, reasonably acceptable in all material respects to the Administrative Agent and counsel for
the Informal Noteholder Committee, approving the Plan of Arrangement within the timeframes
contemplated by this Agreement, and (iii) taking all steps reasonably necessary and desirable to
cause the effective date of the Plans to occur within the timeframes contemplated by this
Agreement, (c) obtain any and all required regulatory and/or third-party approvals for the
Transactions embodied in the Term Sheet, and (d) not take any action that is inconsistent with, or
is intended or is likely to interfere with consummation of, the restructuring and the Transactions
embodied in the Term Sheet. Regardless of whether the Transactions are consummated, the
Company shall promptly pay in cash upon demand any and all reasonable accrued and unpaid
out-of-pocket expenses incurred by the Administrative Agent and the informal committee of
noteholders of Senior Subordinated Notes (the "Informal Noteholder Committee") (including,
without limitation, all reasonable fees and out-of-pocket expenses of the legal counsel and
financial advisors for the Administrative Agent and the Informal Noteholder Committee) in
connection with the negotiation, documentation, and consummation ofthis Agreement, the Term
Sheet, the Solicitation Materials, all other documents related to the Plans and the Transactions.
3.03. Transfer of Interests and Securities. Except as expressly provided herein, this
Agreement shall not in any way restrict the right or ability of any Consenting Lender or
Consenting Noteholder to sell, use, assign, transfer or otherwise dispose of ("Transfer") any of
the Credit Agreement Obligations or Senior Subordinated Notes; provided, however, that for the
period commencing as of the date such Consenting Lender or Consenting Noteholder, as
applicable, executes this Agreement until termination of this Agreement pursuant to the terms
hereof (such period, the "Restricted Period'), no Consenting Lender or Consenting Noteholder
shall Transfer any Credit Agreement Obligations or Senior Subordinated Notes, and any
purported Transfer of Credit Agreement Obligations or Senior Subordinated Notes shall be void
and without effect, unless (a) the transferee is a Consenting Lender or a Consenting Noteholder
or (b) if the transferee is not a Consenting Lender or a Consenting Noteholder prior to the
Transfer, such transferee delivers to the Company, at or prior to the time of the proposed
Transfer, an executed copy of Exhibit B attached hereto pursuant to which such Transferee shall
assume all obligations of the Consenting Lender or Consenting Noteholder transferor hereunder
in respect of the Credit Agreement Obligations or Senior Subordinated Notes being transferred
(such transferee, if any, to also be a "Consenting Lender" or "Consenting Noteholder," as
applicable, hereunder). This Agreement shall in no way be construed to preclude the Consenting
Lenders or Consenting Noteholders from acquiring additional Credit Agreement Obligations or
Senior Subordinated Notes; provided, however, that (a) any Consenting Lender or Consenting
Noteholder that acquires additional Credit Agreement Obligations or Senior Subordinated Notes
after executing this Agreement shall notifY the Company, the Administrative Agent, and the
Informal Noteholder Committee of such acquisition within five business days after the closing of
such trade and (b) additional Credit Agreement Obligations and Senior Subordinated Notes shall
4
K&F. 1427867227
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EXECUTION VERSION
automatically and immediately upon acquisition by a Consenting Lender or Consenting
Noteholder be deemed subject to all of the terms of this Agreement whether or not notice is
given to the Company, the Administrative Agent, or the Informal Noteholder Committee of such
acquisition. This Section 3.03 shall not impose any obligation on (a) the Company to issue any
"cleansing letter" or otherwise publicly disclose information for the purpose of enabling a
Consenting Lender or Consenting Noteholder to Transfer any Credit Agreement Obligations or
Senior Subordinated Notes or (b) the Administrative Agent to monitor or enforce the provisions
of this Section 3.03 as they relate to the Consenting Lenders. Subject to the obligations in any
confidentiality agreement among the Company and a Plan Support Party, including pursuant to
Section 8.12, the Company acknowledges and agrees that the undersigned Plan Support Parties
do not owe any additional duty of confidentiality to the Company or to the any other party with
respect to information provided by, or otherwise relating to, the Company.
3.04. Representation of Consenting Noteholders. Each of the Consenting Noteholders
severally and not jointly represents and warrants that, as of the date such Consenting Noteholder
(a) it is the beneficial owner of the face amount of the Senior Subordinated Notes, or
is the nominee, investment manager, or advisor for beneficial holders of the Senior Subordinated
Notes, as reflected in such Consenting Noteholder's signature block to this Agreement, which
amount the Company and each Consenting Noteholder understands and acknowledges is
proprietary and confidential to such Consenting Noteholder;
(b) other than pursuant to this Agreement and applicable Jaw, such Senior
Subordinated Notes are free and clear of any pledge, lien, security interest, charge, claim, equity,
option, proxy, voting restriction, right of first refusal or other limitation on disposition, or
encumbrances of any kind, that would adversely affect in any way such Consenting Noteholder's
performance of its obligations contained in this Agreement at the time such obligations are
required to be performed;
(c) (i) it is either (a) a qualified institutional buyer as defined in Rule 144A of the
Securities Act of 1933, as amended (the "Securities Act"), or (b) an institutional accredited
investor (as defined in Rule 50l(a)(l), (2), (3), or (7) under the Securities Act (the "Rules")),
(ii) any securities will have been acquired for investment and not with a view to distribution or
resale; and
(d) it is not aware of any event that, due to any fiduciary or similar duty to any other
person, would prevent it from taking any action required of it under this Agreement.
3.05. Representation of Consenting Lenders. Each of the Consenting Lenders severally
and not jointly represents and warrants that, as of the date such Consenting Lender executes and
delivers this Agreement:
(a) it is the beneficial owner of the face amount of the Credit Agreement Obligations,
or is the nominee, investment manager, or advisor for beneficial holders of the Credit Agreement
Obligations, as reflected in such Consenting Lender's signature block to this Agreement, which
5
K&F. 1427Y672.27
EXECUTION VERSION
amount the Company and each Consenting Lender understands and acknowledges is proprietary
and confidential to such Consenting Lender;
(b) other than pursuant to this Agreement, such Credit Agreement Obligations are
free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting
restriction, right of first refusal or other limitation on disposition, or encumbrances of any kind,
that would adversely affect in any way such Consenting Lender's performance of its obligations
contained in this Agreement at the time such obligations are required to be performed; and
Securities Act of 1933, as amended (the "Securities Act"), or (b) an institutional accredited
investor (as defined in Rule 50l(a)(l), (2), (3), or (7) under the Securities Act (the "Rules")),
(ii) any securities acquired by the Consenting Lender in connection with the transactions
described herein will not have been acquired with a view to distribution.
Section 4. Certain Additional Chapter 11 and CCAA Related Matters. The Company shall
provide draft copies of all "first day" motions or applications and other documents the Company
intends to file with the Bankruptcy Court and/or the Canadian Court to counsel for the
Administrative Agent and counsel for the Informal Noteholder Committee at least three days
prior to the date when the Company intends to file such document and shall consult in good faith
with such counsel regarding the form and substance of any such proposed filing with the
Bankruptcy Court and/or the Canadian Court; provided, however, that any such proposed filing
with the Canadian Court shall be in form and substance reasonably acceptable to the
Administrative Agent and counsel for the Informal Noteholder Committee. The Company will
use its reasonable best efforts to provide draft copies of all other pleadings the Company intends
to file with the Bankruptcy Court and/or the Canadian Court to counsel for the Administrative
Agent and counsel for the Informal Noteholder Committee at least three days prior to filing such
pleading and shall consult in good faith with such counsel regarding the form and substance of
any such proposed pleading.
Section 5. Mutual Representations, Warranties, and Covenants. Each of the Parties,
severally and not jointly, represents, warrants, and covenants to each other Party, as of the date
of this Agreement, as follows (each of which is a continuing representation, warranty, and
covenant):
5.01. Enforceability. It is validly existing and in good standing under the laws of the
state of its organization, and this Agreement is a legal, valid, and binding obligation of such
Party, enforceable against it in accordance with its terms, except as enforcement may be limited
by applicable laws relating to or limiting creditor's rights generally or by equitable principles
relating to enforceability.
5.02. No Consent or Approval. Except as expressly provided in this Agreement, the
Bankruptcy Code, the CCAA, or the Canada Business Corporations Act, as applicable, no
consent or approval is required by any other person or entity in order for it to carry out the
Transactions contemplated by, and perform the respective obligations under, this Agreement.
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K&E 14278672 27
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5.03. Power and Authority. Except as expressly provided in this Agreement, it has all
requisite power and authority to enter into this Agreement and to carry out the Transactions
contemplated by, and perform its respective obligations under, this Agreement.
5.04. Authorization. The execution and delivery of this Agreement and the
performance of its obligations hereunder have been duly authorized by all necessary action on its
part.
6.01. Consenting Lender and Consenting Noteholder Termination Events. This
Agreement may be terminated by the delivery to the Company and, as applicable, the
Administrative Agent or the Informal Noteholder Committee of a written notice in accordance
with Section 8.11 hereof by Consenting Lenders holding no less than a majority in principal
amount of the Credit Agreement Obligations held at such time by the Consenting Lenders or
Consenting Noteholders holding no less than a majority in principal amount of the Senior
Subordinated Notes held at such time by the Consenting Noteholders (unless otherwise provided
in this Section 6.01 ), each in the exercise of its sole discretion, upon the occurrence and
continuation of any of the following events (each a "Consenting Lender/Noteholder Termination
Event"):
(a) failure of the Company and Masonite Holding Corporation to commence the
Chapter 11 Cases and the CCAA Proceedings on or before the Outside Petition Date;
(b) failure of the Company and Masonite Holding Corporation to file a Plan of
Reorganization and related disclosure statement with the Bankruptcy Court or a Plan of
Arrangement with the Canadian Court within 10 days after the Petition Date, each of which shall
be materially consistent with this Agreement and the Term Sheet and in form and substance
reasonably acceptable to the Administrative Agent and counsel for the I-nformal Noteholder
Committee;
(c) the Bankruptcy Court's and the Canadian Court's orders approving the
Solicitation Materials and setting a hearing to confirm the Plans shall not have been entered by
the Bankruptcy Court and the Canadian Court within 40 days after the filing of the Plans, or as
soon thereafter as the Bankruptcy Court's and the Canadian Court's schedule permits;
(d) the Bankruptcy Court's and the Canadian Court's orders confirming the Plans
(the "Confirmation Order"), which Plans, including all exhibits, appendices, plan supplement
documents, and related documents, shall each be reasonably acceptable to the Administrative
Agent and counsel for the Informal Noteholder Committee, shall not have been entered by the
Bankruptcy Court and the Canadian Court within 40 days after the date that the Solicitation
Materials are approved; provided, however, that so long as the Company is proceeding in good
faith towards confirmation and/or consummation of the Plans, upon written notice from the
Company to the Administrative Agent and the Informal Noteholder Committee in accordance
with Section 8.11 hereof, there shall be a 15-day extension of such 40-day period;
(e) the effective date of the Plans shall not have occurred within 25 days after the
date that the Plans are confirmed (the "Outside Date"); provided, however, that so long as the
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K&.E 14278672.27
EXECUTION VERSION
Company is proceeding in good faith towards confirmation and/or consummation of the Plans,
upon written notice from the Company to the Administrative Agent and the Informal Noteholder
Committee in accordance with Section 8.ll hereof, there shall be a 15-day extension of such
25-day period;
(f) the breach in any material respect by the Company of any of the obligations,
representations, warranties, or covenants of the Company set forth in this Agreement; provided,
however, that the Administrative Agent or the Informal Noteholder Committee shall transmit a
notice to the Company and the Administrative Agent or the Informal Noteholder Committee, as
applicable, detailing any such breach, and the Company shall have five business days after
receiving such notice to cure any breach;
(g) the issuance by any governmental authority, including any regulatory authority or
court of competent jurisdiction, of any ruling or order enjoining the consummation of a material
portion of the Transactions in a way that cannot be reasonably remedied by the Company;
provided, however, that the Company shall have five business days after receiving such notice to
cure any breach;
(h) the conversion of one or more of the Chapter 11 Cases to a case under chapter 7
of the Bankruptcy Code or if the CCAA Proceedings are dismissed, terminated, stayed,
modified, or converted to a proceeding under the (Canada) Bankruptcy and Insolvency Act or
(Canada) Winding-Up and Restructuring Act, in each case unless such conversion, dismissal,
termination, stay, or modification, as applicable, is made with the prior written consent of the
Administrative Agent and counsel for the Informal Noteholder Committee;
(i) the appointment of a trustee, receiver, or examiner with expanded powers in one
or more of the Chapter 11 Cases or a receiver, interim receiver, receiver and manager, trustee in
bankruptcy, liquidator, or administrator is appointed in the CCAA Proceedings or any other
proceedings against the Company or Masonite Holding Corporation, in each case unless such
appointment is made with the prior written consent of the Administrative Agent and counsel for
the Informal Noteholder Committee;
(j) the amendment, modification, or filing of a pleading by the Company seeking to
amend or modify the Plans, Solicitation Materials, or any documents related to the foregoing,
including motions, notices, exhibits, appendices, and orders, in a manner not reasonably
acceptable to the Administrative Agent and counsel for the Informal Noteholder Committee; or
(k) the Company or Masonite Holding Corporation files any motion or pleading with
the Bankruptcy Court or the Canadian Court that is not consistent in any material respect with
this Agreement or the Term Sheet and such motion or pleading has not been withdrawn prior to
the earlier of (i) five business days of the Company receiving written notice in accordance with
Section 8.11 hereof from either the Administrative Agent or the Informal Noteholder Committee
that such motion or pleading is inconsistent with this Agreement or the Term Sheet and (ii) entry
of an order of the Bankruptcy Court or the Canadian Court, as applicable, approving such
motion.
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Notwithstanding any provisiOn in this Agreement to the contrary, upon the written
consent of Consenting Lenders holding a majority in principal amount of the Credit Agreement
Obligations held at such time by the Consenting Lenders and Consenting Noteholders holding a
majority in principal amount of the Senior Subordinated Notes held at such time by the
Consenting Noteholders, the dates set forth in this Section 6.0 I may be extended prior to or upon
each such date and such later dates agreed to in lieu thereof and shall be of the same force and
effect as the dates provided herein; provided, however, that the Outside Date may not be
extended beyond September 15, 2009, without the written consent of each Party. If this
Agreement is terminated by the Consenting Lenders or the Consenting Noteholders pursuant to
this Section 6.01, this Agreement shall be automatically and simultaneously terminated as to any
other Party that is a signatory to this Agreement. No Party shall terminate this Agreement if such
Party is in breach of any provision hereof.
6.02. Company Termination Events. The Company may terminate this Agreement as to
all Parties upon five business days' prior written notice, delivered in accordance with Section
8.11 hereof, upon the occurrence of any ofthe following events (each, a "Company Termination
Event"): (a) the breach by any of the Plan Support Parties of any of the representations,
warranties, or covenants of such Plan Support Parties set forth in this Agreement that would have
a material adverse impact on the Company, or the consummation of the Transactions, that
remains uncured for a period of three business days after the receipt by the Plan Support Parties
of notice of such breach; (b) the board of directors of the Company reasonably determines based
upon the advice of counsel that proceeding with the Transactions would be inconsistent with the
exercise of its fiduciary duties, or (c) the issuance by any governmental authority, including any
regulatory authority or court of competent jurisdiction, of any ruling or order enjoining the
consummation of a material portion of the Transactions.
6.03. Mutual Termination. This Agreement, and the obligations of all Parties
hereunder, may be terminated by mutual agreement among {a) the Company, (b) Consenting
Lenders holding a majority in principal amount of the Credit Agreement Obligations held at such
time by the Consenting Lenders, and (c) Consenting Noteholders holding a majority in principal
amount of the Senior Subordinated Notes held at such time by the Consenting Noteholders.
6.04. Effect of Termination. Upon termination of this Agreement under Section 6.0 I,
6.02, or 6.03, this Agreement shall be of no further force and effect and each Party hereto shall
be released from its commitments, undertakings, and agreements under or related to this
Agreement and shall have the rights and remedies that it would have had it not entered into this
Agreement, and shall be entitled to take all actions, whether with respect to the Transactions or
otherwise, that it would have been entitled to take had it not entered into this Agreement. Upon
the occurrence of any termination of this Agreement, any and all consents tendered by the Plan
Support Parties prior to such termination shall be deemed, for all purposes, to be null and void
from the first instance and shall not be considered or otherwise used in any manner by the Parties
in connection with the Transactions and this Agreement or otherwise.
6.05. Termination Upon Effective Date of Plan. This Agreement shall terminate
automatically without any further required action or notice on the date that the Plans become
effective (immediately following the effectiveness of the Plans).
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K&E 14278672 27
EXECUTION VERSION
Section 7. Effectiveness; Amendments. This Agreement, including the Term Sheet, may
not be modified, amended, or supplemented (except as expressly provided herein or therein)
except in writing signed by the Company, the Consenting Lenders, and the Consenting
Noteholders.
Section 8. Mir;cellaneous.
8.0 1. Further Assurances. Subject to the other terms of this Agreement, the Parties
agree to execute and deliver such other instruments and perform such acts, in addition to the
matters herein specified, as may be reasonably appropriate or necessary, from time to time, to
effectuate the Transactions, as applicable.
8.02. Complete Agreement. This Agreement is the entire agreement between the
Parties with respect to the subject matter hereof and supersedes all prior agreements, oral or
written, between the Parties with respect thereto. No claim of waiver, modification, consent, or
acquiescence with respect to any provision of this Agreement shall be made against any Party,
except on the basis of a written instrument executed by or on behalf of such Party.
8.03. Parties. This Agreement shall be binding upon, and inure to the benefit of, the
Parties. No rights or obligations of any Party under this Agreement may be assigned or
transferred to any other person or entity except as provided in Section 3.03 hereof. Nothing in
this Agreement, express or implied, shall give to any person or entity, other than the Parties, any
benefit or any legal or equitable right, remedy, or claim under this Agreement.
8.04. Headings. The headings of all sections of this Agreement are inserted solely for
the convenience of reference and are not a part of and are not intended to govern, limit, or aid in
the construction or interpretation of any term or provision hereof.
8.05. GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF
FORUM; WAIVER OF TRIAL BY JURY. THIS AGREEMENT IS TO BE GOVERNED BY
STATE, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF. Each Party hereto agrees that it shall bring any action or proceeding in respect of
any claim arising out of or related to this Agreement, to the extent possible, in either the United
States District Court for the Southern District of New York or any New York State court sitting
in New York City (the "Chosen Courts"), and solely in connection with claims arising under this
Agreement (a) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (b) waives
any objection to laying venue in any such action or proceeding in the Chosen Courts, and
(c) waives any objection that the Chosen Courts are an inconvenient forum or do not have
jurisdiction over any Party hereto; provided, however, that if the Company commences the
Chapter 11 Cases, then the Bankruptcy Court shall be the sole Chosen Court. Each party hereto
irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
8.06. Execution of Agreement. This Agreement may be executed and delivered (by
facsimile, electronic mail, or otherwise) in any number of counterparts, each of which, when
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K&E l427R671..27
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executed and delivered, shall be deemed an original, and all of which together shall constitute the
same agreement. Except as expressly provided in this Agreement, each individual executing this
Agreement on behalf of a Party has been duly authorized and empowered to execute and deliver
this Agreement on behalf of said Party.
8.07. Interpretation. This Agreement is the product of negotiations between the
Company, the Administrative Agent, the Informal Noteholder Committee, the Consenting
Lenders, and the Consenting Noteholders, and in the enforcement or interpretation hereof, is to
be interpreted in a neutral manner, and any presumption with regard to interpretation for or
against any Party by reason ofthat Party having drafted or caused to be drafted this Agreement,
or any portion hereof, shall not be effective in regard to the interpretation hereof.
8.08. Successors and Assigns. This Agreement is intended to bind and inure to the
benefit of the Parties and their respective successors, assigns, heirs, executors, administrators,
and representatives, other than a trustee or similar representative appointed in a bankruptcy case.
8.09. Creditors' Committee. Notwithstanding anything herein to the contrary, if any
Consenting Noteholder is appointed to and serves on an official committee of creditors in the
Chapter II Cases, the terms of this Agreement shall not be construed so as to limit such
Consenting Noteholder's exercise (in its sole discretion) of its fiduciary duties to any person
arising from its service on such committee, and any such exercise (in the sole discretion of such
Consenting Noteholder) of such fiduciary duties shall not be deemed to constitute a breach of the
terms ofthis Agreement; provided, however, that nothing in this Agreement shall be construed as
requiring any Consenting Noteholder to serve on any official committee in any such Chapter 11
Case.
8.1 0. Relationship Among Parties. It is understood and agreed that no Plan Support
Party has any fiduciary duty or other duty of trust or confidence in any form with any other Plan
Support Party, and, except as provided in this Agreement, there are no commitments among or
between them. In this regard, it is understood and agreed that any Consenting Noteholder may
trade in the Senior Subordinated Notes or other debt or equity securities of the Company without
the consent of the Company or any other Plan Support Party, subject to applicable securities laws
and the terms of this Agreement; provided, however, that no Plan Support Party shall have any
responsibility for any such trading by any other entity by virtue of this Agreement. No prior
history, pattern, or practice of sharing confidences among or between the Plan Support Parties
shall in any way affect or negate this understanding and agreement.
11
K&F. 142711<i12.27
EXECUTION VERSION
8.11. Notices. All notices hereunder shall be deemed given if in writing and delivered,
if sent by telecopy, electronic mail, courier, or registered or certified mail (return receipt
requested) to the following addresses and telecopier numbers (or at such other addresses or
telecopier numbers as shall be specified by like notice):
(a)
(b)
K&E 1427867227
if to the Company, to:
Masonite Corporation
One N. Dale Mabry Highway
Suite 950
Tampa, Florida 33609
Attention: General Counsel
E-mail address: mmclark@masonite.com
Citigroup Center
Attention: Jonathan S. Henes, Esq. and Christopher J. Marcus, Esq.
E-mail addresses: jhenes@kirkland.com and cmarcus@kirkland.com
if to the Administrative Agent, to:
The Bank of Nova Scotia
GWS Loan Operations
720 King Street West, 2nd Floor
Toronto, Ontario
M5V 2T3
Attention:
Facsimile:
John Hall, Senior Director
(2 12) 225-5708
Wachtel! Lipton Rosen & Katz
51 W. 52nd Street
Attention: Richard G. Mason, Esq. and Gregory E. Pessin, Esq.
E-mail addresses: rgmason@wlrk.com and gepessin@wlrk.com
12
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(c) if to a Consenting Lender or a transferee thereof, to the addresses or telecopier
numbers set forth below following the Consenting Lender's signature (or as directed by any
transferee thereof), as the case may be
Wachtell Lipton Rosen & Katz
51 W. 52nd Street
Attention: Richard G. Mason, Esq. and Gregory E. Pessin, Esq.
E-mail addresses: rgmason@wlrk.com and gepessin@wlrk.com
(d) if to a Consenting Noteholder or a transferee thereof, to the addresses or
telecopier numbers set forth below following the Consenting Noteholder's signature (or as
directed by any transferee thereof), as the case may be
(e)
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue ofthe Americas
New York, NY 10019-6064
Attention: Alan W. Kornberg, Esq. and Andrew N. Rosenberg, Esq.
E-mail addresses: akornberg@paulweiss.com and arosenberg@paulweiss.com
if to the Informal Noteholder Committee, to:
1285 Avenue ofthe Americas
New York, NY 10019-6064
Attention: Alan W. Kornberg, Esq. and Andrew N. Rosenberg, Esq.
E-mail addresses: akornberg@paulweiss.com and arosenberg@paulweiss.com
Any notice given by delivery, mail, or courier shall be effective when received. Any notice
given by telecopier shall be effective upon oral or machine confirmation of transmission.
8.12. Access. The Company will afford the Plan Support Parties and their respective
attorneys, consultants, accountants, and other authorized representatives reasonable access, upon
reasonable notice during normal business hours, to all properties, books, contracts, commitments,
records, management personnel, lenders, and advisors of the Company; providect however, that
the Company's obligation hereunder shall be conditioned upon such Plan Support Party being
party to an executed confidentiality agreement approved by and with the Company. The
Company acknowledges and agrees that the Administrative Agent, the private-side lenders under
the Credit Agreement, and certain members of the Informal Noteholder Committee have
complied with the requirements of this Section 8.12 by virtue of their existing confidentiality
arrangements with the Company.
8.13. Waiver. Except as expressly provided in this Agreement, nothing herein is
intended to, or does, in any manner waive, limit, impair, or restrict any right of any Consenting
13
K&E 14278672 27
EXECUTION VERSION
Lender or Consenting Noteholder or the ability of each of the Consenting Lenders or each ofthe
Consenting Noteholders to protect and preserve its rights, remedies, and interests, including,
without limitation, its claims against the Company. If the Transactions are not consummated, or
if this Agreement is terminated for any reason (other than Section 6.05 hereof), the Parties fully
reserve any and all of their rights. Pursuant to Federal Rule of Evidence 408 and any other
applicable rules of evidence, this Agreement and all negotiations relating hereto shall not be
admissible into evidence in any proceeding other than a proceeding to enforce its terms.
8.14. Specific Performance. It is understood and agreed by the Parties that money
damages would be an insufficient remedy for any breach of this Agreement by any Party and
each non-breaching Party shall be entitled to specific performance and injunctive or other
equitable relief as a remedy of any such breach, including, without limitation, an order of the
Bankruptcy Court or other court of competent jurisdiction requiring any Party to comply
promptly with any of its obligations hereunder.
8.15. Several. Not Joint, Obligations. The agreements, representations, and obligations
of the Parties under this Agreement are, in all respects, several and not joint.
8.16. Remedies Cumulative. All rights, powers, and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and
not alternative, and the exercise of any right, power, or remedy thereof by any Party shall not
preclude the simultaneous or later exercise of any other such right, power, or remedy by such
Party.
8.17. No Third-Party Beneficiaries. Unless expressly stated herein, this Agreement
shall be solely for the benefit of the Parties, and no other person or entity shall be a third-party
beneficiary hereof.
8.18. Pending Transfers. Notwithstanding anything to the contrary provided herein, if a
Consenting Lender has assigned all or a portion of the Credit Agreement Obligations that it
beneficially owns as of the date hereof but such assignment has not settled as of the date hereof
(such Credit Agreement Obligations, "Pending Transfer Credit Agreement Obligations"), then
such Consenting Lender shall be permitted to exclude from the amount of Credit Agreement
Obligations listed on its signature page an amount of Pending Transfer Credit Agreement
Obligations equal to the Pending Transfer Credit Agreement Obligations assigned to any
transferee that has instructed such Consenting Lender not to execute this Agreement (such
excluded Credit Agreement Obligations, the "Excluded Credit Agreement Obligations"). Such
Consenting Lender shall not be bound by the terms hereof with respect to any Excluded Credit
Agreement Obligations.
Section 9. Disclosure. The Company shall publicly disclose (a) the existence of this
Agreement and the material terms of the Term Sheet in a filing with the Bankruptcy Court on the
Petition Date and the Canadian Court upon the commencement of the CCAA Proceedings and
(b) any material amendment to this Agreement and the Term Sheet in a filing with the
Bankruptcy Court and the Canadian Court following the effective date of such amendment, each
in form and substance reasonably acceptable to the Administrative Agent and the Informal
Noteholder Committee. To the extent reasonably practicable, the Company will submit to
14
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counsel for the Administrative Agent and counsel for the Informal Noteholder Committee all
press releases and public filings relating to this Agreement, the Term Sheet, or the transactions
contemplated hereby and thereby and any amendments thereof. To the extent that the Company
fails to make such initial disclosure within five business days following the Agreement Effective
Date or the effective date of any amendment hereto, the Administrative Agent, each of the
Consenting Lenders, and each of the Consenting Noteholders shall each have the right, but not
the obligation, to disclose such terms publicly. The Company shall not (a) use the name of any
Plan Support Party in any press release without such Plan Support Party's prior written consent
or (b) disclose to any person other than legal and financial advisors to the Company and the
Administrative Agent the principal amount or percentage of any Notes or any other securities of
the Company or any of their respective subsidiaries held by any Consenting Noteholder;
provided, however, that the Company shall be permitted to disclose at any time the aggregate
principal amount of and aggregate percentage of Senior Subordinated Notes held by Consenting
Noteholders or by persons who have otherwise agreed to participate in the Solicitation as a
group.
{signature pages follow]
15
K&E 1427&672.27
K&E 14278672 27
EXECUTION VERSION
Signature Page to the Restructuring and Lock-Up Agreement
MASONITE INTERNATIONAL INC.
MASONITE INTERNATIONAL CORPORATION
MASONITE CORPORATION
By:
Name: Frederick J. Lynch
Title: President and Chief Executive Officer
PREMDOR FINANCE LLC
EGER PROPERTIES
WMW,INC.
WOODLANDS MILL WORK I, LTD.
MASONITE PRIMEBOARD, INC.
FLORIDA MADE DOOR CO.
CUTTING EDGE TOOLING, INC.
PINTU ACQUISITION COMPANY, INC.
MASONITE AIR LLC
DOOR INSTALLATION SPECIALIST
CORPORATION
MASONITE MEXICO S.A. DE C.V.
PREMDOR U.K. HOLDINGS LIMITED
PREMDOR CROSBY LIMITED
BONLEA LIMITED
MASONITE CHILE HOLDINGS S.A.
MASONITE IRELAND
MASONITE EUROPE
MASONITE EUROPE LIMITED
MASONITE COMPONENTS
CROWN DOOR CORPORATION
CASTLEGA TE ENTRY SYSTEMS INC.
3061275 NOVA SCOTIA COMPANY
ROCHMAN UNIVERSAL DOORS INC.
By:
Name: Rose M. Murphy
Title: Authorized Signatory
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K&E 14278672.27
EXECUTION VERSION
[NOTEHOLDERILENDER]
Name:
Title:
Address:
Attention:
Telephone:
Facsimile:
Aggregate principal amount of U.S. Senior
Subordinated Notes beneficially owned or managed
on behalf of accounts that hold or beneficially own
such U.S. Senior Subordinated Notes:
Aggregate principal amount of Canadian Senior
such Canadian Senior Subordinated Notes:
Aggregate principal amount of Credit Agreement
Obligations beneficially owned or managed on
behalf of accounts that hold or beneficially own
such Credit Agreement Obligations:
K&E 14278672.27
EXHIBIT A
TERM SHEET
EXECUTION VERSION
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EXECUTION VERSION
EXHIBITB
the Restructuring and Lock-Up Agreement, dated as of March 11, 2009 (the "Agreement"), by
and among Masonite Corporation and its affiliates and subsidiaries bound thereto, and certain
lenders and noteholders, including the transferor to the Transferee of any Credit Agreement
Obligations
1
or Senior Subordinated Notes (the "Transferor"), and agrees to be bound by the
terms and conditions thereof to the extent Transferor was thereby bound, and shall be deemed a
"Consenting Lender" or "Consenting Noteholder," as applicable) under the terms of the
Agreement.
Indentures or Credit Agreement, as applicable, and the Agreement, and (ii) to be bound by the
vote of the Transferor if cast prior to the effectiveness of the transfer of the loans or notes, as
applicable.
Date Executed: ___ , 2009
Name:
Title:
Address:
Attention:
Telephone: -------------------------------
Facsimile:
Aggregate principal amount of U.S. Senior
on behalf of accounts that hold or benefici;llly own
such U.S. Senior Subordinated Notes:
Aggregate principal amount of Canadian Senior
such Canadian Senior Subordinated Notes:
Aggregate principal amount of Credit Agreement
Obligations beneficially owned or managed on
behalf of accounts that hold or beneficially own
such Credit Agreement Obligations:
Capitalized terms not used but not otherwise defined herein shall have the meanings ascribed to such terms
in the Agreement.
K&E 14278672.27
EXHIBIT 1
Masonite International Inc. Restructuring Term Sheet
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March 12,2009
The following summary outlines the indicative economic terms of a proposed consensual restructuring
transaction with respect to Masonite Holding Corporation, Masonite International Inc. and their
subsidiaries ("Masonite" or the "Company") pursuant to pre-arranged plans of reorganization and plans
of arrangement, respectively, (together, the "Plan") filed and consummated in connection with Chapter
11 and Companies' Creditors Arrangement Act cases of Masonite Holding Corporation and certain of
its subsidiaries. Until all parties execute definitive documentation, there shall not exist any binding
obligation on the part of any party to consummate the transaction described herein. This term sheet
does not constitute a contractual commitment of any party but merely represents proposed terms for a
restructuring transaction. This term sheet is not intended to be a comprehensive list of aU relevant
terms and conditions of the potential transaction described herein. It shall not constitute an offer to sell,
buy or exchange into, nor the solicitation of an offer to sell, buy or exchange into, any of the securities
or instruments referred to herein. Furthermore, nothing herein constitutes a commitment to exchange
any debt, lend funds to the Company, vote debt in a certain way, or negotiate, agree to or otherwise
engage in the transactions described herein.
The Company's existing senior secured obligations (the "Senior Secured Obligations"), including any
obligations (including termination payments) related to the termination of outstanding interest rate
swaps that constitute obligations under the existing credit facility, will be converted on a pro rata basis,
subject to the election of each existing holder of Senior Secured Obligations (each, a "Senior Secured
Lender"), into (i) a new first-priority senior secured term loan (the "New Term Loan"), (ii) a new
second-priority senior secured PIK loan (the "New PIK Loan"), and/or (iii) 97.5% of the common
equity of the reorganized Masonite, subject to dilution under certain conditions described herein.
Holders of the Company's existing senior subordinated notes (such holders, the "Senior Subordinated
Noteholders") will be allocated 2.5% of the common equity in the reorganized Masonite plus wanants
for 17.5% of the common stock of the reorganized Company, subject to dilution under certain
conditions described herein .. Prior to the filing of the Chapter 11 cases, the Company shall solicit
lockup agreements from all Senior Secured Lenders and all Senior Subordinated Noteholders pursuant
to which such persons agree to vote in favor of the Plan.
Treatment of Senior Secured Obligations:
Treatment: All claims in respect of the Senior Secured Obligations shall be canceled,
and each Senior Secured Lender shall receive at each such lender's option:
(a) new Senior Secured Term Loan obligations (the "New Term Loan
Option") in a face amount up to such Senior Secured Lender's pro rata
share of $200,000,000 based on the amount of Senior Secured Obligations
that such Senior Secured Lender elects to apply to the New Term Loan
Option. The aggregate principal amount of the New Term Loan shall be
reduced by the pro rata share of each Senior Secured Lender that does not
elect the New Term Loan Option ($200,000,000 Jess the amount of New
Term Loans actually issued, the "Excess Amount");
THIS IS NOT AN OFFERING MEMORANDUM OR PROSPECTUS AND SHOULD NOT BE TREATED AS
OFFERING MATERIAL OF ANY SORT AND IS FOR INFORMATION PURPOSES ONLY
March 12, 2009
(b) New PIK Loans in an amount up to $100,000,000 plus the Excess
Amount (such amount, the "Maximum New PIK Loan Amount", and such
option, the "New PIK Loan Option"). To the extent that a Senior Secured
Lender elects to exercise its New PIK Loan Option, such lender shall
receive $1 in amount of New PIK Loans for each $2 of equity it would
have received at Plan Equity Value ("Plan Equity Value" shall equal the
enterprise value as set forth in the Company's approved Disclosure
Statement ("Plan Value") less the aggregate principal amount of the Senior
Secured Term Loan and the New PIK Loan actually issued). The
aggregate principal amount of New PIK Loans shall be reduced to the
extent that Senior Secured Lenders elect the New PIK Loan Option in an
amount less than the Maximum New PIK Loan Amount. In the event that
Senior Secured Lenders exercise the New PIK Loan Option for an amount
of New PIK Loans that is in excess of the Maximum New PIK Loan
Amount, the amount of New PIK Loans issued to each Senior Secured
Lender exercising the New PIK Loan Option shall be reduced ratably so
that the aggregate amount of New PIK Loans issued does not exceed the
Maximum New PJK Loan Amount; and/or
(c) such Senior Secured Lender's pro rata share (as adjusted as a result of
such lender's election of the New Term Loan Option and/or New PIK
Loan Option) of 97.5% of the common equity of reorganized Masonite
subject to dilution for warrants issued to the Senior Subordinated
Noteholders and management equity and/or options.
Each Senior Secured Lender shall be entitled to the New Term Loan
Option in a face amount equal to such Senior Secured Lender's pro rata
share of up to $200,000,000 based on the amount of Senior Secured
Obligations that such Senior Secured Lender elects to apply to the New
Term Loan Option and its pro rata share of 97.5% of the equity of the
reorganized Company. To the extent a Senior Secured Lender elects not to
exercise its New Term Loan Option for its full pro rata share of New Term
Loans (its "Pro Rata New Term Loan Amount"), such Senior Secured
Lender shall receive an additional amount of equity of the reorganized
Company in an amount (at Plan Equity Value) equal to the difference
between its Pro Rata New Term Loan Amount and the actual amount of
New Term Loans, if any, it elects to receive. To the extent that a Senior
Secured Lender elects to exercise its New PIK Loan Option, the amount of
equity in the reorganized Company that such Senior Secured Lender
receives shall be reduced by $2 for every $1 of New PIK Loans it receives.
In no event will the holders of Senior Subordinated Notes receive more
than 2.5% of equity value of reorganized Masonite (subject to dilution for
warrants issued to the holders of the Senior Subordinated Notes,
management equity and/or options) on account of their claims in respect of
TIUS IS NOT AN OFFERING MEMORANDUM OR PROSPEt-lUS AND SHOULD NOT BE TREATED AS
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March 12, 2009
New Senior Secured Term
Loan:
New PIK Loan:
Senior Subordinated Notes. To the extent that any Senior Secured Lenders
elect not to receive their full Pro Rata New Term Loan Amount, the equity
received by such Senior Secured Lenders shall be reduced, on a pro rata
basis among such lenders, by 2.5% of the increase in the reorganized
Company's equity value attributable to such elections.
The mechanics of the exchange shall be as illustrated on Annex A hereto.
All letters of credit outstanding under the Company's existing credit
facility shall be replaced or cash collateralized upon the Company's exit
from bankruptcy.
Collateral: First-priority lien on the Collateral.
Maturity: December 31, 2013.
Interest Rate: Cash interest shall be payable quarterly at LIBOR plus 700
basis points (with a LIBOR floor of 3.00%) or Prime Rate plus 600 basis
points (with a Prime Rate tloor of 5.00%).
Amortization: Quarterly repayment schedule of 0.25% of principal
amount.
Covenants and Defaults: No affirmative or negative covenants other than
covenants requiring payment of principal and interest under the loans and
limiting the Company's ability to (a) incur liens that are pari passu with or
senior to the liens securing the New Term Loan (with customary carveouts
and baskets, and a basket for first-priority liens on accounts receivable and
inventory to secure up to $150 million of obligations in respect of
receivables securitizations (the liens in respect of which shall be solely on
accounts receivable) or revolving credit facilities and an additional $25
million of obligations in respect of letter of credit facilities or debt to cash
collateralize letters of credit); new liens shall be subject to an intercreditor
agreement on terms set forth in the New Term Loan or on other customary
terms reasonable acceptable to the agent under the New Term Loan; and
(b) engage in consolidations, mergers or sales of all or substantially all of
its assets. Customary events of default.
Collateral: Second-priority lien on the Collateral.
Maturity: December 31, 2015.
Interest Rate: 8.00%.
Covenants and Defaults: No affirmative or negative covenants other than
THIS IS NOT AN OFI<'EIUNG MEMORANDUM OR PROSPECTUS AND SHOULD NOT BE TREATED AS
March 12, 2009
Senior Subordinated Notes:
Treatment:
Management:
Management Incentive
Plan:
Miscellaneous:
Trade Claims:
Releases:
covenants requiring payment of principal and interest under the loan and
limiting the Company's ability to engage in certain consolidations,
mergers or sales of all or substantially all of its assets. Customary events of
default.
All claims of the Senior Subordinated Noteholders shall be canceled, and
holders of such notes shall receive their pro rata share of:
(a) 2.5% of the common stock of the reorganized Company, subject to
dilution for management equity and/or options and the warrants described
below;
(b) warrants to acquire up to 10.0% of the common stock of the
reorganized Company, subject to dilution for management equity and/or
options, struck at an implied equity value that would give a lOO% recovery
to the existing Senior Secured Lenders (after giving effect to any discount
realized by virtue of exercise of the New PIK Loan Option) and with an
expiry date of 5 years from the date that the Company exits from
bankruptcy; and
(c) warrants to acquire up to 7.5% of the common stock of the reorganized
Company, subject to dilution for management equity and/or options, struck
at an implied equity value that would give a 100% recovery to the existing
Senior Secured Lenders (after giving effect to any discount realized by
virtue of exercise of the New PIK Loan Option) and with an expiry date of
7 years from the date that the Company exits from bankruptcy.
Reserve of up to ten percent (10.0%) of the common stock of the
reorganized Masonite for the implementation of a management incentive
plan to be implemented by the new Board of Directors of the reorganized
Masonite, with some portion of the common stock of the reorganized
Masonite in restricted stock units, stock options, and/or stock appreciation
rights allocated to management by the new Board of Directors of the
reorganized Masonite within 30 days of the effective date of the Plan.
Paid in full in the ordinary course of business.
The Plan will contain language substantially to the effect of the following:
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March 12,2009
"Masonite Shareholders" means (a) KKR Millennium Fund (Overseas),
LP, (b) KKR Partners (International), LP, and (c) Alpin vest Partners CS
Investments 2005 C.V., (d) Alpinvest Partners Later Stage Co-Investments
Custodian IIA B.V., (e) Capstone Equity Investors LLC, (f) Lexington
Capital Holdings, S.a.r.l., and (g) Sculptor Investments, S.a.r.l.
"Released Party" means each of: (a) the Administrative Agent under the
Company's existing credit facility; (b) each Senior Secured Lender that
votes in favor of the Plan, in its capacity as such; (c) each member of the
ad hoc committee of Subordinated Noteholders that votes in favor of the
Plan, in each case in its capacity as such, provided the holders of the
Subordinated Notes vote in favor of the Plan; (d) the indenture trustees in
respect of the Subordinated Notes, in their capacities as such, provided the
holders of the Subordinated Notes vote in favor of the Plan; (e) the
Masonite Shareholders in their capacity as such; (f) with respect to each of
the foregoing entities in clauses (a) through (e), such person's current and
former affiliates, subsidiaries, officers, directors, principals, employees,
agents, financial advisors, attorneys, accountants, investment bankers,
consultants, representatives, and other professionals, in each case in their
capacity as such; and (g) the Masonite debtors' and the reorganized
Masonite debtors' current and former officers, directors, principals,
employees, agents, finam:ial advisors, attorneys, accountants, investment
bankers, consultants, representatives, and other professionals, in each case
in their capacity as such, and only if serving in such capacity.
Releases by the Masonite Debtors. Pursuant to section I I 23(b) of the
Bankruptcy Code, and except as otherwise specifically provided in the
Plan, for good and valuable consideration, including the service of the
Released Parties to facilitate the expeditious reorganization of the
Masonite debtors and the implementation of the restructuring
contemplated by the Plan, on and after the effective date of the Plan, the
Released Parties are deemed released and discharged by the Masonite
debtors, the reorganized Masonite debtors, and the estates from any and all
claims, obligations, rights, suits, damages, causes of action, remedies, and
liabilities whatsoever, including any derivative claims, asserted on behalf
of the Masonite debtors, whether known or unknown, foreseen or
unforeseen, existing or hereinafter arising, in law, equity, m otherwise,
that the Masonite debtors, the reorganized Masonite debtors, the estates, or
their affiliates would have been legally entitled to assert in their own right
(whether individually or collectively) or on behalf of the Holder of any
claim or equity interest or other entity, based on or relating to, or in any
manner arising from, in whole or in part, the Masonite debtors, the Chapter
11 cases or the CCAA proceedings, the purchase, sale, or rescission of the
purchase or sale of any Security of the Masonite debtors or the reorganized
THIS IS NOT AN OFFERING MEMORANDUM OR PROSPECfUS AND SHOULD NOT BE TREATED AS
OFFERING MATERIAL 01<' ANY SORT AND IS FOR INFORMATION PURPOSES ONLY
March 12, 2009
Masonite debtors, the subject matter of, or the transactions or events
giving rise to, any claim or equity interest that is treated in the Plan, the
business or contractual arrangements between any debtor and any
Released Party, the restructuring of claims and equity interests prior to or
in the Chapter 11 Cases or the CCAA proceedings, the negotiation,
formulation, or preparation of the Plan and related disclosure statement, or
related agreements, instruments, or other documents, upon any other act or
omission, transaction, agreement, event, or other occurrence taking place
on or before the confirmation date of the Plan, other than claims or
liabilities arising out of or relating to any act or omission of a Released
Party that constitutes willful misconduct or gross negligence.
Releases by Holders of Claims and Equity Interests. As of the effective
date of the Plan, each holder of a claim or an equity interest (including, for
the avoidance of doubt, all Masonite Shareholders) shall be deemed to
have conclusively, absolutely, unconditionally, irrevocably, and forever,
released and discharged the Masonite debtors, the reorganized Masonite
debtors, and the Released Parties from any and all claims, equity interests,
obligations, rights, suits, damages, causes of action, remedies, and
liabilities whatsoever, including any derivative claims, asserted on behalf
of a debtor, whether known or unknown, foreseen or unforeseen, existing
or hereafter arising, in law, equity or otherwise, that such entity would
have been legally entitled to assert (whether individually or collectively),
based on or relating to, or in any manner arising from, in whole or in part,
the Masonite debtors, the Masonite debtors' resuucturing, the Chapter 11
cases, the CCAA proceedings the purchase, sale, or rescission of the
purchase or sale of any Security of the Masonite debtors or the reorganized
Masonite debtors, the subject matter of, or the transactions or events
giving rise to, any claim or equity interest that is treated in the Plan, the
business or contractual arrangements between any Masonite debtor and
any Released Party, the restructuring of claims and equity interests prior to
or in the Chapter ll cases or the CCAA proceedings, the negotiation,
formulation, or preparation of the Plan, the related disclosure statement,
the related plan supplement, or related agreements, instruments, or other
documents, upon any other act or omission, transaction, agreement, event,
or other occurrence taking place on or before the confirmation date of the
Plan, other than claims or liabilities arising out of or relating to any act or
omission of a Released Party that constitutes willful misconduct or gross
negligence. Notwithstanding anything to the contrary in the foregoing, the
release set forth above does not release any post-effective date obligations
of any patty under the Plan or any document, instrument, or agreement
(including those set forth in the plan supplement) executed to implement
the Plan.
Corporate Governance: To be determined by the Senior Secured Lenders in consultation with
OFFERING MATERIAL 01<' ANY SOUT AND IS FOR INFORMATION PURPOSES ONLY
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Registration Rights:
March 12, 2009
management of the Company.
Standard and customnry registration rights for Senior Secured Lenders, if
any, who will own more than 10% of the equity of reorganized Masonite.
Adequate Protection: Subject to the execution and delivery by Senior Secured Lenders holding
at least two-thirds of the aggregate principal amount of Senior Secured
Obligations of a binding plan support agreement that provides for the
implementation of a restructuring on the terms and conditions set forth in
this term sheet, as "adequate protection" against diminution in the value of
the Senior Secured Lenders' collateral during the Company's chapter 11
case(s), the Senior Secured Lenders shall receive on or beginning on the
date of entry of the interim order authorizing the Company to continue
using cash collateral: (i) payment in cash on a monthly basis of all cash-
pay interest accruing on such indebtedness at the non-default contract rate
(with the Senior Secured Lenders reserving all rights with respect to the
default rate of interest), (ii) payment in cash on a current basis of any
unpaid reasonable fees and expenses of counsel and advisors,
Cash Management:
Structure:
(iii) superpriority administrative expense claims with respect to the
foregoing amounts, and (iv) replacement liens in the Chapter II cases.
Each of the forms of adequate protection in (i) through (iv) above shall be
subject to a standard carve-out for: (i) the payment of accrued and unpaid
professional fees and disbursements incurred by the Company and any
statutory committees appointed in the Company's chapter 11 case(s) in an
aggregate amount not to exceed all accrued and unpaid professional fees
and disbursements, plus $5 million; (ii) the payment of fees pursuant to 28
U.S.C. 1930; (iii) in the event of a conversion of the Company's chapter
11 case(s) to a case(s) under chapter 7 of the Bankruptcy Code, the
payment of fees and expenses incurred by a trustee and any professional
retained by such trustee. (iv) the administration charge in the Canadian
CCAA proceedings (which amounts shall be reasonably acceptable to the
administrative agent for the Senior Secured Obligations) and (v) the
directors and officers charge in the Canadian CCAA proceedings (which
amounts shall be reasonably acceptable to the administrative agent for the
Senior Secured Obligations).
Customary cash management order in the Chapter II cases and the CCAA
proceedings with customary protections for providers of cash management
to the Debtors.
The restructuring transaction described herein shall be implemented
through a tax-efficient structure to be agreed.
TIIIS IS NOT AN OFFERING MEMORANDUM OR PROSPECTUS AND SHOULD NOT BE TREATED AS
OFFERING MATERIAL OF ANY SORT AND IS !<'OR INFORMATION PURPOSES ONLY
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In re Stallion Oilfield Services Ltd., Case No. 09-13562 (Bankr. Del. 2009).
Execution Version
This RESTRUCTURING AND LOCK-UP AGREEMENT (this "Agreement")
1
is made
and entered into as of October 17, 2009, by and among (i) Stallion Oilfield Services Ltd., Central
Industries, Inc., Salty's Disposal Wells, LP, Salty's Manufacturing, Ltd., Stallion Acquisition,
LLC, Stallion Heavy Haulers, LP, Stallion Interests, LLC, Stallion Offshore Quarters, Inc.,
Stallion Oilfield Construction, LLC, Stallion Oilfield Finance Corp., Stallion Oilfield Holdings
GP, LLC, Stallion Oilfield Holdings, Ltd., Stallion Oilfield Services, Inc., Stallion Production
Services, LP, Stallion Production, LLC, Stallion Rockies Ltd., Stallion Solids Control, Inc., and
Stallion Stables, LLC (collectively, the "Company"); (ii) the undersigned lenders under the
Prepetition Secured Credit Agreement (each, a "Consenting Secured Lender"); (iii) the
undersigned lenders under the Prepetition Unsecured Bridge Credit Agreement (each, a
"Consenting Bridge Lender"); (iv) the undersigned holders or investment advisers or managers
of discretionary accounts that hold the Unsecured Notes (each, a "Consenting Notebolder");
and (v) the undersigned holders of equity in Stallion Oilfield Holdings, Ltd. and Stallion Oilfield
Holdings GP, LLC (each, a "Consenting Equity Holder") (each of the foregoing, a "Party,"
and, collectively, the "Parties"). Each Consenting Secured Lender, each Consenting Bridge
Lender, each Consenting Noteholder, and each Consenting Equity Holder (collectively, the
"Consenting Parties") shall be referred to herein as the "Plan Support Parties."
RECITALS
WHEREAS, the Company and the Plan Support Parties are negotiating restructuring and
recapitalization transactions (collectively, the "Transactions"), pursuant to the terms and
conditions set forth in the Term Sheet and in this Agreement, with respect to the capital structure
of the Company, including: (a) the Company's obligations under (i) the Prepetition Secured
Credit Agreement, (ii) the Prepetition Unsecured Bridge Credit Agreement, and (iii) the
Unsecured Notes Indenture (collectively, the "Claims"); and (b) the existing equity interests in
Stallion Oilfield Holdings, Ltd. and Stallion Oilfield Holdings GP, LLC (including any
partnership interest in the Company and its non-filing affiliates and options, warrants, or other
agreements to acquire the same (whether or not arising under or in connection with any
employment agreement)) (each, an "Existing Equity Interest");
WHEREAS, Stallion intends to commence voluntary reorganization cases under chapter
11 of title 11 of the United States Code, 11 U.S.C. 101-1532 (the "Bankruptcy Code"), in
the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") to
effect the Transactions through a prearranged plan of reorganization that implements and is
this Agreement (the "Plan of Reorganization"); and
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, and for other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Party, intending to be legally bound hereby, agrees as follows:
Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in
the Stallion Oilfield Services Ltd. Joint Plain of Reorganization Term Sheet (the "Term Sheet"), attached
hereto as Exhibit A.
K&E I 1
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Execution Version
AGREEMENT
Section 1. Agreement Effective Date. This Agreement shall become effective and binding
upon each of the Parties at 12:01 a.m., prevailing Eastern Time, on the first day immediately
following the date on which:
(a) the following conditions have been satisfied: (i) the Company has executed and
delivered counterpart signature pages of this Agreement to counsel to the Prepetition Secured
Administrative Agent, to counsel to the informal committee of Prepetition Bridge Lenders and
holders of Unsecured Notes (the "Informal Funded Debt Committee"), and to counsel to the
Consenting Equity Holders; (ii) holders of at least two-thirds in amount and more than one-half
in number of outstanding Prepetition Secured Credit Agreement Claims shall have executed and
delivered to the Company counterpart signature pages of this Agreement; (iii) holders of at least
two-thirds in amount and more than one-half in number of outstanding Prepetition Unsecured
Bridge Credit Agreement Claims shall have executed and delivered to the Company counterpart
signature pages of this Agreement; (iv) holders of at least two-thirds in amount and more than
one-half in number of outstanding Unsecured Note Claims shall have executed and delivered to
the Company counterpart signature pages of this Agreement; and (v) holders of at least two-
thirds in amount of the Existing Equity Interests shall have executed and delivered to the
Company counterpart signature pages of this Agreement; and
(b) the Company has given notice to the Prepetition Secured Administrative Agent,
the Informal Funded Debt Committee, and the Consenting Equity Holders in accordance with
Section 8.11 hereof that the conditions in (a)(i) through (iv) have been satisfied and this
Agreement is effective (the "Agreement Effective Date").
Section 2. Term Sheet. The Term Sheet is expressly incorporated herein and is made part of
this Agreement. The general terms and conditions of the Transactions are set forth in the Term
Sheet; provided, however, that the Term Sheet is supplemented by the terms and conditions of
this Agreement. In the event of any inconsistencies between the terms of this Agreement and the
Term Sheet, this Agreement shall govern.
3.0 1. Agreement to Vote.
(a) As long as this Agreement has not been terminated in accordance with the terms
hereof, each of the Plan Support Parties, agrees that it shall, subject to (i) the receipt by such Plan
Support Party of a disclosure statement and other solicitation materials in respect of the Plan of
Reorganization, which disclosure statement and solicitation materials reflect the agreement set
forth in the Term Sheet (it being understood and agreed that (x) any terms not set forth in the
Term Sheet that are set forth in such disclosure statement and other solicitation materials shall be
in form and substance reasonably acceptable to the Prepetition Secured Administrative Agent
(solely as to provisions which (i) affect, or could be reasonably expected to affect, the
Consenting Secured Lenders' rights, claims, recoveries, and/or interests or (ii) are not materially
consistent with the Term Sheet) and counsel to the Informal Funded Debt Committee (solely as
to provisions which (i) affect, or could be reasonably expected to affect, the Consenting Bridge
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Lenders' and Consenting Noteholders' rights, claims, recoveries, and/or interests or (ii) are not
materially consistent with the Term Sheet) and (y) each of the Plan Support Parties must be
entitled to vote to accept or reject the Plan of Reorganization) and have been approved by the
Bankruptcy Court pursuant to section 1125 of the Bankruptcy Code (collectively, the
"Solicitation Materials"):
(i) vote its Claims and Existing Equity Interests to accept the Plan of
Reorganization by delivering its duly executed and completed ballot accepting the Plan of
Reorganization on a timely basis following the commencement of the solicitation and its actual
receipt of the Solicitation Materials and ballot;
(ii) not change or withdraw (or cause to be changed or withdrawn) such vote;
and
(iii) not, in any material respect, (A) object to, delay, impede, or take any other
action to interfere with acceptance or implementation of the Plan of Reorganization or
(B) propose, file, support, or vote for any restructuring, workout, or plan of reorganization for the
Company other than the Plan of Reorganization and shall, in the case of the Consenting Secured
Lenders, the Consenting Bridge Lenders, and the Consenting Noteholders direct the Prepetition
Secured Administrative Agent, the Prepetition Bridge Administrative Agent, and the Unsecured
Notes Trustee, respectively, not to take any action contemplated in (A) and (B) of this Section
3.0l(a)(iii).
(b) For the avoidance of doubt, each Plan Support Party also agrees that upon the
commencement by the Company of the chapter 11 cases, the automatic stay is invoked and each
Plan Support Party agrees that it will not, and, in the case of the Consenting Secured Lenders, the
Consenting Bridge Lenders, and the Consenting Noteholders, it will direct the Prepetition
Secured Administrative Agent, the Prepetition Bridge Administrative Agent, and the Unsecured
Notes Trustee, respectively, not to exercise any right or remedy for the enforcement, collection,
or recovery of any of the Claims against (i) for so long as this Agreement has not been
terminated in accordance with the terms hereof, the Company or (ii) any direct or indirect
affiliates of Stallion Oilfield Services Ltd. that have not filed voluntary petitions in the chapter
11 cases (or have not had involuntary petitions filed on their behalf); provided, however, that,
except as otherwise set forth in this Agreement, the foregoing prohibition will not limit any Plan
Support Parties' rights under any applicable indenture, credit agreement, other loan document,
and/or applicable law to: (A) terminate or close out any swap agreement, repurchase agreement,
or similar transaction with the Company to the extent the underlying agreement permits such
termination or close-out or (B) to appear and participate as a party in interest in any matter to be
adjudicated in any case under the Bankruptcy Code concerning the Company, so long as such
appearance and the positions advocated in connection therewith are not materially inconsistent
with the Term Sheet, this Agreement, or the Plan of Reorganization and does not directly hinder,
delay, or prevent consummation of the Transactions contemplated by the Term Sheet.
3.02. Commitment of Company. The Company shall (a) support and complete the
Transactions on the terms set forth in the Term Sheet, (b) do all things necessary and appropriate
in furtherance of the Transactions embodied in the Term Sheet, including, without limitation
(i) commencing the chapter 11 cases on or before October 20, 2009 (the "Outside Petition
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Date," and the actual commencement date, the "Petition Date"), (ii) taking all steps reasonably
necessary to obtain an order of the Bankruptcy Court, reasonably acceptable in all material
respects to the Prepetition Secured Administrative Agent and counsel to the Informal Funded
Debt Committee, confirming the Plan of Reorganization within the timeframes contemplated by
this Agreement, and (iii) taking all steps reasonably necessary and desirable to cause the
effective date of the Plan of Reorganization to occur within the timeframes contemplated by this
Agreement, (c) obtain any and all required regulatory and/or third-party approvals for the
Transactions embodied in the Term Sheet, (d) not take any action that is inconsistent with, or is
intended or is likely to interfere with consummation of, the restructuring and the Transactions
embodied in the Term Sheet, and (e) if a member of the Company's management knows of a
breach by the Company in any material respect of any of the obligations, representations,
warranties, or covenants of the Company set forth in this Agreement, furnish prompt written
notice (and in any event within three Business Days of such actual knowledge) to the Prepetition
Secured Administrative Agent and counsel to the Informal Funded Debt Committee. Regardless
of whether the Transactions are consummated, the Company shall promptly pay in cash upon
demand any and all reasonable accrued and unpaid out-of-pocket expenses incurred by the
Prepetition Secured Administrative Agent and the Informal Funded Debt Committee (including
all reasonable fees and out-of-pocket expenses of the legal counsel and financial advisors for the
Prepetition Secured Administrative Agent and the Informal Funded Debt Committee) in
connection with the negotiation, documentation, consummation, and performance of this
Agreement, the Term Sheet, the Solicitation Materials, all other documents related to the Plan of
Reorganization and the Transactions.
3.03. Transfer of Interests and Securities. Except as expressly provided herein, this
Agreement shall not in any way restrict the right or ability of any Consenting Party to sell, use,
assign, transfer, or otherwise dispose of ("Transfer") any of the Claims or Existing Equity
Interests; provided, however, that for the period commencing as of the date such Consenting
Party, executes this Agreement until termination of this Agreement pursuant to the terms hereof
(such period, the "Restricted Period"), no Consenting Party shall Transfer any Claims or
Existing Equity Interests and any purported Transfer of any Claims or Existing Equity Interests
shall be void and without effect, unless (a) the transferee is a Consenting Party or (b) if the
transferee is not a Consenting Party prior to the Transfer, such transferee delivers to the
Company, at or prior to the time of the proposed Transfer, an executed copy of Exhibit B
attached hereto pursuant to which such Transferee shall assume all obligations of the Consenting
Party transferor, hereunder in respect of the Claims or Existing Equity Interests being transferred
(such transferee, if any, to also be a Consenting Secured Lender, a Consenting Bridge Lender, a
Consenting Noteholder, or a Consenting Equity Holder, as applicable, hereunder). This
Agreement shall in no way be construed to preclude the Consenting Parties from acquiring
additional Claims or Existing Equity Interests; provided, however, that (a) any Consenting Party
that acquires, as legal owner, additional Claims or Existing Equity Interests after executing this
Agreement shall notify the Company, the Prepetition Secured Administrative Agent, and the
Informal Funded Debt Committee of such acquisition within five business days after the closing
of such trade and (b) additional Claims and Existing Equity Interests shall automatically and
immediately upon acquisition by a Consenting Party, as legal owner, be deemed subject to all of
the terms of this Agreement whether or not notice is given to the Company, the Prepetition
Secured Administrative Agent, or the Informal Funded Debt Committee of such acquisition.
This Section 3.03 shall not impose any obligation on (a) the Company to issue any "cleansing
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letter" or otherwise publicly disclose information for the purpose of enabling a Consenting Party
to Transfer any Claims or Existing Equity Interests or (b) the Prepetition Secured Administrative
Agent or the Informal Funded Debt Committee to monitor or enforce the provisions of this
Section 3.03 as they relate to the Consenting Parties.
3.04. Representation of Consenting Secured Lenders. Each of the Consenting Secured
Lenders severally and not jointly represents and warrants that, as of the date such Consenting
Secured Lender executes and delivers this Agreement:
(a) it is the beneficial owner of the face amount of the Prepetition Secured Credit
Agreement Claims, or is the nominee, investment manager, or advisor for beneficial holders of
the Prepetition Secured Credit Agreement Claims, as reflected in such Consenting Secured
Lender's signature block to this Agreement, which amount the Company and each Consenting
Secured Lender understands and acknowledges is proprietary and confidential to such
Consenting Secured Lender; and
(b) other than pursuant to this Agreement, such Prepetition Secured Credit
Agreement Claims are free and clear of any pledge, lien, security interest, charge, claim, equity,
encumbrances of any kind, that would adversely affect in any material way such Consenting
Secured Lender's performance of its obligations contained in this Agreement at the time such
obligations are required to be performed.
3.05. Representations of Consenting Bridge Lenders. Each of the Consenting Bridge
Lenders severally and not jointly represents and warrants that, as of the date such Consenting
Bridge Lender executes and delivers this Agreement:
(a) it is the beneficial owner of the face amount of the Prepetition Unsecured Bridge
Credit Agreement Claims, or is the nominee, investment manager, or advisor for beneficial
holders of the Prepetition Unsecured Bridge Credit Agreement Claims, as reflected in such
Consenting Bridge Lender's signature block to this Agreement, which amount the Company and
each Consenting Bridge Lender understands and acknowledges is proprietary and confidential to
such Consenting Bridge Lender;
(b) other than pursuant to this Agreement, such Prepetition Unsecured Bridge Credit
Agreement Claims are free and clear of any pledge, lien, security interest, charge, claim, equity,
encumbrances of any kind, that would adversely affect in any way such Consenting Bridge
Lender's performance of its obligations contained in this Agreement at the time such obligations
are required to be performed; and
Securities Act of 1933, as amended (the "Securities Act") or (b) an institutional accredited
investor (as defined in Rule 501(a)(l), (2), (3), or (7) under the Securities Act (the "Rules")) and
(ii) any securities acquired by the Consenting Bridge Lender in connection with the transactions
described herein will not have been acquired with a view to distribution.
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3.06. Representations of Consenting Noteholders. Each of the Consenting Noteholders
severally and not jointly represents and warrants that, as of the date such Consenting Noteholder
(a) it is the beneficial owner of the face amount of the Unsecured Notes, or is the
nominee, investment manager, or advisor for beneficial holders of the Unsecured Notes, as
reflected in such Consenting Noteholder's signature block to this Agreement, which amount the
Company and each Consenting Noteholder understands and acknowledges is proprietary and
confidential to such Consenting Noteholder;
(b) other than pursuant to this Agreement and applicable law, such Unsecured Notes
are free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy,
voting restriction, right of first refusal or other limitation on disposition, or encumbrances of any
kind, that would adversely affect in any way such Consenting Noteholder's performance of its
obligations contained in this Agreement at the time such obligations are required to be
performed; and
Securities Act or (b) an institutional accredited investor (as defined in the Rules) and (ii) any
securities acquired by the Consenting Noteholder in connection with the transactions described
herein will not have been acquired with a view to distribution.
3.07. Representations of Consenting Equity Holders. Each of the Consenting Equity
Holders severally and not jointly represents and warrants that, as of the date such Consenting
Equity Holder executes and delivers this Agreement:
(a) it is the beneficial owner of the number of shares of Existing Equity Interests as
set forth below its name on the signature block to this Agreement, or is the nominee, investment
manager, or advisor for beneficial holders of the Existing Equity Interests, as reflected in such
Consenting Equity Holder's signature block to this Agreement, which number of shares the
Company and each Consenting Equity Holder understands and acknowledges is proprietary and
confidential to such Consenting Equity Holder;
(b) other than pursuant to this Agreement, such Existing Equity Interests are free and
clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction,
right of first refusal or other limitation on disposition, or encumbrances of any kind, that would
adversely affect in any way such Consenting Equity Holder's performance of its obligations
contained in this Agreement at the time such obligations are required to be performed;
(c) (i) it is an accredited investor (as defined in the Rules) and (ii) any securities
acquired by the Consenting Equity Holder in connection with the transactions described herein
will not have been acquired with a view to distribution; and
(d) other than its Existing Equity Interests, it does not hold any other issued and
outstanding securities rights or obligations which are convertible into, exchangeable for, or
exercisable to acquire any capital stock or other equity securities of the Company.
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Section 4. Certain Additional Chapter 11 Related Matters. The Company shall provide
draft copies of all "first day" motions or applications and other documents the Company intends
to file with the Bankruptcy Court to counsel to the Prepetition Secured Administrative Agent and
to counsel to the Informal Funded Debt Committee at least one day prior to the date when the
Company intends to file such document and shall consult in good faith with such counsel
regarding the form and substance of any such proposed filing with the Bankruptcy Court. The
Company will use its reasonable best efforts to provide draft copies of all other pleadings the
Company intends to file with the Bankruptcy Court to counsel to the Prepetition Secured
Administrative Agent and to counsel to the Informal Funded Debt Committee at least two days
prior to filing such pleading and shall consult in good faith with such counsel regarding the form
and substance of any such proposed pleading.
Section 5. Mutual Representations, Warranties, and Covenants. Each of the Parties,
severally and not jointly, represents, warrants, and covenants to each other Party, as of the date
of this Agreement, as follows (each of which is a continuing representation, warranty, and
covenant):
5.0 1. Enforceability. It is validly existing and in good standing under the laws of the
state of its organization, and this Agreement is a legal, valid, and binding obligation of such
Party, enforceable against it in accordance with its terms, except as enforcement may be limited
by applicable laws relating to or limiting creditor's rights generally or by equitable principles
relating to enforceability.
5.02. No Consent or Approval. Except as expressly provided in this Agreement or the
Bankruptcy Code, no consent or approval is required by any other person or entity in order for it
to carry out the Transactions contemplated by, and perform the respective obligations under, this
Agreement.
5.03. Power and Authority. Except as expressly provided in this Agreement, it has all
requisite power and authority to enter into this Agreement and to carry out the Transactions
contemplated by, and perform its respective obligations under, this Agreement.
5.04. Authorization. The execution and delivery of this Agreement and the
part.
5.05. Representation by Counsel. It has been represented by counsel in connection with
this Agreement and the transactions contemplated by this Agreement.
5.06. Actions under this Agreement. It is not aware of any event that, due to any
fiduciary or similar duty to any other person, would prevent it from taking any action required of
it under this Agreement.
6.01. Consenting Party Termination Events. This Agreement may be terminated by the
delivery to the Company and, as applicable, the Prepetition Secured Administrative Agent or the
Informal Funded Debt Committee of a written notice in accordance with Section 8.11 hereof by
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Consenting Secured Lenders holding no less than a maJonty in principal amount of the
Prepetition Secured Credit Agreement Claims held at such time by the Consenting Secured
Lenders, by the Consenting Bridge Lenders holding no less than a majority in principal amount
of the Prepetition Unsecured Bridge Credit Agreement Claims held at such time by the
Consenting Bridge Lenders, or by the Consenting Noteholders holding no less than a majority in
principal amount of the Unsecured Note Claims held at such time by the Consenting Noteholders
(unless otherwise provided in this Section 6.01 ), each in the exercise of its sole discretion, upon
the occurrence and continuation of any of the following events (each a "Consenting Party
Termination Event"):
(a) failure of the Company to commence the chapter 11 cases on or before the
Outside Petition Date;
(b) counsel to the lnfonnal Funded Debt Committee shall have reasonably
detennined that there are General Unsecured Claims, not previously disclosed to it, the existence
of which could have a material adverse effect on the Company, and provided reasonably prompt
written notice of such detennination to the Company and the Prepetition Secured Administrative
Agent;
(c) failure of the Company to file a Plan of Reorganization and related disclosure
statement with the Bankruptcy Court within 10 days after the Petition Date, each of which shall
be materially consistent with this Agreement and the Tenn Sheet and shall be in a fonn and
substance reasonably acceptable to the Prepetition Secured Administrative Agent and to counsel
to the lnfonnal Funded Debt Committee;
(d) the Bankruptcy Court's orders approving the Solicitation Materials and setting a
hearing to confinn the Plan of Reorganization shall not have been entered by the Bankruptcy
Court within 40 days after the filing of the Plan of Reorganization, or as soon thereafter as the
Bankruptcy Court's schedule pennits;
(e) the Bankruptcy Court's order confinning the Plan of Reorganization
(the "Confirmation Order"), which Plan of Reorganization, including all exhibits, appendices,
plan supplement documents, and related documents, shall be reasonably acceptable to the
Prepetition Secured Administrative Agent (solely as to provisions which (i) affect, or could be
reasonably expected to affect, the Consenting Secured Lenders' rights, claims, recoveries, and/or
interests or (ii) are not materially consistent with the Tenn Sheet) and to counsel to the lnfonnal
Funded Debt Committee (solely as to the provisions which (i) affect, or could be reasonably
expected to affect Consenting Bridge Lenders' and Consenting Noteholders' rights, claims,
recoveries, and/or interests or (ii) are not materially consistent with the Tenn Sheet), shall not
have been entered by the Bankruptcy Court within 60 days after the date that the Solicitation
Materials are approved; provided, however, that so long as the Company is proceeding in good
faith towards confinnation of the Plan of Reorganization, upon written notice from the Company
to counsel to the Prepetition Secured Administrative Agent and to counsel to the Infonnal
Funded Debt Committee in accordance with Section 8.11 hereof, there shall be a 15-day
extension of such 60-day period;
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(f) the effective date of the Plan of Reorganization shall not have occurred within
25 days after the date that the Plan of Reorganization is confirmed; provided, however, that so
long as the Company is proceeding in good faith towards confirmation of the Plan of
Reorganization, upon written notice from the Company to counsel to the Prepetition Secured
Administrative Agent and to counsel to the Informal Funded Debt Committee in accordance with
Section 8.11 hereof, there shall be a 15-day extension of such 25-day period;
(g) other than with respect to the covenant and agreement in Section 3 .02( e) of this
Agreement, the breach in any material respect by the Company of any of the obligations,
representations, warranties, or covenants of the Company set forth in this Agreement; provided,
however, that the Company shall have five business days to cure any such breach;
(h) failure to duly observe and perform the covenant and agreement contained in
Section 3 .02( e) of this Agreement;
(i) the issuance by any governmental authority, including any regulatory authority or
court of competent jurisdiction, of any ruling or order enjoining the consummation of the
Transactions in a way that cannot be reasonably remedied by the Company in a manner that does
not prevent or diminish in a material way compliance with the terms of the Term Sheet and this
Agreement; provided, however, that the Company shall have five business days after receiving
such ruling or order to cure any breach in a manner that does not prevent or diminish in a
material way compliance with the terms of the Term Sheet and this Agreement;
(j) the conversion of one or more of the chapter 11 cases to a case under chapter 7 of
the Bankruptcy Code, unless such conversion is made with the prior written consent of the
Prepetition Secured Administrative Agent and counsel to the Informal Funded Debt Committee;
(k) the appointment of a trustee, receiver, or examiner with expanded powers in one
or more of the chapter 11 cases, unless such appointment is made with the prior written consent
of the Prepetition Secured Administrative Agent and counsel to the Informal Funded Debt
Committee;
(l) the amendment, modification, or filing of a pleading by the Company seeking to
amend or modify the Plan of Reorganization, Solicitation Materials, or any documents related to
the foregoing, including motions, notices, exhibits, appendices, and orders, in a manner not
reasonably acceptable to the Prepetition Secured Administrative Agent (solely as to provisions
which (i) affect, or could be reasonably expected to affect, the Consenting Secured Lenders'
rights, claims, recoveries, and/or interests or (ii) are not materially consistent with the Term
Sheet) and counsel to the Informal Funded Debt Committee (solely as to the provisions which
(i) affect, or could be reasonably expected to affect Consenting Bridge Lenders' and Consenting
Noteholders' rights, claims, recoveries, and/or interests or (ii) are not materially consistent with
the Term Sheet);
(m) the Company files any motion or pleading with the Bankruptcy Court that is not
materially consistent in any respect to this Agreement or the Term Sheet and such motion or
pleading has not been withdrawn prior to the earlier of (i) five business days of the Company
receiving written notice in accordance with Section 8.11 hereof from either the Prepetition
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Secured Administrative Agent or counsel to the Informal Funded Debt Committee that such
motion or pleading is inconsistent with this Agreement or the Term Sheet and (ii) entry of an
order of the Bankruptcy Court approving such motion;
(n) if the Company has not paid a fee to each Consenting Secured Lender equal to the
product of (i) 1.50% and (ii) the aggregate principal amount of Loans and Commitments (in each
case as defined in the Prepetition Secured Credit Agreement in effect immediately prior to the
Agreement Effective Date) held by such Consenting Secured Lender immediately prior to the
Agreement Effective Date (without giving effect to any recent or contemplated payments of
principal on such Loans or terminations of Commitments) (such fee, the "Consenting Secured
Lender Fee") on or prior to the effective date of the Plan of Reorganization, failure by the
Company to obtain a final, non-appealable order from the Bankruptcy Court that ensures
treatment of the Consenting Secured Lender Fee as an administrative claim in the chapter 11
cases within 30 days after the Petition Date or as soon thereafter as the Bankruptcy Court's
schedule permits (but in no event later than 45 days after the Petition Date); or
( o) failure by the Company to make mandatory prepayments of principal with respect
to the Loans and Commitments (in each case as defined in the Prepetition Secured Credit
Agreement in effect immediately prior to the Agreement Effective Date) in accordance with that
certain Consent, dated as of September 8, 2009, by and among the Company and the lenders
under the Prepetition Secured Credit Agreement party to such Consent, and payable pursuant to
the terms of Section 2.10 of the Prepetition Secured Credit Agreement.
Notwithstanding any provision in this Agreement to the contrary, upon the written
consent of the (i) Consenting Secured Lenders holding a majority in principal amount of the
Prepetition Secured Credit Agreement Claims held at such time by the Consenting Secured
Lenders, (ii) Consenting Bridge Lenders holding a majority in principal amount of the
Prepetition Unsecured Bridge Credit Agreement Claims, and (iii) Consenting Noteholders
holding a majority in principal amount of the Unsecured Note Claims held at such time by the
Consenting Noteholders, the dates set forth in this Section 6.01 may be extended prior to or upon
each such date and such later dates agreed to in lieu thereof and shall be of the same force and
effect as the dates provided herein. If this Agreement is terminated by the Consenting Parties
pursuant to this Section 6.01, this Agreement shall be automatically and simultaneously
terminated as to any other Party that is a signatory to this Agreement. No Party shall terminate
this Agreement if such Party is in breach of any provision hereof.
6.02. Company Termination Events. The Company may terminate this Agreement as to
all Parties upon five business days' prior written notice, delivered in accordance with
Section 8.11 hereof, upon the occurrence of any of the following events (each, a
"Company Termination Event"): (a) the breach by any of the Plan Support Parties of any of
the representations, warranties, or covenants of such Plan Support Parties set forth in this
Agreement that would have a material adverse impact on the Company or the consummation of
the Transactions that remains uncured for a period of five business days after the receipt by the
Plan Support Parties of written notice of such breach from the Company; (b) the board of
directors of the Company reasonably determines based upon the advice of counsel that
proceeding with the Transactions would be inconsistent with the exercise of its fiduciary duties,
or (c) the issuance by any governmental authority, including any regulatory authority or court of
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competent jurisdiction, of any ruling or order enjoining the consummation of a material portion
of the Transactions.
6.03. Mutual Termination. This Agreement, and the obligations of all Parties
hereunder, may be terminated by mutual agreement among (a) the Company, (b) Consenting
Secured Lenders holding a majority in principal amount of the Prepetition Secured Credit
Agreement Claims held at such time by the Consenting Secured Lenders, (c) Consenting Bridge
Lenders holding a majority in principal amount of the Prepetition Unsecured Bridge Credit
Agreement Claims held at such time by the Consenting Bridge Lenders, (d) Consenting
Noteholders holding a majority in principal amount of the Unsecured Note Claims held at such
time by the Consenting Noteholders, and (e) the Consenting Equity Holders holding a majority
of the Existing Equity Interests held at such time by the Existing Equity Holders.
6.04. Effect of Termination. Upon termination of this Agreement under Section 6.01,
6.02, or 6.03, this Agreement shall be of no further force and effect and each Party hereto shall
be released from its commitments, undertakings, and agreements under or related to this
Agreement and shall have the rights and remedies that it would have had it not entered into this
Agreement, and shall be entitled to take all actions, whether with respect to the Transactions or
otherwise, that it would have been entitled to take had it not entered into this Agreement. Upon
the occurrence of any termination of this Agreement, any and all consents tendered by the Plan
Support Parties prior to such termination shall be deemed, for all purposes, to be null and void
from the first instance and shall not be considered or otherwise used in any manner by the Parties
in connection with the Transactions and this Agreement or otherwise.
6.05. Termination Upon Effective Date of Plan. This Agreement shall terminate
automatically without any further required action or notice on the date that the Plan of
Reorganization becomes effective (immediately following the effectiveness of the Plan of
Reorganization).
Section 7. Amendments. This Agreement, including the Term Sheet, may not be modified,
amended, or supplemented (except as expressly provided herein or therein) except in writing
signed by the Company, a majority in principal amount of the Consenting Secured Lenders, a
majority in principal amount of the Consenting Bridge Lenders, a majority in principal amount
of the Consenting Noteholders, and, solely as to the provisions which affect, or could be
reasonably expected to affect Consenting Equity Holders' rights, claims, recoveries, and/or
interests, a majority in amount of the Consenting Equity Holders.
8.01. Further Assurances. Subject to the other terms of this Agreement, the Parties
effectuate the Transactions in a manner materially consistent with the terms set forth in the Term
Sheet, as applicable.
8.02. Complete Agreement. This Agreement and the annexes hereto represent the
entire agreement between the Parties with respect to the subject matter hereof and supersede all
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prior agreements, oral or written, between the Parties with respect thereto. No claim of waiver,
modification, consent, or acquiescence with respect to any provision of this Agreement shall be
made against any Party, except on the basis of a written instrument executed by or on behalf of
such Party.
8.03. Parties. This Agreement shall be binding upon, and inure to the benefit of, the
Parties. No rights or obligations of any Party under this Agreement may be assigned or
transferred to any other person or entity except as provided in Section 3.03 hereof. Nothing in
this Agreement, express or implied, shall give to any person or entity, other than the Parties, any
benefit or any legal or equitable right, remedy, or claim under this Agreement.
8.04. Headings. The headings of all sections of this Agreement are inserted solely for
the convenience of reference and are not a part of and are not intended to govern, limit, or aid in
the construction or interpretation of any term or provision hereof.
8.05. GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF
FORUM; WAIVER OF TRIAL BY JURY. THIS AGREEMENT IS TO BE GOVERNED BY
STATE, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF. Each Party hereto agrees that it shall bring any action or proceeding in respect of
any claim arising out of or related to this Agreement, to the extent possible, in either the United
States District Court for the Southern District of New York or any New York State court sitting
in New York City (the "Chosen Courts"), and solely in connection with claims arising under
this Agreement (a) irrevocably submits to the exclusive jurisdiction of the Chosen Courts,
(b) waives any objection to laying venue in any such action or proceeding in the Chosen Courts,
and (c) waives any objection that the Chosen Courts are an inconvenient forum or do not have
jurisdiction over any Party hereto; provided, however, that if the Company commences one or
more chapter 11 cases, then the Bankruptcy Court shall be the sole Chosen Court. Each Party
hereto irrevocably waives any and all right to trial by jury in any legal proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby.
8.06. Execution of Agreement. This Agreement may be executed and delivered (by
facsimile, electronic mail, or otherwise) in any number of counterparts, each of which, when
executed and delivered, shall be deemed an original, and all of which together shall constitute the
same agreement.
8.07. Interpretation. This Agreement is the product of negotiatiOns between the
Company, the Prepetition Secured Administrative Agent, the Informal Funded Debt Committee,
the Consenting Secured Lenders, the Consenting Bridge Lenders, the Consenting Noteholders,
and the Consenting Equity Holders, and in the enforcement or interpretation hereof, is to be
interpreted in a neutral manner, and any presumption with regard to interpretation for or against
any Party by reason of that Party having drafted or caused to be drafted this Agreement, or any
portion hereof, shall not be effective in regard to the interpretation hereof.
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K&E 15406298.21
Execution Version
8.08. Successors and Assigns. This Agreement is intended to bind and inure to the
benefit of the Parties and their respective successors, assigns, heirs, executors, administrators,
and representatives, other than a trustee or similar representative appointed in a bankruptcy case.
8.09. Creditors' Committee. Notwithstanding anything herein to the contrary, if any
Consenting Bridge Lender or Consenting Noteholder is appointed to and serves on an official
committee of creditors in the chapter 11 cases, the terms of this Agreement shall not be
construed so as to limit such Consenting Bridge Lender's or Consenting Noteholder's exercise
(in its sole discretion) of its fiduciary duties to any person arising from its service on such
committee, and any such exercise (in the sole discretion of such Consenting Bridge Lender or
Consenting Noteholder) of such fiduciary duties shall not be deemed to constitute a breach of the
terms of this Agreement; provided, however, that nothing in this Agreement shall be construed as
requiring any Consenting Bridge Lender or Consenting Noteholder to serve on any official
committee in any such chapter 11 case.
8.1 0. Relationship Among Parties. It is understood and agreed that no Plan Support
Party has any fiduciary duty or other duty of trust or confidence in any form with any other Plan
Support Party, and, except as provided in this Agreement, there are no commitments among or
between them.
8.11. Notices. All notices hereunder shall be deemed given if in writing and delivered,
if sent by telecopy, electronic mail, courier, or registered or certified mail (return receipt
requested) to the following addresses and telecopier numbers (or at such other addresses or
telecopier numbers as shall be specified by like notice):
(a) if to the Company, to:
K&E 15406298.21
Stallion Oilfield Services Ltd.
950 Corbindale Road
Suite 300
Houston, Texas 77024
Attention: Douglas Stewart, Vice-President and General Counsel
E-mail address: dstewart@sofs.cc
Citigroup Center
Attention: Jonathan S. Henes
E-mail address: jonathan.henes@kirkland.com
and
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(b)
300 North LaSalle
Attention: Chad J. Husnick and Jeffrey D. Pawlitz
Execution Version
Email addresses: chad.husnick@kirkland.com and jeffrey.pawlitz@kirkland.com
if to the Prepetition Secured Administrative Agent, to:
UBS Investment Bank
677 Washington Boulevard
6th Floor
Stamford, Connecticut 06901
Attention: Thomas Donnelly
Email address: Thomas.Donnelly@UBS.com
233 South Wacker Drive
Suite 5800
Attention: David S. Heller
E-mail address: david.heller@1w .com
(c) if to a Consenting Secured Lender or a transferee thereof, to the addresses or
te1ecopier numbers set forth below following the Consenting Secured Lender's signature (or as
directed by any transferee thereof), as the case may be
K&E 15406298.21
233 South Wacker Drive
Suite 5800
Attention: David S. Heller
E-mail address: david.heller@lw.com
14
Execution Version
(d) if to a Consenting Bridge Lender or a Consenting Noteholder or a transferee
thereof, to the addresses or telecopier numbers set forth below following the Consenting Bridge
Lender's signature (or as directed by any transferee thereof), as the case may be
(e)
1285 Avenue of the Americas
Attention: Andrew N. Rosenberg and Sarah Harnett
E-mail addresses: arosenberg@paulweiss.com and sharnett@paulweiss.com
if to the Informal Funded Debt Committee, to:
1285 Avenue of the Americas
Attention: Andrew N. Rosenberg and Sarah Harnett
E-mail addresses: arosenberg@paulweiss.com and sharnett@paulweiss.com
(f) if to a Consenting Equity Holder or a transferee thereof, to the addresses or
telecopier numbers set forth below the Consenting Equity Holder's Signature (or as directed by
any transferee thereof), as the case may be
Riverstone Holdings, LLC
712 Fifth A venue, 51st Floor
New York, NY 10019
Attention: Stephen Coats
E-mail address: scoats@riverstonellc.com
Any notice given by delivery, mail, or courier shall be effective when received. Any notice
given by telecopier shall be effective upon oral or machine confirmation of transmission.
8.12. Access. The Company will afford the Plan Support Parties and their respective
attorneys, consultants, accountants, and other authorized representatives reasonable access, upon
reasonable notice during normal business hours, to all properties, books, contracts, commitments,
records, management personnel, lenders, and advisors of the Company; provided, however, that
the Company's obligation hereunder shall be conditioned upon such Plan Support Party being
party to an executed confidentiality agreement approved by and with the Company. The
Company acknowledges and agrees that the Prepetition Secured Administrative Agent, the
lenders under the Prepetition Secured Credit Agreement, and certain members of the Informal
Funded Debt Committee have complied with the requirements of this Section 8.12 by virtue of
their existing confidentiality arrangements with the Company.
8.13. Waiver. Except as expressly provided in this Agreement, nothing herein is
intended to, or does, in any manner waive, limit, impair, or restrict any right of any Consenting
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K&E 15406298.21
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Party or the ability of each of the Consenting Party to protect and preserve its rights, remedies,
and interests, including, without limitation, its claims against or interests in the Company. If the
Transactions are not consummated, or if this Agreement is terminated for any reason (other than
Section 6.05 hereof, in which case the Parties shall have any rights set forth in the confirmed
Plan of Reorganization, any other court-approved documents, and any other agreements between
the Parties entered into after the Petition Date), the Parties fully reserve any and all of their
rights. Pursuant to Rule 408 of the Federal Rules of Evidence and any other applicable rules of
evidence, this Agreement and all negotiations relating hereto shall not be admissible into
evidence in any proceeding other than a proceeding to enforce its terms.
8.14. Specific Performance. It is understood and agreed by the Parties that money
damages would be an insufficient remedy for any breach of this Agreement by any Party and
each non-breaching Party shall be entitled to specific performance and injunctive or other
Bankruptcy Court or other court of competent jurisdiction requiring any Party to comply
promptly with any of its obligations hereunder.
8.15. Several, Not Joint, Obligations. The agreements, representations, and obligations
of the Parties under this Agreement are, in all respects, several and not joint.
8.16. Remedies Cumulative. All rights, powers, and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and
not alternative, and the exercise of any right, power, or remedy thereof by any Party shall not
preclude the simultaneous or later exercise of any other such right, power, or remedy by such
Party.
8.17. No Third-Party Beneficiaries. Unless expressly stated herein, this Agreement
shall be solely for the benefit of the Parties, and no other person or entity shall be a third-party
beneficiary hereof.
Section 9. Disclosure. The Company shall publicly disclose (a) the existence of this
Agreement and the material terms of the Term Sheet in a press release and/or filing with the
Bankruptcy Court on or before October 20, 2009 and (b) any material amendment to this
Agreement and the Term Sheet in a filing with the Bankruptcy Court following the effective date
of such amendment in form and substance reasonably acceptable to counsel to the Prepetition
Secured Administrative Agent and counsel to the Informal Funded Debt Committee. To the
extent reasonably practicable, the Company will submit to counsel for the Prepetition Secured
Administrative Agent and counsel for the Informal Funded Debt Committee all press releases
and public filings relating to this Agreement, the Term Sheet, or the transactions contemplated
hereby and thereby and any amendments thereof at least two days prior to releasing such press
releases or making such public filings and shall consult in good faith with such counsel regarding
the form and substance of such press releases and public filings. To the extent that the Company
fails to make such initial disclosure within two business days of October 20, 2009, or the
effective date of any amendment hereto, the Prepetition Secured Administrative Agent, the
Bridge Agent, and each of the Consenting Parties shall have the right, but not the obligation, to
disclose such terms publicly. The Company shall not (a) use the name of any Plan Support Party
in any press release without such Plan Support Party's prior written consent or (b) disclose to any
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K&E 15406298.21
Execution Version
person other than legal and financial advisors to the Company the principal amount or percentage
of any Prepetition Secured Credit Agreement Claims, Prepetition Unsecured Bridge Credit
Agreement Claims, or Unsecured Notes Claims or any securities of the Company or any of their
respective subsidiaries held by any Consenting Secured Lender, Consenting Bridge Lender, and
Consenting Noteholder; provided, however, that the Company shall be permitted to disclose at
any time the aggregate principal amount of and aggregate percentage of the Prepetition Secured
Credit Agreement Claims, Prepetition Unsecured Bridge Credit Agreement Claims, or
Unsecured Notes Claims held by the Consenting Secured Lenders, Consenting Bridge Lenders,
and Consenting Noteholders or by persons who have otherwise agreed to participate in the
Solicitation as a group; provided further, however, that the legal and financial advisors to the
Company may disclose the names of holders of Prepetition Secured Credit Agreement Claims,
Prepetition Unsecured Bridge Credit Agreement Claims, or Unsecured Notes Claims to the
extent such advisors deem necessary to satisfy the obligations to make disclosures of connections
to parties in interest in connection with being retained to advise the Company under section
327(a) of the Bankruptcy Code.
lN WITNESS WHEREOF, the Parties have executed this Agreement on the day
[signature pages follow]
17
K&E I 540629R 21
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STALLION OILFIELD SERVICES LTD., a Texas
limited partnership
B y : - + ~ ~ ~ - - ~ ~ ~ ~ ~ ~
N : John R. Castellano
Tit e: Chief Restructuring Officer
STALLION OILFIELD HOLDINGS, LTD., a Texas
limited partnership
By: Stallion Oilfield Holdings GP, LLC, its general
partne
STALLION INTERESTS, LLC, a Texas limited
liabil"
STALLION ACQUISITION, LLC, a Texas limited
liability company
By: Stallion Oilfield Services Ltd., its sole member
By: Stallion Interests, LLC, the general partner of
tal on Oilfield Services Ltd.
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EXHIBIT A
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TERM SHEET
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Final Version
STALLION OILFIELD SERVICES LTD.
THIS TERM SHEET (THIS "TERM SHEET") DESCRIBES A PROPOSED RESTRUCTURING
(THE "RESTRUCTURING") FOR STALLION OILFIELD HOLDINGS, LTD. AND CERTAIN
OF ITS AFFILIATES (COLLECTIVELY, THE "DEBTORS" AND, TOGETHER WITH THEIR
NON-FILING AFFILIATES, "STALLION") PURSUANT TO A JOINT PLAN OF
REORGANIZATION (THE "PLAN OF REORGANIZATION"), WHICH WOULD BE FILED
BY THE DEBTORS IN CONNECTION WITH A CONTEMPLATED CHAPTER 11 FILING IN
THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE (THE
"BANKRUPTCY COURT").
THIS TERM SHEET IS NOT AN OFFER OR A SOLICITATION WITH RESPECT TO ANY
SECURITIES OF STALLION. ANY SUCH OFFER OR SOLICITATION SHALL COMPLY
WITH ALL APPLICABLE SECURITIES LAWS AND/OR PROVISIONS OF THE
BANKRUPTCY CODE.
THIS TERM SHEET IS PROVIDED IN CONFIDENCE AND MAY NOT BE DISTRIBUTED
WITHOUT THE EXPRESS WRITTEN CONSENT OF STALLION. THIS TERM SHEET IS A
SETTLEMENT PROPOSAL IN FURTHERANCE OF SETTLEMENT DISCUSSIONS.
ACCORDINGLY, THIS TERM SHEET IS PROTECTED BY RULE 408 OF THE FEDERAL
RULES OF EVIDENCE AND ANY OTHER APPLICABLE STATUTES OR DOCTRINES
PROTECTING THE USE OR DISCLOSURE OF CONFIDENTIAL SETTLEMENT
DISCUSSIONS.
THIS TERM SHEET IS SUBJECT TO ONGOING REVIEW AND APPROVAL BY, AND IS
NOT BINDING UPON, STALLION, IS SUBJECT TO MATERIAL CHANGE, AND IS BEING
DISTRIBUTED FOR DISCUSSION PURPOSES ONLY.
OVERVIEW
Restructuring Summary Prior to the commencement of the Debtors' chapter 11 cases, the requisite
threshold of Prepetition Secured Credit Agreement Lenders, Prepetition
Bridge Lenders, holders of Unsecured Note Claims, holders of Existing
Equity Interests (as such terms are defined herein), and the Debtors, shall
have executed a Plan Support Agreement (the "Plan SuJ!J!Ort
Agreement"), pursuant to which the Debtors will agree to pursue and
description of all of the terms, conditions, and other provisions that are to
be contained in the Plan of Reorganization and the related definitive
Debt to be Repaid/ Indebtedness that will be treated under the Plan of Reorganization includes:
Restructured
(i) approximately $245.8 million in obligations (together with any accrued
K&E 15012599.36
under the Plan of
Reorganization
K&E 1>01 ~ > 9 9 . 1 6
Final Version
and unpaid interest, unutilized line fee, and LIC fronting fees through
October 11, 2009, including outstanding obligations under outstanding
letters of credit, the "Prepetition Secured Credit Agreement Claims")
outstanding under that certain Third Amended and Restated Credit
Agreement (the "Prepetition Secured Credit Agreement"), dated as of
June 12, 2007, by and among Stallion Oilfield Services Ltd., certain
affiliate guarantors, UBS AG, as administrative agent and collateral agent
(in such capacity, the "Prepetition Secured Administrative Agent"), and
the lenders party thereto (together with the Prepetition Secured
Administrative Agent, the "Prepetition Credit Agreement Lenders");
(ii) approximately $258.9 million in obligations (together with any accrued
and unpaid interest through October 11, 2009, the "Prepetition Unsecured
Bridge Credit Agreement Claims") outstanding under that certain Credit
Agreement (the "Prepetition Unsecured Bridge Credit Agreement"),
dated as of August 1, 2007, by and among Stallion Oilfield Services Ltd.,
certain affiliate guarantors, Wilmington Trust, as administrative agent (in
such capacity, the "Prepetition Bridge Administrative Agent"), and the
lenders party thereto (together with the Prepetition Bridge Administrative
Agent, the "Prepetition Bridge Lenders");
(iii) approximately $283.3 million in obligations (together with any accrued
and unpaid interest through October 11, 2009, the "Unsecured Note
Claims" and, together with the Prepetition Unsecured Bridge Credit
Agreement Claims, the "Unsecured Funded Debt Claims") outstanding
on account of the 9.75% senior unsecured notes due February 1, 2015 (the
"Unsecured Notes"), issued by Stallion Oilfield Services Ltd. and Stallion
Oilfield Finance Corp. pursuant to that certain Indenture, dated as of
January 24, 2007 (the "Unsecured Notes Indenture"), by and among
Stallion Oilfield Services Ltd., Stallion Oilfield Finance Corp., and certain
affiliate guarantors, and The Bank of New York Trust Company, N.A., as
trustee (the "Unsecured Notes Trustee"); and
(iv) amounts due under certain hedging agreements related to the
Prepetition Secured Credit Agreement Claims and the Prepetition
Unsecured Bridge Credit Agreement Claims (the "Secured Swap
Claims").
New Equity. Reorganized Stallion Holdings, a newly formed corporation,
("Reorganized Stallion Holdings") shall issue equity (the "New Equity")
on the effective date of the Plan of Reorganization (the "Effective Date"),
which equity shall be deemed fully paid and non-assessable.
Warrants. Warrants to acquire 1% of the New Equity in Reorganized
Stallion Holdings exercisable at an enterprise value of $750 million
(subject to dilution by the MEIP (as defined herein)) (the "Warrants").
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Administrative Claims
Priority Tax Claims
Other Priority Claims
Other Secured Claims
K&E 15012599.36
Final Version
CLASSIFICATION AND TREATMENT OF CLAIMS
Unclassified Claims
Treatment. Each holder of an allowed administrative claim, including
claims of the type described in section 503(b )(9) of chapter 11 of title 11 of
the United States Code, 11 U.S.C. 101-1532 (the "Bankruptcy Code")
to the extent such claim has not already been paid during the chapter 11
cases, (each, an "Administrative Claim") shall receive payment in full, in
cash, of the unpaid portion of its allowed Administrative Claim on the
Effective Date or as soon thereafter as reasonably practicable (or, if
payment is not then due, shall be paid in accordance with its terms) or
pursuant to such other terms as may be agreed to by the holder of such
Administrative Claim and the Debtors.
Voting. Unimpaired. Holders of Administrative Claims (solely on account
of such Administrative Claims) will be conclusively deemed to have
accepted the Plan of Reorganization pursuant to section 1126(f) of the
Bankruptcy Code. Therefore, holders of Administrative Claims will not be
entitled to vote to accept or reject the Plan of Reorganization.
Treatment. Priority tax claims ("Priority Tax Claims") shall be treated in
accordance with section 1129(a)(9)(C) of the Bankruptcy Code.
Voting. Unimpaired. Each holder of a Priority Tax Claim will be
conclusively deemed to have accepted the Plan of Reorganization pursuant
to section 1126(f) of the Bankruptcy Code. Therefore, each holder of a
Priority Tax Claim will not be entitled to vote to accept or reject the Plan of
Reorganization.
Treatment. Each holder of an allowed claim described in section 507(a) of
the Bankruptcy Code, to the extent such claim has not already been paid
during the chapter 11 cases, (each, an "Other Priority Claim") shall
receive payment in full, in cash, of the unpaid portion of its Other Priority
Claim on the Effective Date or as soon thereafter as reasonably practicable
(or, if payment is not then due, shall be paid in accordance with its terms)
or pursuant to such other terms as may be agreed to by the holder of an
Other Priority Claim and the Debtors.
Voting. Unimpaired. Each holder of an Other Priority Claims will be
to section 1126(f) of the Bankruptcy Code. Therefore, each holder of an
Other Priority Claim will not be entitled to vote to accept or reject the Plan
of Reorganization.
Treatment. Each holder of an allowed secured claim, including Secured
Swap Claims, other than a Prepetition Secured Credit Agreement Claim
(each, an "Other Secured Claim"), shall receive payment in full, in cash,
of the unpaid portion of its Other Secured Claim on the Effective Date or as
Prepetition Secured
Credit Agreement Claims
Unsecured Funded Debt
Claims
Final Version
soon thereafter as reasonably practicable (or, if payment is not then due,
shall be paid in accordance with its terms) or pursuant to such other terms
as may be agreed to by the holder of such Other Secured Claim and the
Debtors.
Voting. Unimpaired. Each holder of an Other Secured Claim will be
to section 1126(f) of the Bankruptcy Code. Therefore, each holder of an
Other Secured Claim will not be entitled to vote to accept or reject the Plan
of Reorganization.
Allowance. The Prepetition Secured Credit Agreement Claims shall be
allowed in an aggregate amount equal to approximately $245.8 million.
Treatment. On the Effective Date or as soon thereafter as reasonably
practicable, except to the extent that a holder of a Prepetition Secured
Credit Agreement Claim agrees to less favorable treatment of its allowed
Prepetition Secured Credit Agreement Claim, each holder of a Prepetition
Secured Credit Agreement Claim shall receive, at the sole and absolute
discretion of Stallion, either (a) its pro rata share of (i) $25 million of cash
(as further described in Exhibit 1) and (ii) $220.8 million
1
in secured debt
pursuant to an amended and restated credit agreement on the terms and
conditions set forth in Exhibit 1 or (b) payment in full, in cash, of the
unpaid portion of its Prepetition Secured Credit Agreement Claim;
provided, however, that Stallion must elect the same option for all holders
of Prepetition Secured Credit Agreement Claims.
Voting. Impaired. Each holder of a Prepetition Secured Credit Agreement
Claim will be entitled to vote to accept or reject the Plan of Reorganization;
provided, however, that if Stallion elects to satisfy Prepetition Secured
Credit Agreement Claims pursuant to (b) above, then each holder of a
Prepetition Secured Credit Agreement Claim will be conclusively deemed
to have accepted the Plan of Reorganization pursuant to section ll26(f) of
the Bankruptcy Code and, therefore, will not be entitled to vote to accept or
reject the Plan of Reorganization.
Allowance. The Prepetition Unsecured Bridge Credit Agreement Claims
shall be allowed in an aggregate amount equal to approximately
$258.0 million. The Unsecured Note Claims shall be allowed in an
aggregate amount equal to approximately $283 .l million.
Treatment. On the Effective Date or as soon thereafter as reasonably
practicable, except to the extent that a holder of an Unsecured Funded Debt
Claim agrees to less favorable treatment of its allowed Unsecured Funded
Debt Claim, each holder of an allowed Unsecured Funded Debt Claim
against the Debtors shall receive its pro rata share of 98% of the New
Number equals total allowed Prepetition Secured Credit Agreement Claims less the cash
portion. Debt consideration subject to adjustment for paydown using asset sale proceeds
and accrued and unpaid interest and fees at such time.
K&E 15012599.36
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General Unsecured
Claims
Final Version
Equity (the "Equity Consideration"), subject to dilution from the MEIP
and the Warrants.
Voting. Impaired. Each holder of an Unsecured Funded Debt Claim will
be entitled to vote to accept or reject the Plan of Reorganization.
Treatment. On the Effective Date, or as soon thereafter as is reasonably
practicable, except to the extent that a holder of an allowed general
unsecured claim (each, a "General Unsecured Claim") agrees to less
favorable treatment of its allowed General Unsecured Claim or has been
paid prior to the Effective Date, each allowed General Unsecured Claim
shall be paid in full, in cash, in the ordinary course ofbusiness or otherwise
rendered unimpaired in accordance with section 1124 of the Bankruptcy
Code.
2
Voting. Unimpaired. Each holder of a General Unsecured Claim will be
to section 1126(t) of the Bankruptcy Code. Therefore, each holder of a
General Unsecured Claim will not be entitled to vote to accept or reject the
Plan of Reorganization.
Existing Equity Interests Treatment. On the Effective Date or as soon thereafter as reasonably
practicable, except to the extent that a holder of an existing equity interest
in Stallion Oilfield Holdings, Ltd. (including any partnership interest in
Stallion and options, warrants, or other agreements to acquire the same
(whether or not arising under or in connection with any employment
agreement)) (each, an "Existing Equity Interest") agrees to less favorable
treatment of its allowed Existing Equity Interest, each holder of an allowed
Existing Equity Interest shall receive a pro rata share of (i) 2% of the New
Equity (subject to dilution from the MEIP and the Warrants) and (ii) the
Warrants.
Management Equity
Incentive Plan
Voting. Impaired. Each holder of an Existing Equity Interest will be
entitled to vote to accept or reject the Plan of Reorganization.
GENERAL PROVISIONS
On the Effective Date, the Reorganized Debtors shall implement the
Management Equity Incentive Plan (the "MEIP") for the benefit of certain
continuing employees of the Reorganized Debtors on the following terms:
Equity Pool. On the Effective Date, the Reorganized Debtors shall reserve
I 0% of the fully diluted New Equity for equity grants to officers and
employees of the Reorganized Debtors (the "Equity Pool"). In the event
shares of New Equity also are made available to the initial members of the
board of directors of the Reorganized Debtors, such shares shall be in
addition to and not out of the Equity Pool.
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Stallion reserves the right to impair certain General Unsecured Claims, including, but not
limited to, rejection damage claims and litigation claims.
K&E 15012599.36
Employment
Agreements/Other
Incentive Plans
K&E 15012599.36
Final Version
Emergence Grants. A minimum of 4% of the fully diluted New Equity
will be issued to officers and employees as emergence grants within
30 days of the Effective Date (the "Emergence Grants"). Emergence
Grants shall vest 50% on the date that is one year after the Effective Date,
25% on the date that is two years after the Effective Date, and 25% on the
date that is three years after the Effective Date. Form of Emergence Grants
TBD, but a material portion of such Emergence Grants will consist of
grants of the equivalent of restricted New Equity.
Future Grants. All New Equity remaining in the Equity Pool may be
granted to officers and employees within 5 years of the Effective Date at
the discretion of the Board (as defined herein). In the event that a liquidity
event occurs before the fifth anniversary of the Effective Date, all New
Equity remaining in the Equity Pool may be, in the discretion of the Board,
granted (in the form of stock) to and vested with officers and employees
participating in the MEIP.
Officer Loans. Reorganized Stallion Holdings shall guarantee the
obligations of the CEO, CFO, and COO (each, an "Officer," and
collectively, the "Officers") under the officer loans (each, an "Officer
Loan," and collectively, the "Officer Loans") and shall have the right to
purchase the Officer Loans from the banks. Reorganized Stallion Holdings
shall make payments to the Officers equal to their required interest
payments plus a gross up for taxes due on account of such payment. For
each scheduled amortization payment, Reorganized Stallion Holdings will
loan, as requested, to each Officer an amount equal to the required
amortization payment, with interest on such loan equal to the applicable
federal rate (AFR) on the Effective Date. The Officers will seek a 5-year
extension of the existing Officer Loans with a 1 0-year amortization
payment schedule for the outstanding amounts. The first forgiveness
period will be 18 months long beginning on the Effective Date (the
"First Forgiveness Period") and thereafter each successive forgiveness
period will be 12 months long ("Successive Forgiveness Period, and,
collectively with the First Forgiveness Period, the "Forgiveness Periods").
At the end of each Forgiveness Period, if the Officer remains employed in
good standing with Reorganized Stallion Holdings or the Officer was
terminated without cause during such period, 50% of any principal
payments made on such Officer's behalf by Reorganized Stallion Holdings
during the applicable Forgiveness Period will be forgiven. Reorganized
Stallion Holdings will not provide a gross up payment with regard to any
taxable income incurred as a result of such forgiveness. Each Officer shall
use a minimum of 50% of, and may use up to 100% of, the after tax
proceeds of any annual cash incentive bonuses such Officer receives to
reduce the bank loan balance.
All obligations of Stallion and its subsidiaries to officers, directors,
employees, and agents thereof shall be assumed m the Plan of
Reorganization. Stallion to establish other incentive-based compensation
programs, the terms and conditions of which shall be subject to approval by
the Board (as defined herein). Agreements with certain management TBD.
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Cancellation of
Instruments, Certificates
and Other Documents
Final Version
On the Effective Date, except to the extent otherwise provided above, all
instruments, certificates, and other documents evidencing debt or equity
interests in the Debtors shall be cancelled, and the obligations of the
Debtors thereunder, or in any way related thereto, shall be discharged.
CORPORATE GOVERNANCE/CHARTER PROVISIONS/RELEASES
Reorganized Stallion
Oilfield Services Ltd.
Shareholders Agreement
Charter; Bylaws
Exemption from SEC
Registration
Debtor Releases
K&E 15012599.16
Reorganized Stallion Holdings shall have a 5-person board of directors (the
"Board"), which shall consist of Reorganized Stallion Holdings' Chief
Executive Officer and 4 directors, including a non-executive Chairman, to
be selected by the Informal Funded Debt Committee (as defined in the Plan
Support Agreement) on or before the hearing to approve the disclos
ure statement.
The holders of New Equity shall be parties to a shareholders agreement that
is in form and substance reasonably acceptable to the Informal Funded
Debt Committee and the Existing Equity Interests, provided, however, that
so long as the Informal Funded Debt Committee and the holders of the
Existing Equity Interests, working in good faith, agree upon certain
reasonable provisions requested by the holders of the Existing Equity
Interests which are not considered material economic terms by the Informal
Funded Debt Committee, such shareholders agreement shall be deemed to
be in form and substance reasonably acceptable to the holders of a majority
of the Existing Equity Interests.
The charter, bylaws, and/or other organizational documents of each of the
Debtors shall be amended and restated in a manner consistent with
section 1123(a)(6) of the Bankruptcy Code.
The issuance of all securities under the Plan of Reorganization will be
"Released Partv" means each of: (a) the Prepetition Secured
Administrative Agent; (b) the Prepetition Secured Credit Agreement
Lenders; (c) the Prepetition Bridge Administrative Agent; (d) the
Prepetition Bridge Lenders; (e) the Unsecured Notes Trustee; (f) holders of
Unsecured Note Claims; (g) holders of Existing Equity Interests; (h) with
respect to each of the foregoing entities in clauses (a) through (g), such
entity's current and former affiliates, subsidiaries, officers, directors,
principals, employees, agents, financial advisors, attorneys, accountants,
investment bankers, consultants, representatives, and other professionals, in
each case in their capacity as such; and (h) the Debtors' and the
Reorganized Debtors' current and former affiliates, subsidiaries, officers,
directors, principals, employees, agents, financial advisors, attorneys,
accountants, investment bankers, consultants, representatives, and other
professionals, in each case in their capacity as such, and only if serving in
such capacity.
Releases by the Debtors. Pursuant to section 1123(b) of the Bankruptcy
Code, and except as otherwise specifically provided in the Plan, for good
and valuable consideration, on and after the Effective Date, the Released
K&E 15012599.36
Final Version
Parties are deemed released and discharged by the Debtors, the
Reorganized Debtors, and their estates from any and all claims, obligations,
rights, suits, damages, causes of action, remedies, and liabilities
whatsoever, including any derivative claims, asserted on behalf of the
Debtors, whether known or unknown, foreseen or unforeseen, existing or
hereinafter arising, in law, equity, or otherwise, that the Debtors, the
Reorganized Debtors, their estates, or their affiliates would have been
legally entitled to assert in their own right (whether individually or
collectively) or on behalf of the holder of any claim or equity interest or
other entity, based on or relating to, or in any manner arising from, in
whole or in part, the Debtors, the chapter 11 cases, the purchase, sale, or
rescission of the purchase or sale of any security of the Debtors or the
Reorganized Debtors, the subject matter of, or the transactions or events
giving rise to, any claim or equity interest that is treated in the Plan of
Reorganization, the business or contractual arrangements between any
Debtor and any Released Party, the restructuring of claims and equity
interests prior to or in the chapter 11 cases, the negotiation, formulation, or
preparation of the Plan of Reorganization and related disclosure statement,
or related agreements, instruments, or other documents, upon any other act
or omission, transaction, agreement, event, or other occurrence taking place
on or before the confirmation date of the Plan of Reorganization, other than
claims or liabilities arising out of or relating to any act or omission of a
Released Party that constitutes willful misconduct or gross negligence.
Releases by Holders of Claims and Equity Interests. As of the Effective
Date, each holder of a claim or an equity interest shall be deemed to have
conclusively, absolutely, unconditionally, irrevocably, and forever, released
and discharged the Debtors, the Reorganized Debtors, and the Released
Parties from any and all claims, equity interests, obligations, rights, suits,
damages, causes of action, remedies, and liabilities whatsoever, including
any derivative claims, asserted on behalf of a debtor, whether known or
unknown, foreseen or unforeseen, existing or hereafter arising, in law,
equity or otherwise, that such entity would have been legally entitled to
assert (whether individually or collectively), based on or relating to, or in
any manner arising from, in whole or in part, the Debtors, the Debtors'
restructuring, the chapter 11 cases, the purchase, sale, or rescission of the
purchase or sale of any security of the Debtors or the Reorganized Debtors,
the subject matter of, or the transactions or events giving rise to, any claim
or equity interest that is treated in the Plan of Reorganization, the business
or contractual arrangements between any Debtor and any Released Party,
the restructuring of claims and equity interests prior to or in the chapter 11
cases, the negotiation, formulation, or preparation of the Plan of
Reorganization, the related disclosure statement, the related plan
supplement, or related agreements, instruments, or other documents, upon
any other act or omission, transaction, agreement, event, or other
occurrence taking place on or before the confirmation date of the Plan of
Reorganization, other than claims or liabilities arising out of or relating to
any act or omission of a Released Party that constitutes willful misconduct
or gross negligence. Notwithstanding anything to the contrary in the
foregoing, the release set forth above does not release any post-effective
date obligations of any party under the Plan of Reorganization or any
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Final Version
document, instrument, or agreement (including those set forth in the plan
supplement) executed to implement the Plan of Reorganization.
Exculpation Customary exculpation provisions, including aU Released Parties.
Discharge Customary discharge provisions.
Injunction Customary injunction provisions, including aU Released Parties.
Indemnification of Under the Plan of Reorganization, aU indemnification provisions currently
Prepetition Officers and in place (whether in the by-laws, certificates of incorporation, board
Directors resolutions, indemnification agreements, or employment contracts) for the
investment bankers, and other professionals of the Debtors shaU be
assumed and irrevocable and shaU survive the effectiveness of the Plan of
Reorganization.
Tax Issues The terms of the Plan of Reorganization and the restructuring contemplated
by this Term Sheet shaU be structured to preserve favorable tax attributes of
the Debtors to the extent practicable.
Restructuring The Debtors anticipate that aU of the assets of StaUion Oilfield Services
Transactions Ltd. wiU be transferred to Reorganized StaUion Holdings in exchange for
100% of the New Equity and such New Equity will then be transferred to
the holders of claims as set forth above.
PLAN IMPLEMENTATION AND PROPOSED REORGANIZATION SCHEDULE
Plan Support Agreement Prior to the commencement of the Debtors' chapter 11 cases, (a) holders of
at least two-thirds in amount and more than one-half in number of
outstanding Prepetition Secured Credit Agreement Claims, (b) holders of at
least two-thirds in amount and more than one-half in number of outstanding
Prepetition Unsecured Bridge Credit Agreement Claims, (c) holders of at
least two-thirds in amount and more than one-half in number of outstanding
Unsecured Note Claims, (d) holders of at least two-thirds in amount of
Existing Equity Interests, and (e) the Debtors shaU execute and deliver the
Conditions Precedent to Confirmation of the Plan of Reorganization shaU be subject to the
Plan Confirmation foUowing conditions precedent: (a) the Plan of Reorganization must be in
form and substance acceptable to the Debtors and reasonably acceptable to
the Prepetition Secured Administrative Agent and counsel to the Ad Hoc
Committee of Unsecured Funded Debt Claims; and (b) the Bankruptcy
Court shaU have entered an order confirming the Plan of Reorganization in
form and substance acceptable to the Debtors and reasonably acceptable to
the Prepetition Secured Administrative Agent and counsel to the Ad Hoc
Committee of Unsecured Funded Debt Claims.
K&E 15012599.36
Final Version
Amendment Terms ofPrepetition Senior Secured Credit Agreement-Exhibit 1
Fees 150 bps, payable to all lenders consentmg to the amendment (keyed off aggregate pnnctpal amount of loans and commitments pnor to givmg effect to any of the
paydowns or commttment reductions noted below). This fee shall be secured bv the collateral and an amendment to that effect shall be executed at the same ume as the
lock up, and shall be deemed earned upon the entering mto of the lock-up agreement and payable Immediately, provided however that Stall ton may defer payment ofthts
fee unttl the date Stall ton emerges from tts bankruptcy if payment of such fee ts assured as an admmistrative claim in Stallion's bankruptcy case and such status ts
reflected m a final, non-appealable order wtthin 30 days of the petitiOn date or as soon thereafter as the bankruptcy court's schedule permits but m no event later than 45
days. Failure to comply with the foregomg shall constttute a "Consentmg Party Termmatton Event" under the lock-up agreement
0 bps, payable to all lenders at maturity or repayment
LIBOR Floor 300%
Applicable Margin !nitta! pricing of L +550 bps on revolver and L +650 bps on term loan, future pncing subject to the following grid:
Secured Debt Outstanding Margin on Eurodollar Loans
Less than or equal to Greater than
(TL!Revolver)
$175 0 million 650 bps/550 bps
$175.0 million $125 0 million 550 bps/450 bps
$125.0 million 450 bps/350 bps
Commitment Fee 25 bps (from 50 bps to 75 bps)
Increase
Paydown $25 million pro rata from balance sheet cash upon effectiveness of the plan, plus thruster sale net proceeds ($15 million) consistent with asset sale consent (payable after
recetpt of net cash proceeds by Stallion), plus $25 mtllion pro rata incremental pnnctpal payment, payable quarterly beginning June 30,2010 and endmg December 31,
2010 ($7 5 million m aggregate}- Full commitment reduction on revolvmg loans for $25 mtllion paydown, thruster proceeds paydown, and $7 5 mtllion mcremental
quarterly principal payments
Financial Covenants Minimum Liquidity (unrestricted cash and revolver availability): $5 million through June 30,2010,$10 million thereafter
- Tested monthly
-Total Leverage and Fixed Charge Coverage (defined in a manner to be agreed. but with fixed charges to include at a minimum interest expense, capital expenditure, net
cash payments for income taxes, amortization payments on debt and certain dividends (if permitted)), subject to the following grid
2009 2010 2Qll There-
Covenant 12/31 3/31 6/30 9/30 12/31 3/31 6/30
after
Total Leverage 5.25x 5.25x 450x 4.50x 4.25x 3.75x 3.75x 3.25x
Fixed Charge Coverage 1.15x 1.15x 1.15x I 25x 125x I 25x 1.25x 1.25x
Permitted Not permitted through September 30, 20 I 0, unless funded with Qualified Capttal Stock
Acqutsttions Permitted thereafter, provided pro forma covenant compliance and less than 2 Ox total leverage
Reportmg Submission of monthly financials within 30 days of each of the first two months of each fiscal quarter
Eqmty Cure Permitted with cash purchasing common equity, provtded that (a) only up to the amount necessary to cure financial covenant breach may be contributed, (b) no more than
4 cures permitted durmg life of loan, (c) cannot exercise cure more than 2 times in any four fiscal quarter period and cannot exerctse cure in two consecutive fiscal
quarters, (d) EBITDA shall only be increased by the amount of cash contributed for purposes of financial covenant compliance and (e) 100% of the cure amount must be
used to prepay the loans (and reduce revolving commitments).
Unsecured Debt Fully equitized
----
K&E 15012599 36
- - - - - - - - - - - - - - - - - - -
~ ....
- - - - - - - - - - - - - - - - -
Final Version
LocatiOn of Cash All cash must be maintained at a RC or TL Syndicate Bank (and control agreements satisfactory to the agent covering such cash to be entered mto between Stallion, UBS
and the relevant syndicate bank)
-Subject to small carve-out not in excess of $5mm, subject to the first lien of the agent in a control agreement satisfactory to the agent
Changes to Covenants and Other To be modified in a manner to be agreed, but
Provisions - To limit Stallion's ability to move mventory and equipment outside of continental United States during life ofloan to the inventory and equipment currently
outside the continental Umted States (approximately $24mm worth) plus an additional $15mm of inventory and equipment going forward (45 of the Security
Agreement)
- To limit Permitted Unsecured Indebtedness to $5mm (6.01(m) of the Credit Agreement)
- To remove second lien debt basket (6.01(n) of the Credit Agreement)
- To remove basket permitting bndge loan (6 01(o) of the Credit Agreement)
- To prohibit L/Cs and bank guarantees not in USD for lease of a vessel in excess of $1 Omm (currently $15mm as per 6.01 (p) of the Credit Agreement)
- To add a new basket for unsecured guarantees of existing (as may be modified) loans to officers and directors in an amount not to exceed $10mm.
- To increase the basket for bid, performance or surety bonds from $3mm to $5mm (6 Ol(f) of the Credit Agreement)
- To remove lien basket permitting liens on the senior notes and second lien facility (6.02(r) of the Credit Agreement)
- To limit investment basket permitting investments in foreign subsidiaries from (x) up to $30mm plus the Available Equity Amount to (y) up to $10mm plus
Available Equity Amount (for equity issued after emergence from bankruptcy); provided that the net cash proceeds of such Issuance are used substantially
contemporaneously with the issuance thereof for the purposes specified in the notice required by the definition of Available EqUity Amount (6.04(j) of the Credit
Agreement)
- To modifY the general investments basket from (x) greater of$15mm or 5% consolidated tangible assets to (y) $15mm (6.04(1) of the Credit Agreement)
- To add an investment basket for existing (as may be modified) loans to officers and directors for the purpose of paying principal and interest on such loans in an
amount not to exceed $1 Omm.
- To modify Stallion's reinvestment rights for asset sale and casualty proceeds to a flat 180 days (removing 360 day reinvestment period) (21 0 of the Credit
Agreement)
- To modifY 6 08(b) of the Credit Agreement to make 1t clear that clause (y) is hm1ted only to net cash proceeds of qualified capital stock issued after emergence
from bankruptcy and may only be used to purchase or redeem quahfied cap1tal stock 1ssued after emergence from bankruptcy
- To remove ability to pay Annual Momtoring Fee and any other fees to current or future equityholders as currently permitted under 6OS( e) and (g) of the Credit
Agreement
- To remove the ability to pay other debt with equity or junior financing (6.11(a) of the Credit Agreement) (other than Permitted Unsecured Debt, Subordinated
Debt and Non-Recourse Debt which can be refinanced with equity issued after emergence from bankruptcy or other permitted unsecured indebtedness not
prohibited for use for such purpose (but in the case of Subordinated Debt or Non-Recourse Debt, to the extent such debt is refinanced with debt, such debt must be
either Subordinated Debt or Non-Recourse Debt, as applicable)
- Changes to related provisions to reflect the foregoing changes
Treatment of Lehman SubJect to the requirements of the credit agreement and applicable bankruptcy law as it relates to Lehman, the parties will endeavor to obtam the following treatment for
Lehman's funded and unfunded revolver comm!lments
- Upon Stallion's emergence from bankruptcy, Lehman's funded revolver w1ll be converted mto a term loan that w11l (a) mature on March I, 2011 (same date as
the revolver) and (b) have the same applicable margin as the revolver. Other than (a) and (b), Lehman's funded revolver will be treated as a term loan for all
purposes under the credit agreement, including mandatory prepayments.
- Lehman's unfunded revolver comm1tments will be term mated m Stallion's bankruptcy
J..:..&E 15012599 36
EXHIBIT B
the Restructuring and Lock-Up Agreement (the "Agreement"),
1
dated as of [DATE], 2009, by
and among the Company, and certain lenders, noteholders, and equity holders, including the
transferor to the Transferee of any Prepetition Secured Credit Agreement Claims, Prepetition
Unsecured Bridge Credit Agreement Claims, Unsecured Note Claims, or Existing Equity
Interests (the "Transferor"), and agrees to be bound by the terms and conditions thereof to the
extent Transferor was thereby bound, and shall be deemed a Consenting Secured Lender,
Consenting Bridge Lender, Consenting Noteholder, or Consenting Equity Holder, (as applicable)
under the terms of the Agreement.
Prepetition Secured Credit Agreement, the Prepetition Unsecured Bridge Credit Agreement, or
the Unsecured Notes Indenture, as applicable, and the Agreement and (ii) to be bound by the
vote of the Transferor if cast prior to the effectiveness of the transfer of the loans or notes, as
applicable.
Date Executed: ___ , 2009
Name:
Title:
Address:
Attention:
Telephone:
Facsimile:
Capitalized terms not used but not otherwise defined herein shall have the meanings ascribed to such terms
in the Agreement.
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In re Atrium Companies, Inc., Case No. 09-13889 (Bankr. Del. 2009).
Book Page 399
EXECUTION
This Restructuring Support Agreement (this "Agreement"), dated as of
September 25, 2009, is entered into by and among Panolam Holdings Co., a Delaware
corporation ("Parent"), Panolam Holdings II Co., a Delaware corporation ("Holdings"),
Panolam Industries International, Inc., a Delaware corporation ("Panolam"), Panolam Industries,
Inc., a Delaware corporation, Pioneer Plastics Corporation, a Delaware corporation, Nevamar
Holding Corp., a Delaware corporation, Nevamar Holdco, LLC, a Delaware limited liability
company, Nevamar Company, LLC, a Delaware limited liability company (collectively with
Parent, Holdings and Panolam, the "Company"), Credit Suisse, Cayman Islands Branch, as
administrative agent under the Credit Agreement (as defined below) (the "Agent"), the
undersigned lenders party to the Credit Agreement (the "Consenting Senior Secured Debt
Holders") and the undersigned holders of Subordinated Notes (as defined below) (the
"Consenting Note Holders" and, collectively with the Consenting Senior Secured Debt Holders,
the "Consenting Holders" and each, a "Consenting Holder"). The Company, Agent, each
Consenting Holder and each person that becomes a party hereto in accordance with the terms
hereof are collectively referred to herein as the "Parties" and individually as a "Party."
RECITALS
WHEREAS, as of the Effective Date (as defined in Section 9), the Company is a
party to (i) that certain Credit Agreement, dated as of September 30, 2005, as amended by
(A) that certain First Amendment to Credit Agreement and Waiver, dated as of February 27,
2006, (B) that certain Second Amendment to Credit Agreement, dated as of March 1, 2006,
(C) that certain Limited Waiver, dated as of June 14, 2006, and (D) that certain Third
Amendment to Credit Agreement and Limited Waiver, dated as of March 30, 2007, by and
among Holdings, Panolam, Agent, and the lenders party thereto (the "Lenders") (as further
amended, restated, amended and restated, supplemented or otherwise modified from time to
time, the "Credit Agreement") and (ii) that certain Indenture, dated as of September 30, 2005,
among Panolam, as issuer, the guarantors party thereto and Wells Fargo Bank, National
Association, as trustee (as amended, restated, amended and restated, supplemented or otherwise
modified from time to time, the "Indenture)', governing the 1 0 ~ Senior Subordinated Notes
due 2013 (the "Subordinated Notes");
WHEREAS, as of the Effective Date, the Consenting Senior Secured Debt
Holders hold at least 83% of the aggregate principal amount of indebtedness under the Credit
Agreement and the Consenting Note Holders hold at least 66% of the aggregate principal amount
of Subordinated Notes issued under the Indenture;
WHEREAS, the Company and the Consenting Holders wish to reorganize and
recapitalize the Company (the restructuring and recapitalization transactions, collectively, the
"Transactions") in accordance with (i) a proposed prepackaged Chapter 11 plan of
reorganization substantially in the form attached hereto as Exhibit A (the "Plan"), (ii) the term
sheet attached hereto as Exhibit B (the "Term Sheet"), (iii) the New Intercreditor Agreement
Term Sheet (as defined in the Plan) attached hereto as Exhibit C, as such Plan, Term Sheet and
New Intercreditor Term Sheet may be amended, modified or supplemented as provided herein
below;
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Book Page 400
solicitation of votes for the Plan (the "Solicitation") pursuant to Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act"), and sections 1125, 1I26 and I145 of the
Bankruptcy Code (as defined below);
WHEREAS, upon the successful conclusion of the Solicitation, as set forth
herein the Company intends to commence voluntary reorganization cases (the "Chapter 11
Cases") under Chapter II of title II of the United States Code, II U .S.C. I 01-1532 (the
"Bankruptcy Code"), in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court") to effect the Transactions pursuant to the Plan;
WHEREAS, the Company intends to file the Plan and related disclosure
statement (the "Disclosure Statement") and other related documents and motions as set forth
herein on the Commencement Date (as defined in Section 5(c)); and
WHEREAS, the Company intends to use its commercially reasonable efforts to
obtain Bankruptcy Court approval of the Plan in accordance with the Bankruptcy Code and on
terms consistent with this Agreement and each Consenting Holder intends to use its
commercially reasonable efforts to cooperate in that regard.
AGREEMENT
I. Plan.
(a) The Consenting Holders acknowledge and agree that (i) the Plan is
substantially in a form and substance reasonably acceptable in all respects to the Consenting
Holders and their counsel and (ii) the terms and conditions set forth in the Term Sheet are
reasonably acceptable in all respects to the Consenting Holders and their counsel. The plan
related documents (the "Plan Related Documents"), which shall include, but not be limited to,
(A) the Disclosure Statement, (B) the materials related to the Solicitation, (C) the proposed
confirmation order, and (D) any other documents or agreements filed with the Bankruptcy Court
by the Company or at the Company's direction that are necessary to implement the Plan,
including: (1) any appendices, amendments, modifications, supplements, exhibits and schedules
relating to the Plan or the Disclosure Statement; (2) an amended and restated Credit Agreement
(the "Amended and Restated Credit Agreement") and such other definitive documentation
(including without limitation security documents) as is necessary to consummate the
Transactions, all on the same economic terms and otherwise in all material respects on the terms
set forth in the Term Sheet; (3) the amended certificate of incorporation and bylaws for the
Company as reorganized; and (4) any registration rights agreement, shall contain the terms and
conditions set forth in the Plan and the Term Sheet, be in form and substance reasonably
acceptable in all respects to the Consenting Holders and counsel to the Agent and counsel for the
ad hoc noteholder group, and be consistent with this Agreement in all material respects (the Plan
Related Documents that contain such terms and conditions, are reasonably acceptable to the
Consenting Holders (as defined below) and counsel to the Agent and counsel for the ad hoc
2
Book Page 401
noteholder group and are consistent herewith in all material respects are referred to herein
collectively as the "Approved Plan Documents").
(b) The Term Sheet may be amended only upon written approval of the (i)
Company, (ii) the Consenting Senior Secured Debt Holders owning more than 66 2/3% in
aggregate principal amount of the Senior Secured Debt (as defined in Section 3(b )), (iii) the
Consenting Note Holders owning more than 50% in aggregate principal amount of the
Subordinated Notes, which requisite percentage shall include the principal amount of the
Subordinated Notes held by Apollo Capital Management and Eaton Vance Management or any
of their respective affiliates (unless Apollo Capital Management or Eaton Vance Management or
any of their respective affiliates transfer their Subordinated Notes or Claims (as defined in
Section 3(b)) related thereto to third parties in accordance with this Agreement) (the "Required
Consenting Note Holders"), and (iv) the Agent; provided that the Agent's approval shall be
solely with regard amendments to the Term Sheet relating to the provisions in Section 9 of the
Credit Agreement and any similar provisions in the Amended and Restated Credit Agreement,
including, without limitation, those provisions relating to its appointment, powers and duties,
general immunity, indemnity, and other duties in its role as Administrative Agent.
(c) This Agreement and the Plan may be amended (so long as any such
amendment is (y) consistent with the Term Sheet (as it may be amended in accordance with
Section I (b)) and (z) not of the nature that, if the Plan had been confirmed by the Bankruptcy
Court, would require are-solicitation, only upon written approval of (A) the Company, (B) the
Agent at the direction of the Consenting Senior Secured Debt Holders owning more than 50% in
aggregate principal amount of the Senior Secured Debt (the "Required Consenting Senior
Secured Debt Holders" and collectively with the Required Consenting Note Holders, the
"Required Consenting Holders") and (D) the Required Consenting Note Holders.
2. Bankruptcy Process. The Company hereby agrees to use commercially
reasonable efforts to obtain confirmation of the Plan as soon as reasonably practicable in
accordance with the Bankruptcy Code, and on terms consistent with this Agreement, and each
Consenting Holder shall use its commercially reasonable efforts to cooperate in that regard;
provided, however, that the Company, the Agent, at the direction of the Required Consenting
Senior Secured Debt Holders and the Required Consenting Note Holders may from time to time
mutually agree in writing to further extend any time period or deadline set forth herein. The
Company and each Consenting Holder shall take all commercially reasonable necessary and
appropriate actions to achieve confirmation of the Plan.
3. Support of the Reorganization; Additional Covenants.
(a) Prior to the Termination Date (as defined in Section 5), no Consenting
Holder or the Agent will (i) object to confirmation of the Plan or object to, or otherwise
commence any proceeding to oppose or alter, the Plan, the Term Sheet, the Approved Plan
Documents, (ii) vote for, consent to, support or participate in the formulation of any plan of
reorganization other than the Plan, (iii) directly or indirectly seek, solicit, negotiate, support or
engage in any discussions regarding any plan other than the Plan, or any sale or disposition of the
Company (or all or substantially all of its assets or equity), or any dissolution, winding up,
liquidation, merger, transaction, reorganization or restructuring of the Company, in any case if
such action reasonably could be expected to prevent, delay or impede the successful
implementation of the Transactions as contemplated by the Plan, the Term Sheet and the
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1
Book Page 402
Approved Plan Documents, (iv) object to the Solicitation or support any such objection by a third
party, or (v) take any other action not required by Jaw that is inconsistent with, or that would
materially delay, the confirmation or consummation of the Plan.
(b) Prior to the Termination Date, each Consenting Holder (i) so long as its
vote has been solicited pursuant to sections 1125 and 1126 of the Bankruptcy Code, including
but not limited to its receipt of the Disclosure Statement, agrees to vote (or cause the voting of)
its claims arising from (as the case may be) the Subordinated Notes and the indebtedness under
the Credit Agreement (the "Senior Secured Debt" and, together with the Subordinated Notes, the
"Debt") and all related claims, rights and causes of action arising out of or in connection with or
otherwise relating to such Debt (collectively, the "Claims") to accept the Plan, and will not
change or withdraw (or cause to be changed or withdrawn) such vote, and (ii) consents to the
treatment of the Claims as set forth in the Plan and the Term Sheet. Notwithstanding anything
contained herein to the contrary, other than as set forth in the preceding sentence, no Consenting
Holder shall be required to file any pleadings or take any other action in support of the Plan
which would require it to hire and pay for counsel to represent it.
(c) Each Consenting Holder agrees that, as long as this Agreement has not
terminated in accordance with its terms, it shall not sell, transfer, assign or otherwise dispose of
any of the Debt or Claims, or any option thereon or any right or interest (voting or otherwise)
therein, unless the transferee is a Consenting Holder or agrees in writing to be bound by all of the
terms of this Agreement by executing the Joinder attached hereto as Exhibit D (such transferee,
if any, to also be a "Consenting Holder" hereunder). If a transferee of any of the Debt or Claims
is not a Consenting Holder or does not execute a Joinder in substantially the form attached hereto
as Exhibit D within five days of the completion of such transfer of the Debt or Claims or
otherwise agree to be bound by all of the terms of this Agreement, then such sale, transfer,
assignment or other disposition of the Debt, Claims or related option, right or interest shall be
deemed void ab initio. This Agreement shall in no way be construed to preclude any Consenting
Holder from acquiring additional Debt, Claims or equity interests in the Company; provided,
however, that any such additional holdings shall automatically be deemed to be subject to all of
the terms of this Agreement and each such Consenting Holder agrees that such additional Debt,
Claims or equity interests shall be subject to this Agreement and that it shall vote (or cause to be
voted) any such additional Debt, Claims or equity interests entitled to vote on the Plan (in each
case, to the extent still held by it or on its behalf at the time of such vote) in a manner consistent
with this Section 3. Subject to the terms and conditions of any order of the Bankruptcy Court,
each Consenting Holder agrees to provide to the Agent and to Company's counsel (i) a copy of
any Joinder and (ii) a notice of the acquisition of any additional Debt or Claims, in each case
within five (5) business days of the consummation of the transaction disposing of, or acquiring,
Debt or Claims.
(d) Each Consenting Holder agrees that as long as this Agreement has not
terminated in accordance with its terms, it shall not (i) pursue any right or remedy under the
Credit Agreement, the Subordinated Notes or the Indenture, as applicable, or (ii) initiate, or have
initiated on its behalf, any litigation or proceeding of any kind with respect to the Debt or Claims
other than to enforce this Agreement.
(e) Notwithstanding the foregoing, nothing in this Agreement shall be
construed to prohibit any Party from appearing as a party-in-interest in any matter to be
adjudicated in the Chapter 11 Cases so long as such appearance and the positions advocated in
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connection therewith are consistent with this Agreement and the Transactions and are not for the
purpose of, and could not reasonably be expected to have the effect of, hindering, delaying or
preventing the consummation of the Transactions.
4. Agreements of the Company.
(a) Additional Transaction Matters. The Company hereby agrees (i) to
prepare or cause the preparation of the Plan Related Documents and (ii) that it shall, except in an
emergency where it is not reasonably practicable, provide draft copies of all motions, including
"first day" motions, and applications and other documents the Company intends to file with the
Bankruptcy Court to counsel for the Agent and counsel for the ad hoc noteholder group as soon
as reasonably practicable, but in no event less than one (1) day before such documents are filed
with the Bankruptcy Court, and shall consult in good faith with such counsel regarding the form
and substance of any such proposed filing.
(b) Commitment of the Company. Subject to its fiduciary duties (set forth in
Section 25 below), the Company agrees to use its commercially reasonable efforts to (i) support
and complete the Transactions and all other actions contemplated under the Plan and the
Approved Plan Documents, (ii) take any and all necessary and appropriate actions in furtherance
of the Transactions and the other actions contemplated under the Plan and the Approved Plan
Documents, (iii) obtain any and all required regulatory approvals and material third-party
approvals for the Transactions, and (iv) not take any actions inconsistent with this Agreement,
the Term Sheet, the Approved Plan Documents, or the confirmation and consummation of the
Plan. Subject to its fiduciary duties (set forth in Section 25 below), the Company shall not,
directly or indirectly, seek, solicit, negotiate, support or engage in any discussions relating to, or
enter into any agreements relating to, any restructuring, plan of reorganization, dissolution,
winding up, liquidation, reorganization, merger, transaction, sale, or disposition of the Company
(or all or substantially all of its assets or equity) other than the Plan (as it may be amended,
supplemented or otherwise modified as provided herein) or as otherwise set forth in the Term
Sheet (as it may be amended, supplemented or otherwise modified as provided herein), nor shall
the Company solicit or direct any person or entity, including, without limitation, any member of
the Company's board of directors or any holder of equity in the Company, to undertake any of
the foregoing; provided, however, that the Company may agree to modifications to the Term
Sheet, the Plan and the Plan Related Documents, as provided herein.
(c) Advisors to the Consenting Holders. In accordance with the terms of the
existing engagement letters, the Company shall pay all fees and expenses of (i) Sidley Austin
LLP, counsel to the Agent ("Sidley"), (ii) Conway Del Genio, financial advisors to the Agent
("CDG"), (iii) Akin Gump Strauss Hauer & Feld LLP, counsel to the Consenting Note Holders
and (iv) The Blackstone Group L.P., financial advisors to the Consenting Note Holders, which
are due and owing prior to the date of termination of this Agreement, plus the fees and expenses
of one ( 1) local counsel retained by each of the Consenting Senior Secured Debt Holders and the
Consenting Note Holders, if necessary, which are due and owing prior to the date of termination
of this Agreement.
(d) Interest Payments Under the Credit Agreement. All Loans (as defined in
the Credit Agreement) shall remain Base Rate Loans (as defined in the Credit Agreement) and
shall bear interest at a rate determined in accordance with Section 2.2A of the Credit Agreement
payable (as of the Effective Day) in arrears on the last business day of each month prior to the
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Commencement Date (such interest payments, together with the fees and expenses payable
pursuant to Sections 4(c)(i) and (ii), the "Senior Debt Payments").
(e) Reporting. In addition to complying with all reporting requirements under
the Credit Agreement and the Indenture, the Company shall deliver to Agent (for distribution to
the Lenders) and to counsel for the Consenting Note Holders (for distribution to the Consenting
Note Holders) certain financial reports as follows: (i) on the fourth business day of ( 1) the week
following the Effective Date and (2) every second week thereafter, a rolling thirteen (13) week
cash flow forecast and (ii) within thirty (30) days after the end of each month (commencing with
the month ended July 31, 2009), an unaudited, consolidated balance sheet, income statement and
year-to-date statement of cash flows, each for the fiscal month most recently ended, subject to
year-end audit adjustments and the absence of footnotes.
5. Termination of Agreement. This Agreement shall terminate, unless waived or
extended by the Company, the Agent and the Required Consenting Holders in writing, upon the
earliest to occur of the following (the date and time of such termination, the "Termination
Date"):
(a) at 5:00P.M. prevailing Eastern Time on the date which is ten (10)
calendar days after the Effective Date unless the Company has commenced the Solicitation (the
"Solicitation Commencement Date");
(b) if the Solicitation Commencement Date has occurred, at 5:00P.M.
prevailing Eastern Time on the date that is 31 calendar days after the Solicitation
Commencement Date (the "Solicitation Termination Date") unless the Company has
successfully concluded the Solicitation;
(c) if the Company has successfully concluded the Solicitation before the
Solicitation Termination Date, at 5:00P.M. prevailing Eastern Time on the date that is five (5)
calendar days after the Solicitation Termination Date unless the Company has commenced the
Chapter 11 Cases (the "Commencement Date") and has filed, and is pursuing confirmation of,
the Plan, and has filed a motion for authority to use cash collateral with a proposed cash
collateral order, in form and substance reasonably acceptable to the Required Consenting
Holders;
(d) at 5:00P.M. prevailing Eastern Time on the date which is 40 calendar
days after the Commencement Date if the Plan has not been confirmed by the Bankruptcy Court
on or before such date;
(e) at 5:00P.M. prevailing Eastern Time on the date which is 30 calendar
days following entry by the Bankruptcy Court of an order confirming the Plan if there has not
occurred substantial consummation (as defined in section 1101 of the Bankruptcy Code) of the
Plan on or before such date;
(f) the filing by the Company of any motion or other request for relief seeking
to (i) dismiss any of the Chapter I1 Cases, (ii) convert any of the Chapter 11 Cases to a case
under chapter 7 of the Bankruptcy Code, or (iii) appoint a trustee or an examiner with expanded
powers pursuant to section II 04 of the Bankruptcy Code in any of the Chapter II Cases;
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(g) the entry of an order by the Bankruptcy Court (i) dismissing any of the
Chapter 11 Cases, (ii) converting any of the Chapter 11 Cases to a case under chapter 7 of the
Bankruptcy Code, (iii) appointing a trustee or an examiner with expanded powers pursuant to
section 1104 of the Bankruptcy Code in any of the Chapter 11 Cases, or (iv) making a finding of
fraud, dishonesty or misconduct by any officer or director of the Company, regarding or relating
to the Company;
(h) the Company files, proposes or otherwise supports any plan of
reorganization other than the Plan or if the Company, in the exercise of its fiduciary duties (set
forth in Section 25 below), takes any other action hereunder that is otherwise prohibited or
refrains from taking any action that is otherwise required;
(i) the material breach by the Company of any of the undertakings,
representations, warranties or covenants of the Company set forth in this Agreement, including
the Company's obligations under Sections 4(c) and (d), which material breach remains uncured
for a period of five (5) business days after the receipt of written notice of such breach from either
the Required Consenting Senior Secured Debt Holders or the Required Consenting Note
Holders;
U) the breach by any of the Consenting Holders of any of the undertakings,
representations, warranties or covenants of such Consenting Holder(s) set forth in this
the Transactions, which breach remains uncured for a period of ten ( 1 0) business days after the
receipt by the Consenting Holder(s) of notice of such breach from the Company;
(k) the withdrawal, amendment or modification by the Company of, or the
filing by any person of a pleading seeking to amend or modify, the Plan, which withdrawal,
amendment, modification or filing is materially inconsistent with the Plan (with such
amendments and modifications as have been effected in accordance with the terms hereof) or is
materially adverse to the Consenting Holders, in each case in a manner not reasonably acceptable
to the Required Consenting Holders, or if the Company files any motion or pleading with the
Bankruptcy Court that is not consistent in any material respect with this Agreement or the Plan
(in each case with such amendments and modifications as have been effected in accordance with
the terms hereof) and such motion or pleading has not been withdrawn prior to the earlier of
(i) five (5) business days after the Company receives written notice from the Required
Consenting Holders that such motion or pleading is inconsistent with this Agreement or the Plan,
as applicable, and (ii) the entry of an order of the Bankruptcy Court approving such motion;
provided, that this Section 5(k) shall not apply with respect to any motion or pleading that is
inconsistent with this Agreement if such motion or pleading is consistent with the Plan;
(l) the Company amends or modifies any Approved Plan Document after it is
filed with the Bankruptcy Court, which amendment or modification is materially inconsistent
with the Plan or the Term Sheet (in each case with such amendments and modifications as have
been as have been effected in accordance with the terms hereof) or not reasonably acceptable to
the Agent and the Required Consenting Holders;
(m) the Bankruptcy Court grants relief that is inconsistent with this Agreement
or the Plan in any material respect (in each case with such amendments and modifications as
have been as have been effected in accordance with the terms hereof); provided that this Section
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5(m) shall not apply with respect to any relief that is inconsistent with this Agreement if such
relief is consistent with the Plan; or
(o) the issuance by any governmental authority, including the Bankruptcy
Court or any other regulatory authority or court of competent jurisdiction, of any ruling or order
enjoining the consummation of a material portion of the Transactions.
For the avoidance of doubt, the Parties hereby waive any requirement under section 362 of the
Bankruptcy Code to lift the automatic stay thereunder for purposes of providing notice under this
Agreement (and agree not to object to any non-breaching Party seeking, if necessary, to lift such
automatic stay in connection with the giving any such notice).
6. Good Faith Cooperation; Further Assurances; Transaction Documents. The
Parties shall cooperate with each other in good faith and shall coordinate their activities (to the
extent practicable) in respect of all matters concerning the implementation and consummation of
the Transactions. Furthermore, each of the Parties shall take such action (including executing
and delivering any other agreements and making and filing any required regulatory filings) as
may be reasonably necessary to carry out the purposes and intent of this Agreement. Each Party
hereby covenants and agrees (a) to negotiate in good faith the Plan Related Documents, each of
which shall (i) contain the same economic terms as, and other terms consistent in all material
respects with, the terms set forth in the Plan and the Term Sheet (as amended, supplemented or
otherwise modified as provided herein), (ii) be in form and substance reasonably acceptable in
all respects to the Parties signatory thereto or beneficiaries thereof and counsel for the Agent and
counsel for the ad hoc noteholder group, and (iii) be consistent with this Agreement in all
material respects, and (b) to execute the Approved Plan Documents (to the extent such Party is a
party thereto).
7. Representations and Warranties. Each Party hereby represents and warrants to the
other Parties that the following statements are true, correct and complete as of the date hereof:
(a) Power and Authority; Authorization. It has all requisite corporate,
partnership, limited liability company or similar authority to enter into this Agreement and carry
out the transactions contemplated hereby and perform its obligations contemplated hereunder;
and the execution and delivery of this Agreement and the performance of such Party's
obligations hereunder have been duly authorized by all necessary corporate, partnership, limited
liability company or other similar action on its part.
(b) No Conflicts. The execution, delivery and performance by such Party of
this Agreement does not and shall not (i) violate (A) any provision of Jaw, rule or regulation
applicable to it or any of its subsidiaries or (B) its charter or bylaws (or other similar governing
documents) or those of any of its subsidiaries or (ii) conflict with, result in a breach of or
(c) Governmental Consents. The execution, delivery and performance by
such Party of this Agreement does not and shall not require any registration or filing with,
consent or approval of, or notice to, or other action to, with or by, any Federal, state or
governmental authority or regulatory body other than the Bankruptcy Court and pursuant to the
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Securities Act (and assuming, as to the Company, the accuracy of the representations and
warranties herein of each Consenting Holder).
(d) Binding Obligation. This Agreement is the legally valid and binding
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or limiting creditors' rights generally or by equitable principles relating
to enforceability or a ruling of the Bankruptcy Court.
(e) Ownership. If such Party is a Consenting Holder, such Consenting Holder
(i) either (A) is the sole legal and beneficial owner of the Debt set forth below its name on the
signature page hereof and all related Claims, in each case free and clear of all claims, liens and
encumbrances, or (B) has investment or voting discretion with respect to such Debt and Claims
and has the power and authority to bind the beneficial owner(s) of such Debt and Claims to the
terms of this Agreement and (ii) such Consenting Holder has full power and authority to vote on
and consent to such matters concerning such Debt and Claims and to exchange, assign and
transfer such Debt and Claims.
(f) Securities Laws Matters. If such Party is a Consenting Note Holder:
(i) it is acquiring the securities to be acquired by it pursuant to the
Transaction (the "New Securities") for investment purposes, solely for its own account and/or
the account of a holder for which it serves as the investment adviser or manager and not with a
view to, or for resale in connection with, the distribution thereof and such Consenting Holder
will not resell, transfer, assign or distribute the New Securities acquired by it, except in
compliance with this Agreement, until this Agreement is validly terminated, and the registration
requirements of the Securities Act, and applicable state securities laws or pursuant to an
available exemption therefrom;
(ii) it, or the holder for whom it acts as investment adviser or manager, is an
"Accredited Investor" (as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act);
(iii) the financial situation of such Consenting Holder is such that it can afford
to bear the economic risk of holding the New Securities;
(iv) the knowledge and experience of such Consenting Holder in financial and
business matters is such that it, together with its advisors, is capable of evaluating the merits and
risks of the investment in the securities;
(v) such Consenting Holder acknowledges that no representations, express or
implied, are being made with respect to the Company, the New Securities being acquired
hereunder, or otherwise, other than those expressly set forth herein or in the Plan and the
(vi) such Consenting Holder understands that the New Securities are a
speculative investment that involve a high degree of risk of loss of its investment therein, that
there may be substantial restrictions on the transferability of the New Securities and,
accordingly, it may not be possible to liquidate such Consenting Holder's investment;
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(vii) in making its decision to invest in the New Securities hereunder, such
Consenting Holder has relied upon independent investigations made by such Consenting Holder
and, to the extent believed by such Consenting Holder to be appropriate, such Consenting
Holder's representatives, including such Consenting Holder's own professional, tax and other
advisors;
(viii) it has been advised by the Company that (A) the offer and sale of the New
Securities has not been registered under the Securities Act, (B) the offering and sale of the New
Securities is intended to be exempt from registration under the Securities Act pursuant to Section
4(2) of the Securities Act and Regulation D thereunder and, if issued pursuant to the Plan,
section 1145 of the Bankruptcy Code, and (C) there is no established market for the New
Securities and such a public market for the New Securities may not be established in the
foreseeable future;
(ix) such Consenting Holder and its representatives have been given the
opportunity to examine all documents and to ask questions of, and to receive answers from, the
Company, and its representatives concerning the terms and conditions of the investment in the
New Securities; and
(x) it is familiar with Rule 144 promulgated by the Securities and Exchange
Commission under the Securities Act, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
8. Amendments and Waivers. None of this Agreement, the Plan or the Term Sheet
may be modified, amended or supplemented except as set forth in Sections 1 (b) and I (c);
provided, however, that any modification of, or amendment or supplement to, this Agreement,
the Plan or the Term Sheet that materially and adversely affects the Consenting Holders taken as
a whole shall require the written consent of all of the Consenting Holders (in addition to the
Company and the Agent).
9. Effectiveness. Subject to the condition precedent set forth below, this Agreement
shall become effective and binding on each Party upon the execution and receipt by the
Company of signature pages signed by the Company, the Agent and the Consenting Holders (the
"Effective Date"). Delivery by telecopier or electronic mail of an executed counterpart of a
signature page to this Agreement shall be effective as delivery of an original executed
counterpart hereof. Notwithstanding the foregoing, this Agreement shall become binding on the
Agent and the Consenting Senior Secured Debt Holders only upon the Company's payment to
Agent, for the account and benefit of the Lenders, of an amount equal to (a) all interest on the
Loans (as defined in the Credit Agreement) that accrued at the non-default rate of interest during
the period beginning June I, 2009 and ending August 31,2009, plus (b) all fees and expenses of
Sidley and CDG due and owing as of the anticipated Effective Date (which fees and expenses
shall be invoiced at least two (2) business days prior to the anticipated Effective Date) pursuant
to the terms of their respective engagement letters.
10. GOVERNING LAW; JURISDICTION; JURY TRIAL WAIVER. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401
OF THE GENERAL OBLIGATIONS LAW), WITHOUT REGARD TO ANY CONFLICTS OF
LAW PROVISIONS WHICH WOULD REQUIRE THE APPLICATION OF THE LAW OF
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ANY OTHER JURISDICTION. BY ITS EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION, SUIT OR PROCEEDING
AGAINST IT WITH RESPECT TO ANY MATTER UNDER OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT RENDERED IN ANY SUCH ACTION, SUIT OR PROCEEDING,
MAY BE BROUGHT IN ANY FEDERAL OR STATE COURT IN THE BOROUGH OF
MANHATTAN, THE CITY OF NEW YORK, AND BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH OF THE PARTIES HEREBY IRREVOCABLY ACCEPTS AND
SUBMITS ITSELF TO THE EXCLUSIVE JURISDICTION OF EACH SUCH COURT,
GENERALLY AND UNCONDITIONALLY, WITH RESPECT TO ANY SUCH ACTION,
SUIT OR PROCEEDING. NOTWITHSTANDING THE FOREGOING CONSENT TO
JURISDICTION, UPON THE COMMENCEMENT OF THE CHAPTER 11 CASES, EACH OF
THE PARTIES AGREES THAT THE BANKRUPTCY COURT SHALL HAVE EXCLUSIVE
JURISDICTION WITH RESPECT TO ANY MATTER UNDER OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY. THE PARTIES WAIVE ALL RIGHTS TO TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE
BETWEEN THE PARTIES, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE.
11. Remedies. All remedies which are available at law or in equity, including specific
performance and injunctive or other equitable relief, to any Party for a breach of this Agreement
by another Party shall be available to the non-breaching Party. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative, and the exercise of any right, power or remedy thereof by any
Party shall not preclude the simultaneous or later exercise of any other such right, power or
remedy by such Party or any other Party.
12. Survival. Notwithstanding (i) any sale of the Debt or Claims in accordance with
Section 3(c) or (ii) the termination of this Agreement in accordance with its terms, the
agreements and obligations of the Parties in Sections 2.1, 22 and 25 shall survive such sale and/or
termination and shall continue in full force and effect for the benefit of the Consenting Holders
in accordance with the terms hereof.
13. Headings. The headings of the Sections, paragraphs and subsections of this
Agreement are inserted for convenience only and shall not affect the interpretation hereof.
14. Successors and Assigns; Severability; Several Obligations. This Agreement is
intended to bind and inure to the benefit of the Parties and their respective permitted successors,
assigns, heirs, executors, estates, administrators and representatives. The invalidity or
unenforceability at any time of any provision hereof in any jurisdiction shall not affect or
diminish in any way the continuing validity and enforceability of the remaining provisions
hereof or the continuing validity and enforceability of such provision in any other jurisdiction.
The agreements, representations and obligations of the Consenting Holders under this Agreement
are, in all respects, several and not joint.
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15. No Third Party Beneficiaries. Unless otherwise expressly stated herein, this
Agreement shall be solely for the benefit of the Parties and no other person or entity shall be a
third party beneficiary hereof.
16. Entire Agreement. This Agreement constitutes the entire agreement of the Parties
with respect to the subject matter hereof and supersedes all prior agreements (oral and written)
and all other prior negotiations but shall not supersede the Plan; provided, however, that the
Parties acknowledge and agree that any confidentiality agreements heretofore executed between
the Company and any Consenting Holder(s) shall continue in full force and effect.
17. Counterparts. The Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall constitute but one
and the same instrument.
18. Consideration. Other than as provided in the Term Sheet, it is hereby
acknowledged by the Parties that, other than the agreements, covenants, representations and
warranties of the Parties, as more particularly set forth herein, no payment or additional
consideration shall be due or paid to any of the Consenting Holders for their agreement to vote in
accordance with, and otherwise comply with the terms and conditions of, this Agreement.
19. Notices. All demands, notices, requests, consents and other communications
under this Agreement shall be in writing, sent contemporaneously to all of the Parties, and
deemed given when delivered, if delivered by hand, or upon confirmation of transmission, if
delivered by email or facsimile, during standard business hours (from 8:00A.M. to 6:00P.M. at
the place of receipt) at the addresses and facsimile numbers set forth on Schedule I hereto.
20. Rule of Interpretation. Notwithstanding anything contained herein to the
contrary, it is the intent of the Parties that all references to votes or voting in this Agreement be
interpreted to include (a) votes or voting on a plan of reorganization under the Bankruptcy Code
and (b) all means of expressing agreement with, or rejection of, as the case may be, a
restructuring or reorganization transaction that is not implemented under the Bankruptcy Code.
21. Reservation of Rights. Except as expressly provided in this Agreement, nothing
herein is intended to, or does, in any manner waive, limit, impair or restrict the ability of each
Consenting Holder to protect and preserve its rights, remedies and interests, including its Claims
against the Company. Nothing herein shall be deemed an admission of any kind. If the
transactions contemplated herein are not consummated, or this Agreement is terminated for any
reason, the Parties fully reserve any and all of their rights. Pursuant to Rule 408 of the Federal
Rule of Evidence, any applicable state rules of evidence and any other applicable law, foreign or
domestic, this Agreement and all negotiations relating thereto shall not be admissible into
22. Publicity. The Company will submit to counsel for the Agent and counsel for the
ad hoc noteholder group all press releases, public filings, public announcements or other
communications with any news media relating to this Agreement or the transactions
contemplated hereby and any amendments thereof. The Company shall not (a) use the name of
any Consenting Holder in any press release without such Consenting Holder's prior written
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consent or (b) disclose to any person, other than legal, accounting and financial advisors to the
Company, the principal amount or percentage of Debt held by any Consenting Holder or any of
its respective subsidiaries; provided, however, that the Company shall be permitted to disclose at
any time the aggregate principal amount of, and aggregate percentage of, any class of Debt held
by the Consenting Holders as a group. Notwithstanding the foregoing, the Consenting Holders
hereby consent to the disclosure by the Company in the Plan, the Disclosure Statement, the
Approved Plan Documents and any required filings by the Company with the Bankruptcy Court
or the Securities and Exchange Commission, or as otherwise required by law or regulation, of the
execution, terms and contents of this Agreement; provided that the Company shall not file a copy
of any stockholders agreement acceptable to Apollo Management and Eaton Vance Management
that is entered into by Apollo and Eaton Vance in connection with the Transactions (the
"Stockholders) Agreement"); provided, however, that the Disclosure Statement will contain a
paragraph regarding the Stockholders' Agreement (the form of which paragraph has been agreed
upon by the Company, Apollo, and Eaton Vance) and the Company may provide a copy of the
Stockholders' Agreement (i) to the extent required by applicable law or regulation or by any
subpoena or similar legal process, (ii) to its directors, officers, employees and agents, including
accountants and legal counsel and other advisors in connection with the Transactions, (iii) to the
extent the Stockholders' Agreement becomes publicly available other than as a result of a breach
of this Section 22, or (iv) with the written consent of Eaton Vance and Apollo.
23. Further Assurances. Subject to the other terms of this Agreement, the Parties
effectuate the Plan and consummate the Transactions.
24. Representation by Counsel. Each Party acknowledges that it has had the
opportunity to be represented by counsel in connection with this Agreement and the transactions
provide any Party with a defense to the enforcement of the terms of this Agreement against such
Party based upon lack of legal counsel shall have no application and is expressly waived.
25. Fiduciary Duties. Notwithstanding anything to the contrary herein, nothing in this
Agreement shall require (a) the Company or any directors or officers of the Company, in such
person's capacity as a director or officer of the Company, to take any action, or to refrain from
taking any action, to the extent required to comply with its or their fiduciary obligations under
applicable law, (b) any Consenting Holder or representative of a Consenting Holder that is also a
director or officer of the Company to take any action, or to refrain from taking any action, in
such person's capacity as a director or officer of the Company, to the extent required to comply
with their fiduciary obligations under applicable law, or (c) any Consenting Holder or
representative of a Consenting Holder that is a member of a statutory committee established in
the Chapter 11 Cases to take any action, or to refrain from taking any action, in such person's
capacity as a statutory committee member, to the extent required to comply with such person's
fiduciary obligations applicable under the Bankruptcy Code.
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26. Conflicts Between the Plan, the Term Sheet, the Approved Plan Documents and
this Agreement. In the event of any conflict among the terms and provisions in the Plan and the
terms and provisions in the Term Sheet and this Agreement, as applicable, the terms and
provisions of the Plan shall control. In the event of any conflict between the terms and
provisions in the Plan and the terms and provisions in the Approved Plan Documents, the terms
and provisions of the relevant Approved Plan Document, as applicable, shall control and govern.
Nothing in this Section 26 shall affect, in any way, the requirements set forth herein for the
amendment of the Plan, the Term Sheet, any Approved Plan Documents or this Agreement.
27. Commitments of Revolving Lenders. Those Consenting Senior Secured Debt
Holders that hold Senior Lender Agreement Revolver Claims (as defined in the Plan) hereby
commit to make the Revolving Loan Commitments as Revolving Lenders under the Amended
and Restated Credit Agreement on the terms, and subject to the conditions, set forth in the Term
Sheet and the Plan; provided, however, that if either the Term Sheet or the Plan is amended (in
accordance with the terms hereof) and such amendment adversely affects such persons holding
Senior Lender Agreement Revolver Claims, the commitment of each such person under this
Section 27 shall be subject to such person's consent to the applicable amendment.
* * * * *
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
14
Book Page 413
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the date first written above.
PANOLAM HOLDINGS CO.
PANOLAM HOLDINGS II CO.
PANOLAM INDUSTRIES INTERNATIONAL, INC.
PANOLAM INDUSTRIES, INC.
PIONEER PLASTICS CORPORATION
NEVAMAR HOLDING CORP.
NEV AMAR HOLDCO, LLC
NEVAMAR COMPANY, LLC
By:/s/ Robert J. Muller, Jr.
Robert J. Muller, Jr.
President and Chief Executive Officer
[SIGNATURE PAGE TO RESTRUCTURING SUPPORT AGREEMENT]
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In re Penton Business Media Holdings, Inc., Case No. 10-10689 (Bankr. S.D.N.Y. 2010).
This Restructuring Support Agreement (this "Agreement'), dated as of January
20, 2010, is entered into by and among Penton Business Media Holdings, Inc. (f/k/a Prism
Business Media Holdings Inc.) ("Holdings"), Penton Media, Inc. ("Penton"), Penton Business
Media, Inc. (f/k/a Prism Business Media Inc.) ("Penton Business Media"), certain other
subsidiaries of Holdings identified on the signature pages hereto (together with Holdings, Penton
and Penton Business Media, the "Company"), General Electric Capital Corporation, as
administrative agent under the First Lien Credit Agreement (as defined below) (the
"Administrative Agenf'), the undersigned lenders party to the First Lien Credit Agreement,
solely in their capacity as such lender to the extent and as set forth on the signature page hereto
(the "Consenting First Lien Debt Holders"), Wells Fargo Bank, National Association, as
administrative agent under the Second Lien Credit Agreement (as defined below) (the "Second
Lien Agenf'), the undersigned lenders party to the Second Lien Credit Agreement, solely in their
capacity as such lender to the extent and as set forth on the signature page hereto (the
"Consenting Second Lien Debt Holders" and, collectively with the Consenting First Lien Debt
Holders, the "Consenting Holders" and each, a "Consenting Holder") and the persons identified
on Schedule I attached hereto (the "Equity Investors" and each, an "Equity Investor"). The
Company, the Administrative Agent, the Second Lien Agent, each Consenting Holder, each
Equity Investor and each person that becomes a party hereto in accordance with the terms hereof
are collectively referred to herein as the "Parties" and individually as a "Party." Capitalized
terms not defined in this introduction or in the recitals to this Agreement shall have the meanings
assigned thereto in Section 1 hereof.
RECITALS
WHEREAS, as of the Effective Date, the Company is a party to (i) that certain
First Lien Credit Agreement, dated as of February 1, 2007, as amended by that certain Consent
and Amendment Agreement, dated as of November 24, 2009, that certain Amendment No.2,
dated as of December 23, 2009 and that certain Amendment No. 3, dated as of January [_],
2010, by and among Holdings, Penton, Penton Business Media, certain other subsidiaries of
Holdings, the Administrative Agent, and the lenders party thereto (the "First Lien Lenders") (as
further amended, restated, amended and restated, supplemented or otherwise modified from time
to time, the "First Lien Credit Agreement') and (ii) that certain Second Lien Credit Agreement,
dated as of February 1, 2007, by and among Holdings, Penton, Penton Business Media, certain
other subsidiaries of Holdings, the Second Lien Agent, and the lenders party thereto (the
"Second Lien Lenders") (as amended, restated, amended and restated, supplemented or
otherwise modified from time to time, the "Second Lien Credit Agreement");
WHEREAS, as of the Effective Date, the Consenting First Lien Debt Holders
hold at least 66 2/3%
1
of the aggregate principal amount of the First Lien Debt and the
Consenting Second Lien Debt Holders hold at least 66 2/3% of the aggregate principal amount of
the Second Lien Debt;
1
Must include the New Revolving Lenders (as defined in Section 4(d}(iil).
US_ ACTIVE :143230221 \2514 7660.3449
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WHEREAS, the Company, the Consenting Holders and the Equity Investors
wish to reorganize and recapitalize the Company (the restructuring and recapitalization
transactions, collectively, the "Transactions") pursuant to the Plan;
solicitation of votes for the Plan accompanied with a copy ofthe Disclosure Statement (the
"Solicitation") pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and sections 1125, 1126 and 1145 of the Bankruptcy Code (as defined below);
WHEREAS, upon the successful conclusion ofthe Solicitation, the Company
intends to commence voluntary reorganization cases (the "Chapter 11 Cases") under chapter 11
oftitle 11 ofthe United States Code, 11 U.S.C. 101-1532 (the "Bankruptcy Code"), in the
United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court") to effect the Transactions pursuant to the Plan;
WHEREAS, the Company intends to file the Plan and related disclosure
statement (the "Disclosure Statement") and other related documents and motions as set forth
herein on the Commencement Date;
WHEREAS, the Company intends to effectuate a rights offering (the "Rights
Offering") with the Second Lien Lenders pursuant to the terms of the term sheet attached hereto
as Exhibit A (as amended, supplemented or otherwise modified as provided in this Agreement,
the "Rights Offering Term Sheet");
WHEREAS, the Equity Investors have agreed to provide a backstop to the Rights
Offering in a cash amount of between $37.8 and $48.1 million pursuant to the terms and
conditions set forth on the backstop commitment letter attached hereto as Exhibit 8 (the "Equity
Commitment Letter") and the Rights Offering Term Sheet; and
WHEREAS, the Company intends to use its commercially reasonable efforts to
obtain Bankruptcy Court approval of the Plan in accordance with the Bankruptcy Code and on
terms consistent with this Agreement and each Consenting Holder and each Equity Investor
intends to use its commercially reasonable efforts to cooperate in that regard.
NOW, THEREFORE, in consideration ofthe foregoing, the covenants and
conditions contained herein and other good and valuable consideration, the receipt and
sufficiency ofwhich are hereby acknowledged, the Parties agree as follows:
AGREEMENT
1. Definitions. As used in this Agreement, the following terms shall have the
meanings specified below.
"Acceptable Cash Collateral Order" shall have the meaning set forth in Section
Q.{1 hereof.
"Amended and Restated Credit Agreement" shall mean that certain Amended and
Restated Credit Agreement, in the form attached hereto as Exhibit C, as the same may be
amended, supplemented or otherwise modified as provided in this Agreement.
US _ACTIVE:\43230221125147660.3449 2
"Approved Plan Documents" shall have the meaning set forth in Section 2(a)
hereof
"Approving First Lien Debt Holders" shall mean the Consenting First Lien Debt
Holders comprising holders owning more than 66 2/3% in aggregate principal amount of the
First Lien Debt.
"CDG" shall have the meaning set forth in Section 5(c) hereof.
"Claims" shall have the meaning set forth in Section 4(b) hereof.
''Commencement Date" shall have the meaning set forth in Section 6(c) hereof
"Debt" shall have the meaning set forth in Section 4(b) hereof.
"Effective Date" shall have the meaning set forth in Section 10 hereof.
"First Lien Debt" shall have the meaning set forth in Section 4(b) hereof.
"First Lien Required Lenders" shall mean the Consenting First Lien Debt
Holders consisting of "Required Lenders'' (under and as defined in the First Lien Credit
Agreement).
"Joinder" shall have the meaning set forth in Section 4(e) hereof.
"Joining Party" shall have the meaning set forth in Section 4(e) hereof
"MidOcean" shall mean MidOcean Partners III, L.P. or its affiliates.
"New Revolving Lender" shall have the meaning set forth in Section 4(d)(ii)
hereof
"Plan" shall mean the Joint Prepackaged Plan of Reorganization for Penton
Media Holdings, Inc. and its Subsidiary Debtors, in the form as attached hereto as Exhibit D, as
the same may be amended, supplemented or otherwise modified as provided in this Agreement.
"Plan Related Documents" shall mean the Plan and all documents required to
effectuate the Plan, including, but not limited to, (a) the Disclosure Statement, (b) the materials
related to the Solicitation, (c) the proposed confirmation order and (d) any other documents or
agreements filed with the Bankruptcy Court by the Company or at the Company's direction that
are necessary to implement the Plan, including: ( 1) any appendices, amendments, modifications,
supplements, exhibits and schedules relating to the Plan or the Disclosure Statement; (2) the
Amended and Restated Credit Agreement and such other definitive documentation (including,
without limitation, security documents) as is necessary to consummate the Transactions; (3) the
amended certificate of incorporation and bylaws for Holdings as reorganized; and (4) any
registration rights agreement, in each case as amended, supplemented or otherwise modified.
"Required Consenting Holders" shall mean the First Lien Required Lenders and
the Second Lien Required Lenders.
US_ACTIVE 143230221125147660.3449 3
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"Second Lien Debt" shall have the meaning set forth in Section 4(b) hereof.
"Second Lien Required Lenders" shall mean the Consenting Second Lien Debt
Holders consisting of''Required Lenders" (under and as defined in the Second Lien Credit
Agreement); provided that such Second Lien Required Lenders includes the principal amount of
the Second Lien Debt held by MidOcean and Wasserstein (unless MidOcean and Wasserstein
transfer their Second Lien Debt or related Claims to third parties in accordance with this
Agreement).
"Termination Date" shall have the meaning set forth in Section 6 hereof.
"Transfer" shall have the meaning set forth in Section 4(e) hereof.
"Wasserstein" shall mean Wasserstein Partners, L.P. or its affiliates.
"Weif' shall have the meaning set forth in Section 5(c) hereof.
2. Plan.
(a) The Consenting Holders and the Equity Investors acknowledge and agree
that the terms and conditions set forth in the Plan are acceptable in all respects to the Consenting
Holders, the Equity Investors and their respective counsel. The Plan Related Documents shall
contain the terms and conditions set forth in the Plan, the Amended and Restated Credit
Agreement and the Rights Offering Term Sheet, be in form and substance reasonably acceptable
in all respects to the Company, the Required Consenting Holders, the Administrative Agent, the
Second Lien Agent, the Equity Investors and, to the extent set forth in Section 4(d)(ii) hereof, the
New Revolving Lenders, and be consistent with this Agreement in all material respects (such
Plan Related Documents, the "Approved Plan Documents").
(b) The Plan, the other Approved Plan Documents (other than the Amended
and Restated Credit Agreement and the Loan Documents (as defined in the Amended and
Restated Credit Agreement)) and the Rights Offering Term Sheet may each be amended only
upon written approval of(i) the Company, (ii) the Approving First Lien Debt Holders, (iii) the
Second Lien Required Lenders, (iv) the Administrative Agent, (v) the Second Lien Agent, (vi)
the Equity Investors and (vii) to the extent set forth in Section 4(d)(ii) hereof, the New Revolving
Lenders.
(c) The Amended and Restated Credit Agreement and the Loan Documents
(as defined in the Amended and Restated Credit Agreement) may each be amended only upon
written approval of(i) the Company, (ii) the Approving First Lien Debt Holders, (iii) the
Administrative Agent, (iv) the Equity Investors and (v) to the extent set forth in Section 4(d)(ii)
hereof, the New Revolving Lenders.
(d) This Agreement may be amended (so long as any such amendment is
consistent with each ofthe Plan, the Amended and Restated Credit Agreement, the other
Approved Plan Documents and the Rights Offering Term Sheet) only upon written approval of
(i) the Company, (ii) the Administrative Agent, (iii) the Second Lien Agent, (iv) the Required
Consenting Holders and (v) the Equity Investors.
US_ACTIVE 143230221\25147660 3449 4
3. Bankruptcy Process. The Company hereby agrees to use commercially
reasonable efforts to obtain confirmation of the Plan as soon as reasonably practicable in
accordance with the Bankruptcy Code, and on terms consistent with this Agreement, the Plan
and the other Approved Plan Documents, and each Consenting Holder and each Equity Investor
shall use its commercially reasonable efforts to cooperate in that regard; provided, however, that
the Company, the Administrative Agent, the First Lien Required Lenders, the Second Lien
Required Lenders and the Equity Investors may from time to time mutually agree in writing to
further extend any time period or deadline set forth herein.
4. Support of the Reorganization; Additional Covenants.
(a) Prior to the Termination Date, no Consenting Holder, the Administrative
Agent, the Second Lien Agent or any Equity Investor will (i) object to confirmation ofthe Plan
or object to, or otherwise commence any proceeding to oppose, alter, delay or impede the Plan,
the Amended and Restated Credit Agreement, the other Approved Plan Documents or the Rights
Offering Term Sheet, (ii) vote for, consent to, support or participate in the formulation of any
plan of reorganization other than the Plan, (iii) directly or indirectly seek, solicit, negotiate,
support or engage in any discussions regarding any chapter 11 plan other than the Plan, or any
sale or disposition of the Company (or all or substantially all of its assets or equity), or any
dissolution, winding up, liquidation, merger, transaction, reorganization or restructuring of the
Company, in any case if such action reasonably could be expected to prevent, delay or impede
the successful implementation of the Transactions as contemplated by the Plan, the Amended
and Restated Credit Agreement, the other Approved Plan Documents and the Rights Offering
Term Sheet, (iv) object to the Solicitation or support any such objection by a third party, or
(v) take any other action not required by law that is inconsistent with, or that would materially
delay, the confirmation or consummation of the Plan.
(b) Unless the Termination Date has occurred, each Consenting Holder (i) so
long as its vote has been solicited in a manner sufficient to comply with the requirements of
sections 1125 and 1126 of the Bankruptcy Code, including but not limited to its receipt ofthe
Disclosure Statement, agrees to (A) vote (or cause the voting of) its claims arising from (as the
case may be) the indebtedness under the First Lien Credit Agreement (the "First Lien Debt")
and the indebtedness under the Second Lien Credit Agreement (the "Second Lien Debt" and,
together with the First Lien Debt, the "Debt") and all related claims, rights and causes of action
arising out of or in connection with or otherwise relating to such Debt (collectively, the
"Claims") to accept the Plan, by delivering its duly executed and completed ballot accepting
such Plan on a timely basis following the commencement of the Solicitation, and agrees that the
solicitation period may be as short as five (5) business days; provided, however, that such vote
shall be immediately revoked and deemed void ab initio upon termination of this Agreement and
written notice to the Company, pursuant to the terms hereof; and (B) not change or withdraw (or
cause to be changed or withdrawn) such vote, and (ii) consents to the treatment of the Claims as
set forth in the Plan. Notwithstanding anything contained herein to the contrary, other than as set
forth in the preceding sentence, no Consenting Holder shall be required to file any pleadings or
take any other action in support of the Plan that would require it to hire and pay for counsel to
represent it unless the Company agrees (and is authorized and directed by the Bankruptcy Court)
to pay the fees and expenses of such counsel.
5
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(c) Each Equity Investor hereby commits to make an equity investment in
Holdings on the terms and subject to the conditions set forth in the Equity Commitment Letter
and the Rights Offering Term Sheet.
(d) Unless the Termination Date has occurred:
(i) each Consenting First Lien Debt Holder agrees that it shall vote or
otherwise take reasonable actions to amend the First Lien Credit Agreement, effective upon the
effective date of the Plan, in the manner contemplated by the Amended and Restated Credit
Agreement and the other Approved Plan Documents; and
(ii) each Consenting First Lien Debt Holder, whose name is set forth on
Schedule II hereto, by execution of this Agreement, hereby commits to make the "Revolving
Facility Loans" under the Amended and Restated Credit Agreement in an amount equal to the
Revolving Facility Commitment of such Consenting First Lien Debt Holder set forth on
Schedule II (such person, a "New Revolving Lender"), in each case, on the terms, and subject to
the conditions, set forth in the Amended and Restated Credit Agreement; provided, however, that
if the Amended and Restated Credit Agreement or the Plan is amended and such amendment
adversely affects any New Revolving Lender, the commitment of each such New Revolving
Lender under this Section 4(d)(ii) shall be subject to such New Revolving Lender's consent to
the applicable amendment.
(e) Prior to the Termination Date, each Consenting Holder agrees that it shall
not sell, transfer, assign or otherwise dispose (each such sale, transfer, assignment or disposition,
a "Transfer") of any ofthe Debt or Claims, or any option therein or any right or interest (voting
or otherwise) therein, unless the transferee (the "Joining Party") is a Consenting Holder or
agrees in writing to be bound by all ofthe terms ofthis Agreement by executing a joinder (the
"Joinder") in the form attached hereto as Exhibit E, without modification (such Joining Party, if
any, to also be deemed to be a "Consenting First Lien Debt Holder" or "Consenting Second Lien
Debt Holder," as the case may be, a "Consenting Holder" and a "Party" hereunder), and
otherwise complies with the assignment provisions set forth in Section 1 0.04, respectively, of the
First Lien Credit Agreement and the Second Lien Credit Agreement, as applicable. If a
transferee of any of the Debt or Claims is not a Consenting Holder or does not execute a Joinder
and comply with such assignment provisions upon the completion of such Transfer of the Debt
or Claims, then such Transfer of the Debt, Claims or related option, right or interest shall be
deemed void ab initio. This Agreement shall in no way be construed to preclude any Consenting
Holder from acquiring additional Debt, Claims or equity interests in the Company; provided,
however, that any such additional holdings shall automatically be deemed to be subject to all of
the terms of this Agreement, without modification, and each such Consenting Holder agrees that
such additional Debt, Claims or equity interests shall be subject to this Agreement and that it
shall vote (or cause to be voted) any such additional Debt, Claims or equity interests entitled to
vote on the Plan (in each case, to the extent still held by it or on its behalf at the time of such
vote) in a manner consistent with this Section 4. Subject to the terms and conditions of any order
of the Bankruptcy Court, unless the Termination Date has occurred, each Consenting Holder
agrees to provide to the Administrative Agent, the Second Lien Agent and to Company's counsel
(i) a copy of any Joinder and (ii) a notice of the Transfer or acquisition of any additional Debt,
Claim or equity interest in the Company, in each case within three (3) business days of the
consummation of such Transfer or acquisition. With respect to the aggregate principal amount
US_ACTIVE 143230221125147660 3449 6
of any Debt or Claims held by the Joining Party upon consummation of a Transfer of such Debt
or Claims, the Joining Party, by executing and delivering the Joinder, makes the representations
and warranties ofthe Consenting Holders set forth in Section 8 ofthis Agreement to each of the
other Parties to this Agreement as of the date such Joinder is effective.
(f) Prior to the Termination Date, each Consenting Holder agrees that it shall
not (i) pursue any right or remedy under the First Lien Credit Agreement or the Second Lien
Credit Agreement, as applicable, or (ii) initiate, or have initiated on its behalf, any litigation or
proceeding of any kind with respect to the Debt, Claims or equity interests in the Company, other
than to enforce this Agreement.
(g) Notwithstanding the foregoing, nothing in this Agreement shall be
construed to prohibit any Party from appearing as a party-in-interest in any matter to be
adjudicated in the Chapter 11 Cases so long as such appearance and the positions advocated in
connection therewith are not inconsistent with this Agreement and the Transactions and are not
for the purpose of, and could not reasonably be expected to have the effect of, hindering,
delaying or preventing the confirmation of the Plan or consummation of the Transactions
pursuant to the Plan.
(h) Each Consenting Second Lien Debt Holder has indicated on its signature
page hereto whether it (i) intends to elect Cash or Stock (each, as defined in the Plan) of
Reorganized Holdings (as defined in the Plan) in respect of its Class 3 Claim (as set forth in the
Plan) and (ii) will participate in the Rights Offering; provided, however, that each Consenting
Second Lien Debt Holder hereby acknowledges and agrees that it may not purchase common
stock of Reorganized Holdings (as defined in the Plan) under the Rights Offering or elect to
receive Stock (as defined in the Plan) in respect to such claim pursuant to the Plan except and
only to the extent indicated in the Second Lien Lender Elections (as defined in the Plan).
5. Agreements ofthe Company.
(a) Additional Transaction Matters. The Company hereby agrees (i) to use its
reasonable best efforts to prepare or cause the preparation of the Plan and the other Plan Related
Documents (other than the Amended and Restated Credit Agreement and the security and other
documents related thereto, which shall be prepared by the Administrative Agent), (ii) to take all
necessary and appropriate actions to achieve confirmation of the Plan and (iii) that it shall
provide draft copies of all "first day" motions, and, to the extent reasonably practicable, all other
motions, applications and other documents the Company intends to file with the Bankruptcy
Court related to the Plan to counsel for the Administrative Agent, counsel for the Second Lien
Agent and counsel for the Equity Investors as soon as reasonably practicable before such
documents are filed with the Bankruptcy Court, and shall consult in good faith with such counsel
regarding the form and substance of any such proposed filing.
(b) Commitment of the Company. Subject to its fiduciary duties (as set forth
in Section 26 hereof), the Company agrees to use its commercially reasonable efforts to (i) obtain
confirmation of the Plan by the Bankruptcy Court and consummate the Transactions pursuant to
the Plan and all other actions contemplated under the Approved Plan Documents, (ii) take any
and all necessary and appropriate actions in furtherance of the Transactions and the other actions
contemplated under the Approved Plan Documents, (iii) obtain any and all required regulatory
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approvals and material third-party approvals for the Transactions, and (iv) not take any actions
inconsistent with this Agreement, the Plan, the Amended and Restated Credit Agreement, the
other Approved Plan Documents, the Rights Offering Term Sheet, or the confirmation and
consummation of the Plan. Subject to its fiduciary duties (as set forth in Section 26 hereof), the
Company shall not, directly or indirectly, seek, solicit, negotiate, support or engage in any
discussions relating to, or enter into any agreements relating to, any restructuring, plan of
reorganization, dissolution, winding up, liquidation, reorganization, merger, transaction, sale, or
disposition ofthe Company (or all or substantially all of its assets or equity) other than as set
forth in the Plan, nor shall the Company solicit or direct any person or entity, including, without
limitation, any member of the Company's board of directors or any holder of equity in the
Company, to undertake any ofthe foregoing; provided, however, that the Company may agree to
modifications to the Plan, the Amended and Restated Credit Agreement, any other Approved
Plan Document, and the Rights Offering Term Sheet, as provided herein.
(c) Advisors. The Company shall pay all fees and expenses of (i) Wei!,
Gotshal & Manges LLP, counsel to the Administrative Agent ("Weir'), (ii) Conway Del Genio
Gries & Co., LLC, financial advisors to Wei! ("CDG") and (iii) Pillsbury Winthrop Shaw
Pittman LLP ("Pillsbury"), counsel to the Second Lien Agent, which are due and owing prior to
the Termination Date ofthis Agreement.
(d) Reporting. The Company shall comply with all reporting requirements
under the First Lien Credit Agreement and the Second Lien Credit Agreement.
6. Termination of Agreement. This Agreement shall terminate automatically
without any further action required by any Party hereto, unless extended by the Company, the
Administrative Agent, the Second Lien Agent, the Required Consenting Holders and the Equity
Investors, in writing, upon the earliest to occur of the following (the date and time of such
termination, the "Termination Date"); provided, however that Section 6(b) below can be waived
or extended, in part or in whole, by the Company, the Administrative Agent, the Required First
Lien Lenders and the Equity Investors without the consent of any other Party hereto:
(a) at 5:00P.M. prevailing Eastern Time on January 22, 2010 unless the
Company has commenced the Solicitation;
(b) at 5:00P.M. prevailing Eastern Time on January 29, 2010 ifthe Plan shall
not have received the acceptances of at least 66 2/3% of the aggregate principal amount of the
First Lien Debt and Second Lien Debt, respectively, and more than 50% ofthe number of
holders of Claims in respect ofthe First Lien Debt and Second Lien Debt, respectively, in each
case that vote on the Plan;
(c) at 11:59 P.M. prevailing Eastern Time on February 3, 2010 unless the
Company has commenced the Chapter 11 Cases (the "Commencement Date") in the Bankruptcy
Court and has filed, and is pursuing confirmation of, the Plan, and has filed a motion for
authority to use cash collateral with a proposed cash collateral order that, among other things,
provides for customary replacement liens, current payment of interest on the First Lien Debt at
the non-default rate and reimbursement of all of the Administrative Agent's costs and expenses
under the First Lien Credit Agreement, including, without limitation, professionals' fees and
US_ ACTIVE:\43230221 \25\4 7660.3449 8
expenses, and otherwise in form and substance acceptable to the Administrative Agent and the
First Lien Required Lenders (an "Acceptable Cash Collateral Order");
(d) at any time after three (3) business days following the Commencement
Date unless an Acceptable Cash Collateral Order has been entered by the Bankruptcy Court and
remains unstayed and in full force and effect with no amendments or modifications other than
any consented to in writing by the Administrative Agent and the First Lien Required Lenders;
(e) at 5:00P.M. prevailing Eastern Time on the date which is sixty (60)
calendar days after the Commencement Date if the Plan has not been confirmed by the
Bankruptcy Court on or before such date;
(f) at 5:00P.M. prevailing Eastern Time on the date which is thirty (30)
calendar days following entry by the Bankruptcy Court of an order confirming the Plan if there
has not occurred substantial consummation (as defined in section 1101 ofthe Bankruptcy Code)
ofthe Plan on or before such date;
(g) the filing by the Company of any motion or other request for relief seeking
to (i) dismiss any of the Chapter 11 Cases, (ii) convert any ofthe Chapter 11 Cases to a case
under chapter 7 of the Bankruptcy Code, or (iii) appoint a trustee or an examiner with expanded
powers pursuant to section II 04 of the Bankruptcy Code in any of the Chapter 11 Cases;
(h) the entry of an order by the Bankruptcy Court (i) dismissing any ofthe
Chapter 11 Cases, (ii) converting any ofthe Chapter 11 Cases to a case under chapter 7 of the
Bankruptcy Code, (iii) appointing a trustee or an examiner with expanded powers pursuant to
section 1104 of the Bankruptcy Code in any of the Chapter 11 Cases, or (iv) making a finding of
fraud, dishonesty or misconduct by any officer or director of the Company, regarding or relating
to the Company;
(i) the Company files, proposes or otherwise supports any plan other than the
Plan or if the Company, in the exercise of its fiduciary duties (set forth in Section 26 hereof),
takes any other action hereunder that is otherwise prohibited hereunder or refrains from taking
any action that is otherwise required hereunder;
(j) the material breach by the Company of any of the undertakings,
representations, warranties or covenants of the Company set forth in this Agreement, including
the Company's obligations under Section 5 hereof, which material breach remains uncured for a
period of five (5) business days after the receipt ofwritten notice of such breach from the
Administrative Agent;
(k) the occurrence of any Default (as defined in the First Lien Credit
Agreement) or Event of Default (as defined in the First Lien Credit Agreement) prior to the
Commencement Date, which breach remains uncured or unwaived for a period of five (5)
business days after the receipt by the Company of notice of such breach from the Administrative
Agent (excluding any such Default or Event of Default as a result of a non-payment of any
Second Lien Obligations (as defined in the First Lien Credit Agreement), cross default to the
Second Lien Credit Agreement, solely as a result of noncompliance with the Financial
Performance Covenants (as defined in the Second Lien Agreement), the filing ofthe Chapter 11
US ACTIVE\43230221125147660 3449 9
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Cases or the noncompliance with the Financial Performance Covenants (as defined in the First
Lien Credit Agreement) for the fiscal quarters ending December 31, 2009 and March 31, 201 0);
(I) the breach by any of the Consenting Holders of any of the undertakings,
representations, warranties or covenants of such Consenting Holder(s) set forth in this
the Transactions, which breach remains uncured for a period of ten ( 1 0) business days after the
receipt by the Consenting Holder(s) of notice of such breach from the Company;
(m) the withdrawal, amendment or modification by the Company of, or the
filing by the Company of a pleading seeking to amend or modify, the Plan, which withdrawal,
amendment, modification or pleading is materially inconsistent with the Plan (with such
amendments and modifications as have been effected in accordance with the terms hereof) or is
materially adverse to the Consenting Holders, in each case in a manner not acceptable to the
Investors, or if the Company files any motion or pleading with the Bankruptcy Court that is
inconsistent in any material respect with this Agreement, the Plan or the other Approved Plan
Documents (in each case with such amendments and modifications as have been effected in
accordance with the terms hereof) and such motion or pleading has not been withdrawn prior to
the earlier of (i) three (3) business days after the Company receives written notice from the
Administrative Agent or the Second Lien Agent that such motion or pleading is inconsistent with
this Agreement, the Plan or any other Approved Plan Document, as applicable, and (ii) the entry
of an order of the Bankruptcy Court approving such motion;
(n) the Company amends or modifies any Approved Plan Document after it is
filed with the Bankruptcy Court, which amendment or modification is materially inconsistent
with the Plan (in each case with such amendments and modifications as have been effected in
accordance with the terms hereof) or not acceptable to the Administrative Agent, the Second
Lien Agent, the Required Consenting Holders and the Equity Investors;
( o) the Bankruptcy Court grants relief that is inconsistent with this Agreement
or the Plan in any material respect (in each case with such amendments and modifications as
have been as have been effected in accordance with the terms hereof);
(p) the issuance by any governmental authority, including the Bankruptcy
Court or any other regulatory authority or court of competent jurisdiction, of any ruling,
determination or order making illegal or otherwise restricting, preventing or enjoining the
consummation of a material portion ofthe Transactions, including an order denying confirmation
ofthe Plan, and such ruling, determination or order has not been vacated or reversed within five
(5) business days of issuance; or
(q) any payment by the Company or any of its affiliates of any amount in
respect of the Second Lien Obligations (as defined in the First Lien Credit Agreement) except as
set forth in Section 5(c) hereof or on the effective date ofthe Plan as described in the Plan or as
otherwise contemplated under the Plan, without the written consent of the Administrative Agent.
Subject to Section 13 hereof, upon termination ofthis Agreement, each Party hereto shall be
released from its commitments, undertakings and agreements under or related to this Agreement
US_ACTIVE 143230221125\47660.3449 10
and shall have the rights and remedies that it would have had and shall be entitled to take all
actions, whether with respect to the Transactions or otherwise, that it would have been entitled to
take had it not entered into this Agreement. For the avoidance of doubt, the Parties hereby waive
any requirement under section 362 of the Bankruptcy Code to lift the automatic stay thereunder
for purposes of providing notice under this Agreement (and agree not to object to any non-
breaching Party seeking, if necessary, to lift such automatic stay in connection with the giving
any such notice).
7. Good Faith Cooperation; Further Assurances; Transaction Documents. The
Parties shall cooperate with each other in good faith and shall coordinate their activities (to the
extent practicable) in respect of all matters concerning the implementation and consummation of
the Transactions. Furthermore, each of the Parties shall take such action (including executing
and delivering any other agreements and making and filing any required regulatory filings) as
may be reasonably necessary to carry out the purposes and intent of this Agreement. Each Party
hereby covenants and agrees (a) to negotiate in good faith the Plan Related Documents, each of
which shall (i) contain the same economic terms as, and other terms consistent in all material
respects with, the terms set forth in the Plan, the Amended and Restated Credit Agreement and
the Rights Offering Term Sheet (as each may be amended, supplemented or otherwise modified
as provided herein), (ii) be in form and substance reasonably acceptable in all respects to the
Investors, and (iii) be consistent with this Agreement in all material respects, and (b) to execute
the Approved Plan Documents (to the extent such Party is a party thereto).
other Parties (provided that the representations and warranties in clauses (e) and (f) below shall
be given by the Consenting Holders only) that the following statements are true, correct and
complete as of the date hereof and as of the date of any amendment of this Agreement approved
by such Party:
this Agreement does not and shall not (i) violate (A) any provision of law, rule or regulation
constitute (with due notice or lapse oftime or both) a default under any material contractual
such Party ofthis Agreement does not and shall not require any registration or filing with,
governmental authority or regulatory body other than the Bankruptcy Court.
US_ ACTIVE \43230221125\47660 3449 11
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(e) Compliance with Laws. Although none of the Parties intends that this
Agreement should constitute, and they each believe it does not constitute, a solicitation and
acceptance ofthe Plan, each Consenting Holder, on a several and not joint basis, acknowledges
and agrees that, regardless ofwhether its Debt constitutes a "security" within the meaning of the
Securities Act, (i) such Consenting Holder is an "accredited investor" as such term is defined in
Rule 50 I (a) of the Securities Act or a "qualified institutional buyer" as such term is defined in
Rule 144A of the Securities Act and (ii) such Consenting Holder has information sufficient in
order to enable it to make an informed decision such that, were this Agreement to be construed
as or deemed to constitute such a solicitation and acceptance, such solicitation was in compliance
with any applicable non bankruptcy law governing the adequacy of disclosure in connection with
such solicitation, or ifthere is not any such law, solicited after disclosure to such holder of
"adequate information" as such term is defined in section 1125(a) ofthe Bankruptcy Code.
(f) Ownership. If such Party is a Consenting Holder, such Consenting Holder
(i) either (A) is the sole legal and beneficial owner ofthe Debt set forth below its name on the
signature page hereof and all related Claims, in each case free and clear of all claims, liens and
encumbrances or (B) has investment or voting discretion with respect to such Debt and Claims
and has the power and authority to bind the beneficial owner(s) of such Debt and Claims to the
terms of this Agreement and (ii) such Consenting Holder has full power and authority to vote on
and consent to such matters concerning such Debt and Claims and to Transfer such Debt and
Claims.
9. Amendments. None ofthis Agreement, the Plan, the Amended and Restated
Credit Agreement, the other Approved Plan Documents, or the Rights Offering Term Sheet may
be amended, supplemented or otherwise modified except as set forth herein.
Company of signature pages signed by the Company, the Administrative Agent, the Equity
Investors and the Consenting Holders holding at least 66 2/3% ofthe aggregate principal amount
ofthe First Lien Debt (including all ofthe New Revolving Lenders) and at least 66 2/3% of the
aggregate principal amount of the Second Lien Debt (the "Effective Date"). Delivery by
telecopier or electronic mail of an executed counterpart of a signature page to this Agreement
shall be effective as delivery of an original executed counterpart hereof. Notwithstanding the
foregoing, this Agreement shall become binding (i) on the Administrative Agent and the
Consenting First Lien Debt Holders only upon the Company's payment to the Administrative
Agent, for the account and benefit of the First Lien Lenders, of an amount equal to all fees and
expenses ofWeil and COG due and owing as ofthe anticipated Effective Date and (ii) on the
Second Lien Agent and the Consenting Second Lien Debt Holders only upon the Company's
payment to the Second Lien Agent of an amount equal to all fees and expenses of Pillsbury due
and owing as of the anticipated Effective Date (which fees and expenses shall be invoiced at
least two (2) business days prior to the anticipated Effective Date).
US_ACTIVE 143230221\25\47660.3449 12
11. GOVERNING LAW; JURISDICTION: JURY TRIAL WAIVER. THIS
OF THE GENERAL OBLIGATIONS LAW), WITHOUT REGARD TO ANY CONFLICT OF
LAWS PROVISIONS WHICH WOULD REQUIRE THE APPLICATION OF THE LAW OF
OTHERWISE.
13. Survival. Notwithstanding (i) any Transfer of the Debt or Claims in accordance
with Section 4(e) hereof or (ii) the termination of this Agreement in accordance with its terms,
the agreements and obligations of the Parties in Sections 5(c), 11, 12, 13, 22, 23 and 26 hereof
shall survive such Transfer and/or termination and shall continue in full force and effect for the
benefit of the Parties hereto in accordance with the terms hereof.
14. Headings. The headings of the Sections, paragraphs and subsections ofthis
15. Successors and Assigns: Severability; Several Obligations. This Agreement is
141230221\25'47660 3449 13
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third party beneficiary hereof.
17. Entire Agreement. This Agreement constitutes the entire agreement of the Parties
with respect to the subject matter hereof and supersedes all prior agreements (oral and written)
and all other prior negotiations but shall not supersede the Plan, the other Approved Plan
Documents or the Fee Letter (as defined in the Amended and Restated Credit Agreement).
18. Counterparts. This Agreement and any amendments, waivers, consents or
19. Consideration. Other than as provided in the Plan and this Agreement, it is
hereby acknowledged by the Parties that no payment or additional consideration shall be due or
paid to any of the Consenting Holders for their agreement to vote in accordance with, and
otherwise comply with the terms and conditions of, this Agreement.
20. Notices. All demands, notices, requests, consents and other communications
under this Agreement shall be in writing, sent contemporaneously to all of the Parties, and
deemed given when delivered, if delivered by hand, or upon confirmation of transmission, if
delivered by email and facsimile, during standard business hours (from 8:00A.M. to 6:00 P.M.
at the place of receipt) at the addresses and facsimile numbers set forth on Schedule III hereto.
21. Rule oflnterpretation; Calculation ofTime Period. Notwithstanding anything
contained herein to the contrary, it is the intent of the Parties that all references to votes or voting
in this Agreement be interpreted to include votes or voting on a plan of reorganization under the
Bankruptcy Code. The provisions of this Agreement shall be interpreted in a reasonable manner
to effect the intent ofthe Parties hereto. None of the Parties hereto shall have any term or
provision construed against such Party solely by reason of such Party having drafted the same.
When calculating the period of time before which, within which or following which any act is to
be done or step taken pursuant to this Agreement, the date that is the reference date in calculating
such period shall be excluded. If the last day of such period is not a business day, the period in
question shall end on the next succeeding business day.
reason, the Parties fully reserve any and all oftheir rights. Pursuant to Rule 408 ofthe Federal
US_ACTIVE 143230221125147660.3449 14
23. Publicity; Confidentiality.
(a) The Parties agree that all press releases, public filings, public
announcements or other communications or the transactions contemplated hereby and any
amendments thereof with any news media relating to this Agreement shall be submitted and
mutually acceptable to counsel for the Administrative Agent, counsel for the Second Lien Agent
and counsel for the Company. The Company shall not (a) use the name of the Administrative
Agent, the Second Lien Agent or any Consenting Holder in any press release without such
Party's prior written consent or (b) disclose to any person, other than legal, accounting and
financial advisors to the Company, the principal amount or percentage of Debt held by any
Consenting Holder or any of its respective subsidiaries; provided, however, that the Company
shall be permitted to disclose at any time the aggregate principal amount of, and aggregate
percentage of, any class ofDebt held by the Consenting Holders as a group. Notwithstanding the
foregoing, the Consenting Holders and the Equity Investors hereby consent to the disclosure by
the Company in the Plan, the Disclosure Statement, the other Approved Plan Documents and any
required filings by the Company with the Bankruptcy Court or as otherwise required by law or
regulation, of the execution, terms and contents of this Agreement.
(b) The Parties understand and acknowledge that, until publicly disclosed as
herein contemplated, the terms of this Agreement and the exhibits hereto are confidential
information, and the Parties agree to keep such information confidential and not use it for any
purpose except as contemplated hereby or as reasonably necessary in the Chapter II Cases.
provide any Party with a defense to the enforcement of the terms ofthis Agreement against such
Agreement shall require the Company or any directors or officers of the Company, in such
taking any action, that such person determines in good faith, after consultation with counsel, is
inconsistent with its or their fiduciary obligations under applicable law, and no action or failure
to take action, including, without limitation, any disclosure that the board of directors of
Holdings so determines is required by its fiduciary duties pursuant to this Section 26 shall be
deemed to have been so required.
27. Continued Banking Practices. Notwithstanding anything herein to the contrary,
each Consenting Holder, the First Lien Agent and the Second Lien Agent, and their respective
US_ACTI\"E 14:123022 1125\47b60 :1449 15
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affiliates, may accept deposits from, lend money to, and generally engage in any kind of
banking, investment banking, trust or other business with, or provide debt financing, equity
capital or other services (including financial advisory services) to the Company or any affiliate of
the Company or any other person, including, but not limited to, any person proposing or entering
into a transaction related to or involving the Company or any affiliate thereof.
28. Acknowledgement. This Agreement and the Transactions are the product of
negotiations among the Parties, together with their respective representatives. This Agreement is
not, and shall not be deemed to be, a solicitation of votes for the acceptance of the Plan or any
plan of reorganization for the purposes of sections 1125 and 1126 of the Bankruptcy Code or
otherwise. The votes of the holders of claims against the Company will not be solicited until
such holders who are entitled to vote on the Plan have received the Disclosure Statement and any
other required materials related to the Solicitation. In addition, this Agreement does not
constitute an offer to issue or sell securities to any person, or the solicitation of an offer to
acquire or buy securities, in any jurisdiction where such offer or solicitation would be unlawful.
29. No Waiver. The failure of any Party hereto to exercise any right, power or
remedy provided under this Agreement or otherwise available in respect hereof at law or in
equity, or to insist upon compliance by any other Party hereto with its obligations hereunder, and
any custom or practice or the Parties at variance with the terms hereof, shall not constitute a
waiver by such Party of its right to exercise any such right, power or remedy or to demand such
compliance.
30. Conflicts Between the Plan, the Amended and Restated Credit Agreement. the
other Approved Plan Documents, the Rights Offering Term Sheet and this Agreement. In the
event of any conflict among the terms and provisions in the Plan, the Rights Offering Term Sheet
and this Agreement, as applicable, the terms and provisions of the Plan shall control. In the
event of any conflict between the terms and provisions in the Plan and the terms and provisions
in the Amended and Restated Credit Agreement or any other Approved Plan Document, the
terms and provisions ofthe Amended and Restated Credit Agreement or relevant other Approved
Plan Document, as applicable, shall control and govern. Nothing in this Section 30 shall affect,
in any way, the requirements set forth herein for the amendment of the Plan, the Amended and
Restated Credit Agreement, the other Approved Plan Documents, the Rights Offering Term
Sheet or this Agreement.
* * * * *
US_ACTIVE.\43230221\25\47660 3449 16
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
as ofthe date ftrst written above.
PENTON MEDIA, INC.
PENTON BUSINESS MEDIA, INC.
PENTON BUSINESS MEDIA HOLDINGS, INC.
PENTON BUSINESS MEDIA
PUBLICATIONS, INC.
PENTON BUSINESS MEDIA INTERNET, INC.
INTERNET WORLD MEDIA, INC.
DUKE INVESTMENTS, INC.
DUKE COMMUNICATIONS
INTERNATIONAL, INC.
DVGM & ASSOCIATES
By: ______________ _
Name:
Title:
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WASSERSTEIN PARTNERS, L.P.
By: ______________ _
Name:
Title:
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SCHEDULE I
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Wasserstein Partners, L.P. or its affiliates
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Schedule 1-1
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SCHEDULE II
REVOLVING COMMITMENTS
CIT Lending Services Corporation
JPMorgan Chase Bank, N .A.
The Governor and Company of the Bank of Ireland
Wells Fargo Foothill, Inc.
CSFB
Total:
Schedule II-I
$12,187,500.00
$8,125,000.00
$14,218,750.00
$3,250,000.00
$812,500.00
$4,062,500.00
$42,656,250.00
SCHEDULE III
NOTICE ADDRESSES
If to the Company:
Penton Business Media, Inc.
249 West 17th Street
Fourth Floor
Attn.: Jean Clifton
Facsimile: 913-514-6431
Email: Jean.Ciifton@penton.com
with a copy to (which shall not constitute notice):
Jones Day
222 E. 41st Street
Attn.: Robert A. Profusek
Facsimile: 212-755-7306
Email: raprofusek@jonesday.com
If to the Administrative Agent or First Lien Required Lenders:
2325 Lakeview Parkway
Suite 700
Alpharetta, Georgia 30009
Attn.: Penton Business Media Account Manager
Facsimile: 678-624-7903
Email: ellen.weaver@ge.com
and to:
20 I Merritt 7
Norwalk, Connecticut 06851
Attn.: Counsel- Media and Communications
Facsimile: 203-956-4216
Email: Mark.O'Leary@ge.com
Wei!. Gotshal & Manges LLP
767 Fifth A venue
Attn.: Gary Holtzer, Esq.
Schedule 111-l
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Facsimile: 212-310-8007
Email: gary.holtzer@weil.com
If to the Second Lien Agent or the Second Lien Required Lenders:
Wells Fargo Bank, National Association
45 Broadway, 14th Floor
New York, NY 10006
Attn: Michael D. Pinzon
Facsimile: 212-515-1576
Email: michael.d.pinzon@wellsfargo.com
Pillsbury Winthrop Shaw Pittman LLP
725 So. Figueroa Street, Suite 2800
Los Angeles, CA 90017
Attn: William Freeman, Esq.
Facsimile: 213-629-1033
Email: bill.freeman@pillsburylaw .com
If to any other Consenting Holder, at the address shown for such Consenting Holder on the
applicable signature page hereto, to the attention of the person who has executed this Agreement
on behalf of such Consenting Holder.
Schedule III-2
AMENDMENT NO. 1 TO
This AMENDMENT NO. 1 TO RESTRUCTURING SUPPORT AGREEMENT
(this "Agreement"), dated as of January 29, 2010, by and among Penton Business Media
Holdings, Inc. (f/k/a Prism Business Media Holdings Inc.) ("Holdings"), Penton Media, Inc.
("Penton"), Penton Business Media, Inc. (f/k/a Prism Business Media Inc.) ("Penton Business
Media"), certain other subsidiaries of Holdings identified on the signature pages hereto (together
with Holdings, Penton and Penton Business Media, the "Company"), General Electric Capital
Corporation, as administrative agent under the First Lien Credit Agreement (as defined in the
RSA) (the "Administrative Agent"), the undersigned lenders party to the First Lien Credit
Agreement and/or the Second Lien Credit Agreement (as defined in the RSA), solely in their
capacity as such lender to the extent and as set forth on the signature page hereto (the "Required
Consenting Holders"), Wells Fargo Bank, National Association, as administrative agent under
the Second Lien Credit Agreement (the "Second Lien Agent"), MidOcean Partners III, L.P.
("MidOcean") and Wasserstein Partners, L.P. (together with MidOcean, the "Equity Investors").
RECITALS
WHEREAS, the Company, the Administrative Agent, the Consenting Holders (as
defined in the RSA), the Second Lien Agent and the Equity Investors have entered into that
certain Restructuring Support Agreement, dated as of January 20, 2010 (the "RSA"; capitalized
terms used herein and not defined herein shall have the meanings ascribed thereto in the RSA);
WHEREAS, subject to the terms and conditions hereof, Company, the
Administrative Agent, the Required Consenting Holders, the Second Lien Agent and the Equity
Investors have agreed to amend the RSA as described herein.
AGREEMENT
1. Amendment to RSA. The RSA is, effective as of the date hereof and subject to
the satisfaction of the conditions precedent set forth in Section 4 ofthis Agreement, hereby
amended as follows:
(a) The proviso to the first sentence of Section 6 of the RSA is amended by
deleting the words "Required First Lien" and adding the words "First Lien Required" in the
place thereof;
(b) Section 6(b) of the RSA is amended by deleting the words "January 29,
201 0'' and adding the words "February 8, 201 0" in the place thereof;
(c) Section 6(c) of the RSA is amended by deleting the words "February 3,
201 0" and adding the words "February 8, 20 I 0" in the place thereof; and
US_ACTI\'E \4,291595,06\47660.3449
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(d) Section 6(e) ofthe RSA is amended by deleting the words "sixty (60)" and
adding the words "fifty five (55)" in the place thereof.
other Parties (provided that the representations and warranties in clause (e) below shall be given
by the Required Consenting Holders only) that the following statements are true, correct and
by such Party:
constitute (with due notice or lapse oftime or both) a default under any material contractual
such Party ofthis Agreement does not and shall not require any registration or filing with,
similar Jaws relating to or limiting creditors' rights generally or by equitable principles relating
(e) Ownership. If such Party is a Required Consenting Holder, such Required
Consenting Holder (i) either (A) is the sole legal and beneficial owner of the Debt set forth
below its name on the signature page hereof and all related Claims, in each case free and clear of
all claims, liens and encumbrances or (B) has investment or voting discretion with respect to
such Debt and Claims and has the power and authority to bind the beneficial owner(s) of such
Debt and Claims to the terms ofthis Agreement and (ii) such Required Consenting Holder has
full power and authority to vote on and consent to such matters concerning such Debt and Claims
and to Transfer such Debt and Claims.
3. Amendments. This Agreement may not be amended, supplemented or otherwise
modified except as provided in the RSA.
US_ACTI VE:\43291595\06\47660 3449 2
Company of signature pages signed by the Company, the Administrative Agent, the Second Lien
Agent, the Equity Investors and the Required Consenting Holders (the "Effective Date").
Delivery by telecopier or electronic mail of an executed counterpart of a signature page to this
Agreement shall be effective as delivery of an original executed counterpart hereof.
Notwithstanding the foregoing, this Agreement shall become binding (i) on the Administrative
Agent and the Consenting First Lien Debt Holders only upon the Company's payment to the
Administrative Agent, for the account and benefit of the First Lien Lenders, of an amount equal
to all fees and expenses of Wei! and COG due and owing as of the anticipated Effective Date and
(ii) on the Second Lien Agent and the Consenting Second Lien Debt Holders only upon the
Company's payment to the Second Lien Agent of an amount equal to all fees and expenses of
Pillsbury due and owing as of the anticipated Effective Date (which fees and expenses shall be
invoiced at least two (2) business days prior to the anticipated Effective Date).
OTHERWISE.
US_ACTI\'E 43291595106147660 3449 3
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7. Survival. Notwithstanding the termination of the RSA in accordance with its
terms, the agreements and obligations of the Parties in Sections 5, 6, 7, 14, 15 and 11 hereof shall
survive such termination and shall continue in full force and effect for the benefit of the Parties
hereto in accordance with the terms hereof.
8. Headings. The headings ofthe Sections, paragraphs and subsections ofthis
third party beneficiary hereof
11. Entire Agreement. The RSA, as amended by this Agreement, constitutes the
entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior
agreements (oral and written) and all other prior negotiations but shall not supersede the Plan, the
other Approved Plan Documents or the Fee Letter (as defined in the Amended and Restated
Credit Agreement).
hereby acknowledged by the Parties that no payment or additional consideration shall be due or
otherwise comply with the terms and conditions of the RSA, as amended by this Agreement.
reason, the Parties fully reserve any and all oftheir rights. Pursuant to Rule 408 of the Federal
US _ACT! VE:\43291595\06\47660.3449 4
15. Publicity: Confidentiality.
amendments thereof with any news media relating to this Agreement shall be submitted and
percentage of, any class of Debt held by the Consenting Holders as a group. Notwithstanding the
required filings by the Company with the Bankruptcy Court or as otherwise required by law or
regulation, ofthe execution, terms and contents ofthis Agreement.
herein contemplated, the terms of this Agreement and the exhibits hereto are confidential
purpose except as contemplated hereby or as reasonably necessary in the Chapter 11 Cases.
US_ACTIVE '4,291595\06147660.3449 5
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plan ofreorganization for the purposes of sections 1125 and 1126 ofthe Bankruptcy Code or
compliance.
* * * * *
US_ ACTIVE:\43291595\06\4 7660.3449 6
IN WITNESS WHEREOF. the Parties have caused this Agreement to be executed
as of the date first \\-Titten above.
PENTON MEDIA. INC.
PENTON BUSINESS MEDA. INC.
PENTON BUSINESS MEOlA HOLDrNGS. INC.
PUBUCATlONS. INC.
PENTON BUSINESS MEDIA INTERNET. fNC.
INTERNET WORLD MEDIA. INC.
DUKE INVESTMENTS. INC.
DUKE COMMUNICATIONS
INTERNATIONAL. INC.
DVGM & ASSOCIATES
ISIG'-'A TIIRE f'AG to :\MENDMENr NO. I ro
RfSTRUCT! IRJNG SUPPORf :\GRITMFNfJ
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AMENDMENT NO.2 TO
This AMENDMENT NO.2 TO RESTRUCTURING SUPPORT AGREEMENT
(this "Agreement"), dated as of February 8, 2010, by and among Penton Business Media
Holdings, Inc. (f/kla Prism Business Media Holdings Inc.) ("Holdings"), Penton Media, Inc.
("Penton"), Penton Business Media, Inc. (f/kla Prism Business Media Inc.) ("Penton Business
Media"), certain other subsidiaries ofHoldings identified on the signature pages hereto (together
with Holdings, Penton and Penton Business Media, the "Company"), General Electric Capital
Corporation, as administrative agent under the First Lien Credit Agreement (as defined in the
RSA) (the "Administrative Agent"), the undersigned lenders party to the First Lien Credit
Agreement and/or the Second Lien Credit Agreement (as defined in the RSA), solely in their
capacity as such lender to the extent and as set forth on the signature page hereto (the "Required
Consenting Holders"), Wells Fargo Bank, National Association, as administrative agent under
the Second Lien Credit Agreement (the "Second Lien Agent"), MidOcean Partners III, L.P.
("MidOcean") and Wasserstein Partners, L.P. (together with MidOcean, the "Equity Investors").
The Company, the Administrative Agent, each Required Consenting Holder, the Second Lien
Agent and each Equity Investor are collectively referred to herein as the "Parties" and
individually as a "Party".
RECITALS
WHEREAS, the Company, the Administrative Agent, the Consenting Holders (as
defined in the RSA), the Second Lien Agent and the Equity Investors have entered into that
certain Restructuring Support Agreement, dated as of January 20, 2010, as amended by the
Parties pursuant to that certain Amendment No. 1 to Restructuring Support Agreement, dated as
of January 29, 20 I 0 (as further amended, restated, amended and restated or modified through the
date hereof, the "RSA"; capitalized terms used herein and not defined herein shall have the
meanings ascribed thereto in the RSA);
WHEREAS, the Equity Investors have agreed to provide a backstop to the Rights
Offering in a cash amount of between $38.9 and $51.2 million pursuant to the Equity
Commitment Letter and the Rights Offering Term Sheet; and
WHEREAS, subject to the terms and conditions hereof, the Parties have agreed
to amend the RSA as described herein.
AGREEMENT
I. Amendment to the RSA. The RSA is, effective as of the date hereof and subject
to the satisfaction of the conditions precedent set forth in Section 4 ofthis Agreement, hereby
amended as follows:
US_ACTIVE143299578104147660.3449
(a) Section 4(h) of the RSA is amended by deleting the words "Class 3
Claim" and adding the words "Class 4 Claim" in the place thereof;
(b) Section 6(c) of the RSA is amended by deleting the words "February 8,
201 0" and adding the words "February I 0, 20 I 0" in the place thereof; and
(c) Section 6 of the RSA is amended by (i) deleting the word "or" at the end
of clause (p), (ii) deleting the period(.) at the end of clause (q) and adding"; or" in the place
thereof and (iii) adding the following as a new clause (r):
"(r) at 5:00P.M. prevailing Eastern Time on February 8, 2010 if
the Consenting Holders shall not have reaffirmed or been deemed to have
reaffirmed support of the Plan, Amended and Restated Credit Agreement, Rights
Offering Term Sheet and Equity Commitment Letter."
other Parties (provided that the representations and warranties in clause (e) below shall be given
by the Required Consenting Holders only) that the following statements are true, correct and
by such Party:
(a) Power and Authority: Authorization. It has all requisite corporate,
and the execution and delivery ofthis Agreement and the performance of such Party's
such Party of this Agreement does not and shall not require any registration or filing with,
(e) Ownership. If such Party is a Required Consenting Holder, such Required
Consenting Holder (i) either (A) is the sole legal and beneficial owner of the Debt set forth
US_ACTIVE 143299578\04\47660 3449 2
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below its name on the signature page hereof and all related Claims, in each case free and clear of
all claims, liens and encumbrances or (B) has investment or voting discretion with respect to
such Debt and Claims and has the power and authority to bind the beneficial owner(s) of such
Debt and Claims to the terms ofthis Agreement and (ii) such Required Consenting Holder has
full power and authority to vote on and consent to such matters concerning such Debt and Claims
and to Transfer such Debt and Claims.
3. Amendments. This Agreement may not be amended, supplemented or otherwise
modified except as provided in the RSA.
Company of(i) signature pages to this Agreement signed by the Company, the Administrative
Agent, the Second Lien Agent, the Equity Investors and the Required Consenting Holders and
(ii) by 5:00P.M. prevailing Eastern Time on February 8, 2010, a sufficient number of
(A) executed Joinder Agreements (in the form attached hereto as Exhibit A) or (B) ballots cast in
support of the Plan, collectively, sufficient to constitute, when taken together with the existing
Consenting Second Lien Debt Holders, support ofthe Plan by at least 66 %%of the aggregate
principal amount of the Second Lien Debt and more than 50% ofthe number of holders of
Claims in respect of Second Lien Debt (the "Effective Date"). Delivery by telecopier or
electronic mail of an executed counterpart of a signature page to this Agreement shall be
effective as delivery of an original executed counterpart hereof. Notwithstanding the foregoing,
this Agreement shall become binding (i) on the Administrative Agent and the Consenting First
Lien Debt Holders only upon the Company's payment to the Administrative Agent, for the
account and benefit of the First Lien Lenders, of an amount equal to all fees and expenses of
Weiland COG due and owing as ofthe anticipated Effective Date and (ii) on the Second Lien
Agent and the Consenting Second Lien Debt Holders only upon the Company's payment to the
Second Lien Agent of an amount equal to all fees and expenses of Pillsbury due and owing as of
the anticipated Effective Date (which fees and expenses shall be invoiced at least two (2)
business days prior to the anticipated Effective Date).
US_ACTIVE:\43299578\04\47660.3449 3
OTHERWISE.
performance and injunctive or other equitable relief, to any Party for a breach ofthis Agreement
7. Survival. Notwithstanding the termination of the RSA in accordance with its
terms, the agreements and obligations of the Parties in Sections 5, 6, 7, 14, 15 and ll hereof shall
survive such termination and shall continue in full force and effect for the benefit of the Parties
hereto in accordance with the terms hereof.
8. Headings. The headings of the Sections, paragraphs and subsections of this
The agreements, representations and obligations of the Required Consenting Holders under this
Agreement are, in all respects, several and not joint.
1 0. No Third Party Beneficiaries. Unless otherwise expressly stated herein, this
third party beneficiary hereof
11. Entire Agreement. The RSA, as amended by this Agreement, constitutes the
entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior
agreements (oral and written) and all other prior negotiations but shall not supersede the Plan, the
other Approved Plan Documents or the Fee Letter (as defined in the Amended and Restated
Credit Agreement).
US_ACTI\"E 'A:1299q8\04\47660 3449 4
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delivered sha11 be deemed an original, but a11 such counterparts together sha11 constitute but one
hereby acknowledged by the Parties that no payment or additional consideration sha11 be due or
otherwise comply with the terms and conditions of the RSA, as amended by this Agreement.
14. Reservation ofRights. Except as expressly provided in this Agreement, nothing
against the Company. Nothing herein sha11 be deemed an admission of any kind. If the
reason, the Parties fully reserve any and all oftheir rights. Pursuant to Rule 408 of the Federal
15. Publicity; Confidentiality.
amendments thereof with any news media relating to this Agreement sha11 be submitted and
percentage of, any class ofDebt held by the Consenting Holders as a group. Notwithstanding the
required filings by the Company with the Bankruptcy Court or as otherwise required by Jaw or
regulation, ofthe execution, terms and contents ofthis Agreement.
herein contemplated, the terms ofthis Agreement and the exhibits hereto are confidential
purpose except as contemplated hereby or as reasonably necessary in the Chapter II Cases.
US_ACTIVE\43299578\04\47660.3449 5
pIan of reorganization for the purposes of sections 1125 and 1126 of the Bankruptcy Code or
compliance.
* * * * *
US_ ACTI \iE.1432995 7810414 7660.3449 6
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
as ofthe date first written above.
PENTON MEDIA, INC.
PENTON BUSINESS MEDIA, INC.
PENTON BUSINESS MEDIA HOLDINGS, INC.
PUBLICATIONS, INC.
PENTON BUSINESS MEDIA INTERNET, INC.
INTERNET WORLD MEDIA, INC.
DUKE INVESTMENTS, INC.
DUKE COMMUNICATIONS
INTERNATIONAL, INC.
DVGM & ASSOCIATES
By: ______________ _
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT NO.2 TO
RESTRUCTURING SUPPORT AGREEMENT)
In re Redback Networks, Inc., Case No. 03-13359 (Bankr. Del. 2003).
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Exhibit A
Form of lock-up agreement
LOCK-UP AGREEMENT, dated as of July 6, 2003, by and among Redback Networks Inc., a Delaware
corporation (the "Company"), and the undersigned beneficial owners (or investment managers or
advisors for the beneficial owners) of the Notes (as defined below) identified on Schedule A to this
Agreement on the date of this Agreement and each other beneficial owner (or investment managers or
advisors for the beneficial owners) of Notes that executes a counterpart signature page to this Agreement
after the date of this Agreement, as provided in Section 23 (collectively, the ''Noteholders," and each,
individually, a "Noteholder").
For purposes hereof, all references in this Agreement to Noteholders or parties that are "signatories to
this Agreement" shall mean, as of any date of determination, those Noteholders or parties, as the case
may be, who executed and delivered this Agreement as an original signatory on or before the date of this
Agreement, together with those additional Noteholders or parties, as the case may be, who, after the date
of this Agreement but on or before such date of determination, become party to this Agreement by
executing and delivering counterpart signature pages, as provided in Section 23. After the date of this
Agreement, when Noteholders become signatories to this Agreement, Schedule A shall be deemed
updated to include the Notes held by such Noteholder.
WHEREAS, the Company and the Noteholders, through their representatives, have engaged in good
faith negotiations with the objective of restructuring the debt and equity capital of the Company (the
"Restructuring"), substantially as reflected in the Restructuring Term Sheet (as defined below) which sets
forth the terms and conditions of (i) the Exchange Offer, (ii) the Proxy Solicitation, and (iii) the
Prepackaged Plan; and
WHEREAS, the Company and the Noteholders desire that the Company conduct the Exchange Offer
and the Proxy Solicitation as soon as practicable on the terms described in the Restructuring Term Sheet
to accomplish the Restructuring, or, if necessary under the terms of the Restructuring Term Sheet, that
the Company commence a case under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy
Code") to accomplish the Restructuring through the confirmation of the Prepackaged Plan (the
"Pfe"Packaged Proceeding").
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, each of the parties signatory to this Agreement hereby agrees as follows:
l. Definitions. Capitalized terms used and not defined in this Agreement have the meanings ascribed
to them in the Restructuring Term Sheet, and the following terms shall have the following meanings:
"Agreement" means this Lock-Up Agreement, including the Schedule hereto (including any agreements
incorporated herein or therein), all of which are incorporated by reference herein.
"Common Stock" means the Common Stock, par value $0.0001 per share, of the Company.
"Convertible Subordinated Notes Indenture" means the Indenture dated as of March 29, 2000, as
supplemented by the First Supplemental Indenture dated as of May 8, 2001, between the Company and
Wells Fargo Bank Minnesota, National Association, formerly known as Norwest Bank Minnesota,
National Association, as Trustee.
A-1
"Current Common Holders" means rhe holders of Common Stock of the Company of record as of the
date immediately prior to the consummation of the Restructuring, whether or not effected through the
Prepackaged Proceeding.
"Committee" means the Ad Hoc Committee of Holders of the 5.0% Convertible Subordinated Notes of
Redback Networks, Inc. due April 1, 2007, that has, through its representatives, negotiated the terms of
the Restructuring with the Company.
"Exchange Offer" means the offer by the Company to holders of the Notes to exchange Notes for
Common Stock, upon the terms set forth in the Restructuring Term Sheet.
"Minimum Tender Condition" means the condition to the consummation of the Exchange Offer that
there be validly tendered and not withdrawn not less than 98% in aggregate principal amount of the
Notes outstanding on the date of the expiration of the Exchange Offer.
"Notes" means the 5.0% Convertible Subordinated Notes due April 1, 2007, in a currently outstanding
aggregate principal amount of approximately $467,500,000, issued by the Company to the
Convertible Subordinated Notes Indenture.
"Outstanding Indebtedness" means all indebtedness outstanding under the Notes and all other claims, as
defined in Section 101 of the Bankruptcy Code, against the Company as of the date of the
commencement of a Prepackaged Proceeding.
"Person" means any individual, partnership, corporation, limited liability company, association, trust,
joint venture, unincorporated organization, governmental unit or other entity.
"Prepackaged Plan" means such plan of reorganization under Chapter 11 of the Bankruptcy Code,
consistent in all respects with the Restructuring Term Sheet, as may be filed by the Company in the
Prepackaged Proceeding to effectuate the Restructuring under the circumstances set forth herein.
"Proxy Solicitation" means the solicitation of the Company's Stockholders for the approval of the
Restructuring as set forth in the Restructuring Term Sheet.
"Required Creditors" means (i) with respect to any material economic term, Noteholders holding at least
66 2il 'Yo of the aggregate principal amount of, and accrued interest on, the Notes, and (ii) with respect to
any other term, Note holders holding a majority of the aggregate principal amount of, and accrued
interest on, the Notes.
"Restructuring Term Sheet" means that certain Restructuring Term Sheet attached hereto as Annex A,
which sets forth material terms and conditions of the Restructuring.
"Securities Act" means the Securities Act of 1933, as amended, and the rule and regulations promulgated
thereunder by the Securities and Exchange Commission (the "Commission").
"Transfer" means to, directly or indirectly, (i) sell, pledge, assign, encumber, grant an option with respect
to, transfer or dispose of any participation or interest (voting or otherwise) in or (ii) enter into an
agreement, commitment or other arrangement to sell, pledge, assign, encumber, grant an option with
respect to, transfer or dispose of any participation or interest (voting or otherwise) in, the subject matter
of the Transfer, or the act thereof.
A-2
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2. Agreement to Complete the Restructuring. Subject to the terms and conditions of this Agreement,
the parties to this Agreement agree to use commercially reasonable best efforts to wmplete the
Restructuring through the Exchange Offer and the Proxy Solicitation. If the Minimum Tender Condition
is not satisfied or waived or the Company is otherwise not able to consummate the Exchange Offer, but
acceptances of the Prepackaged Plan are received from holders of Outstanding Indebtedness in numbers
and holding amounts that are sufficient to confirm the Prepackaged Plan under applicable provisions of
chapter 11 of the Bankruptcy Code, then the parties agree to use commercially reasonable best efforts to
file, confirm and implement the Prepackaged Plan. The obligations of the parties hereunder are several
and not joint and no party hereto shall be responsible for the failure of any other party hereto to perform
its obligations hereunder.
3. The Company's Obligations to Support the Restructuring. a. The Company agrees to use its
commercially reasonable best efforts to commence the Exchange Offer and the Proxy Solicitation, to do
all things reasonably necessary and appropriate in furtherance thereof, including filing any related
documents with the Commission, and to use its commercially reasonable best efforts to complete the
same within the period set forth in the Restructuring Term Sheet.
b. The Company agrees that it will not waive the Minimum Tender Condition without the prior
written consent of the Board of Directors and the Required Creditors.
c. If all of the conditions to the Exchange Offer are not satisfied or waived by September 30, 2003, but
by that date acceptances of the Prepackaged Plan are received from holders of Outstanding Indebtedness
in numbers and holding amounts that are sufficient to confirm the Prepackaged Plan, then on such date
(or such earlier date as the Company may determine), the Company shall commence the Prepackaged
Proceeding and file and seek to confirm the Prepackaged Plan.
d. The Company shall not, without the prior written consent of the Required Creditors: {i) initiate any
exchange offer for the Notes, except the Exchange Offer described in the Restructuring Term Sheet, or
(ii) otherwise seek to restructure or recapitalize the Company, except through the Restructuring in
accordance with the Restructuring Term Sheet.
e. Subject to the terms and conditions of this Agreement, the Company shall issue to the Current
Common Holders warrants to purchase additional shares of Common Srock concurrently and in
connection with and conditioned upon the consummation of the Restructuring on the terms set forth in
the Restructuring Term Sheet.
f. Subject to the terms and conditions of this Agreement and the Restructuring Term Sheet, the
Company shall use its commercially reasonable best efforts to effect a reconstitution of its board of
directors concurrently and in connection with consummation of the Restructuring on the terms set forth
in the Restructuring Term Sheet, which reconstitution shall be a condition precedent to effectiveness of
the Restructuring through consummation of the Exchange Offer or consummation of the Prepackaged
Plan.
g. The Company further agrees that it will not object to, nor otherwise commence any proceeding to
oppose, the Restructuring and shall not take any action that is inconsistent with, or that would
unreasonably delay the consummation of, the Restructuring.
h. During the effectiveness of this Agreement, the Company shall not, without the prior consent of the
Required Creditors: (i) issue preferred stock, or (ii) incur any indebtedness for borrowed money that
would appear on a balance sheet in accordance with United States generally accepted accounting
principles.
A-3
1. Notwithstanding any provisions of this Agreement, nothing shall be deemed to prevent the Company
from taking, or failing to take, any action that it is obligated to take (or not to take) in the performance
of any fiduciary or similar duty which the Company owes to any other Person; it being understood and
agreed that if any such action (or failure to act) results in (i) an alteration of the terms of the
Restructuring not permitted by Section 7 or (ii) the Company giving written notice of its intention to
terminate this Agreement pursuant to Section 8(a)(v), then this Agreement and all of the obligations and
undertakings of the parties set forth in this Agreement, other than the obligations of the Company
contained in Section 26, shall terminate and expire.
4. Notcholdcrs' Obligations to Support the Restructuring. Subject to the terms and conditions of this
Agreement, so long as this Agreement is in effect:
a. Each Noteholder agrees with each of the other parties to this Agreement, in connection with and
conditioned upon consummation of the Restructuring upon the terms set forth in the Restructuring Term
Sheet: (i) to tender its Notes pursuant to and in accordance with the Exchange Offer and the other terms
and conditions of the Restructuring Term Sheet within ten business days following the commencement of
the Exchange Offer; (ii) to vote to accept the Prepackaged Plan within ten business days following their
receipt of the solicitation of their acceptance of the Prepackaged Plan; and (iii) subject to the terms of the
Restructuring Term Sheet, not to withdraw or revoke any of the foregoing unless and until this
Agreement is terminated in accordance with its terms.
b. Each Noteholder agrees, so long as this Agreement remains in effect, not to Transfer any of the
Notes held by it, in whole or in part, unless the transferee (i) is a party that the Noteholder reasonably
believes is an institutional accredited investor within the meaning of the Securities Act, (ii) makes a
written representation to the Company to the effect that it is such an institutional accredited investor,
and (iii) agrees in writing to be bound by the terms of this Agreement as though it had been an original
signatory hereto. In the event that any Noteholder Transfers any of the Notes, as a condition precedent
to such Transfer, each Noteholder agrees to cause the transferee to execute and deliver to the Company a
joinder agreement in customary form confirming the agreement of such transferee to be bound by the
terms of this Agreement as though it had been an original signatory hereto for so long as this Agreement
shall remain in effect. In the event that the Company's consent is required for any Transfer of the Notes,
the Company hereby agrees to grant such consent promptly in accordance with the requirements of this
Agreement. Any Transfer of the Notes in violation of the foregoing shall be deemed ineffective to
Transfer any right to accept or reject the Exchange Offer or to accept or reject the Prepackaged Plan,
which right shall remain with and he exercised only by the purported transferor.
c. Each Noteholder agrees that it will (i) not vote for, consent to, provide any support for, participate in
the formulation of, or solicit or encourage others to formulate any other tender offer, settlement offer, or
exchange offer for the Notes other than the Exchange Offer; and (ii) permit public disclosure, including
in a press release, of the contents of this Agreement, including, but not limited to, the commitments
contained in this Section 4 and the Restructuring Term Sheet, but not including information about the
specific Noteholder or the amount of such Noteholder's ownership of Notes.
d. Each Noteholder further agrees that, so long as this Agreement is effective and has not been
Terminated in accordance with Section 8 hereof, it will not object to, nor otherwise commence any
proceeding to oppose, the Restructuring, and will not take any action that is materially inconsistent with,
nor that would unreasonably delay the consummation of, the Restructuring in accordance with the terms
of the Restructuring Term Sheet. Accordingly, so long as this Agreement is in effect, each Noteholder
agrees that it shall not (i) object to confirmation of the Prepackaged Plan or otherwise commence any
action or proceeding to alter, oppose or add any other provision to the Prepackaged Plan or any other
A-4
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documents or agreements consistent with the Prepackaged Plan; (ii) object to the approval of any
disclosure statement that, within the purposes of this Agreement, describes the Prepackaged Plan (except
as such disclosure statement may contain information regarding the Committee, such Noteholder or such
Noteholder's holdings of the Notes that is inaccurate, and the Company fails upon notice promptly to
correct such inaccuracy); (iii) vote to accept, consent to, support, intentionally induce or participate
directly or indirectly in the formulation of any other plan of reorganization or liquidation proposed or
filed, or to be proposed or filed, in any Chapter 11 case for the Company that proposes to treat the
Current Common Holders in a manner that is inconsistent with, or less favorable than, the Restructuring
as contemplated by the Restructuring Term Sheet (except for the formulation of such a plan of
reorganization that may be proposed by such Noteholder or the Committee in the event that this
Agreement is Terminated in accordance with Section 8); (iv) commence or support any action or
proceeding to shorten or terminate the period during which only the Company has the exclusive right to
propose and/or to seek confirmation of a plan of reorganization for the Company (except as is provided
in Section 10); (v) directly or indirectly seek, solicit, support or encourage any other plan, sale, proposal
or offer of winding up, liquidation, reorganization, merger, consolidation, dissolution or restructuring of
the Company; or (vi) commence or support any action filed by any party in interest to appoint a trustee,
conservator, receiver or examiner for the Company, or to dismiss any Chapter 11 case, or to convert
such Chapter 11 case to a case under Chapter 7, or otherwise to commence an involuntary bankruptcy
case against the Company.
e. Nothing in this Agreement shall be deemed to prevent any Noteholder from taking, or failing to take,
any action that it is obligated to take (or not to take) in the performance of any fiduciary or similar duty
which the Noteholder owes to any other Person, including any duties that may arise as a result of any
Noteholder's appointment to any committee in the Prepackaged Proceeding or any other bankruptcy or
insolvency proceeding.
f. Each Noteholder further agrees that any Notes acquired by such Noteholder following the date of
this Agreement shall be subject to the terms and conditions of this Agreement and shall be subject to the
same treatment in the Restructuring as the Notes held by such Noteholder as of the date hereof.
5. Additional Obligations to Support the Restructuring. Subject to the terms and conditions of this
Agreement, so long as this Agreement is in effect:
a. Subject to Section 2 of this Agreement, each party to this Agreement agrees that so long as it is the
beneficial owner of all or any portion of either a "claim" or an "equity security," each as defined in
Section 101 of the Bankruptcy Code (such ownership interest, a "Claim"), it will: (i) take all reasonable
steps to support the Prepackaged Plan and defend the adequacy of pre-petition disclosure and solicitation
procedures in connection with the Prepackaged Plan and the Exchange Offer and, to the extent
necessary, support the adequacy of any post-petition disclosure statement that may be required by the
bankruptcy court and circulated in connection herewith or therewith; (ii) from and after the date hereof,
not agree to, consent to, provide any support to, participate in the formulation of, or vote for any plan of
reorganization or liquidation of the Company, other than the Prepackaged Plan; and (iii) agree to permit
disclosure in the Prepackaged Plan or any document ancillary thereto (hereinafter a "Reorganization
Document") or any necessary filings by the Company with the Commission or other regulatory body
having jurisdiction over matters concerning the contents of this Agreement (excluding information about
the specific Noteholder or the amount of any Noteholder's ownership of Notes).
h. Each party to this Agreement agrees that so long as it is a holder of a Claim, it shall not object to, or
otherwise commence any proceeding to oppose or alter, the Prepackaged Plan or any other
A-5
Reorganization Document and shall not take any action that is inconsistent with, or that would
unreasonably delay or impede approval or confirmation of, the Prepackaged Plan or any of the
Reorganization Documents. Without limiting the generality of the foregoing and except as otherwise
permitted by a Noteholder as provided in the parenthetical in Section 4(d)(iii) hereof, no party may
directly or indirectly seek, solicit, support or encourage any other plan, sale, proposal or offer of
dissolution, winding up, liquidation, reorganization, merger, consolidation, liquidation or restructuring
of the Company that could reasonably be expected to prevent, delay or impede the Exchange Offer,
Proxy Solicitation, confirmation of the Prepackaged Plan or approval of any Reorganization Document.
c. Each of the Noteholders agrees to waive its respective rights and remedies under the Convertible
Subordinated Notes Indenture and related documents or applicable law in respect of or arising out of any
"Default" (as defined in such documents) or "Event of Default" (as defined in such documents) arising
under the Convertible Subordinated Notes Indenture, in each case until this Agreement is terminated as
provided in Section 8. If this Agreement is terminated as provided in Section 8, the agreement of the
Noteholders so to waive shall automatically and without further action terminate and be of no force and
effect, it being expressly agreed that the effect of such termination shall be to permit each of them to
exercise any rights and remedies immediately; provided, however, that nothing herein shall be construed
as a waiver by the Company of any right it may have as a "debtor" under the Prepackaged Proceeding or
other bankruptcy proceeding or by any Creditor to seek adequate protection retroactive to the date of
filing of the Prepackaged Proceeding or other bankruptcy proceeding.
6. Effectiveness of this Agreement. The effectiveness of this Agreement, and the respective obligations
of the parties under this Agreement, are conditioned upon the receipt of the consent and signature hereto
of the Company and of Notebolders holding at least 66 7!3% of the aggregate principal amount of the
Notes, unless such minimum amount is otherwise waived in writing by the Company and the
Noteholders.
7. Amendments to the Restructuring Term Sheet. The terms of this Lock-Up Agreement, including
without limitation the Restructuring Term Sheet, shall not be amended, modified or altered without the
prior written consent of the Company and the Required Creditors. Furthermore, neither this Section 7
nor the definition of "Required Creditors" herein shall be amended, modified or altered without the
prior written consent of the Company and Note holders holding at least 663% of the aggregate
principal amount of, and accrued interest on, the Notes. Any Noteholder that does not provide such
prior written consent to an amendment, modification or alteration of a material economic term of this
Lock-Up Agreement, including without limitation the Restructuring Term Sheet, or to this Section 7 or
the definition of "Required Creditors" herein, which amendment, modification or alteration otherwise
satisfies the requirements of this Section 7 and becomes effective, shall be relieved of all obligations under
this Lock-Up Agreement. Notwithstanding the foregoing, the Company may extend the expiration date
of the Exchange Offer to any date not later than September 30, 2003, if at the time of any such extension
the conditions to closing set forth in the Exchange Offer shall not have been satisfied or waived as
provided in this Agreement.
S. Termination of Agreement. Notwithstanding anything to the contrary set forth in this Agreement:
a. Unless the Restructuring, consistent in all respects with the Restructuring Term Sheet, has been
consummated as provided in this Agreement, this Agreement and all of the obligations and undertakings
of the parties set forth in this Agreement, other than the obligations of the Company contained in Section
26 which shall survive, shall terminate and expire upon the earliest to occur of:
(i) October 1, 2003, unless a Prepackaged Proceeding has been filed as set forth in Section 3(c);
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(ii) the date (the "Prepackaged Proceeding Confirmation Deadline") that is sixty (60) days
following the date of commencement of the Prepackaged Proceeding if, by that date, an order
has not been entered confirming the Prepackaged Plan;
(iii) a material alteration by the Company of the terms of the Restructuring, including, without
limitation, the filing by the Company with a bankruptcy court of a Chapter 11 plan of
reorganization that is inconsistent in any respect with the Restructuring Term Sheet and not
otherwise permitted under Section 7;
(iv) receipt of written notice from either the Company or the Required Creditors of the intention
to terminate this Agreement upon the occurrence of a material breach, in the case of notice by
the Company, by any Noteholder and, in the case of notice by the Required Creditors, by the
Company, of its respective obligations, representations or warranties under this Agreement
that is not, by its terms, curable or that is, by its terms, curable and is not cured within 30
days after notice of such breach;
(v) receipt of written notice from the Company of its intention to terminate this Agreement upon
a determination by the Board of Directors that such termination is in the best interests of the
Company;
(vi) the thirtieth day following the filing of any involuntary bankruptcy or other involuntary
insolvency case or proceeding involving the Company, if such proceeding has not been
dismissed by such day, unless the Company files the Prepackaged Plan in such involuntary
bankruptcy case and no other event of Termination occurs hereunder;
(vii) the Prepackaged Proceeding being dismissed or converted to a case under Chapter 7 of the
Bankruptcy Code;
(viii) a material adverse change occurs in the business operations, assets and liabilities, or financial
condition of the Company and its subsidiaries, taken as a whole, after the date of this
Agreement, but not including any material adverse change (A) that occurs solely by reason of
the filing of the Prepackaged Proceeding, or (B) that arises out of actions required to be taken
by the Company pursuant to this Agreement or the Restructuring Term Sheet; and
(ix) receipt of written notice from the Required Creditors terminating this Agreement due to the
Company's continuing failure to pay, as required, the fees and expenses incurred by Chanin
Capital Partners or Milbank, Tweed, Hadley & McCloy, LLP, within the cure periods
provided for such a breach as set forth in the relevant agreements between the Company and
such parties executed in anticipation of the Restructuring.
9. Representations and Warranties. a. Each of the signatories to this Agreement represents and
warrants to the other signatories to this Agreement that:
(i) if an entity, it is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate, partnership or other power and
authority to enter into this Agreement and to carry out the transactions contemplated by, and
perform its respective obligations under, this Agreement;
(ii) the execution and delivery of this Agreement and the performance of its obligations hereunder
have been duly authorized by all necessary corporate, partnership or other action on its part;
(iii) the execution, delivery and performance by it of this Agreement do not and shall not
(A) violate any provision of law, rule or regulation applicable to it or any of its affiliates or its
certificate of incorporation or bylaws or other organizational documents or those of any of irs
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subsidiaries or (B) conflict with, result in the breach of or constitute (with due notice or lapse
of time or both) a default under any material contractual obligations to which it or any of its
affiliates is a party or under its certificate of incorporation, bylaws or other governing
instruments;
(iv) the execution, delivery and performance by it of this Agreement do not and shall not require
any registration or filing with, the consent or approval of, notice to, or any other action with
respect to, any Federal, state or other governmental authority or regulatory body, except for
(A) the registration under the Securities Act of the shares of the Common Stock to be issued in
the Exchange Offer and such consents, approvals, authorizations, registrations or
qualifications as may be required under the state securities or Blue Sky laws in connection
with the issuance of those shares, (B) the filing with the Commission of a proxy statement
and/or registration statement in connection with the Proxy Solicitation, and (C) such other
filings as may be necessary or required by the Commission;
(v) assuming the due execution and delivery of this Agreement by each of the other parties hereto,
this Agreement is the legally valid and binding obligation of it, enforceable against it in
accordance with its terms (except insofar as indemnification for liability under securities and
similar laws may be unenforceable as against public policy); and
(vi) it has been represented by counsel in connection with this Agreement and the transactions
contemplated by this Agreement.
b. Each of the Noteholders further represents and warrants to the other signatories to this Agreement
that:
(i) as of the date of this Agreement, such Noteholder is the beneficial owner of, or the investment
adviser or manager for the beneficial owners of, the principal amount at maturity of the
Notes, set forth opposite such Noteholder's name on Schedule A hereto, with the power and
authority to vote and dispose of such Notes;
(ii) such Noteholder has reviewed, or has had the opportunity to review, with the assistance of
professional and legal advisors of its choosing, sufficient information necessary for such
Noteholder to decide to tender its Notes pursuant to the Exchange Offer and to accept the
proposed terms of the Prepackaged Plan as set forth in the Restructuring Term Sheet;
(iii) as of the date of this Agreement, such Noteholder is not aware of any event that, due to any
fiduciary or similar duty to any other Person, would prevent it from taking any action
required of it under this Agreement; and
(iv) such Noteholder is an institutional accredited investor, and will remain so during the term of
this Agreement, as such term is used under the Securities Act.
10. Preparation of Restructuring Documents. Notwithstanding anything to the contrary contained in
this Agreement, the obligations of the signatories to this Agreement shall be subject to the preparation of
definitive documents (in form and substance reasonably satisfactory to each of the parties hereto and
their respective counsel) relating to the transactions contemplated by this Agreement, including, without
limitation, the documents relating to the Exchange Offer, the Prepackaged Plan, the Proxy Solicitation
and each Reorganization Document, which documents shall be in all respects materially consistent with
this Agreement (including, without limitation, the Restructuring Term Sheet) and shall include
appropriate releases. If a case under Chapter 11 of the Bankruptcy Code is filed by or against the
Company, it shall use its best efforts to obtain an order entered within ten days after the commencement
of such Chapter 11 case terminating solely for the benefit of the Committee and the Noteholders the
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Company's exclusive rights to file a plan of reorganization and to solicit acceptances of any such filed
plan of reorganization. If such an order in not obtained by such date, then any Noteholder, the
Committee, or any official committee appointed in such Chapter 11 case of which a Noteholder is a
member shall have the right to seek termination of such exclusivity rights solely for the benefit of the
Committee and the Noteholders in accordance with Bankruptcy Code Section 1121 (d).
11. Good Faith. Each of the signatories to this Agreement agrees to cooperate in good faith with each
other to facilitate the performance by the parties of their respective obligations hereunder and the
purposes of this Agreement. Each of the signatories to this Agreement further agrees to review and
comment upon the definitive documents in good faith and, in any event, in all respects consistent with
the Restructuring Term Sheet.
12. Amendments and Modifications. Except as otherwise expressly provided in this Agreement, this
Agreement shall not be amended, modified or supplemented, except in writing signed by the Company
and the Required Creditors; provided, however, that without the prior written consent of each
Noteholder, there shall be no alteration that adversely affects such party in a manner inconsistent with
the other Noteholders.
13. No Waiver. Each of the signatories to this Agreement expressly acknowledges and agrees that,
except as expressly provided in this Agreement, nothing in this Agreement is intended to, nor does, in
any manner waive, limit, impair or restrict the ability of any party to this Agreement to protect and
preserve all of its rights, remedies and interests, including, without limitation, with respect to its
ownership of claims against or equity securities of the Company.
14. Further Assurances. Each of the signatories to this Agreement hereby further covenants and agrees
ro execute and deliver all further documents and agreements and take all further action that may be
commercially reasonably necessary or desirable in order to enforce and effectively implement the terms
and conditions of this Agreement.
15. Complete Agreement. This Agreement, including the Schedule hereto, constitutes the complete
agreement between the signatories to this Agreement with respect to the subject matter hereof and
supersedes all prior and contemporaneous negotiations, agreements and understandings with respect to
the subject matter hereof. The provisions of this Agreement shall be interpreted in a reasonable manner
to effect the intent of the signatories to this Agreement.
16. Notices. All notices, requests, demands, claims and other communications hereunder shall be in
writing and shall be (a) transmitted by hand delivery, or (b) mailed by first class, registered or certified
mail, postage prepaid, or (c) transmitted by overnight courier, or (d) transmitted by telecopy, and in each
case, if to the Company, at the address set forth below:
Redback Networks, Inc.
300 Holger Way
San Jose, California 95134
Telephone: (408) 750-5000
Fax: (408) 750-5599
Attention: Tom Cronan
A-9
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Telephone: (650) 493-9300
Fax: (650) 845-5000
Attention: Daniel J. Weiser
and
tv1organ Lewis & Bockius LLP
One Market
Spear Street Tower
San Francisco, California 94105
Telephone: (415) 442-1000
Fax: (415) 442-1001
Attention: Larry Engel
if to a Noteholder, to the address set forth on the signature pages to this Agreement, with a copy to the
Noteholders' counsel:
Milbank, Tweed, Hadley & McCloy, LLP
601 South Figueroa Street, 30th Floor
Los Angeles, California 90017-5735
Telephone: (213) 892-4501
Fax: (213) 629-.5063
Attention: Robert Moore
Notices mailed or transmitted in accordance with the foregoing shall be deemed to have been given upon
receipt.
17. Governing Law. This Agreement shall he governed in all respects by the laws of the State of
California, except to the extent such law is preempted by the Bankruptcy Code.
18. Jurisdiction. By its execution and delivery of this Agreement, each of the signatories to this
Agreement irrevocably and unconditionally agrees that any legal action, suit or proceeding against it with
respect to any matter under or arising out of or in connection with this Agreement or for recognition or
enforcement of any judgment rendered in any such action, suit or proceeding, shall be brought (a) in the
United States Bankruptcy Court in Delaware if the Company has commenced a case under Chapter 11 of
the Bankruptcy Code, or (b) in a Federal or state court of competent jurisdiction in the State of
California located in the County of Contra Costa if the Company has not commenced a case under
Chapter 11 of the Bankruptcy Code. By its execution and delivery of this Agreement, each of the
signatories to this Agreement irrevocably accepts and submits itself to the jurisdiction of the United
States Bankruptcy Court in Delaware or a court of competent jurisdiction in the State of California, as
applicable under the preceding sentence, with respect to any such action, suit or proceeding.
19. Consent to Service of Process. Each of the signatories to this Agreement irrevocably consents to
service of process by mail at the address listed with the signature of each such party on the signature
pages to this Agreement. Each of the signatories to this Agreement agrees that its submission to
jurisdiction and consent to service of process by mail is made for the express benefit of each of the other
signatories to this Agreement.
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20. Specific Performance. lt is understood and agreed by each of the signatories to this Agreement
that money damages would not be a sufficient remedy for any breach of this Agreement by any party and
each non-breaching party shall be entitled to specific performance, injunctive, rescissionary or other
equitable relief as remedy for any such breach.
21. Headings. The headings of the sections, paragraphs and subsections of this Agreement are
inserted for convenience only and shall not affect the interpretation hereof.
22. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of the
signatories to this Agreement to this Agreement and their respective successors, permitted assigns, heirs,
executors, administrators and representatives. The agreements, representations and obligations of the
undersigned parties under this Agreement are, in all respects, several and not joint.
23. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page by facsimile shall be effective as delivery of a manually executed
counterpart. Any Noteholder may become party to this Agreement on or after the date of this Agreement
by executing a signature page to this Agreement.
24. No Third-Party Beneficiaries. Unless expressly stated in this Agreement, this Agreement shall be
solely for the benefit of the signatories to this Agreement, and no other Person or entity shall be a third-
party beneficiary hereof.
25. No Solicitations. This Agreement is not intended to be, and each signatory to this Agreement
acknowledges that it is not, a solicitation of the acceptance or rejection of any Prepackaged Plan of
reorganization for the Company pursuant to Section 1125 of the Bankruptcy Code.
26. Indemnification Obligations. The Company agrees that it shall fully indemnify each Noteholder
and each and every other person by reason of the fact that such person is or was a director, officer,
employee, agent, shareholder, counsel, financial advisor or other authorized representative of any of the
foregoing (all of the foregoing Noteholders and other persons above, the "Indemnitees") against any
claims, liabilities, actions, suits, damages, fines, judgments or expenses (including reasonable attorney's
fees), brought or asserted by anyone (other than the Company, the Indemnitees or any entity to whom
any of the Indemnitees owe a fiduciary obligation with respect to asserted violations of this Agreement or
any other agreement with the Company entered into by such Indemnitee in connection with the
Restructuring) arising during the course of, or otherwise in connection with or in any way related to, the
negotiation, preparation, formulation, solicitation, dissemination, implementation, confirmation and
consummation of the Restructuring, provided, however, that this indemnity shall not extend to any
claims asserted by any Noteholder against any other Indemnitee, and provided, further, that the
foregoing indemnification shall not apply to any tax liabilities that result solely from the conversion of
such Noteholders' Notes into the equity of the Company as set forth in the Restructuring Term Sheet and
any liabilities to the extent arising solely from the gross negligence or willful misconduct of any
Indemnitee as determined by a final judgment of a court of competent jurisdiction. If any claim, action or
proceeding is brought or asserted against an Indemnitee in respect of which indemnity may be sought
from the Company, the Indemnitee shall promptly notify the Company in writing, and the Company
shall assume the defense thereof, including the employment of counsel reasonably satisfactory ro the
Indemnitee, and the payment of all expenses. The Indemnitee shall have the right to employ separate
counsel in any such claim, action or proceeding and to participate in the defense thereof, bur the fees and
expenses of such counsel shall be at the expense of the Indemnitee unless and until (a) the Company has
A-11
agreed to pay the fees and expenses of such counsel, or (b) the Company shall have failed promptly to
assume the defense of such claim, action or proceeding and employ counsel reasonably satisfactory to the
Indemnitee in any such claim, action or proceeding or (c) the named parties to any such claim, action or
proceeding (including any impleaded parties) include both the Indemnitee and the Company, and the
Indemnitee reasonably believes based upon written advice of counsel that the joint representation of the
Company and the Indemnitee will result in a conflict of interest (in which case, if the Indemnitee notifies
the Company in writing that it elects to employ separate counsel at the expense of the Company, the
Company shall not have the right to assume the defense of such action or proceeding on behalf of the
Indemnitee).
27. Consent to Company's Representation by Wilson Sonsini Goodrich & Rosati Professional
Corporation and Morgan Lewis & Bockius LLP. Each of the parties hereby acknowledges and agrees
that each of Wilson Sonsini Goodrich & Rosati Professional Corporation and Morgan Lewis & Bockius
LLP, each special counsel to the Company in connection with the Restructuring, has in the past rendered,
and may in the future render, legal services to the Company and one or more of the undersigned holders
of Notes. Each of the undersigned consents to and agrees to such representation of the Company in
connection with the Restructuring and such party or parties in contexts other than the Restructuring and
waives any right to object to such representation on the basis of any conflict that may exist or arise by
reason thereof.
28. Consideration. It is hereby acknowledged by each of the signatories to this Agreement that no
consideration (other than the obligations of the other parties under this Agreement) shall be due or paid
to the parties for their agreement to support the Prepackaged Plan in accordance with the terms and
conditions of this Agreement, other than the Company's agreement to use commercially reasonable best
efforts to obtain approval of confirmation of the Prepackaged Plan in accordance with the terms and
conditions of this Agreement.
[Signatures begi11 on next page/
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed and delivered by
its duly authorized officers as of the date first written above.
REDBACK NElWORKS INC.
By:
----------------------------------
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Schedule A
Noteholders and Aggregate Principal Amount of Notes Held
Noteholder:
By: _______________ _
Its:-----------------
Aggregate Principal Amount of Notes held by such Noteholder as beneficial owner (or as investment
manager or advisor for the beneficial owner):
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Annex A
Redback Networks Inc.
Restructuring term sheet
This Restructuring Term Sheet is a part of and made subject to that certain Lock-Up Agreement (the
"Lock-Up Agreement") dated as of July 6, 2003, by and between Redback Networks Inc. (the
"Company" or the "Issuer") and the "Noteholders" (as defined in the Lock-Up Agreement).
Issuer:
Issue:
Exchange
Offer:
Minimum
Condition:
Stockholder
Approval:
Redback Networks lnc.
Common Stock, par value $0.001 per share.
If 98% or more of the Issuer's then outstanding 5.0% Subordinated Convertible Notes
due 2007 ("Old Notes") are accepted in the exchange offer: (a) holders of Old Notes
validly tendered in the exchange offer will receive shares of Common Stock which would
equal in the aggregate 95% of the Common Stock outstanding on a fully diluted basis
(excluding shares of Common Srock underlying options referred to following the caption
"Employee Equity Reserve") immediately after consummation of the restructuring,
assuming 100% of such Old Notes are validly tendered in the exchange offer (and
proportionately less in the aggregate if fewer than all such Old Notes are so tendered)
and after giving effect to the reverse stock split mentioned below; and (b) then existing
Common Stockholders (record date to be agreed upon) will (i) retain 5% of the
Common Stock to be outstanding on a fully diluted basis (excluding shares of Common
Stock underlying options referred to following the caption "Employee Equity Reserve")
immediately after consummation of the restructuring, assuming the valid tender of
100% of such Old Notes in the exchange offer (and proportionately more in the
aggregate if fewer than all such Old Notes are so tendered), after giving effect to the
reverse stock split mentioned below, (ii) receive seven-year warrants to purchase 5.0%
of the Issuer's fully diluted common stock at an exercise price equal to an Enterprise
Value of $250 million, and (iii) receive seven-year warrants to purchase 5.0/c, of the
Issuer's fully diluted Common Srock at an exercise price equal to an Enterprise Value of
$500 million. lt is agreed that the Company will incorporate as part of this transaction a
reverse stock split in an amount to be determined between the Company and the Ad
Hoc Committee of Holders of the Old Notes (the "Committee").
The exchange offer shall be conditioned upon the valid tender of a minimum of 98% of
the aggregate principal amount of outstanding Old Notes.
It is expected that consummation of the exchange offer will require the approval of the
Issuer's stockholders under applicable law, which is expected to require the filing and
clearance with the SEC of a proxy statement or combined proxy/registration statement.
A-15
Prepackaged
Plan:
Board of
Directors:
Employee
Equity
Reserve:
Restrictive
Covenants:
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Contemporaneously with the exchange offer, the Issuer will solicit from relevant classes
of claims and interests acceptances of a "prepackaged" plan of reorganization (the
"Plan") that would be consistent with this Restructuring Term Sheet and would
implement in a Chapter 11 case for the Company (a "Case") the restructuring
contemplated hereunder. If by September 30, 2003, the Company either (i) is not able
to satisfy the Minimum Condition or obtain Stockholder Approval, as described above,
or (ii) otherwise determines that it is in its interest to commence a Chapter 11 case, then
the Company shall commence a Case and shall file and use its best efforts to seek
confirmation of the Plan in such Case within the timeframe contemplated in the
"Conditions to Noteholder Support," below.
~ The Plan would be consistent in all respects with this Restructuring Term Sheet and
in form and substance reasonably acceptable to the Committee.
~ Unless any of the Company's material U.S. real estate leases are at current market
terms as of the commencement of the Case or before the bankruptcy court hearing on
the Company's motion to reject such leases, the Plan will provide for the rejection of
all such leases pursuant to applicable provisions of the Bankruptcy Code.
Upon consummation of the exchange offer, the board of directors of the Issuer initially
will be composed of nine members, including the Issuer's then CEO and CFO, seven of
which directors shall be nominated by tendering Noteholders (four of whom shall be
reasonably acceptable to the current Board of Directors of the Company).
~ The Committee shall conduct a customary process for the selection of director
candidates to the Board of Directors for election by the Noteholders, with the goal
and expectation that such process shall conclude in a timeframe that will allow such
candidates to be disclosed as part of the tender offer process to implement this
Restructuring Term Sheet and to solicit acceptances for the Plan.
As part of the restructuring, the Issuer's stockholders (and the other classes of claims
and equity securities from whom acceptance of the Plan will be solicited) shall be asked
to approve a reservation of a pool of options exercisable for Common Stock of the
post-restructuring Issuer, covering up to an additional 18.0% of the Common Stock of
the Issuer (compared with the current pool of options which represents 39% of the
Common Stock of the Issuer), to be outstanding immediately following the
restructuring on a fully diluted basis. The aggregate exercise price of such options shall
be struck at fair market value on the date of the grant of such stock options or, if
granted during a Case, at an amount equal to the equity value of the Issuer implied by
its reorganized value. The grant of such options shall be at the discretion of the Issuer's
post-restructuring Board of Directors.
The Issuer shall agree, pending consummation of the exchange offer, to a limitation on
the incurrence of indebtedness for borrowed money that would be included on a
balance sheet prepared in accordance with United States generally accepted accounting
principles and to a prohibition on the issuance of any preferred stock, unless otherwise
agreed in writing by the Committee.
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Conditions to
Noteholder
Support: Any agreement entered into between the Company and a Noteholder based upon,
arising under or in connection with, or in support of the implementation of the
restructuring contemplated hereunder that would require or commit such Noteholder
(i) to refrain from taking any action seeking to commence an involuntary Case against
the Company, (ii) to vote to accept the Plan in a Case, (iii) not to oppose confirmation
of the Plan, or (iv) not to file, support, vote in favor of, or seek confirmation of a plan
of reorganization in a Case that is inconsistent with the Plan or that proposes to treat
the holders of shares of Common Stock in a manner that is inconsistent with, or less
favorable than, the restructuring contemplated hereunder, shall terminate and be of no
force or effect if: (a) either (i) the exchange offer contemplated hereunder has not been
consummated by September 30, 2003, and a Case has not been commenced, or (ii) a
Case has been commenced by such date, but the Company has failed to file the Plan in
that Case by that date; (b) within ten days following the commencement of a Case, an
order has not been entered in such Case terminating, solely for the benefit of the
Committee and the Noteholders, the Company's exclusive rights to file a plan of
reorganization and to solicit acceptances of any such filed plan of reorganization
(provided, however, that if this is the sole condition that then has failed to be satisfied,
the Noteholders shall continue to be bound by the terms of the Lock-Up Agreement
other than any term prohibiting the Committee or the Noteholders from seeking relief
from such exclusive rights); (c) the Company files a plan of reorganization in a Case
that is inconsistent in any respect with this Restructuring Term Sheet or the
restructuring contemplated hereunder; or (d) by the date that is sixty days following
the date upon which a Case has been commenced, an order has not been entered
confirming the Plan.
A-17
FORM OF
AMENDMENT TO LOCK-UP AGREEMENT
This AMENDMENT TO LOCK-UP AGREEMENT (this "Amendment'') is made and entered into as of
September , 2003 by and among Redback Networks Inc., a Delaware corporation (the "Company")
and each Noteholder that executes a counterpart signature page to this Amendment. Capitalized terms
used and not defined in this Amendment shall have the same meanings assigned to them in the Lock-Up
Agreement (together with the Restructuring Term Sheet attached as Annex A thereto, collectively, the
"Lock-Up Agreement"), by and among the Company and the signatories thereto, which is being
amended by this Amendment.
WHEREAS, the Company and the Noteholders desire to amend the Lock-Up Agreement as set forth in
this Amendment on the terms and subject to the conditions set forth below; and
WHEREAS, Noteholders holding a majority of the aggregate principal amount of, and accrued interest
on, the Notes represent the Required Creditors for purposes of amending the Lock-Up Agreement as set
forth herein.
NOW, THEREFORE, in consideration of the premises and agreements, provisions and covenants set
forth herein, the parties hereto agree as provided below. Any terms of the Lock-Up Agreement in conflict
or otherwise inconsistent with this Amendment are hereby superseded and replaced by the terms of this
Amendment.
1. Prepackaged Plan. In the event that the Company satisfies the conditions to the Exchange Offer on
or before October 31, 2003 (the "New Deadline"), the Company shall have no obligation to commence
a Case. In the event that by the New Deadline the Company has failed to satisfy the conditions to the
Exchange Offer but has secured acceptances of the Prepackaged Plan from holders of Outstanding
Indebtedness in numbers and holding amounts that are sufficient to confirm the Prepackaged Plan under
applicable provisions of chapter 11 of the Bankruptcy Code (the "Required Acceptances"), then on or
before November 3, 2003, the Company shall commence a Case in which it shall file the Prepackaged
Plan, and the Company shall use its commercially reasonable best efforts to confirm before the
Prepackaged Proceeding Confirmation Deadline and implement the Prepackaged Plan.
2. Pre-Negotiated Proceeding. In the event that by the New Deadline the Company has failed to
satisfy the conditions to the Exchange Offer and has failed to secure the Required Acceptances, then on
or before November 3, 2003, the Company shall commence a Case and file a pre-negotiated plan of
reorganization under Chapter 11 of the Bankruptcy Code, consistent in all material respects with the
Restructuring Term Sheet (a "Pre-Negotiated Plan"), to effectuate the Restructuring, and the Company
shall use its commercially reasonable best efforts to confirm before February 27, 2004 (the "Pre-
Negotiated Proceeding Confirmation Deadline") and implement such Pre-Negotiated Plan. --
3. Termination. The Lock-Up Agreement shall remain effective until and terminate and expire upon
November 3, 2003, unless: (a) on or before that date, (i) the Company has commenced a Case and filed
the Prepackaged Plan, in which case the Lock-Up Agreement shall terminate on the Prepackaged
Proceeding Confirmation Deadline, or (ii) the Company has commenced a Case and filed the Pre-
Negotiated Plan, in which case the Lock-Up Agreement shall terminate on the Pre-Negotiated Proceeding
Confirmation Deadline; or (b) any other condition or event set forth in Section 8(a) of the Lock-Up
Agreement, excluding Section 8(a)(i) and Section 8(a)(ii), has occurred.
4. Amendment and References. Each reference in the Lock-Up Agreement to "this Agreement", "the
Lock-Up Agreement", the "Restructuring Term Sheet", "hereunder", "hereof", "herein" or words
of like import shall mean and be a reference to the Lock-Up Agreement as amended by this Amendment.
A-18
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The Lock-Up Agreement is amended only as specifically amended by this Amendment and shall remain in
full force and effect except as otherwise provided herein. By executing this Amendment, each of the
signatories to this Amendment agrees to be bound by the Lock-Up Agreement as though it had been an
original signatory thereto, except as amended by this Amendment.
5. Representations and Warranties. a. Each of the signatories to this Amendment represents and
warrants to the other signatories to this Amendment that:
(i) if an entity, it is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate, partnership or other power and authority
to enter into this Amendment and to carry out the transactions contemplated by, and perform its
respective obligations under, this Amendment;
(ii) if an entity, the execution and delivery of this Amendment and the performance of its obligations
hereunder have been duly authorized by all necessary corporate, partnership or other action on its part;
(iii) the execution, delivery and performance by it of this Amendment do not and shall not (A) violate
any provision of law, rule or regulation applicable to it or any of its affiliates or its certificate of
incorporation or bylaws or other organizational documents or those of any of its subsidiaries or (B)
conflict with, result in the breach of or constitute (with due notice or lapse of time or both) a default
under any material contractual obligations to which it or any of its affiliates is a party or under its
certificate of incorporation, bylaws or other governing instruments; and
(iv) assuming the due execution and delivery of this Amendment by each of the other parties hereto,
this Amendment is the legally valid and binding obligation of it, enforceable against it in accordance with
its terms (except insofar as indemnification for liability under securities and similar laws may be
unenforceable as against public policy).
b. Each of the Note holders further represents and warrants to the other signatories to this Amendment
that as of the date of this Amendment, such Noteholder is the beneficial owner of, or the investment
adviser or manager for the beneficial owner(s) of, the principal amount at maturity of the Notes, set
forth below such Noteholder's name on Schedule A hereto, with the power and authority to vote and
dispose of such Notes.
6. No Waiver. Each of the signatories to this Amendment expressly acknowledges and agrees that,
except as expressly provided in this Amendment, nothing in this Amendment is intended ro, nor does, in
any manner waive, limit, impair or restrict the ability of any party to this Amendment to protect and
preserve all of its rights, remedies and interests, including, without limitation, with respect to its
ownership of claims against or equity securities of the Company.
7. Miscellaneous. This Amendment shall be governed in all respects by the laws of the State of
California, except to the extent such law is preempted by the Bankruptcy Code. This Amendment is not
intended to be, and each signatory to this Amendment acknowledges that it is not, a solicitation of the
acceptance or rejection of any Prepackaged Plan of reorganization for the Company pursuant to Section
1125 of the Bankruptcy Code. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page of this Amendment by facsimile shall
be effective as delivery of a manually executed counterpart.
[SIGNATURE PAGES FOLLOW]
A-19
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed by its duly
authorized officers as of the date first written above.
REDBACK NETWORKS INC.
By:------------------
Its:------------------
A20
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Schedule A
Noteholders and Aggregate Principal Amount of Notes Held
Noteholder:
By:----------------
Its:----------------
Aggregate Principal Amount of Notes held by such Noteholder as beneficial owner (or as investment
manager or advisor for the beneficial owner):
A-21
In re Adelphia Communications Corporation, eta/., Case No. 02-41729 (Bankr. S.D.N.Y. 2002).
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Final Version
PLAN SUPPORT AGREEMENT CONCERNING FOURTH AMENDED JOINT
PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE
BANKRUPTCY CODE FOR ADELPHIA COMMUNICATIONS
CORPORATION, et al. (the "Debtors")
Following successful negotiations between the Debtors, the Ad Hoc Adelphia Trade Claims
Committee (the ''Trade Committee"), and the members of the Trade Committee that are a party to
this Agreement (solely in their capacity as members of the Trade Committee and as the holders of
Operating Company Trade Claims (defined below), the "Trade Committee Members" and
collectively with the Debtors and the Trade Committee, the "Parties"), the Parties have reached
agreement on the terms and conditions of certain modifications to the Debtors' Fourth Amended
Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated November 21, 2005
(as filed, the "Existing Plan" and as so modified, including in accordance with the terms of this
Agreement, the "Modified Plan") that, subject to satisfaction of the provisions hereof, will result in
the full support of the Trade Committee and the Trade Committee Members with respect to the
treatment of Operating Company Trade Claims under the Modified Plan. In connection therewith,
this plan support agreement (the "Agreement"), dated as of the lOth day of April 2006, sets forth the
terms and conditions pursuant to which the Trade Committee and the Trade Committee Members
will support the Modified Plan:
Capitalized terms used but not defined herein have the meanings given to them in the
Existing Plan.
1. General Structure: The terms and structure of the Modified Plan will be the same as
those contained in the Existing Plan, as (i) contemplated to be modified by this Agreement, (ii)
necessary to reflect, in the Debtors' sole discretion, changes to subject one or more of the Debtors or
Debtor Groups, identified in the list provided to counsel to the Trade Committee on April 10, 2006
(the "Additional Debtor Group(s)"), to holdback provisions similar to those contained in the Existing
Plan with respect to the Arahova and FrontierVision Holdco Debtor Groups, and (iii) otherwise may
be modified by the Debtors in a manner that does not adversely affect the treatment of Trade Claims
held against the Operating Companies (as defined in Paragraph 5 below) (collectively, such Trade
Claims are referred to hereinafter as "Operating Company Trade Claims"). Except as provided in
Paragraph 2(b) below, the Debtors shall not amend or modify the Modified Plan in any manner that
adversely affects the treatment of Operating Company Trade Claims contemplated by the Plan
Modifications (as defined below) without the prior written consent of the Trade Committee (which
consent shall not be unreasonably withheld or delayed so long as the modifications do not adversely
impact the Trade Committee's economic interest), unless: (w) such amendment or modification is
required as a result of a decision of the Bankruptcy Court, or the Debtors conclude after due inquiry
and analysis as is reasonable under the circumstances that: (x) prior to Bankruptcy Court approval of
this Agreement, it is necessary to further amend or modify the Modified Plan in order to satisfy the
legal entitlements of holders of Claims that are structurally or legally senior or pari passu in priority
to Operating Company Trade Claims for the purpose of obtaining confirmation of the Modified Plan
(and provided that the Debtors inform the Trade Committee in writing promptly after the Debtors
make such determination), provided however that in connection with any modification or
amendment under this subparagraph (x), in no event shall the Debtors substitute TWC Class A
Common Stock for Cash in distributions to holders of Allowed Operating Company Trade Claims if
the holders of the FrontierVision Holdco Notes, the FPL Note, or the Olympus Parent Notes are
receiving Plan Consideration on account of the principal and interest components of such Claims
3115277.223115277 _22
which includes Cash unless such Claims are pari passu with Allowed Operating Company Trade
Claims in the applicable Debtor Group; or (y) after Bankruptcy Court approval of this Agreement,
changed circumstances (that is, a change in circumstance arising after the date of this Agreement that
is not reasonably anticipated) cause consummation of the Modified Plan consistent with the Plan
Modifications to be unobtainable, provided, however, that (1) prior to making any such modification
or amendment under this subparagraph (y), the Debtors shall confer in good faith with the Trade
Committee regarding the changed circumstances and if the Parties cannot reach agreement they shall
cooperate in promptly seeking Bankruptcy Court resolution of whether there are any such changed
circumstances, (2) in connection with any modification or amendment under this subparagraph (y),
the Debtors may substitute TWC Class A Common Stock for Cash in distributions to Allowed
Operating Company Trade Claims to the extent necessary to consummate the Modified Plan and
only if the holders of the FrontierVision Holdco Notes, the FPL Note, or the Olympus Parent Notes
are not receiving Plan Consideration on account of the principal and interest components of such
Claims which includes Cash unless such Claims are pari passu with Allowed Operating Company
Trade Claims in the applicable Debtor Group and the Debtors shall use their reasonable best efforts
to adopt any such modification or amendment under this subparagraph (y) that under the
circumstances mitigates the adverse impact on the Plan Modifications described herein, and (3)
unless required as a result of a decision or order of a court of competent jurisdiction, the Debtors
may not make any modifications to the rate of postpetition interest as set forth in Paragraph 2(a)
below.
2. Payment of Postpetition Interest: Inter-Creditor Dispute Issues:
a. Payment of Postpetition Interest. The Existing Plan shall be modified to provide that
simple interest shall accrue at 8% per annum with respect to each Allowed Operating
Company Trade Claim from the Commencement Date until the Effective Date (such
interest, "Postpetition Interest"), whether or not an agreement or instrument or
applicable law gives rise to such Claim for postpetition interest and/or provides for a
different rate of interest with respect to such Claim for postpetition interest, provided
however, that with respect to Trade Claims against the Arahova Debtor Group, the
FrontierVision Holdco Debtor Group and the Additional Debtor Group(s)
(collectively, the "Affected Debtor Groups"), accrual of Postpetition Interest remains
subject to the resolution of the Inter-Creditor Dispute; and provided further however,
that with respect to Trade Claims against the Ft. Myers Debtor Group and the
Affected Debtor Groups, the payment of postpetition interest shall be subject to the
first and last sentences of Section 8.14(a) of the Existing Plan. The Trade Committee
acknowledges that drafts of the proposed modifications necessary to implement the
foregoing and the terms set forth in Paragraph 3 below have been provided to them by
the Debtors and are acceptable in form and substance.
b. Inter-Creditor Dispute Issues. To the extent the Debtors determine, after due inquiry
and analysis, it is necessary to change the proposed treatment for one or more of the
Debtors or Debtor Groups identified on the list provided to counsel to the Trade
Committee on April 10, 2006, in connection with the Inter-Creditor Dispute, the
Debtors shall be permitted to modify the Modified Plan to provide that (i)
distributions on account of Operating Company Trade Claims in such Debtors or
Debtor Groups shall be determined in accordance with the Inter-Creditor Dispute
Resolution and (ii) the right to the payment of postpetition interest on account of
Operating Company Trade Claims in such Debtors or Debtor Groups shall be subject
to the first and last sentences of Section 8.14(a) of the Existing Plan.
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3115277.223115277_22
3. Payment and Form of Consideration: Subject to the provisions of Paragraphs 1 and 2
above, holders of Allowed Operating Company Trade Claims within all Debtor Groups (except the
Arahova Debtor Group, the FrontierVision Holdco Debtor Group, the Additional Debtor Group(s)
and the Ft. Myers Debtor Group) shall be paid in full plus postpetition interest, and as to form of
Plan Consideration distributed on account of such Claims each of the following terms shall apply:
(a) with respect to the portion of such Operating Company Trade Claims that
is represented by the face amount of the Claim plus postpetition interest computed at the
federal judgment rate as of the Commencement Date (the "Federal Judgment Rate"),
holders of such Claims shall receive the treatment provided on account of such Claims
under the Existing Plan, which treatment is payment in Cash, subject only to the follow
limited exceptions:
(x) in the Debtors' sole discretion, up to one percentage point of the entire
payment on account of such portion of the Claims shall be in the form of TWC
Class A Common Stock (for the avoidance of doubt, if the recovery on account of
such portion of the Claims is 108 points, then no less than 107 points shall be in
Cash and no more than 1 point shall be in the form of TWC Class A Common
Stock);
(y) in the event there are Non-Transferred MCE Systems prior to the
Effective Date, some portion of the Plan Consideration (as described in Section
II.A.2. of the Disclosure Statement) may be in the form of TWC Class A
Common Stock, provided, however, that the Debtors may not substitute TWC
Class A Common Stock if the holders of the Frontier Vision Holdco Notes, the
FPL Note, or the Olympus Parent Notes are receiving Plan Consideration on
account of the principal and interest components of such Claims which includes
Cash unless such Claims are pari passu with Allowed Operating Company Trade
Claims in the applicable Debtor Group; and
(z) for those Debtor Groups to which it is applicable pursuant to the
Existing Plan (that is, the Century-TCI and Parnassos Debtor Groups), if the TW
Expanded Transaction is consummated, some portion of the Plan Consideration
may be in the form of TWC Class A Common Stock, provided, however, that the
Debtors may not substitute TWC Class A Common Stock if the holders of the
FrontierVision Holdco Notes, the FPL Note, or the Olympus Parent Notes are
receiving Plan Consideration on account of the principal and interest components
of such Claims which includes Cash unless such Claims are pari passu with
Allowed Operating Company Trade Claims in the applicable Debtor Group,
provided that nothing herein shall be construed to preclude the Debtors from
amending the Modified Plan to modify the form of Plan Consideration to be paid
to holders of Allowed Operating Company Trade Claims against Debtor Groups
in addition to the Century-TCI and Parnassos Debtor Groups in the event the TW
Expanded Transaction is consummated, but any such amendment shall constitute
a Termination Event as set forth in Paragraph 13(c) of this Agreement.
(b) with respect to the portion of such Operating Company Trade Claims that
is represented by postpetition interest in excess of the Federal Judgment Rate (that is, the
difference between the Federal Judgment Rate and eight (8%) percent):
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3115277.223115277 _22
(x) in the Debtors' sole discretion, up to one percentage point of the entire
payment on account of such portion of the Claims shall be in the form of TWC
Class A Common Stock and the remaining payment on account of such portion of
the Claims shall be in Cash (for the avoidance of doubt, if the recovery on account
of such portion of the Claims is 24 points, then not less than 23 points would be in
Cash and not more than 1 point would be in the form of TWC Class A Common
S t o c k ) ~ and
(y) except as set forth in the immediately preceding clause (x), holders of
such Claims shall receive Cash on account of such Claims to the extent there is
sufficient Cash in the "waterfall" structure incorporated into the Plan to pay Cash
on account of such Claims, and to the extent of any Cash shortfall, then holders of
such Claims shall receive TWC Class A Common Stock, provided, however, that
the Debtors may not substitute TWC Class A Common Stock if the holders of the
FrontierVision Holdco Notes, the FPL Note, or the Olympus Parent Notes are
receiving Plan Consideration on account of the principal and interest components
of such Claims which includes Cash unless such Claims are pari passu with
Allowed Operating Company Trade Claims in the applicable Debtor Group; and
(c) in no event shall such Operating Company Trade Claims receive less
favorable treatment in terms of the form of Plan Consideration distributed on account of
such Claims than that received by holders of other general unsecured claims within the
applicable Debtor Group (it being agreed that the Bank Claims and the FPL Note are
secured by certain pledges of stock and therefore are not considered general unsecured
claims for purposes of this Paragraph).
4. Approval of Plan Modifications; Creditors' Committee Support:
(a) The proposed plan modifications contemplated by this Agreement (the "Plan
Modifications") shall be incorporated into the Modified Plan. Not later than five (5) business
days after the full execution of this Agreement by the Parties, the Debtors shall file with the
Bankruptcy Court (i) a motion seeking Bankruptcy Court approval of this Agreement and the
Plan Modifications, as part of the confirmation process, pursuant to Bankruptcy Rule 9019
and sections 1123, 1127 and 1129 of the Bankruptcy Code, and (ii) a motion (the "New
Recommendation Motion") seeking Bankruptcy Court approval of (a) the New
Recommendation (defined below) pursuant to section 1125(b) of the Bankruptcy Code, and
(b) the protections afforded pursuant to section 1125(e) of the Bankruptcy Code with respect
to the New Recommendation. In connection with such filings and the Debtors' obligations
hereunder, the Debtors shall promptly, and in good faith, pursue confirmation of the
Modified Plan. The Parties agree that if no objections to the New Recommendation Motion
are filed, then the Debtors may present for consideration and entry without a hearing by the
Bankruptcy Court a proposed order allowing the New Recommendation Motion. The
foregoing filings referred to in this Paragraph 4 shall be in a form reasonably satisfactory to
counsel to the Trade Committee. Not later than five (5) business days after the full execution
of this Agreement by the Parties, the Debtors shall also file a Form 8-K with the United
States Securities and Exchange Commission concerning the Debtors' entry into this
Agreement with the Trade Committee.
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3115277.223115277_22
(b) Promptly upon execution of this Agreement, the Debtors and the Trade
Committee shall undertake good faith efforts to obtain the support of the Official Committee
of Unsecured Creditors for this Agreement.
5. Trade Committee Support and Claim Holdings: So long as the Modified Plan
provides for the Plan Modifications, and otherwise is consistent with this Agreement, but subject, in
all respects, to the Provisos (as defined below), the Trade Committee and the Trade Committee
Members shall support confirmation of the Modified Plan and shall not object to, oppose or
otherwise seek to modify or delay approval or confirmation of the Modified Plan or the occurrence
of its Effective Date. As soon as reasonably practicable after obtaining the Bankruptcy Court's
approval of the New Recommendation Motion, the Debtors, on behalf of the Trade Committee, shall
distribute a letter (the "New Recommendation") by which the Trade Committee recommends and
urges all holders of Trade Claims against all Debtor Groups other than the Holding Company Debtor
Group (collectively, the "Operating Companies") to vote to accept the Modified Plan (and, if such
holders already have voted to reject the Existing Plan, to supersede such earlier vote with a new
ballot that votes to accept the Modified Plan). A copy of the New Recommendation is annexed
hereto as Exhibit A.
Each Trade Committee Member represents and warrants, on a several but not joint
basis, that, as of the date hereof, it is the legal or beneficial holder of, or holder of investment and
voting authority over, the Operating Company Trade Claims set forth in the list provided to the
Debtors by the Trade Committee on March 17, 2006 (collectively, the "Subject Claims") and has or
will have the authority to vote or direct the voting of claims relating to such Claims. Subject to the
Provisos, each Trade Committee Member believes that consummation of the Modified Plan,
consistent with this Agreement, is in its best interests. Accordingly, each Trade Committee Member
will support the Modified Plan and hereby agrees, without any further action by it or any other
person, that all Operating Company Trade Claims held by or subsequently acquired by it shall be
deemed to have voted to accept the Modified Plan, whether or not a vote previously has been cast to
accept or reject the Existing Plan in respect of such Claims, consistent with the terms and conditions
of this Agreement. Without limiting the foregoing, the Trade Committee and each Trade Committee
Member commits to, for so long as this Agreement remains in effect (but subject, in all respects, to
the Provisos):
a. support the Modified Plan and use its reasonable efforts to facilitate the
Debtors' filing, confirmation and consummation of the Modified Plan at the earliest practicable
date;
b. not pursue, propose, support, vote to accept or encourage the pursuit, proposal
or support of, any chapter 11 plan, or other restructuring or reorganization for the Debtors,
directly or indirectly, that is not consistent with this Agreement and the Modified Plan;
c. not, nor encourage any other person or entity, to execute or file any ballot
rejecting the Plan, or otherwise interfere with, delay, impede, appeal or take any other negative
action, directly or indirectly, in any respect regarding acceptance or implementation of the
Modified Plan;
d. not commence any proceeding or prosecute any objection to oppose or object
to the Modified Plan, and not to take any action that would delay approval, confirmation or
consummation of the Modified Plan, provided that the Debtors acknowledge that without
violating the terms of this Agreement, the Trade Committee or any Trade Committee Member
may: (i) participate in any proceedings, and assert positions, with respect to the determination of
5
3115277.223115277 _22
the Deemed Value of the TWC Class A Common Stock to be distributed to creditors under the
Modified Plan; and (ii) participate in any proceedings, and assert positions, with respect to the
Inter-Creditor Dispute; and
e. not take any action inconsistent with the purposes of this Agreement;
in each case consistent with the terms and provisions of this Agreement; provided, however, that
notwithstanding anything herein to the contrary, (i) if any Trade Committee Member is
appointed to or serves on the Creditors' Committee, the terms of this Agreement shall not be
construed to limit such Trade Committee Member's exercise of its fiduciary duties in its role as a
member of the Creditors' Committee, and any exercise of such fiduciary duties shall not be
deemed to constitute a breach of the terms of this Agreement, and (ii) this Agreement applies to
each Trade Committee Member solely in its capacity as a Trade Committee Member and as the
holder of Operating Company Trade Claims, such that nothing herein shall subject any Trade
Committee Member to an obligation to act or refrain from acting in any manner with respect to
Claims other than Operating Company Trade Claims that such Trade Committee Member holds
against any Debtor Group, including, without limitation, in each of the following cases on
account of Claims other than Operating Company Trade Claims, taking any actions prohibited by
this Agreement or this Paragraph 5 as to Operating Company Trade Claims, voting to reject the
Plan, objecting to confirmation of the Plan, participating and asserting certain positions in the
Inter-Creditor Dispute or taking any other action in the Chapter 11 Cases on account of such
Claims as such Trade Committee Member may determine in its sole discretion (the preceding
subparagraphs (i) and (ii), together, the "Provisos").
6.
(i)
Pending Litigation/Discovery:
Upon execution of this Agreement by all Parties, the T!ade Committee shall:
a. stay the prosecution of its appeal of the Government Settlement
Agreements (the "Government Settlement Appeal"); provided that the Trade Committee shall
withdraw with prejudice the Government Settlement Appeal as soon as practicable after the
Effective Date of the Modified Plan; and
b. withdraw its pending discovery requests;
without prejudice to the rights of the Trade Committee to prosecute the Government Settlement
Appeal and re-serve such discovery in the event of the occurrence of a Termination Event
(defined below). Notwithstanding anything contained herein to the contrary, in the event of a
Termination Event, the Debtors and the Trade Committee promptly shall confer in good faith to
determine whether they can agree, under the circumstances then present, on the Debtors'
obligations, if any, with respect to any such re-served discovery requests. In the event the parties
cannot reach agreement they shall cooperate in promptly seeking Bankruptcy Court resolution of
such dispute.
(ii) Reference is made to the agreement between the Debtors and the Trade Committee
set forth in the electronic mail correspondence between Jamie M. Ketten, Esq. and Sunni P. Beville,
Esq. dated as of January 26, 2006 regarding the general continuance of certain deadlines, which is
hereby incorporated herein by reference except for the last sentence of Paragraph 5 thereof (the
"Tolling Agreement"). Upon termination of this Agreement, the Debtors and counsel for the Trade
Committee promptly shall confer in good faith to determine an appropriate timeline for the
establishment of the various deadlines set forth in the Tolling Agreement (in order to limit, to the
extent reasonably practicable under the circumstances, prejudice, if any, to the Debtors and the
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3115277.223115277_22
Trade Committee), and in the event such Parties cannot reach agreement the Bankruptcy Court shall
determine any such dispute.
7. Claims Reconciliation:
(i) The Debtors shall undertake reasonable good faith efforts to address and reconcile, to
the extent practicable, the Trade Committee Members' Operating Company Trade Claims as soon as
reasonably possible under the circumstances. In the event that, notwithstanding such good faith
efforts, a Trade Committee Member's Operating Company Trade Claims have not been resolved
prior to the Effective Date, the Reorganized Debtors and the Plan Administrator, as applicable, shall
be obligated to undertake the same efforts as the Debtors were obliged (before the Effective Date).
The Trade Committee shall have the right to seek Bankruptcy Court enforcement of the obligations
of the Debtors, Reorganized Debtors and the Plan Administrator in this Paragraph 7 and to have its
reasonable fees and expenses incurred in doing so reimbursed.
(ii) Prior to Bankruptcy Court approval of this Agreement, the Trade Committee shall
have the right to monitor and review the projected amount of (and, if necessary, challenge)
Administrative Expense Claims, Fee Claims, Priority Tax Claims, DIP Lender Claims, Other
Priority Claims, Secured Tax Claims and Other Secured Claims, and Bank Claims to ensure the
Debtors have adequate Cash to pay the amount set forth in Paragraph 3 in Cash, subject to the
limited exceptions set forth therein.
8. Trade Committee Fees and Expenses:
(i) Stated Fee Reimbursement: The Debtors shall support the payment of, and shall not
oppose or object to, nor encourage any other person or entity to oppose or object to, the reasonable
fees and expenses of the Trade Committee's professionals in representing the Trade Committee in
the Chapter 11 Cases based on the hourly billings (plus expenses) of such professionals (the "Stated
Fee Reimbursement"). The Trade Committee's professionals shall file fee applications ("Fee
Applications") with the Court in support of the Stated Fee Reimbursement, which filings shall be
made on or before the deadline for filing final applications for Fee Claims as set forth in Section
2.02 of the Existing Plan (the "Fee Application Deadline") and shall be subject to review by the
Debtors and other parties in interest solely as to the reasonableness of the such fees and expenses.
To the extent the Fee Applications are allowed by the Bankruptcy Court, the Debtors shall be
required to reimburse the amounts paid by members of the Trade Committee on account of the
Stated Fee Reimbursement, in the manner directed by the Trade Committee's counsel (Brown
Rudnick Berlack Israels LLP ("Brown Rudnick")).
The Trade Committee represents that as of March 31, 2006, the Trade Committee's
professionals have incurred hourly billings plus expenses of approximately $2.13 million. The
Parties acknowledge that the Stated Fee Reimbursement shall include reimbursement for all
reasonable fees (based on hourly billings) and expenses incurred through February 28, 2006 plus
such additional reasonable fees (based on hourly billings) and expenses that may be incurred by the
Trade Committee's professionals at the direction of the Trade Committee relating to: (A) the
preparation, administration, prosecution for approval and enforcement of this Agreement, including
without limitation, representing the Trade Committee in connection with the confirmation of the
Modified Plan and any hearings related thereto and the performance of any functions that might be
requested by the Debtors to facilitate obtaining confirmation of the Modified Plan; (B) the
determination of the Deemed Value of the TWC Class A Common Stock to be distributed to
creditors under the Modified Plan (with respect to which the Trade Committee reserves all of its
rights to challenge such Deemed Value); (C) the Trade Committee's monitoring and diligence with
respect to Administrative Expense Claims, Fee Claims, Priority Tax Claims, DIP Lender Claims,
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3115277.223115277 _22
Other Priority Claims, Secured Tax Claims and Other Secured Claims, and Bank Claims which may
cause the Debtors to fail to have adequate Cash to comply with Paragraph 3 of this Agreement; (D)
the Trade Committee's right, if any, to challenge any Administrative Expense Claims and Fees
Claims which (1) has the effect of increasing the aggregate Allowed Administrative Expense Claims
and Allowed Fee Claims to in excess of 150% of the estimates therefor set forth in the Disclosure
Statement, and (2) may cause the Debtors to fail to have adequate Cash to comply with Paragraph 3
of this Agreement; (E) the Trade Committee's role in the Inter-Creditor Dispute, and (F) the
representation of Sierra Liquidity Fund, LLC, a member of the Trade Committee, in its capacity as a
member of the official unsecured creditors' committee appointed in these cases.
(ii) Contingent Fee Claim: The Trade Committee represents that in addition to the Trade
Committee's agreement to pay Brown Rudnick its standard hourly rates, in order to further
incentivize Brown Rudnick, the Trade Committee agreed to support an application by Brown
Rudnick for a contingent fee payment based upon the improvement (in excess of the Federal
Judgment Rate) in the recoveries of the Operating Company Trade Claims on account of postpetition
interest. The Debtors shall, in addition to payment of the Stated Fee Reimbursement, not oppose or
object to any such contingent fee claim filed by Brown Rudnick Berlack Israels LLP (on account of
its contingent fee arrangement with the Trade Committee), not to exceed $5 million (less the amount
of the Stated Fee Reimbursement), pursuant to section 503(b) of the Bankruptcy Code or other
applicable law (the "Contingent Fee Claim") with respect to services rendered in connection with
their rendition of services to the Trade Committee which application shall be filed on or before the
Fee Application Deadline. The foregoing shall be without prejudice to the rights of other parties in
interest to be heard with respect to any such Contingent Fee Claim. In no event shall the Contingent
Fee Claim and the Stated Fee Reimbursement aggregate more than $5 million.
9. Impairment: Each Trade Committee Member acknowledges and agrees that the
treatment of the Subject Claims under the Modified Plan results in such Claims being "impaired"
within the meaning of the Bankruptcy Code.
10. Limitations on Transfer: Each Trade Committee Member hereby agrees not to (a)
sell, transfer, assign, pledge, or otherwise dispose, directly or indirectly their right, title or interest in
respect of the Subject Claims, in whole or in part, or any interest therein, or (b) grant any proxies,
deposit any of its claims into a voting trust, or enter into a voting agreement with respect to any such
Subject Claims (clauses (a) and (b), collectively, a "Transfer") unless the recipient of such Subject
Claim (a ''Transferee") agrees in writing (such writing, a ''Transferee Acknowledgment"), prior to
such Transfer, to be bound by this Agreement in its entirety without revisions (including with respect
to any and all other Operating Company Trade Claims it already may hold prior to such Transfer
(the "Purchased Claims")). Upon the execution of the Transferee Acknowledgment, the Transferee
shall be deemed to be a party to this Agreement with respect to the Purchased Claims and all
Operating Company Trade Claims already held or subsequently acquired by it. Any Transfer that
does not comply with this Paragraph shall be void ab initio. In the event of a Transfer, the transferor
shall, within three (3) business days thereof, provide written notice of such transfer to the Debtors,
together with a copy of the Transferee Acknowledgment. No Trade Committee Member may create
any subsidiary, affiliate or other vehicle or device for the purpose of acquiring any Operating
Company Trade Claims without first causing such subsidiary or affiliate to become a party hereto.
11. Further Acquisition of Trade Claims: This Agreement shall in no way be construed
to preclude any Trade Committee Member from acquiring additional Operating Company Trade
Claims. However, any such additional Operating Company Trade Claims so acquired shall, whether
or not the Trade Committee Member holds any Operating Company Trade Claims at the time of the
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acquisition, automatically be deemed to be (i) "Subject Claims," (ii) subject to all of the terms of this
Agreement, and (iii) voted to accept the Modified Plan, whether or not a vote previously has been
cast to accept or reject the Existing Plan or the Modified Plan in respect of such Operating Company
Trade Claims.
12. Condition to each Party's Obligations: Each Party's obligations under this
Agreement are subject to the execution of this Agreement by each of the following persons:
(i) the Debtors;
(ii) the Trade Committee; and
(iii) each Trade Committee Member that is a Party hereto.
13. Termination Events: The occurrence of each of the following events shall constitute
a "Termination Event":
a. the Modified Plan when filed with the Bankruptcy Court, or later amended by
the Debtors and filed with the Bankruptcy Court, shall not be consistent with the terms of this
Agreement;
b. the Modified Plan is amended, without the Trade Committee's consent, as a
result of the occurrence of the circumstances described in Paragraph l(w), (x) or (y) of this
Agreement, and such Modified Plan, as amended, is filed with the Bankruptcy Court;
c. if the Modified Plan is amended to modify the form of Plan Consideration to
be paid to holders of Allowed Operating Company Trade Claims, in the event the TW Expanded
Transaction is consummated, in Debtor Groups in addition to the Century-TCI and Parnassos
Debtor Groups and such Modified Plan as amended is filed with the Bankruptcy Court;
d. the Debtors' chapter 11 cases shall have been dismissed or converted to a case
under chapter 7 of the Bankruptcy Code;
e. any court of competent jurisdiction shall declare in a final, non-appealable
order that this Agreement is unenforceable;
f. the Modified Plan is withdrawn by the Debtors;
g. the Bankruptcy Court enters an order either denying (i) approval of the Plan
Modifications; or (ii) confirmation of the Modified Plan;
h. the termination of the Sales Transaction (other than by consummation); and
i. unless waived in writing by the Debtors and the Trade Committee (the
"Required Parties"), any representation or warranty of any Party made or deemed made herein is
incorrect in any material respect on or as of the date made or deemed made and such default
(unless it is a willful misrepresentation) shall continue unremedied for a period of five (5) days
after the earlier of (i) the date upon which the relevant Party knew of such failure or (ii) the date
upon which written notice thereof is given by any Party to the other Parties hereto.
The Termination Events described in subparagraphs (a) through (c) above are referred to
hereinafter, collectively, as the "Trade Committee Termination Events" and each individually, a
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3115277.223115277_22
"Trade Committee Termination Event." The Termination Events described in subparagraphs (d)
through (i) above are referred to hereinafter, collectively, as the "Parties' Termination Events"
and each individually, a "Parties' Termination Event."
Nothing in this Paragraph 13 that provides for termination shall otherwise modify any of the
Parties' obligations to abide by the terms of this Agreement.
14. Termination of this Agreement:
(i) Trade Committee Termination Event. The Trade Committee shall provide the
Debtors with written notice (the "Termination Notice") of the Trade Committee's election to
terminate this Agreement as a result of the occurrence of a Trade Committee Termination Event no
later than five (5) business days of the date the Trade Committee acquires actual knowledge of, or
should reasonably have known of, the occurrence of such Termination Event, provided that the
Debtors shall be entitled to a five (5) day grace period following receipt of the Termination Notice to
cure any such alleged Termination Event. If no such election timely is made by the Trade
Committee with respect to a Trade Committee Termination Event, then the Trade Committee shall
not have the right to terminate this Agreement on account of such event.
(ii) Parties' Termination Event. Upon the occurrence of a Parties' Termination Event,
this Agreement shall terminate following written notice by either the Debtors or the Trade
Committee of such occurrence, of any of the Termination Events provided that (i) a breaching party
shall not be entitled to terminate this Agreement on account of its own breach of this Agreement, (ii)
neither the Trade Committee nor a Trade Committee Member shall be entitled to terminate this
Agreement on account of a breach by either the Trade Committee or a Trade Committee Member of
this Agreement, (iii) the Debtors may not terminate this Agreement or cause this Agreement to be
terminated by withdrawing the Modified Plan for the purpose of filing another Plan with the effect of
avoiding the Debtors' obligations hereunder, and (iv) the Debtors and the Trade Committee shall be
entitled to a 5-day grace period following receipt of a termination notice to cure any such alleged
Termination Event.
15. Effect of Termination: Upon termination of this Agreement pursuant to Paragraph
14, all obligations hereunder shall terminate and shall be of no further force and all Subject Claims
shall be deemed to vote to reject the Existing or Modified Plan (unless otherwise agreed to in writing
by any Trade Committee Member) and the Trade Committee and any Trade Committee Member
shall be entitled to object, oppose or otherwise seek to modify or delay approval or confirmation of
the Existing or Modified Plan or the occurrence of its Effective Date; provided however, that any
claim for breach of this Agreement, other than a claim for breach of the representation set out in
Paragraph 16(e), shall survive termination and all rights and remedies with respect to such claims
shall not be prejudiced in any way; provided further however, that the breach of this Agreement by
one or more Trade Committee Members shall not create any rights or remedies against any non-
breaching Trade Committee Member unless such non-breaching Trade Committee Member has
participated in or aided and abetted the breach by the breaching Trade Committee Member; and
provided further however, that any breach of this Agreement by the Debtors (except for any bad
faith breach) shall not give rise to a claim or alleged claim for affirmative damages against the
Debtors. Except as set forth above in this Paragraph 15, upon such termination or consummation of
the Modified Plan, any obligations of the non-breaching Parties set forth in this Agreement shall be
null and void ab initio and all claims, causes of action, remedies, defenses, setoffs, rights or other
benefits of such non-breaching Parties shall be fully preserved without any estoppel, evidentiary or
other effect of any kind or nature whatsoever. The Parties acknowledge that upon termination of this
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3115277.223115277_22
Agreement pursuant to Paragraph 14 hereof, the Tolling Agreement shall continue in full force and
effect subject to its terms.
16. Representations and Warranties: The Debtors and each Trade Committee Member,
on a several but not joint basis, represents and warrants to each other Party that the following
statements are true, correct and complete as of the date hereof (except to the extent the Debtors
require the approval and/or authorization of the Bankruptcy Court) and to the extent applicable to
such party:
a. Corporate Power and Authority. If not a natural person, it is duly organized,
validly existing, and, if applicable, in good standing under the laws of the jurisdiction of its
organization, and has all requisite corporate, partnership or other power and authority to enter
into this Agreement and to carry out the transactions contemplated by, and perform its respective
obligations under, this Agreement.
b. Authorization. If not a natural person, the execution and delivery of this
Agreement and the performance of its obligations hereunder have been duly authorized by all
necessary corporate, partnership or other action on its part.
c. Binding Obligation. This Agreement has been duly executed and delivered by
it and constitutes its legal, valid and binding obligation, enforceable in accordance with the terms
hereof.
d. No Conflicts. The execution, delivery and performance by it (when such
performance is due) of this Agreement do not and shall not (i) violate any provision of law, rule
or regulation applicable to it, or, if applicable, any of its subsidiaries or its certificate of
incorporation or bylaws or other organizational documents or those of any of its subsidiaries or
(ii) except with respect to the Debtors, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any material contractual obligation to which it or,
if applicable, any of its subsidiaries is a party.
e. Accuracy of lnfonnation. Accuracy of Information Provided. The Debtors
represent that, to the best of their knowledge, after reasonable inquiry, (i) information provided
to the Trade Committee by the Debtors in connection with this Agreement, does not contain any
material misstatement of fact, nor does it fail to state a fact necessary to make the information
not materially misleading and (ii) the statements made by the Debtors in the various
representations set forth herein are true and accurate.
17. Amendment or Waiver: Except as otherwise specifically provided herein, this
Agreement may not be modified, amended or supplemented without the prior written consent of the
Required Parties. No waiver of any of the provisions of this Agreement shall be deemed or
constitute a waiver of any other provision of this Agreement, whether or not similar, nor shall any
waiver be deemed a continuing waiver.
18. Notices: Any notice required or desired to be served, given or delivered under this
Agreement shall be in writing, and shall be deemed to have been validly served, given or delivered if
provided by personal delivery, or upon receipt of fax delivery or electronic mail delivery, as follows:
a. if to the Debtors, to Marc Abrams and Paul Shalhoub, Willkie Farr &
Gallagher LLP, 787 Seventh Avenue, New York, New York 10019, fax: 212-728-8111, email:
mabrams@willkie.com and pshalhoub@willkie.com; and
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3115277.223115277_22
b. if to the Trade Committee, to Edward Weisfelner, Brown Rudnick Berlack
Israels LLP, Seven Times Square, New York, NY 10036, fax: 212-209-4801, email:
eweisfelner@brownrudnick.com; and Steven Pohl, Brown Rudnick Berlack Israels LLP, One
Financial Center, Boston, MA 02111, fax: 617-856-8201, email: spohl@ brownrudnick.com.
19. Governing Law; Jurisdiction: TillS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PROVISION WHICH
WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION,
AND ANY APPLICABLE PROVISIONS OF THE BANKRUPTCY CODE. By its execution and
delivery of this Agreement, each of the Parties hereto hereby irrevocably and unconditionally agrees
for itself that (i) any legal action, suit or proceeding against it with respect to any matter under or
arising out of or in connection with this Agreement or for recognition or enforcement of any
judgment rendered in any such action, suit or proceeding, must be brought in the Bankruptcy Court,
and (ii) each such Party irrevocably accepts and submits itself to the exclusive jurisdiction of the
Bankruptcy Court, generally and unconditionally, with respect to any such action, suit or proceeding,
and waives any objection it may have to venue or the convenience of the forum of all matters arising
out of or in connection with this Agreement.
20. Specific Performance: This Agreement, including without limitation the Parties'
agreement herein to support and vote for the Modified Plan and to facilitate its confirmation and
consummation, is intended as a binding commitment enforceable in accordance with its terms. It is
understood and agreed by each of the Parties hereto that money damages would not be a sufficient
remedy for any breach of this Agreement by any Party and each non-breaching Party shall be
entitled to seek specific performance and injunctive or other equitable relief as a remedy of any such
breach.
21. Cooperation: Each Party shall cooperate with the other Parties to do or cause to be
done all things as may be reasonably necessary or desirable to confirm and carry out and to
effectuate fully the intent and purpose of this Agreement and shall not take any action contrary to the
essential intent and principles of this Agreement.
22. Headings: The headings of the sections, paragraphs and subsections of this
23. Intemretation: This Agreement is the product of negotiations of the Parties, and in
the enforcement or interpretation hereof, is to be interpreted in a neutral manner, and any .
presumption with regard to interpretation for or against any Party by reason of that Party having
drafted or caused to be drafted this Agreement, or any portion hereof, shall not be effective in regard
to the interpretation hereof.
24. Successors and Assigns: This Agreement is intended to bind and inure to the benefit
of the Parties and their respective successors, assigns (including, but not limited to, Transferees
under Paragraph 10 above), heirs, executors, administrators and representatives.
25. No Third-Party Beneficiaries: Unless expressly stated herein, this Agreement shall be
solely for the benefit of the Parties hereto and no other person or entity shall be a third-party
beneficiary hereof.
26. Countemarts: This Agreement may be executed in one or more counterparts, each of
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3 115277.223115277 _22
Delivery of an executed signature page of this Agreement by facsimile or electronic mail shall be
effective as delivery of a manually executed signature page of this Agreement.
27. Representation by Counsel: Each Party acknowledges that it has been represented by,
or provided a reasonable period of time to obtain access to and advice by, counsel with this
Agreement and the transactions contemplated herein. Accordingly, any rule of law or any legal
decision that would provide any Party with a defense to the enforcement of the terms of this
Agreement against such Party based upon lack of legal counsel shall have no application and is
expressly waived.
28. Entire Agreement: This Agreement and the exhibits and schedules hereto constitute
the entire agreement between the Parties and supersedes all prior and contemporaneous agreements,
representations, warranties and understandings of the Parties, whether oral, written or implied, as to
the subject matter hereof.
29. Several not Joint: The agreements, representations and obligations of the Parties
under this Agreement are, in all respects, several and not joint.
30. Settlement Discussions: This Agreement is part of a proposed settlement of a dispute
among the Parties. Nothing herein shall be deemed an admission of any kind. Pursuant to Federal
Rule of Evidence 408 and any other applicable federal or state rules of evidence, this Agreement and
all discussions and negotiations relating hereto shall be privileged and shall not be used in any
manner, nor be admissible into evidence in any proceeding, other than in a proceeding to obtain
approval of the Modified Plan or to enforce or interpret this Agreement. If the Bankruptcy Court
refuses to confirm the Modified Plan or the Effective Date does not occur through no fault or action
of any Party hereto, the terms of this Agreement shall not be binding on any of the Parties hereto and
this Agreement shall not be admissible for any purpose in any other action, matter or proceeding.
[Rest of Page Intentionally Left Blank]
13
'.,
' 311S277 .20311 S1:11 ...JIJ
Wll..LKIE PARR & GALLAGHER LLP
B y . ~ ~
MarcAb s
Paul Shalhoub
(Members of the Finn)
787 Seventh A venue
New York, NY 10019
Tel: (212) 728-8000
Counsel for the Debtors
BROWN RUDNICK BERLACK ISRAELS LLP
By: ______________ __
Edward Weisfelner
StevenPohl
(Members of the Finn)
120 West 45
111
Street
New York. NY 10036
Tel: (212) 704-0100
Counsel for the Trade Committee
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Final Version
EXHIBIT A
AD HOC ADELPHIA TRADE CLAIMS COMMITTEE
c/o Brown Rudnick Berlack Israels LLP
Seven Times Square
New York, NY 10036
April _, 2006
TO: THE HOLDERS OF OPERATING COMPANY TRADE CLAIMS IN THE
ADELPIDA COMMUNICATIONS CORPORATION, ET AL BANKRUPTCY
CASES
Brown Rudnick Berlack Israels LLP ("Brown Rudnick") is counsel to the Ad Hoc
Adelphia Trade Claims Committee (the "Trade Claims Committee") in the bankruptcy cases of
Adelphia Communications Corporation, et al. (collectively, the "Debtors"), Chapter 11 Case No.
02-41729 (REG) (Jointly Administered). The Trade Claims Committee is comprised of certain
institutions holding claims against the Operating Company Debtor Groups,
1
which institutions
are set forth in the Sixth Amended 2019 Statement filed on September 26, 2005, by Brown
Rudnick, as the same may be amended.
We write to advise you of the Trade Claims Committee's position regarding the Debtors'
Modified Fourth Amended Joint Chapter 11 Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code (the "Plan"), which modifies the Debtors' November 21, 2005 proposed plan
to reflect, among other things, the agreement described herein that was reached by the Trade
Claims Committee and the Debtors in respect of Operating Company Trade Claim distributions
(the "Operating Company Trade Claims Settlement"). The Plan, described in and annexed to the
Supplement to the Debtors' Fourth Amended Disclosure Statement Pursuant to Section 1125 of
the Bankruptcy Code (the "Disclosure Statement Supplement"), as modified to reflect the
Operating Company Trade Claims Settlement, provides, among other things, how trade claims
against the Operating Company Debtor Groups will be treated. (Capitalized terms not otherwise
defined herein shall have the meanings assigned to them in the Disclosure Statement Supplement
or the Plan.)
FOR THE REASONS DESCRIBED BELOW, THE TRADE CLAIMS
COMMITTEE SUPPORTS THE PLAN AS MODIFIED TO REFLECT THE
OPERATING COMPANY TRADE CLAIMS SETTLEMENT AND BELIEVES THAT
THE PLAN IS IN THE BEST INTERESTS OF THE HOLDERS OF TRADE CLAIMS
AGAINST THE OPERATING COMPANY DEBTOR GROUPS UNDER THE
CIRCUMSTANCES OF THESE CASES AND STRONGLY URGES THE HOLDERS OF
OPERATING COMPANY TRADE CLAIMS TO VOTE TO ACCEPT THE PLAN.
1
The Operating Company Debtor Groups are all Debtor Groups described in the Debtors' Fourth Amended
Disclosure Statement except the Holding Company Debtor Group.
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3115277.22
The Trade Claims Committee believes that the recoveries (and, particularly, the rate of
post-petition interest) to be provided to holders of Trade Claims against the Operating Company
Debtor Groups (the "Operating Company Trade Creditors") in the Plan, as modified to reflect the
Operating Company Trade Claims Settlement, represent a fair and reasonable compromise of the
issues and positions raised by the Trade Claims Committee in support of Operating Company
Trade Creditors' recoveries. Throughout these cases, the Trade Claims Committee, together
with its legal advisor, Brown Rudnick, has advanced the position that Operating Company Trade
Creditors are entitled to post-petition interest at a rate that is reflective of such Operating
Company Trade Creditors' rights under state law, and not merely the Federal Judgment Rate (in
these cases, approximately 2% per annum), that was provided for in the November 21, 2005
version of the Plan for creditors without contracts or with contracts that did not include a stated
rate of interest that is enforceable. Specifically, the Trade Claims Committee has analyzed the
state judgment rates in the primary states in which the Debtors conduct business, and has
determined that a post-petition interest rate of 8% per annum fairly and adequately reflects the
rights afforded to Operating Company Trade Creditors under state law.
As a result of the Trade Claims Committee's efforts to advance its position in these cases
and through negotiations, the parties have reached a consensual resolution regarding the post-
petition interest rate to be afforded to Operating Company Trade Creditors, the terms of which
are reflected in the Plan as modified to reflect the Operating Company Trade Claims Settlement.
Specifically, holders of Operating Company Trade Claims against all Operating Company
Debtor Groups (whether or not there is an agreement or instrument giving rise to such Claims)
will be paid in full plus post-petition interest at the rate of 8% per annum, except for Trade
Claims against a limited number of Debtor Groups.
2
That rate of post-petition interest will be
paid regardless of whether such claims are (i) supported by a contract with a stated interest rate;
or (ii) not supported by a contract with a stated interest rate. The Trade Claims Committee
submits that this resolution represents a fair and reasonable outcome under the circumstances of
these Chapter 11 cases. The form of consideration to be paid on account of such Operating
Company Trade Claims is also addressed in the Operating Company Trade Claims Settlement.
While the Operating Company Trade Claims Settlement provides that such claims will be paid
largely in cash, subject to certain exceptions and in some circumstances, payment may include a
significant amount of stock. To fully understand the form of consideration to be paid, you
should read the Operating Company Trade Claims Settlement in coordination with the Plan.
In addition, the Debtors have agreed to pay the reasonable fees (based upon hourly
billings) and expenses incurred by the Trade Claims Committee's professionals in representing
the Trade Claims Committee during these cases. As of March 31, 2006, the Trade Claims
Committee's professionals have incurred fees (based upon hourly billings) plus expenses of
approximately $2.13 million; the Trade Claims Committee's professionals will incur further fees
and expenses on behalf of the Trade Claims Committee through the end of these cases. In
2
More specifically, the accrual ofpostpetition interest with respect to Trade Claims against the Arahova,
Frontier Vision Holdco and Olympus Parent Debtor Groups remains subject to the Inter-Creditor Dispute
proceeding, and the payment of postpetition interest with respect to these three groups and the Ft. Myers Debtors
Group are dependant upon the provisions of Section 8.14 of the Plan.
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3115277.22
addition, the Trade Claims Committee has agreed that Brown Rudnick Berlack Israels LLP is
entitled to a contingent fee on account of the increase in the recoveries for Operating Company
Trade Claims. The contingent fee is computed based upon the difference between the post-
petition interest at the federal judgment rate as afforded to unsecured creditors under the
November 21, 2005 version of the Plan and the 8% post-petition interest rate achieved through
the Operating Company Trade Claims Settlement. As part of the consensual resolution reached,
the Debtors will not oppose or object to any contingent fee claim filed by Brown Rudnick
Berlack Israels LLP, which contingent fee claim shall not exceed $5 million (less the amount of
the reimbursement of the reasonable fees (based upon hourly billing) and expenses described
above).
The foregoing is not intended as a substitute for the Disclosure Statement Supplement.
Operating Company Trade Claim holders should read the Disclosure Statement Supplement
and the Plan in their entirety, and then make their own respective independent decision as to
whether the Plan is acceptable.
The Debtors have provided you with a Ballot to vote to accept or reject the Plan, which
Plan has been modified to reflect the Operating Company Trade Claims Settlement. In order to
have your vote counted, you must complete and return the ballot in accordance with the
procedures set forth therein and in the accompanying Disclosure Statement Supplement and
Disclosure Statement ApprovalNoting Procedures orders. PLEASE READ THE DIRECTIONS
ON THE BALLOT CAREFULLY AND COMPLETE YOUR BALLOT IN ITS ENTIRETY
BEFORE RETURNING IT TO THE DEBTORS' BALLOTING AGENT.
Your timely vote is important, as only those holders of Operating Company Trade Claims
that timely vote on the Plan will have their vote counted for purposes of determining whether the
classes of Claims in the Plan in which Operating Company Trade Claims have been classified
have accepted the Plan. In short, the Trade Claims Committee supports approval of the Plan,
as modified to reflect the Operating Company Trade Claims Settlement, and strongly
recommends that you timely vote to accept the Plan in accordance with the procedures that
have been established by the Bankruptcy Court. If you already have voted to reject the Plan,
the Trade Claims Committee strongly recommends that you change your vote to one accepting
the Plan in accordance with the procedures that have been established by the Bankruptcy
Court. If you need a new ballot, please call [TO COME].
[remainder of page intentionally left blank]
-33-
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3115277.22
Very truly yours,
Attorneys for the Ad Hoc Trade Claims Committee
BROWN RUDNICK BERLACK ISRAELS LLP
By: / ~ s ~ ' - - - - - - - - - - - - - - - - - - - - - -
Edward S. Weisfelner, Esq.
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In re Almatis B. V., et al., Case No. 10-12308 (Bankr. S.D.N.Y. 2010).
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t
Objection Deadline: July 29, 2010 at 5:00p.m. (prevailing U.S. Eastern Time)
Hearing Date and Time: August 3, 2010 at 2:00p.m. (prevailing U.S. Eastern Time)
GIBSON, DUNN & CRUTCHER LLP
Michael A. Rosenthal (MR-7006)
Janet M. Weiss (JM-5460)
Matthew K. Kelsey (MK-3137)
200 Park A venue
Telephone: (212) 351-4000
Facsimile: (212) 351-4035
Attorneys for the Debtors and Debtors in Possession
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------x
IN RE: Chapter 11
ALMA TIS B.V., et al., Case No. 10-12308 (MG)
Debtors. Jointly Administered
------------------------------------------------------------- X
DEBTORS' MOTION PURSUANT TO SECTIONS
lOS(a), 363(b), AND 1125(b) OF THE BANKRUPTCY CODE AND
BANKRUPTCY RULE 6004 FOR AN ORDER AUTHORIZING: (A) THE DEBTORS
AND OTHER PARTIES THERETO TO ENTER INTO THE PLAN SUPPORT
AGREEMENT; (B) THE DEBTORS TO EXECUTE THE ESCROW AGREEMENT AND
THE COMMITMENT LETTERS AND PAY THE FEES, OTHER AMOUNTS,
AND REIMBURSEMENT OF EXPENSES REQUIRED THEREUNDER; AND (C) THE
DEBTORS TO ENTER INTO CURRENCY RATE HEDGING TRANSACTIONS
TABLE OF CONTENTS
PRELIMINARY STATEMENT ................................................................................................... 2
BACKGROUND ........................................................................................................................... 4
JURISDICTION AND VENUE .................................................................................................... 6
RELIEF REQUESTED .................................................................................................................. 6
THE PLAN SUPPORT AGREEMENT ........................................................................................ 7
A.
B.
C.
Key Terms ofthe First Amended Plan .................................................................. 7
The Debtors' Obligations ....................................................................................... 9
The Obligations ofthe Supporting Junior Prepetition Lenders and DIC ............. 10
THE COMMITMENT LETTERS AND REIMBURSEMENT OF EXPENSES ....................... 10
A. The Commitment Letters and Plan Financing ..................................................... 1 0
B. Fees and Expenses Payable Under the Commitment Letters ............................... l2
1. Aggregate Arranger Fees ......................................................................... 12
n. Revolving Credit Facility Commitment Letter ........................................ 12
111. GSO Commitment Letter ......................................................................... 13
iv. Sankaty and GoldenTree Commitment Letter ......................................... 14
v. JPM and MLI Engagement Letter ............................................................ 15
vi. Equity Contribution Letter ....................................................................... 16
c. Indemnification Provisions .................................................................................. 16
CURRENCY RATE HEDGING TRANSACTIONS .................................................................. 17
BASIS FOR RELIEF REQUESTED ........................................................................................... 18
A. The Entry Into the Plan Support Agreement, the Commitment Letters, the
Escrow Agreement, and the Currency Rate Hedging Transactions Are
Sound Exercises of the Debtors' Business Judgment.. ........................................ l8
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B.
c.
Table of Contents
(Continued)
Payment ofthe Fees and Reimbursement of the Expenses Under the
Commitment Letters are Reasonable ................................................................... 21
The Plan Support Agreement Complies with Section 1125 of the
Bankruptcy Code ................................................................................................. 22
D. Conclusion ........................................................................................................... 24
WAIVER OF THE STAY UNDER BANKRUPTCY RULE 6004(h) ....................................... 24
NOTICE ...................................................................................................................................... 25
NO PRIOR REQUEST ................................................................................................................ 25
ii
TABLE OF AUTHORITIES
Page(s)
Cases
Century Glove, Inc. v. First American Bank of New York,
860 F .2d 94 (3d Cir. 1988) ....................................................................................................... 22
Comm. of Asbestos-Related Litigants v. Johns-Manville Corp (In re Johns-Manville Corp.),
60 B.R. 612 (Bankr. S.D.N.Y. 1986) ........................................................................................ 19
Committee of Equity Security Holders v. Lionel Corp. (In re Lionel Corp.),
722 F .2d 1063 (2d Cir. 1983) ................................................................................................... 18
In re Chateaugay Corp.,
973 F.2d 141 (2d Cir. 1992) ..................................................................................................... 18
In re Owens Corning,
Case No. 00-03837 (JKF) (Bankr. D. Del. June 29, 2006) ....................................................... 23
In re Tronox Inc.,
Case No. 09-10156 (ALG) (Bankr. S.D.N.Y. Dec. 23, 2009) .................................................. 22
In re Visteon Corp.,
Case No. 09-11786 (CSS) (Bankr. D. Del. June 17, 2010) ...................................................... 22
Official Comm. OfSubordinated Bondholders v. Integrated Res., Inc.,
(In reIntegrated Res., Inc.), 147 B.R. 650 (S.D.N.Y. 1992) .............................................. 18, 19
Trans World Airlines, Inc. v. Texaco, Inc. (In re Texaco, Inc.),
81 B.R. 813 (Bankr. S.D.N.Y. 1988) ........................................................................................ 22
Statutes
11 U.S.C. 105(a) ............................................................................................................ 1, 3, 6, 18
11 u.s.c. 363 ............................................................................................................................. 18
11 U.S.C. 363(b) .................................................................................................................. 1, 3, 6
11 u.s.c. 363(b)(1) ............................................................................................................. 18, 19
11 U.S.C. 1107(a) ........................................................................................................................ 3
11 u.s.c. 1108 ............................................................................................................................. 3
11 U.S.C. 1125(b) .............................................................................................. 1, 3, 6, 22, 23, 24
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Table of Authorities
(Continued)
Page(s)
28 u.s.c. 157 ............................................................................................................................... 6
28 u.s.c. 157(b)(2) ..................................................................................................................... 6
28 u.s.c. 1334 ............................................................................................................................. 6
28 u.s.c. 1408 ............................................................................................................................. 6
28 u.s.c. 1409 ............................................................................................................................. 6
Rules
Fed. R. Bankr. P. 6004 ................................................................................................................ 1, 6
Fed. R. Bankr. P. 6004(h) ............................................................................................................. 24
iv
TO THE HONORABLE MARTIN GLENN,
UNITED STATES BANKRUPTCY JUDGE:
Almatis B.V. and certain of its subsidiaries and affiliates, as debtors and debtors
in possession (collectively, the "Debtors" and each, a "Debtor"), submit this motion (the
"Motion") pursuant to sections 105(a), 363(b) and 1125(b) of title 11 of the United States Code
(the "Bankruptcy Code") and Rule 6004 of the Federal Rule of Bankruptcy Procedure (the
"Bankruptcy Rules"), for entry of an order, substantially in the form attached hereto as Exhibit
A (the "Order"), authorizing: (A) the Debtors and the other parties thereto to enter into that
certain plan support agreement (the "Plan Support Agreement') by and among the Debtors,
Dubai International Capital LLC ("DIC') and the Supporting Junior Prepetition Lenders (as
defined below), substantially in the form annexed hereto as Exhibit B; I (B) the Debtors (i) to
execute the Revolving Credit Facility Commitment Letter, the GSO Commitment Letter, the
Sankaty and GoldenTree Commitment Letter, the JPM and MLI Engagement Letter, the Equity
Commitment Letter (each as defined below, and collectively, with all attachments thereto, the
"Commitment Letters"), and the Escrow Agreement (as defined below) with regard to the Plan
Financing (as defined below) in connection with the First Amended Chapter 11 Plan of
Reorganization contemplated by the Plan Support Agreement, substantially in the form annexed
as Annex A to the Plan Support Agreement (the "First Amended Plan"), and (ii) to pay the
Arranger Fees (as defined below), other amounts, and reimbursement of the expenses required
by the Commitment Letters and the JPM and MLI Capital Structuring Letters (as defined below);
and (C) the Debtors to enter into one or more forward contracts (the "Currency Rate Hedging
Transactions") to minimize the impact of currency rate fluctuations on the transactions
contemplated by the First Amended Plan. In support thereof, the Debtors respectfully represent:
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PRELIMINARY STATEMENT
1. The Debtors' chapter 11 cases (the "Chapter ll Cases") were filed with a
prepackaged chapter 11 plan (the "Initial Plan") that enjoyed the support ofthe Senior Lenders
(defined below), but was rejected by nearly all ofthe Junior Lenders. On July 2, 2010, the
Debtors received from DIC, the Debtors' largest ultimate equity holder, a credible proposal for
an alternative chapter 11 plan that provides for, among other things, payment in full in cash of
the Senior Lender Claims (defined below) and meaningful recoveries to the Junior Lenders.
DIC's proposal was accompanied by the support of an informal committee of Junior Lenders
holding at least two-thirds in amount and more than one-half in number of claims in each class of
Junior Lender Claims (defined below) (the "Informal Lender Committee").
2. Accordingly, the Debtors requested the Court to adjourn the confirmation
hearing for the Initial Plan to allow the Debtors to evaluate, and negotiate improvements to,
DIC's proposal. At the hearing related to the adjournment, the Debtors advised the Court that if,
after further evaluation and negotiation, DIC's proposal proved, to the Debtors' satisfaction, to
be feasible and deliverable, the Debtors would exercise the Debtors' fiduciary out in the Initial
Plan Support Agreement (defined below) and pursue confirmation of an amended plan to
implement the DIC proposal. At the status conference held on July 8, 2010, the Court granted
the Debtors' request for an adjournment of the hearing to consider confirmation of the Initial
Plan.
3. The Debtors have used this time to negotiate significant improvements to
DIC's initial proposal, and to confirm (a) the feasibility of, and the availability of funding for
such proposal, and (b) the delivery of enhanced recoveries to all of the Debtors' financial
Capitalized terms used but not otherwise defined in this Motion shall have the meanings set forth in the Plan
Support Agreement and the exhibits thereto, as applicable.
2
creditors. Based on this effort, and the deposit by DIC of its $100,000,000 investment relative to
the First Amended Plan into an escrow account at JP Morgan Chase Bank pursuant to an agreed
escrow agreement with the Debtors (the "Escrow Agreement"), the Debtors now believe that it is
in the best interest of their estates and in the best interests of all parties in interest to exercise the
fiduciary out in the Initial Plan Support Agreement and pursue the alternative DIC proposal.
Accordingly, the Debtors seek the Court's approval to enter into the Plan Support Agreement,
and thereafter pursue confirmation of the First Amended Plan.
4. The First Amended Plan requires the Plan Financing to implement the
various restructuring transactions contemplated therein. To lock in the Plan Financing, the
Debtors must be permitted to enter into, and perform under, the Commitment Letters (and pay all
fees and expenses contemplated therein). Finally, given the Debtors' obligation under the Euro-
denominated senior debt, to ensure that currency fluctuations do not adversely impact the ability
to consummate the transactions contemplated by the First Amended Plan, the Debtors must be
permitted to enter into the Currency Rate Hedging Transactions.
5. The Debtors do not make any of these requests lightly. They have
engaged in an exhaustive process to vet the DIC proposal and compare it to the Initial Plan. In
the exercise of their considered business judgment, the Debtors believe that entering into the
Plan Support Agreement and the Commitment Letters and performing all obligations thereunder
in support of confirmation of the First Amended Plan is in the best interests of all parties in
interest and is permissible under sections 105(a), 363(b) and 1125(b) of the Bankruptcy Code.
Accordingly, the Debtors respectfully request the Court to grant the relief requested herein so
that the drive toward consensual confirmation of the First Amended Plan may begin.
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BACKGROUND
6. On April30, 2010 (the "Petition Date"), the Debtors conunenced the
Chapter 11 Cases. The Debtors are operating their businesses and managing their properties as
debtors in possession pursuant to sections 11 07(a) and 1108 of the Bankruptcy Code.
7. Prior to the Petition Date, the Debtors engaged in negotiations with
various parties to achieve a restructuring of the Debtors' institutional debt totaling approximately
$1.032 billion (the "Prepetition Indebtedness"). The structure ofthe Debtors' Prepetition
Indebtedness is as follows:
"Senior Lenders":

The Debtors' lenders under the first lien
term loan and revolving credit
subfacilities established by that certain
Senior and Second Lien Facilities
Agreement, dated October 31, 2007 (the
"Senior Credit Agreement'); and
non-Debtor counterparties under certain
interest rate swap agreements.
"Second Lien Lenders":

The Debtors' lenders under the second
lien subfacilities established by the
Senior Credit Agreement.
"Mezzanine Lenders":
The Debtors' lenders under that certain
Mezzanine Facility Agreement dated
October 31, 2007.
"Junior Mezzanine Lenders" (together with
the Second Lien Lenders and the Mezzanine
Lenders, the "Junior Lenders"):
The Debtors' lenders under that certain
Junior Mezzanine Facility Agreement
dated November 11, 2007.
$676,181 ,963 (the "Senior
Lender Claims")
322,912,138 (equivalent
to $429,279,396) ofthe
Senior Lender Claims are
denominated in Euros.
$76,890,855 (the "Second Lien
Claims")
$198,886,087 {the "Mezzanine
Claims")
$80,088,654 (the "Junior
Mezzanine Claims" and
together with the Second Lien
Claims and the Mezzanine
Claims, the "Junior Lender
Claims")
First priority security interests on
certain assets and equity of the
Debtors (the "Prepetition
Collateraf')
Second priority security interests
on the Prepetition Collateral
Third priority security interests on
the Prepetition Collateral
Fourth priority pledge ofthe
equity in Almatis Holdings 7
B.V., Almatis B.V., Almatis
Holdings 9 B.V., and Almatis
Holdings 3 B.V., and first priority
pledge of the equity in DIC
Almatis Bidco B.V.
2 Portions of the Prepetition Indebtedness denominated in Euros have been converted at the rate of exchange in
effect on the Petition Date (1.00 = $1.3294), solely for the informational purposes of this chart. The Debtors
reserve their right to repay the Prepetition Indebtedness in the currency in which the Prepetition Indebtedness is
denominated.
4
8. On March 9, 2010, the Debtors were able to reach an agreement (the
"Initial Plan Support Agreement") with certain of the Senior Lenders on a plan of restructuring
that would result in: (a) the distribution to the Senior Lenders of (i) approximately $414.6
million in senior and junior debt and (ii) 100% of the equity interests in the Debtors; (b) the
distribution to the Second Lien Lenders and Mezzanine Lenders of warrants that would vest only
upon the value of the Debtors' equity exceeding certain amounts; and (c) no distribution to the
Junior Mezzanine Lenders or to DIC and the Debtors' other ultimate equity holders.
9. After reaching terms on the Initial Plan Support Agreement, the Debtors
drafted the Initial Plan embodying the terms of the Initial Plan Support Agreement. On April23,
2010, the Debtors commenced solicitation of votes with respect to the Initial Plan through their
Disclosure Statement With Respect to Joint Prepackaged Plan of Reorganization for the Debtors
Under Chapter II of the Bankruptcy Code, dated April23, 2010 [Docket No. 20] (including all
exhibits and supplements, the "Initial Disclosure Statement").
10. The Senior Lenders voted to accept the Initial Plan, while the Junior
Lenders overwhelmingly rejected the Initial Plan. The Court established a schedule for
discovery relating to certain confirmation disputes and a trial regarding the confirmability of the
Initial Plan (and the adequacy of the Initial Disclosure Statement), with such trial to commence
on July 19,2010 (the "Combined Hearing"). See Order (A) Scheduling a Combined Hearing to
Consider the Adequacy of the Disclosure Statement and Confirmation of the Plan;
(B) Establishing Deadlines and Procedures to File Objections; and (C) Approving the Form and
Manner of the Notice of Combined Hearing [Docket No. 77].
11. As noted above, on July 2, 2010, the Debtors received the initial
restructuring proposal from DIC that (i) provided full recoveries to the Senior Lenders, (ii) was
5
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supported by the Supporting Junior Prepetition Lenders, (iii) appeared to be feasible, and (iv)
was accompanied by tangible evidence of financing.
12. Based on the results of their preliminary evaluation of the DIC proposal,
the Debtors delivered a letter to the Court dated July 7, 2010 [Docket No. 263], requesting that
the Court adjourn the Combined Hearing so that the Debtors could make a more complete and
meaningful evaluation of the merits of the DIC's initial proposal, as well as negotiate certain
improvements thereto. On July 9, 2010, the Court granted the Debtors' request for an
adjournment, and rescheduled the Combined Hearing for August 16, 2010. The Court scheduled
a status conference on July 19,2010 to provide the Debtors with an opportunity to update the
Court on any progress.
13. Since July 2, 2010, the Debtors have negotiated extensively with DIC,
representatives of the Supporting Junior Prepetition Lenders, and the Plan Financing Parties
(defined below). The results ofthis negotiation yielded the Plan Support Agreement and the
Commitment Letters, each of which are integral components ofthe First Amended Plan.
JURISDICTION AND VENUE
14. The Court has jurisdiction to consider this Motion pursuant to 28 U.S.C.
157 and 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b )(2). Venue is proper
pursuant to 28 U.S.C. 1408 and 1409.
RELIEF REQUESTED
15. By this Motion, the Debtors, pursuant to sections 105(a), 363(b), and
1125(b) of the Bankruptcy Code and Bankruptcy Rule 6004, request entry of the Order, annexed
hereto as Exhibit A, authorizing the Debtors to: (A) enter into the Plan Support Agreement;
(B) execute the Commitment Letters and pay the fees and reimbursements of expenses required
thereunder; and (C) enter into the Currency Rate Hedging Transactions.
6
THE PLAN SUPPORT AGREEMENT
16. The Plan Support Agreement sets forth the parties' commitment to and
obligations with respect to the First Amended Plan, a draft of which is annexed to the Plan
Support Agreement as Annex A. The First Amended Plan is based on the terms of restructuring
set forth in the Restructuring Term Sheet, annexed to the Plan Support Agreement as Annex B
(together with all attachments thereto, the "Restructuring Term Sheef'). The Plan Support
Agreement includes customary conditions for such documents, such as an agreement to support
the First Amended Plan, negotiate in good faith to reach definitive documentation, and not take
any actions that will delay or impede consummation of the proposed First Amended Plan.
A. Key Terms of the First Amended Plan3
I 7. The key terms of the treatment of creditors contemplated by the Plan
Support Agreement and embodied in the First Amended Plan are summarized below:4
CLASS OF TREAT1\1ENT UNDER FIRST AMENDED '
CLAIMS PLAN
TREATMENT UNDERJN!TIAL PLAN
'
Full payment of principal plus accrued pre- and
Either:
post-petition interest at the rate provided for in

Distribution of new senior debt, cash, and
the applicable agreement. The Senior Lender
equity, with an estimated value of87% of
Class 2(c)-(m) Claims are both U.S. dollar denominated and
the principal amount of Allowed Senior
Senior Lender Euro denominated claims. Payment of the
Lender Claims, or
Claims Senior Lender Claims will be made, as provided

Distribution of new junior debt and equity,
in the Senior Facility Agreement, in the
with an estimated value of78% of the
currency in which the underlying loans were
principal amount of Allowed Senior
extended and such Claims are denominated.
Lender Claims.
Class 3(c)-(m)

Senior unsecured notes in the aggregate
Warrants, with an estimated value of2.2% of
Second Lien
amount of 5 2, I 00,000 issued by the newly
the principal amount of Allowed Second Lien
Claims
formed intermediate holding company,
Claims, for 3% of the amount by which the
equity value of the Reorganized Debtors
3 The Debtors are not requesting the Court to rule on the confrrmability of the First Amended Plan in connection
with this Motion. However, important for the relief requested in this Motion is that the Court be apprised of the
benefits of the First Amended Plan compared to the Initial Plan.
4
The following summary is qualified in its entirety by the provisions of the First Amended Plan, the Plan
Support Agreement and its exhibits. The First Amended Plan, Plan Support Agreement and their exhibits will
control in the event of any inconsistency with this Motion.
7
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CLASS OF
c:jLAIMS
Class 4(c)-(m)
Mezzanine
Claims
Class 5(b)-(t)
Junior
Mezzanine
Claims
Class 7(a)-(m)
General
Unsecured
Claims
Class 8(a)-(m)
Intercompany
Claims
Class 9(a)-(m)
Subordinated
Claims
Class lO(a)-
TREATMENT:tJNi>ltR FlRSTAMENDED . . .
PLAN .. ..... . ... . d. . :.:_:'.; ,. TR)i:ATMENTUNDER INITIAL PLAN
Almatis Topco 2, that will own the exceeds $325 million.
Reorganized Debtors;5 and
The right, commencing five (5) years after
the Effective Date, to be issued PIK
Preference Warrants by Almatis Topco 1 to
acquire up to 5%, subject to dilution, of the
ordinary share capital of Almatis Topco I
if the notes are not repaid within such 5
years, and, if the notes remain outstanding
thereafter, the right to acquire an additional
2.5%, subject to dilution, of the ordinary
share capital of Almatis Topco 1 on the
three following anniversaries of the
Effective Date, up to a maximum of 12.5%,
subject to dilution.

35.08%, subject to dilution, of the ordinary
shares in Almatis Topco I, the ultimate
holding company that will own the
Reorganized Debtors, and
Junior Preference Shares in Almatis Topco
1 with a liquidation preference of
approximately $14.6 million.
4.92%, subject to dilution, ofthe ordinary
shares in Almatis Topco l; and
Junior Preference Shares in Almatis Topco
I with a liquidation preference of
approximately $2.1 million.
The benefit of the Mezzanine Investor
Ratchet which increases the recovery on
Junior Mezzanine Claims as the enterprise
value of the Reorganized Debtors
increases.
Payment in full either on the Effective Date or
in accordance with normal terms.
Impaired/Unimpaired, depending on treatment
provided in E&Y Implementation
Memorandum.
Impaired. No distribution
Warrants, with an estimated value of0.5% of
the principal amount of the Mezzanine Claims,
for 2% of the amount by which the equity value
of the Reorganized Debtors exceeds $400
million.
No distribution.
Payment in full either on the Effective Date or
in accordance with normal terms.
Impaired/Unimpaired, depending on treatment
provided in E&Y Implementation
Memorandum.
Impaired, with no distribution, except for DIC
Almatis Holdco, B.V.
Unimpaired. On the Effective Date Dutch Co- Unimpaired, except for Interests in DlC
5 On the Effective Date, DIC Almatis Equityco CooperatiefU.A. ("Dutch Co-op"), a non-debtor and the ultimate
parent of the Debtors, will transfer the shares in DIC Almatis Holdco B.V. to Almatis Topco 2 for 1. DIC
currently owns approximately 90% of Dutch Co-op. Almatis Topco 2 will be a wholly owned subsidiary of
another newly formed Dutch holding company, Almatis Topco 1, which will be the ultimate parent of the
Reorganized Debtors.
8
CLASS OF TREATMENT UNDER FIRST AMENDED
;. .. . ' ... ,. . . . :'' '
TREATMENT UNDER INITIAL PLAN
CLAIMS.
PLAN . . . ..' :.;.:; .
; j.. :!'
' .;!.": ... ,,,..
(m) Interests op will transfer the shares in DIC Alrnatis Alrnatis Holdco B.V. which were to be
Holdco B.V. to Almatis Topco 2 for 1 transferred for benefit of Senior Lenders.
B. The Debtors' Obligations
18. The Plan Support Agreement sets forth the obligations to be undertaken by
the Debtors in support of confirmation of the First Amended Plan, including, but not limited to,
the following:
To file this Motion as soon as reasonably practicable after the execution of the Plan
Support Agreement by DIC and the Supporting Junior Prepetition Lenders;
To file the First Amended Plan and the Amended Disclosure Statement with the
Bankruptcy Court as soon as reasonably practicable after the entry of the Order
requested by this Motion, and to use commercially reasonable efforts to obtain
approval of the Amended Disclosure Statement;
To use commercially reasonable efforts to obtain confirmation of the First Amended
Plan as soon as reasonably practicable, in accordance with the Bankruptcy Code and
on terms consistent with the Plan Support Agreement; and
To terminate their obligations under, and withdraw their support for, the Initial Plan
and the Initial Plan Support Agreement.
19. Notwithstanding the provisions of the Plan Support Agreement
summarized above, however, the Plan Support Agreement does not:
Prevent the Debtors' management from taking actions in accordance with their
fiduciary duties;
Require any Debtor to breach any legal or statutory requirement or any order or
direction of any court or governmental body, or to waive or forego the benefit of any
applicable attorney/client privilege; or
Restrict the management of any of the Debtors or their affiliates from complying with
any legal obligation to commence insolvency or similar proceedings.
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c. The Obligations of the Supporting Junior Prepetition Lenders and DIC
20. The Plan Support Agreement obligates the Supporting Junior Prepetition
Lenders and DIC to support the confirmation and implementation of the First Amended Plan.
Specifically, the Supporting Junior Prepetition Lenders and DIC are obligated to:
A.
Vote their Claims and Interests to accept the First Amended Plan, which obligation is
expressly subject to receipt and review of reasonably acceptable, Court-approved
solicitation materials with respect to the First Amended Plan;
Not pursue or encourage the pursuit of any plan of restructuring or reorganization
inconsistent with the First Amended Plan, or take any action that would interfere with
the acceptance or implementation of the First Amended Plan; and
Consent to and support the Debtors' use of cash collateral.
THE COMMITMENT LETTERS AND REIMBURSEMENT OF EXPENSES
The Commitment Letters and Plan Financing
21. To consummate the transactions contemplated by the First Amended Plan,
the Debtors propose executing the Commitment Letters in which various parties (collectively,
the "Plan Financing Parties") commit to provide the multiple tranches of debt financing and the
equity contribution necessary for the implementation of the First Amended Plan. Specifically,
the Commitment Letters evidence the commitment of the Plan Financing Parties to provide
and/or facilitate the following tranches of financing and equity contributions on the Effective
Date of the First Amended Plan (collectively, the "Plan Financing"):6
PLAN FINANCING TERMS
Revolving Credit Facili!}: On the Effective Date, Reorganized Almatis B. V., Almatis Holdings 9 B. V., Almatis
GmbH and Almatis, Inc. will enter into the Revolving Credit Facility of$50 million,
of which not more than $10 million will be drawn on the Effective Date. The
Revolving Credit Facility will be arranged by J.P. Morgan pic, Merrill Lynch
6 The following summaries of the Plan Financing and the Commitment Letters are qualified in their entirety by
the provisions of the Commitment Letters. The Commitment Letters will control in the event of any
inconsistency between this Motion and the Commitment Letters. Capitalized terms used but not otherwise
defined in this summary or elsewhere in the Motion shall have the meanings set forth in the Commitment
Letters.
10
Senior Secured Notes
Engagement of JPM and
BofA/MLI
DIC Investment
. TERMS
International JPMorgan Chase Bank, N.A., and Bank of America N.A. (collectively,
the "Revolving Credit Facility Arrangers"). The obligations under the Revolving
Credit Facility will rank senior to the obligations under the Senior Secured Notes,
subject to the terms of the New Intercreditor Agreement. The commitment letter with
respect to the Revolving Credit Facility is attached to the Restructuring Term Sheet as
Schedule 4 (together with all attachments thereto, the "Revolving Credit Facility
Commitment Letter'').
On the Effective Date, Reorganized Almatis Holdings 9 B.V. will issue the Senior
Secured Notes, consisting of the following:
Dollar Notes: U.S. dollar denominated senior secured notes in the aggregate
principal amount of at least $400 million but no more than $420 million. The
purchaser of these notes will be one or more affiliates ofGSO Capital Partners LP
("GSO"). The commitment letter with respect to the Dollar Notes is attached to
the Restructuring Term Sheet as Schedule 5 (together with all attachments thereto,
the "GSO Commitment Letter'').
Euro Notes: Euro denominated senior secured notes in the aggregate principal
amount of110 million. The purchasers of these notes are Sankaty Credit
Opportunities IV, L.P. ("Sankaty") and GoldenTree Asset Management LP
("Golden Tree"), whose commitment letter with respect to the Euro Notes is
attached to the Restructuring Term Sheet as Schedule 5 (together with all
attachments thereto, the "Sankaty and Golden Tree Commitment Letter'').
Arrangement Services. J.P. Morgan Securities Ltd. ("JPM') and Bank of
America/Merrill Lynch International ("MLI ") will be engaged for a term of 6 months
to act as joint and exclusive bookrunners, arrangers, and placement agents for the (i)
public or private offering or placement of debt securities or preferred stock in
connection with the implementation of the First Amended Plan (the "Permanent
Securities"). The Engagement Letter with respect to the fmancing arrangement
services provided by JPM and MLI is attached to the Restructuring Term Sheet as
Schedule 5 (together with all attachments thereto, the "JPM and MLI Engagement
Letter").
Notwithstanding the foregoing, JPM and MLI will not be engaged in their capacities
under the JPM and MLI Engagement Letter with respect to the purchase or placement
of the Dollar Notes.
Structuring Advisory Services. JPM and MLI were engaged by DIC to provide
capital structuring services, including assisting DIC in evaluating the First Amended
Plan. The Engagement Letters with respect to the capital structuring services provided
by JPM and MLI are attached to the Restructuring Term Sheet as Schedule 5 (together
with all attachments thereto, the "JPM and MLI Capital Structuring Letters").
Prior to the filing of this Motion, DIC deposited $100 million (the "Equity
Contribution") into the escrow account at JP Morgan Chase Bank established pursuant
to the Escrow Agreement. Pursuant to the terms of the Escrow Agreement, the funds
have been converted into 77,657,236.47, the Euro equivalent (using the exchange rate
in effect on the date of conversion (the "Conversion Date")) of$1 00 million by the
Escrow Agent. On the Effective Date, the escrowed funds will be used to fund DIC's
investment in the Reorganized Debtors as follows (the "DJC Investment'):
DIC Investor Share Allocation: In exchange for the Euro equivalent (using the
exchange rate on the Conversion Date) of$50 million, the DIC Investor will
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, TERMS . ..
receive 60%, subject to dilution, of the ordinary shares in Alma tis Top co I, the
ultimate holding company of the Reorganized Debtors under the First Amended
Plan.
DJC Senior Preferred Shares: In exchange for the Euro equivalent (using the
exchange rate on the Conversion Date) of$50 million, the DIC Investor will
receive paid-in-kind senior preference shares to be issued by Almatis Topco l
with a liquidation preference of the Euro equivalent of $50 million.
The commitment letter with respect to the DIC Investment is attached to the
Restructuring Term Sheet as Schedule 7 (together with all attachments thereto, the
"Equity Commitment Letter'').
The Escrow Agreement in which the Equity Contribution is currently deposited was
negotiated with the Debtors to ensure that the Equity Contribution would be available
on or prior to the Effective Date. The executed Escrow Agreement is attached to the
Restructuring Term Sheet as Schedule 6.
Fees and Expenses Payable Under the Commitment Letters
i. Aggregate Amounts Payable Under the Commitment Letters
22. The aggregate fees to be paid to the various parties to the Commitment
Letters for arranging and/or underwriting the Plan Financing, including the fees payable in
connection with the JPM and MLI Capital Structuring Letters (the "Arranger Fees"), are
approximately $26.6 million. Except as specifically noted below, the Arranger Fees will only be
payable if and when the Plan Financing actually occurs on the Effective Date. If the First
Amended Plan does not become effective, and except as specifically noted below, no Arranger
Fees will be paid. If the First Amended Plan (or some other DIC sponsored plan) is not
confirmed, the maximum liability of the Debtors under the Commitment Letters is $2.915
million.
ii. Revolving Credit Facility Commitment Letter
23. Under the Revolving Credit Facility Fee Letter attached to the Revolving
Credit Facility Commitment Letter, the Debtors are obligated to pay to the Revolving Credit
Facility Arrangers the following fees and expenses:
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TYPE OF
TERMS
PAYABLE DATE
.. PAYMENTS
"'.,
: .
.
..
Arrangement and 111111!! which represents.ofthe maximum aggregate amount Effective Date of
Underwriting Fee ving Credit Facility. First Amended Plan,
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if it occurs
Reimbursement Reimbursement of up to $1.5 million in reasonable out-of-pocket costs Promptly upon
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of Expenses and expenses incurred in connection with the transactions contemplated demand
by the Revolving Credit Facility Commitment Letter including, but not
limited to:
travel expenses,
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overnight cost of providing funds for the provision of the Revolving
Credit Facility, if the Closing Date does not occur on the date
specified in a funding request by the Debtors, I
any sales, use or similar taxes,
the reasonable fees and disbursements of Latham & Watkins
(London) LLP, counsel to Revolving Credit Facility Arrangers, and
other reasonable professional fees and other expenses in connection
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with any due diligence regarding the Debtors.
iii. GSO Commitment Letter
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24. Under the Additional Matters Letter attached to the GSO Commitment
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Letter, the Debtors are obligated to pay to GSO the following fees and expenses:
TYPE OF
TERMS
. . PAYABLE DATE

. ,. "' ,. .
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Closing!Underwri which represents!! of the aggregate Effective Date of
ting Fee principal amount o t e o ar Notes and the Euro otes issued on the First Amended Plan,
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Effective Date of the First Amended Plan, if it occurs. if it occurs
Liquidated $12 million will be due from the Debtors as liquidated damages if: Upon consummation
Damages
any ofDIC, the Debtors, or the respective officers, directors, agents,
of the alternative
representatives or affiliates of either, solicit an alternative financing
financing proposal.
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proposal within 6 months of the date of the GSO Commitment Letter,
and
such an alternative financing proposal is consummated within the
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same period.
The Liquidated Damages are not due if:
The alternative financing is utilized as part of a chapter II plan of I
reorganization which results in DIC holding an economic interest not
exceeding 30% of the aggregate equity value of the Almatis Group
(i.e., the Debtors and their non-Debtor affiliates), and provided that
such equity interest shall have a pro forma post-reorganization
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valuation not exceeding $30 million;
The alternative financing is utilized as part of a recapitalization
completed after the 6-month period following the GSO Commitment
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Letter; or
GSO does not fund the Dollar Notes.
Reimbursement Reimbursement of up to $1 million ofGSO's fees, costs, and expenses, Upon demand
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of Expenses including, without limitation, all reasonable out-of-pocket costs and
expenses arising in connection with the syndication of the Senior
Secured Notes and any due diligence performed by GSO, the
reasonable fees and expenses of legal counsel and professional advisors
to GSO (including any reasonably necessary local legal counsel) in
connection with the transactions contemplated by the GSO
Commitment Letter.
iv. Sankaty and GoldenTree Commitment Letter
25. Under the Sankaty and GoldenTree Commitment Letter, the Debtors are
obligated to pay to Sankaty and GoldenTree the following fees and expenses:
l'YPE OF
PAYMENTS
Closing/Underwri
ting Fee
Liquidated
Damages
Reimbursement
of Expenses
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Approximately-- or-roximately- at today's
exchange rate, of the aggregate principal
amount of the Euro Notes issue on t e ffective Date of the First
Amended Plan, if it occurs.
3.3 million, which represents 3% of the aggregate principal amount of
the Euro Notes, due from the Debtors as liquidated damages if:
any ofDIC, the Debtors, or the respective officers, directors, agents,
representatives or affiliates of either, solicit an alternative financing
proposal within 6 months of the date of the Sankaty and GoldenTree
Commitment Letter, and
such an alternative fmancing proposal is consummated within the
same period.
The alternative fmancing is utilized as part of a chapter II plan of
The alternative financing is utilized as part of a recapitalization
completed after the 6-month period following the Sankaty and
GoldenTree Commitment Letter; or
Sankaty and GoldenTree do not fund the Euro Notes
Reimbursement of up to $415,000 in reasonable out-of-pocket costs and
expenses incurred in connection with the transactions contemplated by
the Sankaty and GoldenTree Commitment Letter including, but not
limited to,
travel expenses,
sales, use or similar taxes,
fees and disbursements of Ropes & Gray International LLP, as
counsel to Sankaty and GoldenTree, and
other reasonable professional fees and other expenses in connection
with any due diligence regarding the Debtors.
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DATE
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Effective Date of the
First Amended Plan,
if it occurs
Upon consummation
of the alternative
financing proposal.
Promptly upon
demand
v. JPM and MLI Engagement Letter
26. Under the JPM and MLI Engagement Letter, the Debtors, in consideration
of the services provided by JPM and MLI, are obligated to pay to JPM and MLI the following
fees and expenses:
Arranger Fee
Liquidated
Damages
Reimbursement
of Expenses
The Permanent Securities refer to the Senior Secured Notes to be issued
pursuant to the First Amended Plan or any DIC Supported Alternative
Plan consummated within the six month term of the JPM and MLI
.__ .. ,.,a
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,,, ..... , .. Letter. The amount of this fee is approximately.
and will be split equally between JPM and MLI.
If, during the six month term of the JPM and MLI Engagement Letter,
any offering or placement of Permanent Securities is consummated in
which either or both of JPM and MLI did not act for the Debtors as
bookrunners, arrangers, and placement agents, an amount equal to the
fee specified above will be due to JPM and/or MLI, as applicable,
damages.
The alternative financing is utilized as part of a chapter 11 plan of
If the Arranger Fee has not been paid;
The alternative fmancing is utilized as part of a recapitalization
completed after the 6-month term of the JPM and MLI Engagement
Letter; or
If GSO, Sankaty, or Golden Tree breach their commitments to fund
the Dollar Notes or the Euro licable.
Reimbursement up to $1.5 million (inclusive of any amounts paid as
reimbursement of expenses under the Revolving Credit Facility
Commitment Letter, for out-of-pocket costs and expenses incurred in
connection with the transactions contemplated by the JPM and MLI
Engagement Letter including, but not limited to:7
Fees and disbursements of counsel and other professional advisors to
JPM and MLI,
Rating agency and road show expenses,
Listing fees and expenses,
Travel
The Effective Date
ofthe First
Amended Plan, if it
occurs, or the
effective date of any
DIC Supported
Alternative Plan.
Only upon the
occurrence of events
specified.
Promptly upon
demand
7 Total expense reimbursement payable to JPM and MLI, under the JPM and MLI Engagement Letter, the
Revolving Credit Facility Commitment Letter, the JPM and MLI Capital Structuring Letters or any other related
documents is limited to $1.5 million in the aggregate.
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Stamp, transfer, and other similar taxes,
Compliance and qualification costs related to the qualification of
securities under applicable "blue sky" or other laws,
Expenses related to the preparation, printing, and distribution of
offering materials.
vi. Equity Contribution Letter
27. In exchange for the Equity Contribution and DIC's efforts to facilitate the
Plan Financing, the Equity Commitment Letter requires the Debtors, if and only if the Effective
Date of the First Amended Plan occurs, to reimburse the reasonable fees and out-of-pocket costs
and expenses incurred by DIC, as set forth in more detail in Schedule 8 to the Restructuring
Term Sheet (the "Reimbursement Schedule"). Among the fees agreed to be reimbursed to DIC,
if and only if the Effective Date of the First Amended Plan occurs, are the capital structuring
fees, in the aggregate amount of- payable to JPM and MLI under the JPM and MLI
Capital Structuring Letters. The reimbursement ofDIC's fees and expenses will be: (i) capped
at $6.0 million (plus the-fees payable under the JPM and MLI Capital Structuring
Letters), regardless of the actual amount of such fees and expenses incurred;8 (ii) limited only to
the reasonable, actual, and documented fees and expenses paid by DIC; and (iii) conditioned on
the occurrence of the Effective Date and upon such fees and expenses being invoiced to the
Debtors in accordance with the procedures set forth in the Reimbursement Schedule.
C. Indemnification Provisions
28. The Commitment Letters require the Debtors to indemnify the Plan
Financing Parties for any loss arising out of the Commitment Letters, other than losses resulting
from the Plan Financing Parties' gross negligence or willful misconduct.
8 In addition to this reimbursement for fees and expenses ofDIC's legal and financial advisors, the Debtors have
agreed, subject to the occurrence of the Effective Date, to reimburse DIC up to $5 million for fees and expenses
of the Junior Advisors (as defined and provided in Schedule 8 of the Restructuring Term Sheet) which already
have been paid by DIC.
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CURRENCY RATE HEDGING TRANSACTIONS
29. To protect the Debtors against the risks associated with currency exchange
rate fluctuations between entry of the Order with respect to this Motion and the anticipated
Effective Date of the First Amended Plan, the Debtors request approval to enter into the
Currency Rate Hedging Transactions. The Currency Rate Hedging Transactions will be a
forward contract or contracts, with counterparties and terms to be determined in the Debtors'
business judgment.
30. Under the First Amended Plan, the payment of the Senior Lender Claims
will be made in the currency in which the Senior Lender Claims are denominated. While the
Plan Financing and the Equity Contribution are being extended in both U.S. dollars and Euros,
payment ofthe Euro Claims of the Senior Lenders will require that some of the funds provided
by the GSO Commitment Letter must, on the Effective Date, be converted to Euros. In this
regard, approximately 329.0 million of the Senior Lender Claims are denominated in Euros
(equivalent to approximately $419.6 million at today's exchange rate); however, only 178
million of the Plan Financing and Equity Contribution (the proceeds from the Euro Notes and the
Equity Contribution) will be available in Euros. The Debtors will contribute approximately 54
million ofEuro denominated cash sources. To bridge the remaining gap, the Debtors will have
to purchase Euros with the U.S. dollar-denominated proceeds of the Plan Financing in order to
facilitate the payment of the Senior Lender Claims.
31. Given the recent instability of the Euro-to-U.S. dollar exchange rate, it is
possible that the relative value of the Euro against the U.S. dollar may move unfavorably for the
Debtors in the period between now and the Effective Date of the First Amended Plan. Rather
than fund the shortfall caused by an exchange rate that moves against the Debtors from their
available cash, the Debtors, consistent with their past practice of hedging against such risks,
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intend to enter the Currency Rate Hedging Transactions. The Currency Rate Hedging
Transactions will place acceptable limits on the risk associated with negative currency rate
fluctuations.
32. The anticipated cost of the Currency Rate Hedging Transactions is far less
than the cost that the Debtors would have to bear if the exchange rate moved adversely in any
material amount. By locking in the applicable exchange rate at a favorable rate, the Debtors also
effectively preserve their available cash for operation of their business upon emergence from
Chapter 11 Cases. Accordingly, the costs of entering into the Currency Rate Hedging
Transactions are necessary costs of preserving the Debtors' estate for the benefit of all parties in
interest.
A.
BASIS FOR RELIEF REQUESTED
The Entry Into the Plan Support Agreement, the Commitment
Letters, the Escrow Agreement, and the Currency Rate Hedging
Transactions Are Sound Exercises of the Debtors' Business Judgment
33. Section IOS(a) of the Bankruptcy Code provides, in relevant part, that
"[t]he court may issue any order, process, or judgment that is necessary or appropriate to carry
out the provisions of this title." 11 U.S.C. 1 05(a). Section 363(b )(1) of the Bankruptcy Code,
in turn, provides, in relevant part, that "the trustee, after notice and a hearing, may use, sell, or
lease, other than in the ordinary course of business, property of the estate .... " 11 U.S.C.
363(b)(1). Courts in the Second Circuit have required a proposed transaction not in the ordinary
course be supported by the sound business judgment ofthe debtor. See, e.g., In re Chateaugay
Corp., 973 F.2d 141, 145 (2d Cir. 1992) (holding that a good business reason must exist to
authorize a use of property outside of the ordinary course under section 363); Committee of
Equity Security Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1071 (2d Cir. 1983)
(same).
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34. Once a debtor articulates a valid business justification under section 363
of the Bankruptcy Code, a presumption arises that the debtor's decision was made on an
informed basis, in good faith, and in the honest belief the action was in the best interest of the
company. See Official Comm. OfSubordinated Bondholders v. Integrated Res., Inc., (In re
Integrated Res., Inc.), 147 B.R. 650, 656 (S.D.N.Y. 1992). Furthermore, once "the debtor
articulates a reasonable basis for its business decisions (as distinct from a decision made
arbitrarily or capriciously), courts will generally not entertain objections to the debtor's
conduct." Comm. of Asbestos-Related Litigants v. Johns-Manville Corp (In re Johns-Manville
Corp.), 60 B.R. 612,616 (Bankr. S.D.N.Y. 1986). The protection ofthe business judgment rule
continues to operate to shield a debtor's management from judicial second-guessing. See In re
Integrated Res. Inc., 147 B.R. at 656; In re Johns-Manville, 60 B.R. at 615-16 ("[T]he Code
favors the continued operation of a business by a debtor and a presumption of reasonableness
attaches to a debtor's management decisions.") Thus, if a debtor's actions satisfy the business
judgment rule, then the transaction in question should be approved under sections 363(b )(1) of
the Bankruptcy Code.
35. The Debtors' management, together with their professional advisors, has
expended considerable time and effort evaluating and negotiating the terms of the First Amended
Plan. They have ensured that it is both feasible and deliverable, with as little execution risk as
possible, and that the Plan Financing Parties, the Supporting Junior Prepetition Lenders and DIC
are fully and as unconditionally as possible committed to the First Amended Plan.. In their
deliberations, the Debtors have, among other things, compared the First Amended Plan, and its
recoveries and risks, to the Initial Plan, and its recoveries and risks. This analysis, conducted in
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the sound exercise of the business judgment of the Debtors' management, resulted in the
decision to file this Motion.
36. Entry into the Plan Support Agreement will have at least three significant
benefits for the Debtors. First, it will enable the Debtors to propose the First Amended Plan that
will, upon confirmation, provide to all parties in interest recoveries in excess of, or at least equal
to, the recoveries envisioned by the Initial Plan. Second, it will ensure that, so long as the
Debtors comply with the terms of the Plan Support Agreement, (a) the Plan Financing and
Equity Contribution will be available to fund the First Amended Plan, and (b) the First Amended
Plan enjoys the support of DIC and the Supporting Junior Prepetition Lenders. Third, it will
enable the Debtors to reduce the potentially significant litigation costs that would otherwise have
been incurred if the Debtors had continued to pursue confirmation ofthe Initial Plan, and the
attendant litigation risk of that Plan. The First Amended Plan leaves every class other than the
Junior Lender Classes unimpaired. The Supporting Junior Prepetition Lenders, however, have
executed the Plan Support Agreement and, therefore have agreed, subject to receipt and review
of a Court-approved disclosure statement with respect to the First Amended Plan, to support the
First Amended Plan and hold sufficient votes to ensure acceptance of the First Amended Plan by
each Junior Lender Class.
37. The Plan Financing is essential to the feasibility of the First Amended
Plan. The higher recoveries contemplated by the First Amended Plan are made possible only by
the availability of the Plan Financing to be provided by the Plan Financing Parties. The Debtors'
execution of the Plan Support Agreement, the Commitment Letters, and the Escrow Agreement
will bind the Plan Financing Parties to provide the Plan Financing necessary to consummate the
transactions contemplated by the First Amended Plan.
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38. Finally, entry into the Currency Rate Hedging Transactions will ensure
that the proceeds of the Plan Financing, together with the Debtors' available cash, will be more
than sufficient to implement and consummate the transactions contemplated by the First
Amended Plan, and that the benefits of the Currency Rate Hedging Transactions far exceed the
cost.
B. Payment of the Fees and Reimbursement of the Expenses Under the
Commitment Letters are Reasonable
39. The payment of the Arranger Fees and other amounts as described above,
and the reimbursement of the expenses of the Plan Financing Parties in connection with their
commitment to provide the Plan Financing are essential inducements and conditions of their
willingness to commit to provide and/or facilitate the Plan Financing. Accordingly, the Debtors'
agreement to reimburse the Plan Financing Parties' expenses and to pay the Arranger Fees and
other amounts associated with the Plan Financing when due are actual and necessary costs of
preserving the Debtors' estates. Absent authority to reimburse these expenses and pay the other
amounts (or, in the case of the Arranger Fees, commit to make such payment if the First
Amended Plan becomes effective), the Debtors will not be able to secure the Plan Financing,
which is necessary to consummate the First Amended Plan (and provide the enhanced recovery
to creditors provided therein).
40. Importantly, the payment of the Arranger Fees associated with the Plan
Financing will not occur until the First Amended Plan is consummated. Thus, the Debtors'
estates will not have spent significant funds vis-a-vis the Arranger Fees if, for whatever reason,
the Debtors are unable to confirm or consummate the First Amended Plan.
41. With respect to the Liquidated Damages provisions contained in the GSO
Commitment Letter and the Sankaty and Golden Tree Commitment Letter, the magnitude of such
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damages is approximately three percent of the total commitments. The Liquidated Damages
provisions are quite unique and are not automatically payable if a plan other than the First
Amended Plan is consummated. Rather, the Liquidated Damages are only payable if, within six
months after the execution of the Commitment Letters, the Debtors obtain alternative financing
for a plan in which DIC receives more than 30% of the equity interest in the Reorganized
Debtors, and such equity interest has a pro forma post-reorganization valuation not exceeding
$30 million- a scenario which is unlikely to occur. Nor are they payable if the First Amended
Plan fails and the Debtors return to the terms (or some variation thereof) of the Initial Plan which
provides no distributions to DIC on account of its equity interest in the Debtors.
C. The Plan Support Agreement Complies with
Section 1125 of the Bankruptcy Code
42. The Debtors submit that the Plan Support Agreement complies with the
requirements of section 1125 of the Bankruptcy Code. Section 1125(b) provides that "[a]n
acceptance or rejection of a plan may not be solicited after the commencement of the case under
this title ... unless, at the time of or before such solicitation, there is transmitted ... a written
disclosure statement approved, after notice and a hearing, by the court as containing adequate
information." 11 U.S.C. 1125(b).
43. Courts have long recognized that the scope of impermissible postpetition
"solicitation" under section 1125(b) should be interpreted narrowly, and that section 1125(b)
should not be used to inhibit negotiations among the parties in interest. See Century Glove, Inc.
v. First American BankofNew York, 860 F.2d 94, 101 (3d Cir. 1988); see also Trans World
Airlines, Inc. v. Texaco, Inc. (In re Texaco, Inc.), 81 B.R. 813, 814-16 (Bankr. S.D.N.Y. 1988).
Accordingly, courts in this District and others have approved postpetition plan support
agreements reached among debtors and their creditors. See, e.g., In re Tronox Inc., Case No. 09-
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10156 (ALG) (Bankr. S.D.N.Y. Dec. 23, 2009) [Docket No. 1030) (approving postpetition plan
support agreement); In re Visteon Corp., Case No. 09-11786 (CSS) (Bankr. D. Del. June 17,
2010) [Docket No. 3427] (same); In re Owens Corning, Case No. 00-03837 (JKF) (Bankr. D.
Del. June 29, 2006) [Docket No. 18208] (same).9
44. The Plan Support Agreement is the product of extensive negotiations
among the parties. The Plan Support Agreement does not dispense, or purport to dispense, with
the solicitation and voting requirements of the Bankruptcy Code. In particular, the Plan Support
Agreement does not absolutely commit any of the parties thereto to support or vote for a
particular plan of reorganization with no consideration of the disclosures set forth in an approved
disclosure statement. The Plan Support Agreement thus contemplates that the Debtors would file
and receive court approval for a disclosure statement with respect to the First Amended Plan, and
that only thereafter, and after review of the approved Disclosure Statement and its attachments,
would the parties to the Plan Support Agreement be obligated to exercise their chapter 11 voting
rights.
45. Given that the Plan Support Agreement is the product of the very plan
negotiations that are so critical to the Chapter 11 process and that should, as a policy matter, be
strongly encouraged, and the flexibility afforded to the parties to the Plan Support Agreement,
the Debtors submit that their entry into the Plan Support Agreement does not constitute a
"solicitation" of the votes of DIC and the Supporting Junior Prepetition Lenders that violates
either the letter or the spirit of section 1125(b) of the Bankruptcy Code.
9 The Debtors have not annexed copies of the unreported orders cited herein. Copies of these orders are available
upon request to the Debtors' counsel and will also be available at the hearing to consider the Motion.
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D. Conclusion
46. Based on the foregoing, the Debtors respectfully submit, in their
considered business judgment, that the relief requested herein is necessary and appropriate, is in
the best interests of their estates and all parties in interest, and should be granted. Moreover, the
Debtors respectfully submit that the Plan Support Agreement is not a "solicitation" of votes to
accept a plan of reorganization, and does not violate section 1125(b) of the Bankruptcy Code.
WAIVER OF THE STAY UNDER BANKRUPTCY RULE 6004(h)
47. Bankruptcy Rule 6004(h) provides that an "order authorizing the use, sale,
or lease of property other than cash collateral is stayed until the expiration of 14 days after entry
of the order, unless the court orders otherwise." Fed. R. Bankr. P. 6004(h). The Debtors request
that the order approving the relief requested in this Motion be effective immediately by
providing that the 14-day stay under Bankruptcy Rule 6004(h) is waived. Such a waiver is
necessary because absent a waiver of the stay, the Debtors would be delayed from seeking
confirmation of the First Amended Plan, to the detriment of all parties in interest. Even more
importantly, however, failure to waive the provisions of Bankruptcy Rule 6004(h) would
potentially (a) allow DIC and the Requisite Junior Lenders to terminate the Plan Support
Agreement; the Plan Support Agreement specifies that the failure of the Court to enter an order
approving this Motion within twenty one (21) days after it is filed constitutes a termination
event; and (b) allow the parties to some of the Commitment Letters to withdraw their
commitments; the GSO Commitment Letter, the Sankaty and Golden Tree Commitment Letter
and the Revolving Credit Facility Commitment Letter all provide that they terminate two (2)
business days after entry of the order approving this Motion unless the Debtors have executed
such Commitment Letter by such date.
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NOTICE
48. No trustee, examiner, or official committee of unsecured creditors has
been appointed in the Chapter 11 Cases. The Debtors have provided notice of filing of the
Motion by electronic mail, facsimile, and/or overnight mail to the parties listed in the Master
Service List established in the Chapter 11 Cases, and any other party who has requested service
of documents filed in the Chapter 11 Cases, all in accordance with the Court's order establishing
notice procedures [Docket No. 53]. Due to the nature of the relief requested herein, the Debtors
submit that no other or further notice is required. The Motion is also available on the following
website: http://chapter11.epiqsystems.com/almatis.
NO PRIOR REQUEST
49. No prior motion for the relief sought in this Motion has been made to this
or any other court.
WHEREFORE, the Debtors respectfully request that the Court grant the relief
requested herein and such other and further relief as the Court may deem just and proper.
Dated: New York, New York
July 23, 2010
Respectfully submitted,
Is! Michael A. Rosenthal
Michael A. Rosenthal (MR-7006)
Janet M. Weiss (JW-5460)
Matthew K. Kelsey (MK-3137)
GIBSON, DUNN & CRUTCHER LLP
200 Park A venue
Telephone: (212) 351-4000
Facsimile: (212) 351-4035
ATTORNEYS FOR THE DEBTORS AND
DEBTORS IN POSSESSION
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In re Ampex Corporation, Case No. 08-11094 (Bankr. S.D.N.Y. 2008).
EXECUTION VERSION
PLAN SUPPORT AGREEMENT
This PLAN SUPPORT AGREEMENT is made and entered into as of the date hereof(the
"Agreement") by and among the following parties:
(a) The undersigned holders (each, a "Consenting Senior Secured
Noteholder") of the 12% Senior Secured Notes due 2008 (the "Senior Secured Notes"), issued
pursuant to the Indenture, dated as of February 28, 2002, between Ampex Corporation
("Ampex"), as issuer, and U.S. Bank National Association ("Trustee"), as successor trustee to
State Street Bank and Trust Company, as trustee (including ancillary documents executed
therewith, as amended, the "Indenture");
(b) The undersigned holder ("Hillside" and together with the Consenting
Senior Secured Noteholders, the "Consenting Holders"), as holder of those certain notes (the
"Hillside Notes") issued pursuant to the settlement agreement dated as of December 1, 1994,
between Hillside, the Company (as defined in paragraph (c) below) and certain entities affiliated
with Sherborne Holdings Incorporated (as amended, the "USA Agreement"); and
(c) Ampex and certain of its affiliates (collectively, the "Company") that will
or may constitute one of the "Debtors" (as defined below) (each ofthe foregoing, the
Consenting Senior Secured Noteholders, Hillside and the Company, a "Party", and collectively,
the "Parties").
RECITALS
WHEREAS, the Company has determined that a prompt restructuring of its capital
structure would be in the best interests of its stakeholders;
WHEREAS, each Consenting Senior Secured Noteholder is the holder of a Claim, as
defined in section 101(5) oftitle 11 of the United States Code (the "Bankruptcy Code") arising
out of, or related to, the Senior Secured Notes (each, a "Senior Secured Note Claim," and/or an
''Ampex Claim");
WHEREAS, the Consenting Senior Secured Noteholders hold a majority of the
aggregate face amount of the Senior Secured Notes;
WHEREAS, Hillside is the holder of a Claim, as defined in section 101 (5) of the
Bankruptcy Code arising out of, or related to, the Hillside Notes (the "Hillside Notes Claim,"
and/or an "Ampex Claim");
WHEREAS, the Parties intend to implement the restructuring contemplated by this
Agreement (the "Restructuring") through a confirmed plan of reorganization, the form and
substance of which shall be consistent in all material respects with the terms set forth in that
certain Joint Chapter II Plan of Reorganization for Ampex Corporation and its Affiliates
attached hereto as Exhibit A (as the same may be amended from time to time with the
Consenting Holders' consent, the "Plan"). The Plan will be filed on behalf of the Ampex and its
U.S. subsidiaries (collectively, the "Debtors") in voluntary bankruptcy cases (the
''Reorganization Cases") to be commenced by the Debtors by filing petitions (the "Petitions")
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under chapter 11 of the Bankruptcy Code (the date of that event being the "Petition Date") in
the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court");
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WHEREAS, the Parties have engaged in good faith, ann's length negotiations with the
objective of reaching an agreement with regard to restructuring the Ampex Claims and other
outstanding claims against, and equity interests in, the Debtors in accordance with the terms set
forth in this Agreement and the Plan;
WHEREAS, each Consenting Holder has reviewed, or has had the opportunity to review
the Plan and this Agreement with the assistance of professional legal advisors of its own
choosing;
WHEREAS, each Consenting Holder desires to support the Plan, and the Company
desires to obtain the commitment of the Consenting Holders to support the Plan, in each case
subject to the terms and conditions set forth herein;
WHEREAS, subject to execution of definitive documentation and appropriate approvals
by the Bankruptcy Court of the Plan and the associated disclosure statement (as the same may be
amended from time to time, the "Disclosure Statement"), each of which shall be in form and
substance satisfactory to the Debtors and the Consenting Holders, and which shall be consistent
with the Plan annexed hereto, the following sets forth the agreement between the Parties
concerning their respective obligations; and
WHEREAS, in expressing such support, the Parties do not desire and do not intend in
any way to derogate from or diminish the solicitation requirements of applicable securities and
bankruptcy laws, or the fiduciary duties of any Consenting Holder who is appointed to any
oflicial committee of unsecured creditors (the "Creditors' Committee") in the Reorganization
Cases.
NOW, THEREFORE, in consideration of the foregoing and the promises, mutual
covenants and agreements set forth herein and for other good and valuable consideration, the
Parties agree as follows:
AGREEMENT
Section 1. Means for Implementing the Plan.
To implement the Plan, the Debtors and each of the signatories hereto have agreed, on the
terms and conditions set forth herein, that the Debtors shall use their best efforts to:
(a) initiate the Reorganization Cases promptly following the effectiveness of this
Agreement and no later than the date set forth in Section 8.l(b);
The Debtors in the Reorganization Cases will include: (i) Ampex Corporation; (ii) Ampex Data Systems
Corporation; (iii) Ampex Data International Corporation; (iv) Ampex Finance Corporation; (v) AFC
Holdings Corporation; (vi) Ampex Holdings Corporation; and (vii) Ampex International Sales Corporation.
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(b)
(c)
(d)
(e)
coordinate with counsel to the Consenting Holders to prepare the Plan and the
submit for and obtain at the earliest practicable date, Bankruptcy Court approval
of the Disclosure Statement in fonn and substance reasonably satisfactory to the
Consenting Holders;
solicit the requisite acceptances of the Plan in accordance with section 1125 of the
Bankruptcy Code after: (i) the Reorganization Cases have commenced; and
(ii) the Bankruptcy Court has approved the Disclosure Statement;
make a motion in the Bankruptcy Court to confinn the Plan as expeditiously as
practicable under the Bankruptcy Code, the Federal Rules of Bankruptcy
Procedure and the local rules for the Bankruptcy Court for the Southern District
of New York (the federal and local rules being the "Bankruptcy Rules");
(f) implement all steps necessary and desirable to obtain from the Bankruptcy Court
an order confirming the Plan (the "Confirmation Order") within the time frame
set forth in this Agreement, which Confirmation Order shall be in form and
substance satisfactory to the Debtors and each Consenting Holder; and
(g) consummate the confirmed Plan;
provided. however, that the form and substance of the Plan, including any Plan Supplement (as
defined below) confirmed in connection therewith, and the Disclosure Statement shall be
consistent in all material respects with the Plan attached hereto. Notwithstanding anything to the
contrary contained herein, the Consenting Holders shall be under no requirement to participate in
the Restructuring if the Plan or Disclosure Statement presented to the Consenting Holders
provides for any terms that are materially inconsistent with this Agreement or the Plan attached
hereto.
Provided that this Agreement has not been terminated in accordance with Section 8.1
herein, the Company shall not (i) support or seek to implement any restructuring transaction or
series of restructuring transactions other than those contemplated in the Plan; (ii) support any
effort to cause the United States Trustee to appoint a separate committee to represent the interest
of equity holders; (iii) impede confirmation of the Plan or take any action, directly or indirectly,
or encourage any transaction that may interfere with confirmation of the Plan; or (iv) encourage
in any fashion any person or entity to do any of the actions identified in subclauses (i)- (iii) of
this section.
Section 2. Plan
The Plan annexed hereto is incorporated herein by reference. Capitalized terms used
herein without definition shall have the meanings ascribed to such terms in the Plan. The general
terms and conditions of the Restructuring are set forth in the Plan annexed hereto; provided,
however, that the Plan is supplemented by the terms and conditions of this Agreement. In the
event the terms and conditions set forth in the Plan and this Agreement are inconsistent, the
terms and conditions set forth in the Plan shall govern.
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Section 3. Commitments of the Consenting Holders Under this Agreement and the
Plan.
3.1 Consenting Holders.
Each Consenting Holder commits herein to support the Plan and represents that it is its
intention to continue to support the Plan (subject to Section 1 hereof) so long as it is the legal
owner, beneficial owner and/or the investment adviser or manager of or with power and/or
authority to bind any Ampex Claims and has been properly solicited pursuant to sections 1125
and 1126 of the Bankruptcy Code, however, this Agreement is not and shall not be deemed to be
a solicitation for consent to the Plan. The acceptance of the Consenting Holders will not be
solicited until the Consenting Holders have received the Disclosure Statement and the related
ballots in forms approved by the Bankruptcy Court.
3.2 Support of Plan.
(a)
(b)
As long as a Termination Event has not occurred, or has occurred but has been
duly waived or cured in accordance with the terms hereof, and so long as the Plan
and all documents necessary for the Reorganization Cases (including the
Disclosure Statement and all other motions and pleadings that could be
reasonably anticipated to affect the interests of the Consenting Holders
(collectively, the "Chapter 11 Documents")) shall be and remain in form and
substance satisfactory to the Consenting Holders, each of the Consenting Holders
(as long as each such Consenting Holder remains the legal owner, beneficial
owner and/or the investment advisor or manager of or with power and/or authority
to bind any Ampex Claims) agrees that, subject to Section I hereof, by having
executed and become party to this Agreement, from and after the date hereof, it
will:
(i)
(ii)
support the Plan;
not, directly or indirectly seek, solicit, argue for, support or vote in favor
of any other plan, sale, proposal or offer of dissolution, winding up,
liquidation, reorganization, merger or restructuring of the Debtors that is
inconsistent with the Plan annexed hereto or could reasonably be expected
to prevent, delay or impede the restructuring of the Debtors as
contemplated by the Plan or any other document filed in connection with
confirming the Plan (each, a "Reorganization Document"); and
(iii) subject to the Company's confidentiality obligations in Section 9.9 hereof
agree to pennit disclosure in the Disclosure Statement and any filings
made by the Debtors with the Securities and Exchange Commission of the
contents of this Agreement.
Subject to Section 1, as long as a Termination Event has not occurred, or has
occurred but has been duly waived or cured in accordance with the terms hereof,
and so long as the Plan, Disclosure Statement and all other Chapter II Documents
are in form and substance satisfactory to the Consenting Holders, the Debtors and
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each Consenting Holder, further agree that they shall not object in court to or
otherwise commence any proceeding opposing any of the terms of this
Agreement, the Disclosure Statement or the Plan.
3.3 Transfer of Claims, Interests and Securities.
Each of the Consenting Holders hereby agrees, for so long as this Agreement shall
remain in effect as to it (such period, the "Restricted Period"), not to sell, assign, transfer,
hypothecate or otherwise dispose of, directly or indirectly (each such transfer, a "Transfer"), all
or any of its Ampex Claims (or any right related thereto and including any voting rights
associated with such Ampex Claims), unless the transferee thereof agrees to be bound by all of
the terms of this Agreement by executing the Joinder attached hereto as Exhibit B. The
Company shall promptly acknowledge any such Transfer in writing and provide a copy of that
acknowledgement to the transferor. By its acknowledgement of the relevant Transfer, the
Company shall be deemed to have acknowledged that its obligations to the Consenting Holders
hereunder shall be deemed to constitute obligations in favor of the relevant transferee as a
Consenting Holder hereunder. Any sale, transfer or assignment of any Relevant Claim (as
defined below) that does not comply with the procedure set forth in the first sentence of this
Subsection 3.3 shall be deemed void ab initio. No Consenting Holder may create any subsidiary
or affiliate for the sole purpose of acquiring any securities or notes issued by any Debtor without
first causing such subsidiary or affiliate to become a party hereto as a Consenting Holder.
3.4 Further Acquisition of Ampex Claims.
This Agreement shall in no way be construed to preclude any Consenting Holder or any
of its respective subsidiaries from acquiring additional Ampex Claims or interests (or voting
rights associated therewith); provided that any such additional Ampex Claims or interests (or
voting rights associated therewith) acquired by a Consenting Holder shall automatically be
deemed to be subject to the terms of this Agreement. Upon written request ofthe Debtors, each
Consenting Holder shall, in writing and within five (5) business days, provide an accurate and
current list of all Ampex Claims or interests (or voting rights asserted therewith) that it holds at
that time, subject to any applicable confidentiality restrictions and applicable law and subject to
the confidentiality obligations set forth in Section 9.9 hereof).
3.5 Representation of Consenting Holders' Holdings.
Each of the Consenting Holders represents that, as of the date hereof:
(a)
(b)
it is the legal owner, beneficial owner and/or the investment adviser or manager
for the beneficial owner of such legal or beneficial owner's Ampex Claims set
forth on its respective signature page (collectively, the "Relevant Claims");
there are no Ampex Claims of which it is the legal owner, beneficial owner and/or
investment adviser or manager for such legal or beneficial owner that are not part
of its Relevant Claims unless such Consenting Holder does not possess the full
power to vote and dispose of such Claims; and
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(c)
Section 4.
it has all requisite power and authority to enter into this Agreement and to carry
out the transactions contemplated hereby, and to perform its obligations
hereunder.
The Debtors' Fiduciary Obligations.
Notwithstanding anything to the contrary contained in this Agreement, nothing in this
Agreement requires the Company to breach any respective fiduciary obligation that it may have
under applicable law, and the Company may commit any act or take any actions consistent with
such fiduciary obligations; provided, however, that it is agreed that such act may still result in a
Termination Event hereunder and shall not affect the rights of the Parties set forth in Section 8
hereof.
Section 5. Mutual Representations, Warranties, and Covenants.
Each Party makes the following representations, warranties and covenants to each of the
other Parties, each of which are continuing representations, warranties and covenants:
5.1 Enforceability.
Subject to the provisions of sections 1125 and 1126 ofthe Bankruptcy Code, this
Agreement is a legal, valid and binding obligation of the Party, enforceable against it in
accordance with its terms, except as enforcement may be limited by applicable laws relating to or
limiting creditors' rights generally or by equitable principles relating to enforceability.
5.2 Mutual Cooperation.
Each Party shall cooperate with the other Parties to do or cause to be done all things as
may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the
intent and purpose of this Agreement.
5.3 Power and Authority.
It has all requisite power and authority to enter into this Agreement and to carry out the
transactions contemplated by, and perform its respective obligations under, this Agreement and
the Plan.
5.4 Authorization.
The execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly authorized by all necessary action on its part.
5.5 Governmental Consents.
The execution, delivery and performance by it of this Agreement does not and shall not
require any registration or tiling with consent or approval of, or notice to, or other action to, with
or by, any federal, state or other governmental authority or regulatory body, except such 1ilings
as may be necessary and/or required under the federal securities laws and, in c01mection with the
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commencement of the Reorganization Cases, the approval of the Disclosure Statement and
confirmation of the Plan by the Bankruptcy Court.
5.6 No Conflicts.
As to each Party, the execution, delivery and performance of this Agreement does not and
shall not: (a) violate any provision of law, rule or regulations applicable to it; (b) violate its
certificate of incorporation, bylaws or other organizational documents; or (c) conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a default under any material
contractual obligation to which it is a party.
5.7 Waiver.
The failure of a Party hereto at any time or times to require performance of any provision
hereof shall in no manner affect its right at a later time to enforce the same. No waiver by a
Party of any condition or of any breach of any term, covenant, representation or warranty
contained in this Agreement shall be effective unless in writing by such Party, and no waiver in
any om: or more instances shall be deemed to be a further or continuing waiver of any such
condition or breach of other instances or a waiver of any other condition or breach of any other
term herein.
Section 6. No Waiver of Participation and Preservation of Rights.
The Company agrees that the Senior Secured Notes, Hillside Notes, the HSA Agreement,
the Indenture and all other documents and agreements executed in conjunction with any of the
foregoing shall remain and continue in full force and effect. This Agreement and the Plan are
part of a proposed settlement of disputes among the Parties. Except as expressly provided in this
Agreement, nothing herein is intended to, does or shall be deemed in any manner to waive, limit,
impair or restrict the ability of each of the Consenting Holders to protect and preserve its rights,
remedies and interests, including, but not limited to, any and all of its claims and causes of action
against any of the Debtors, any liens or security interests it may have in any assets of any of the
Debtors or any third parties, or its full participation in the Reorganization Cases. Moreover,
nothing contained herein effects a modification of Hillside's, the Consenting Senior Secured
Noteholders' or the Trustee's respective rights under the HSA Agreement or the Indenture or
other documents and agreements executed in conjunction therewith unless and until the
Restructuring is consummated. Without limiting the foregoing, in any way, if the transactions
contemplated by this Agreement or otherwise set forth in the Plan are not consummated as
provided herein, if a Termination Event occurs, or if this Agreement is otherwise tenninated for
any reason, the Parties each fully reserve any and all of their respective rights, remedies,
defenses and interests. Notwithstanding anything herein to the contrary, if a Consenting Holder
is appointed to and serves on an official committee in the Reorganization Cases, the terms of this
Agreement shall not be construed to limit such Consenting Holder's exercise of its fiduciary
duties in its role as a member of such committee, and any exercise of such fiduciary duties shall
not be deemed to constitute a breach of the terms ofthis Agreement.
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Section 7. Non-solicitation of Votes.
This Agreement, the Plan and the transactions contemplated herein and therein are the
product of arm's length negotiations among the Parties, together with their respective
representatives. This Agreement is not, and shall not be deemed to be, a solicitation of votes for
the acceptance of a plan of reorganization for the purposes of sections 1125 and 1126 of the
Bankruptcy Code or otherwise.
Section 8. Termination.
8.1 Termination Events.
The term "Termination Event," wherever used in this Agreement, means any of the
following events (whatever the reason for such Termination Event and whether it is voluntary or
involuntary); provided, however, with respect to a Termination Event contemplated by clauses
(b), (c), (d), (e) and (f) of this Section 8.1, such date may be extended jointly in writing by (i) the
Debtors, (ii) Hillside and (iii) Consenting Senior Secured Noteholders holding in the aggregate at
least 51% of the aggregate outstanding principal amount of the Senior Secured Note Claims held
by Consenting Holders (the "Senior Secured Note Requisite Holders"):
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
the Plan or any subsequent plan of reorganization filed by the Debtors with the
Bankruptcy Court (or any Plan supported or endorsed by the Debtors) is not
satisfactory to the Debtors and each of the Consenting Holders;
the Debtors shall not have commenced these Reorganization Cases under chapter
11 of the Bankruptcy Code within 14 days following the execution of this
Agreement;
the Debtors shall not have filed the Plan and Disclosure Statement which are each
reasonably acceptable to each of the Consenting Holders, with the Bankruptcy
Court on or before 10 days following the Petition Date;
a hearing to consider the Disclosure Statement has not been scheduled to occur on
or before 45 days following the Petition Date;
a hearing to consider the Confirmation Order has not been scheduled to occur on
or before 75 days following the Petition Date;
The Plan shall not have been consummated within 60 days of the entry of the
Confirmation Order;
any Party has breached any material provision of this Agreement and, if curable,
any such breach has not been duly cured in accordance with the terms hereof after
a period of five (5) business days;
the Bankruptcy Court shall enter an order in any of the Reorganization Cases
appointing (i) a trustee under chapter 7 or chapter 11 of the Bankruptcy Code,
(ii) a responsible officer, (iii) an equity committee or (iv) an examiner;
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4195729.4
(i) any of the Reorganization Cases of the Debtors are (i) dismisssed or (ii) converted
to cases under chapter 7 of the Bankruptcy Code and any such order has not been
vacated within thirty (30) days following the date of such order;
(j) any court shall enter a judgment or order declaring this Agreement or any material
portion hereof to be unenforceable;
(k) the Debtors shall withdraw the Plan or publicly announce their intention not to
support the Plan;
(I) the stipulation or order approving the Debtors' use of Hillside's cash collateral
and the Consenting Senior Secured Noteholders' cash collateral is not in form and
substance satisfactory to Hillside and the Consenting Holders, respectively, is
terminated or is not approved;
(m) the Company takes formal action (including, without limitation, the filing of a
pleading in the Reorganization Cases), or announces an intention to take or pursue
action, inconsistent with (i) the Plan or (ii) any of the Chapter II Documents;
(n) an involuntary bankruptcy case or similar proceeding or any other action
enforcing remedies not brought, supported, proposed, consented to, or
participated in by the Consenting Holders, is initiated against the Company
unless, within twenty-five (25) days after such case or proceeding has been
initiated, the Company consents to the entry for an order for relief or files for
chapter 11 protection, and then files the Chapter 11 Documents, and seeks to
implement the Restructuring by filing the Disclosure Statement and Plan;
(o) the Debtors shall have filed an amendment of the Plan without having obtained
the Consenting Holders' prior written consent;
(p) the Confirmation Order is not in form and substance reasonably satisfactory to the
Consenting Holders; and
(q) the Consenting Holders do not hold at least 50% in outstanding amount of the
Senior Secured Note Claims.
The foregoing Termination Events are intended solely for the benefit of the Debtors and
the Consenting Holders; provided that no Party may seek to terminate this Agreement based
upon a breach or a failure of a condition (if any) in this Agreement arising out of its own actions
or omiSSIOns.
8.2 Termination Event Procedures.
(a) Unless waived in writing by each Party to this Agreement, this Agreement shall
terminate three (3) business days following the date of occurence of any
Termination Event.
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(b)
(c)
With respect to any Tennination Event which is triggered by the failure or
inability to obtain the agreement or consent of each Consenting Holder or to have
a document satisfactory to each Consenting Holder (a "Non-Consenting
Holder"), the Tennination Event shall only apply to such Non-Consenting Holder
and this Agreement shall otherwise remain in full force and effect.
If this Agreement is validly tenninated by any Party (other than a Non-Consenting
Holder) and the transactions contemplated hereunder are abandoned in
accordance with this Section 8, except as set forth in Section 9.9 hereof, all
obligations hereunder shall tenninate and be of no further force and effect,
provided, however, that any claim for breach of this Agreement shall survive
tennination and all rights and remedies with respect to such claims shall not be
prejudiced in any way, provided further, however, that if the Company tenninates
this Agreement, it shall be obligated to promptly pay all fees and expenses of the
Consenting Holders' professionals incurred through the date oftennination
provided. further, that this provision shall in no way limit the Company's
obligation to pay thefees and expenses of the Consenting Holders' professionals
under any order approving the use of cash collateral.
8.3 Consent to Termination.
In addition to the Tennination Events set forth in Section 8.1 hereof, this Agreement shall
tenninate effective upon a written agreement of the Company, Hillside and the Senior Secured
Note Requisite Holders to tenninate this Agreement.
Section 9. Miscellaneous Terms.
9.1 Third Party Beneficiaries; Assignment.
Third Party Beneficiaries. This Agreement shall be solely for the benefit of the parties
hereto, and nothing in this Agreement, express or implied, shall give to any entity, other than the
Parties, any benefit or any legal or equitable right, remedy or claim under this Agreement. The
agreements, representations, warranties, covenants and obligations of the Consenting Holders
contained in this Agreement, are, in all respects, several and not joint, and no Party shall have
any liability for any breach by any other Party of any obligation of such set forth herein. None of
the Parties shall have or acquire any liability or responsibility for any other Party's perfonnance
or non-perfonnance under this Agrement.
Assignment. No rights or obligations of any Party under this Agreement may be
assigned or transferred to any other Entity except as provided in Section 3.3 hereof.
9.2 Further Assurances.
The Parties agree to execute and deliver such other instnnnents and perform such acts, in
addition to the matters herein specified, as may be reasonably appropriate or necessary, from
time to time, to effectuate the agreements and understandings of the Parties.
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9.3 Headings.
The headings of all sections of this Agreement are inserted solely for the convenience of
reference and are not a part of and are not intended to govern, limit or aid in the construction or
interpretation of any term or provision hereof.
9.4 Governing Law.
THIS AGREEMENT IS TO BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED fN SUCH STATE, WITHOUT GIVfNG
EFFECT TO THE CHOICE OF LAWS PRINCIPLES THEREOF. Upon the commencement of
the Reorganization Cases, each of the Parties hereto hereby agrees that the Bankruptcy Court
shall have exdusive jurisdiction of all matters arising out of or in connection with this
Agreement.
9.5 Complete Agreement, Interpretation and Modification.
9.6
(d) Interpretation. Any Party enforcing or interpreting this Agreement shall
interpret it in a neutral manner. There shall be no presumption concerning
whether to interpret this Agreement for or against any Party by reason of that
Party having drafted this Agreement, or any portion thereof, or caused it or any
portion thereof to be drafted.
(e) Modification ofthis Agreement. Except as set forth in Section 8.2, this
Agreement may only be modified, altered, amended or supplemented by an
agreement in writing signed by the Company and each Consenting Holder.
Execution of this Agreement.
This Agreement may be executed and delivered (by facsimile or via PDF upon
contirmation of receipt) in any number of counterparts, each of which, when executed and
delivered, shall be deemed an original, and all of which together shall constitute the same
agreement. Except as expressly provided in this Agreement, each individual executing this
Agreement on behalf of a Party has been duly authorized and empowered to execute and deliver
this Agreement on behalf of said Party; provided, however, that no holder of a Senior Secured
Note Claim may become a Consenting Holder by executing this Agreement at any time on or
after the Petition Date nor shall the Parties agree to treat any such holder as a Party to this
Agreement.
9.7 Settlement Discussions.
This Agreement and the Restructuring are part of a proposed settlement of a dispute
among the Parties. Nothing herein shall be deemed an admission of any kind. Pursuant to
Federal Rule of Evidence 408 and any applicable state rules of evidence, this Agreement and all
negotiations relating thereto shall not be admissible into evidence in any proceeding other than a
proceeding to enforce the terms of this Agreement.
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4195729.4
9.8 Consideration.
The Debtors and each Consenting Holder hereby acknowledge that no consideration,
other than that specifically described herein shall be due or paid to the Consenting Holders for
their agreement to support the Plan in accordance with the terms and conditions of this
Agreement. No party hereto shall be liable tor any monetary damages for breach or tennination
hereof.
9.9 Confidentiality
Unless required by applicable law or regulation (including, without limitation, the
Bankruptcy Code and the United States securities Jaws and any rules or regulations of the
Securities and Exchange Commission) or court order, which law, regulation, or order may
require disclosure of the following, or in conjunction with an action to enforce this Agreement,
the Company shall not disclose any Consenting Holder's holdings of Senior Secured Notes
without the prior written consent of the Consenting Holder whose individual holdings are to be
disclosed. The foregoing shall not prohibit the Company from disclosing the existence and terms
of this Agreement or the aggregate amount of Senior Secured Notes, regardless ofwhether such
disclosure is required by law, regulation, or court order, in any appropriate bankruptcy pleading.
9.10 Notices.
All notices hereunder shall be deemed given if in writing and delivered, if sent by
facsimile, courier or by registered or certified mail (return receipt requested) to the following
addresses and facsimile numbers (or at such other addresses or facsimile numbers as shall be
specified by like notice):
(a) If to the Debtors, to:
Ampex Corporation
1228 Douglas A venue
Redwood City, California 94063
Attn: Joel D. Talcott, Esq., General Counsel
Telephone: (650) 367-3330
Facsimile: (650) 367-3440
-and-
Willkie Farr & Gallagher LLP
787 Seventh A venue
Attn: Matthew A. Feldman, Esq.
Rachel C. Strickland, Esq.
Telephone: (212) 728-8000
Facsimile: (212) 728-811 1
12
4195729.4
(b)
(c)
If to Hillside, to:
Hillside Capital Inc.
405 Park A venue, 12th Floor
New York, NY 10022
Attn: Raymond F. Weldon
Donald Hawks
Telephone: (212) 935-6090
and
Milbank Tweed Hadley McCloy, LLP
One Chase Manhattan Plaza
New York, NY 10005
Attn: Dennis Dunne, Esq.
Jessica Fink, Esq.
Telephone: (212) 530-5000
Facsimile: (212) 530-5219
If to a Consenting Senior Secured Noteholder, to the addresses or facsimile
numbers set forth below following the Consenting Senior Secured Noteholder's
signature (or as directed by any transferee thereof), as the case may be, with
copies to:
DDJ Capital Management, LLC
Stony Brook Office Park
130 Turner Street
Building 3, Suite 600
Waltham, Massachusetts 02453
Attn: JacksonS. Craig, Managing Director
Telephone: (781) 283-8500
Facsimile: (781) 2 ~ D - 8 5 5 5
and counsel to DDJ Capital Management LLC,
O'Melvcny and Meyers LLP,
Times Square Tower,
7 Times Square
New York, NY 10036
Attn: Michael Sage, Esq.
Telephone: (212) 728-5942
Facsimile: (212) 326-2061
and
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411.}572'1.4
Cn:dit Suisse Asset Management, LLC
Eleven Madison A venue
NewYork, NY 10010
Attn: Martha B. Metcalf
Telephone: (212) 325 2000
Facsimile: (212) 325 6665
Any notice given by delivery, mail or courier shall be effective when received.
Any notice given by facsimile or PDF shall be effective upon oral or machine confirmation of
transmission.
14
IN WITNESS WHEREOF, the parties have entered into this Agreement on the day and
year first above written.
Dated: March 30, 2008
AMPEX CORPORATION
By: Is/ D. Gordon Strickland
D. Gordon Strickland
Chief Executive Officer and President
AMPEX DATA SYSTEMS CORPORA TlON
By: /s/ Joel D. Talcott
Joel D. Talcott
Vice President and Secretary
AMPEX DATA
INTERNATIONAL CORPORATION
Joel D. Talcott
AMPEX FINANCE CORPORATION
By: /s/ D. Gordon Strickland
D. Gordon Strickland
President
AFC HOLDINGS CORPORATION
Joel D. Talcott
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EXHIBIT A
JOINT CHAPTER 11 PLAN OF REORGANIZATION
FOR AMPEX CORPORATION AND ITS AFFILIATES
EXHIBIT B
JOINDER TO PLAN SUPPORT AGREEMENT
This Joinder to the Plan Support Agreement, dated as of March_, 2008, by and among
Ampex Corporation and the Consenting Holders signatory thereto (the "Agreement"), is
executed and delivered by [ ] (the "Joining Party") as of[_ _____ __],
2008. Each capitalized term used herein but not otherwise defined shall have the meaning set
forth in the Agreement.
Agreement to be Bound. The Joining Party hereby agrees to be bound by all of the terms
of the Agreement. The Joining Party shall hereafter be deemed to be a "Consenting Holder" for
all purposes under the Agreement.
Representations and Warranties. With respect to the Senior Secured Notes or Hillside
Notes set forth below its name on the signature page hereof and all related Ampex Claims, the
Joining Party hereby makes the representations and warranties of the Consenting Holders set
forth in the Agreement.
Governing Law. This Joinder shall be governed by and construed in accordance with the
internal laws ofthe State ofNew York, without regard to any conflicts of law provisions which
would require the application of the law of any other jurisdiction.
* * * * *
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4!95729.4
IN WITNESS WHEREOF, the Joining Party has caused this Joinder to be executed as of
the date first written above.
NY! 17305541
HOLDER OF RELEVANT OWNERSHIP
[Name of Holder]
By: ____________ _
Name: ___________ _
Title:. ___________ _
Notice Address
Fax: _____________ _
Attention:
---------------
Senior Secured Notes
or Hillside Notes:
Aggregate Amount
of Notes:
DTC Information:
Acknowledged:
Ampex Corporation
By: _________________ ___
Name:
-----------------
Title: _____________ _
2
In re Oneida Ltd., Case No. 06-10489 (Bankr. S.D.N.Y. 2006).
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EXECUTION VERSION
PLAN SUPPORT AGREEMENT (this "Agreement"), dated as of March 9, 2006, by and
among (i) the LENDERS that are party hereto (the "Plan Support Lenders"), in their individual
capacities, (ii) JPMORGAN CHASE BANK, N.A. (f/k/a JPMorgan Chase Bank; "JPMCB"), as
Agent under the Credit Agreement (as each term is defined in Recital A below) and (iii) Oneida
Ltd. ("Oneida").
A. Pursuant to that certain Second Amended and Restated Credit Agreement dated as of
August 9, 2004 among Oneida, certain institutional lenders from time to time party thereto
(collectively, the "Lenders") and JPMCB as administrative agent and collateral agent for the
Lenders (in such capacity, the "Agent"), as amended by an Amendment No. 1 to the Second
Amended and Restated Credit Agreement dated as of October 15, 2004, a Consent and Amendment
No. 2 to the Second Amended and Restated Credit Agreement, dated as of February 2, 2005, a
Consent, Waiver and Amendment No. 3 to the Second Amended and Restated Credit Agreement
dated as of April 7, 2005, and an Amendment No.4 to the Second Amended and Restated Credit
Agreement dated as of June 23, 2005 (as may be hereafter further amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"). Capitalized terms not otherwise
defined herein shall have the meaning set forth in the Credit Agreement.
B. Oneida is the sponsor of the Retirement Plan for the Employees of Oneida Ltd.
(FEINIPN: 15-0405700/00 I) (the "Oneida Plan") and Buffalo China, Inc., a wholly-owned
subsidiary of Oneida, is the sponsor of each of the Retirement Income Plan for Employees of
Buffalo China, Inc. (FEIN/PN: 16-0979731/001) (the "Buffalo China Plan") and the GMP- Buffalo
China, Inc. Pension Plan for Employees Who Are Members of Local 76A (FEIN/PN: 16-
097973 1/003) (the "Buffalo China Union Plan" and, together with the Buffalo China Plan and the
Oneida Plan, the "Oneida Pension Plans").
C. In connection with the Recapitalization (defined below) and as further described in
the Term Sheet (defined below), Oneida intends to seek a distressed termination of one or more of
the Oneida Pension Plans pursuant to Section 4041(c)(2)(B)(ii) of ERISA, which would result in a
liability to the PBGC (the "PBGC Obligation").
D. The Lenders and Oneida have engaged in extensive negotiations to restructure
certain outstanding obligations of Oneida and its subsidiaries to the Lenders under the Credit
Agreement, and Oneida and the PBGC have had discussions regarding compromising the PBGC
Obligations.
E. Each Plan Support Lender has agreed to enter into the transactions (the
"Recapitalization"), described in the term sheet attached hereto as Exhibit A (the "Term Sheet") on
a consensual basis subject to the terms and conditions contained herein.
F. Oneida and the Plan Support Lenders (each a "Party" and together, the "Parties"),
together with the Agent, anticipate that the Recapitalization will be implemented through a "pre-
lNY/1991204.17
negotiated" (with the Plan Support Lenders) plan of reorganization for Oneida and certain of its
subsidiaries in voluntary bankruptcy cases (the "Chapter 11 Cases") under chapter 11 of title 11 of
the United States Code, II U.S.C. 1011532 (as amended) (the ''Bankruptcy Code") in the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court").
G. Subject to execution of definitive documentation and appropriate approvals of the
Bankruptcy Court, the following sets forth the agreement among the Parties (and the Agent)
concerning their respective obligations.
NOW, THEREFORE, in consideration of the covenants and agreements contained herein,
and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
each of the Parties and the Agent, intending to be legally bound hereby, agrees as follows:
1. Each Plan Support Lender's consent to the Recapitalization, and the agreement of each Plan
Support Lender and the Agent set forth herein, shall be effective at 11:59 p.m. prevailing Eastern
Time on March 9, 2006 (the "Effective Date"), if Oneida and, (i) with respect to those Plan Support
Lenders that have Tranche A Loans (the "Tranche A Plan Support Lenders"), Lenders holding more
than 662/3% in dollar amount of the Tranche A Term Loans outstanding under the Credit
Agreement and who number more than onehalf of all of the Tranche A Lenders and (ii) with
respect to those Plan Support Lenders that have Tranche B Loans (the ''Tranche B Plan Support
Lenders"), Lenders holding more than 662/3% in dollar amount of the Tranche B Term Loans
outstanding under the Credit Agreement and who number more than onehalf of all of the Tranche
B Lenders, shall have delivered and not withdrawn an executed counterpart of this Agreement to the
Agent.
2. This Agreement, and the Plan Support Lenders' and Agent's consents and agreements, shall
terminate, be of no further force or effect:
(1) immediately and automatically without the act of any party in the event that any of the
following occurs:
(i) by ll :59 p.m. prevailing Eastern Time on March 31, 2006, Oneida and all of its domestic
subsidiaries party to the Credit Agreement (together with Oneida, the "Filing Entities") have
not filed voluntary petitions with the Bankruptcy Court commencing the Chapter II Cases
(the date on which the Chapter II Cases are commenced being, the "Petition Date"); (ii) a
plan of reorganization proposed by the Filing Entities (the "Plan") and the related disclosure
statement (the "Disclosure Statement") shall not have been filed with the Bankruptcy Court
within 45 days of the Petition Date; (iii) the Plan shall not have been confirmed by an order
of the Bankruptcy Court within 270 days of the Petition Date; (iv) the effective date of the
Plan and substantial consummation thereof shall not have occurred within 45 days from the
date upon which the Bankruptcy Court enters an order confinning the Plan; (v) after filing
the Plan, any of the Filing Entities withdraws (or moves to withdraw) the Plan; or (vi) a
trustee or examiner with enlarged powers shall have been appointed under Sections I 05 or
1104 of the Bankruptcy Code for service in the Chapter II Cases; or
(II) in the event that any of the following occurs, upon the delivery to Oneida of a notice
from the Agent acting at the direction of the Required Plan Support Lenders (as hereinafter defined)
1-NY/199120417
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terminating this Agreement as to the Tranche A Plan Support Lenders or the Tranche B Plan
Support Lenders, as the case may be:
(i) prior to the Petition Date, an Event of Default under Section 7(b) or 7(c) of the Credit
Agreement shall have occurred and be continuing with respect to the Tranche A Loans; (ii)
the Plan or any amendment, modification or supplement thereto, or any other plan of
reorganization, shall have been filed by any of the Filing Entities with the Bankruptcy Court
containing terms that are not substantially in accordance with the transactions embodied in
the Term Sheet (including the treatment of the Claims (as hereinafter defined) contemplated
and set forth in the Term Sheet), or otherwise fails to be in form and substance reasonably
satisfactory to the Required Plan Support Lenders; (iii) the Filing Entities fail to deliver to
the Plan Support Lenders an executed commitment letter for exit financing to be provided
upon the consummation of the Plan by one or more proposed lenders by no later than 5:00
p.m. prevailing Eastern Time on April 30, 2006, or such commitment letter fails to be
reasonably acceptable in form and substance to the Required Plan Support Lenders and/or
fails to be for loans and other financial accommodations in an aggregate amount sufficient to
repay in full the loans and other obligations under the DIP Revolver or the Tranche A
Loans; (iv) the Bankruptcy Court grants relief that is inconsistent with the transactions
embodied in the Term Sheet (including the treatment of the Claims contemplated and set
forth in the Term Sheet) and materially adverse to the Plan Support Lenders, including,
without limitation, a motion to vacate or modify the automatic stay contained in Section 362
of the Bankruptcy Code with regard to any material assets of the Filing Entities (it being
understood that any such relief granted to the Agent and any of the Lenders in connection
with the DIP Revolver (as defined in the Term Sheet) shall not constitute a basis for the Plan
Support Lenders to invoke this termination event); or (v) as to any matter or issue specified
on the term sheet as "TBD," such matter or issue, when determined, shall not be reasonably
satisfactory to the Required Plan Support Lenders.
The earlier to occur of any of the events set forth in (I) and (II), above, shall be referred to as
the "Termination Date". Notwithstanding the occurrence of the Termination Date, paragraphs 14,
17 and 18 herein shall survive such termination.
"Required Plan Support Lenders" shall mean, at such time (i) as to the Tranche A Plan
Support Lenders, Plan Support Lenders holding greater than fifty percent (50%) of the unpaid
principal amount of Tranche A Term Loans (the "Reguired Tranche A Plan Support Lenders") and
(ii) as to the Tranche B Plan Support Lenders, Plan Support Lenders holding greater than fifty
percent (50%) ofthe unpaid principal amount of Tranche B Term Loans (the "Required Tranche B
Plan Support Lenders"). For the avoidance of doubt, a determination by the Required Plan Support
Lenders pursuant to clause (i) of this definition shall be binding on all Tranche A Plan Support
Lenders but not Tranche B Plan Support Lenders. A determination by the Required Plan Support
Lenders pursuant to clause (ii) of this definition shall be binding on all Tranche B Plan Support
Lenders but not Tranche A Plan Support Lenders.
3. Oneida may attach a copy of the Plan as Annex C hereto if, at such time, Oneida shall have
received the prior written confirmation from the Agent that the Plan is in fonn and substance
reasonably satisfactory to either or both of the Required Tranche A Plan Support Lenders or/and the
Required Tranche B Plan Support Lenders; provided, that if Oneida attaches a copy of the Plan
INY/199120417
3
without having received prior written confirmation from the Agent that the Plan is in form and
substance reasonably satisfactory to both the Required Tranche A Plan Support Lenders and the
Required Tranche B Plan Support Lenders, then the event specified in Section 2(II)(ii) of this
Agreement shall be deemed to have occurred with respect to all of the Plan Support Lenders related
to the group of Required Plan Support Lenders that did not give their prior written confirmation.
4. Subject to and upon the terms and conditions set forth herein, including the occurrence of
the Effective Date and subject to the occurrence of the Termination Date (if applicable), each of the
Plan Support Lenders hereby (i) consents to the transactions embodied in the Term Sheet, which is
incorporated herein and is made part of this Agreement, (ii) agrees to enter into and execute
definitive documentation reasonably necessary to effectuate such transactions, provided that such
definitive documentation is reasonably satisfactory in form and substance to the Plan Support
Lenders and the Agent, (iii) agrees not to object, on any grounds, to the terms, conditions, nature or
amount of the DIP Revolver to be provided by the Agent (in its capacity as post-petition
administrative agent}, or to the nature, amount and scope of the adequate protection ("Adequate
Protection") sought to be granted and as set forth on Annex A hereto; provided, that the terms of the
DIP Revolver and Adequate Protection are substantially in accordance with the terms and
conditions contained in the Term Sheet and (iv) so long as the Plan and the related Disclosure
Statement provide for the treatment of Claims substantially in accordance with the treatment
embodied and set forth in the Tenn Sheet, each Plan Support Lender shall, when solicited after
receipt of the Disclosure Statement previously approved by the Bankruptcy Court pursuant to
Section 1125(b) of the Bankruptcy Code, (a) vote to accept the Plan and (b) not (1) object to
confirmation of the Plan, (2) vote for, or otherwise directly or indirectly seek, solicit, support or
encourage (x) any objection to the Plan or (y) any other plan of reorganization or liquidation or (3)
take any other action, including, without limitation, initiating any legal proceedings that is
inconsistent with, or that would delay consummation of, the transactions embodied in the Term
Sheet and the Plan; provided, however, that neither a Plan Support Lender nor the Agent shall be
barred from objecting to compliance with Section 1125 of the Bankruptcy Code or other applicable
law relating to disclosure if it reao:;onably believes that the Disclosure Statement or other document
received by such Party lacks adequate information (as defined in Section 1125(a) ofthe Bankruptcy
Code).
Notwithstanding the foregoing, nothing in this Agreement shall be construed as to prohibit
any Party from appearing as a party-in-interest in any matter to be adjudicated in the Chapter 11
Cases so long as such appearance and the positions advocated in connection therewith are not
inconsistent with the provisions hereof.
5. The Agent is hereby authorized by each of the Plan Support Lenders to continue to pursue
and negotiate the Recapitalization and documentation related thereto containing terms (i)
substantially in accordance with the terms described in the Term Sheet, and (ii) with respect to
terms not set forth in the Term Sheet, reasonably satisfactory to the Required Plan Support Lenders.
6. Subject to the occurrence of the Effective Date and until the occurrence of the Termination
Date (if applicable}, this Agreement and the consent set forth herein shall be binding upon and inure
to the benefit of each Plan Support Lender, the Agent and their respective assigns, transferees,
participants and successors. In the event that any Plan Support Lender transfers, assigns or sells a
participation in its claims, rights or obligations ("Claims") relating to Oneida or its subsidiaries after
l-NY!I991204.17
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such Plan Support Lender's execution of this Agreement (including, without limitation, to an
Affiliate), such Plan Support Lender shall provide such assignee, transferee or participant with a
copy of this Agreement and shall obtain such assignee's, transferee's or participant's written
acknowledgment of and agreement to be bound by the terms hereof as a condition to such transfer,
assignment, or sale and any such transfer, assignment or sale that is made without obtaining such
written acknowledgment and agreement shall be null and void. In addition, by its execution and
delivery hereof, each Plan Support Lender acknowledges and agrees that the Agent may withhold
its consent under the Credit Agreement to any such proposed transfer, assignment or sale unless the
Assigrunent and Acceptance that is delivered to the Agent in respect thereof is accompanied by a
counterpart of this Agreement executed by the proposed transferee, assignee or purchaser.
7. Subject to the occurrence of the Effective Date and until the occurrence of the Termination
Date (if applicable), the Parties and the Agent will (i) negotiate in good faith the documentation
necessary to implement the Recapitalization, which shall be, in all respects, substantially in
accordance with the terms and conditions contained in the Term Sheet, and (ii) act in good faith to
support the implementation ofthe Recapitalization.
8. Each Plan Support Lender represents that, as of the date hereof, such Plan Support Lender
(i) either (A) is the sole legal and beneficial owner of the principal amount of Claims relating to
Tranche A Loans and Tranche B Loans in amounts of not less than the amounts set forth on its
executed signature page hereto and all related claims, rights and causes of action arising out of or in
connection with or otherwise relating to such claims, in each case free and clear of all claims, liens
and encumbrances, or (B) has investment or voting discretion with respect to its Claims and has the
power and authority to bind the beneficial owner(s) of such Claims to the terms of this Agreement
and (ii) has full power and authority to enter into this Agreement and to vote on and consent to
matters concerning such Claims.
9. Each Party and the Agent represents that the execution and delivery of this Agreement and
the performance of its obligations hereunder have been duly authorized by all necessary corporate,
partnership or limited liability company action on its part.
10. This Agreement, including schedules and annexes, constitutes the entire agreement of the
Parties and the Agent with respect to the subject matter of this Agreement, and supercedes all other
prior negotiations, agreements, and understandings, whether written or oral, among the Parties and
the Agent with respect to the subject matter of this Agreement.
11. Notwithstanding any provision to the contrary contained in the Term Sheet, (i) the
completion of due diligence with respect to Oneida and its subsidiaries is not a condition precedent
to each Plan Support Lender's or the Agent's obligations and agreements under this Agreement and
(ii) the Plan Support Lenders and the Agent may not seek to condition or avoid the performance of
its obligations hereunder based on or subject to the completion of any such due diligence.
12. This Agreement shall in no way be construed to preclude any Plan Support Lender from
acquiring additional Claims; provided, however, that any such additional Claims so acquired shall
automatically be deemed to be subject to the terms of this Agreement. Moreover, and for purposes
of greater certainty, all Claims held by any Plan Support Lender shall be deemed covered and
governed by the tenns of this Agreement.
1-NY/1991204.17
5
13. The request for registration of certain shares of Oneida's common stock made by certain of
the Lenders, pursuant to that Registration Rights Agreement dated as of August 9, 2004, shall be
deemed withdrawn by such each Lender that is a Plan Support Lender as of the date hereof.
14. If the transactions contemplated herein are not consummated, or following the occurrence of
the Termination Date, if applicable, nothing shall be construed herein as a waiver by any Party,
including the Agent, of any or all of such Party's or the Agent's respective rights and the Parties and
the Agent expressly reserve any and all of their respective rights. Pursuant to Federal Rule of
Evidence 408 and any other applicable rules of evidence, this Agreement and all negotiations
relating thereto shall not be admissible into evidence in any proceeding other than a proceeding to
enforce its terms.
15. This Agreement may be executed in one or more counterparts, each of which, when so
executed, shall constitute the same instrument and the counterparts may be delivered by facsimile
transmission or by electronic mail in portable document format (.pdf).
16. It is understood and agreed by the Parties and the Agent that money damages would not be a
sufficient remedy for any breach of this Agreement by any Party or the Agent and each non-
breaching Party and the Agent shall be entitled to specific performance and injunctive or other
Bankruptcy Court or other court of competent jurisdiction requiring any Party and the Agent to
comply promptly with any of its obligations hereunder.
17. This Agreement shall be governed by, and construed in accordance with, the laws of the
State of New York, without regard to such state's choice of law provisions which would require the
application of the law of any other jurisdiction. By its execution and delivery of this Agreement,
each of the Parties and the Agent hereby irrevocably and unconditionally agrees for itself that any
legal action, suit or proceeding against it with respect to any matter arising under or arising out of or
in connection with this Agreement or for recognition or enforcement of any judgment rendered in
any such action, suit or proceeding, may be brought in the United States District Court for the
Southern District of New York, and by execution and delivery of this Agreement, each of the
Parties and the Agent hereby irrevocably accepts and submits itself to the exclusive jurisdiction of
such court, generally and unconditionally, with respect to any such action, suit or proceeding.
Notwithstanding the foregoing consent to New York jurisdiction, upon the commencement of the
Chapter 11 Cases, each Party and the Agent hereto hereby agrees that the Bankruptcy Court shall
have exclusive jurisdiction of all matters arising out of or in connection with this Agreement.
18. The terms and provisions of this Agreement are intended solely for the benefit of the Parties
and the Agent hereto and their respective successors and permitted assigns, and it is not the
intention of the Parties, including the Agent, to confer third-party beneficiary rights upon any other
person.
(Signature Pages Follow)
INY!I991204.17
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IN WITNESS WHEREOF, Oneida, the Agent and the Plan Support London have
cxCC\RCd Ibis Apemem as of rhe date tim written above.

,.. .. G.
ltN; I
FJMAle.lf\L
SQ 'i
(Sianature Pap to Plan Support Apmon1]
EXHIBIT A TO PLAN SUPPORT AGREEMENT
TERM SHEET FOR
PROPOSED ONEIDA L TO. RECAPITALIZATION
This term sheet is not an offer with respect to any securities or a solicitation of acceptances of a
chapter 11 plan of reorganization. Such offer or solicitation will be made only in compliance with
all applicable securities laws and/or provisions of the Bankruptcy Code. This term sheet is being
provided in furtherance of settlement discussions and is entitled to protection pursuant to Fed. R.
Evid. 408 and any similar rule of evidence. This Term Sheet is the "Term Sheet" as referenced in
that certain Plan Support Agreement dated as of March 9, 2006 (the "Plan Support Agreement")
among the Plan Support Lenders (as defined in the Plan Support Agreement), JPMorgan Chase
Bank, N.A. as agent and Oneida. Capitalized terms not otherwise defined herein shall have the
meaning set forth in the Credit Agreement (defined below).
I. Transaction/Plan of Reorganization
Company:
Debt to be Restructured:
INY/1991204.17
Oneida Ltd. ("Oneida") and all of its direct and indirect
U.S. subsidiaries (together with Oneida, the
"Company").
A going-private recapitalization implemented through a
prenegotiated chapter 11 plan of reorganization (the
"Plan").
Second Amended and Restated Credit Agreement dated
as of August 9, 2004, as amended (the "Credit
Agreement").
Tranche A Term Loan
Tranche B Term Loan
Oneida Ltd. Plan, Buffalo China Salaried Employees
Plan and Buffalo China Union Plan distressed
termination pension liability; provided, however, that
if the PBGC does not object to the consideration to be
provided to it under Option A under the heading
"Pension Liabilities" below, the Buffalo China
Salaried Employees Plan and the Buffalo China Union
Plan may not be terminated.
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Revolver Recovery:
Tranche A Term Loan Recovery:
INY/1991204.17
Existing $30MM Revolver to be refinanced by $40MM
debtor-in-possession revolver facility (the "DlP
Revolver"). The DlP Revolver will be replaced with
an Exit Revolver (see below).
Repaid in full upon exit pursuant to new facility to be
funded in connection with Oneida's exit from its
chapter 1 I cases.
As adequate protection for the priming by the
DIP Revolver: (x) replacement liens on all
assets of the Company junior only to the
liens granted to the agent and lenders under
the DIP Revolver (and to other liens as to
which such liens under the DIP Revolver
shall be subject); (y) payment in cash,
throughout the pendency of the chapter 11
cases, of (i) monthly interest at nondefault
contract rate applicable to Eurodollar Loans
or Base Rate Loans, as and when applicable
for the Loans then outstanding plus the
applicable margins, (ii) reasonable fees and
expenses (including those of counsel and
financial advisor) incurred by Administrative
Agent on behalf of Tranche A Lenders and
(iii) fees of the Administrative Agent; and (z)
a superpriority claim as contemplated by
Section 507(b) of the Bankruptcy Code
junior only to the claims under Section
364(c)(l) ofthe Bankruptcy Code held by
the agent and the lenders under the DIP
Revolver. in each case substantially in
accordance with Annex A hereto.
Tranche 8 Term Loan Recovery:
Pension Liabilities:
Trade Debt Recovery:
1-NY/1991204 17
1 00% of the principal and accrued interest with respect
to Tranche B Loans converted into 1 00% of
restructured Oneida's new common stock (subject to
issuance of new equity under Long Term Incentive
Plan (see below)).
As adequate protection for the priming by the
DIP Revolver: (x) replacement liens on all
assets of the Company junior only to the
liens granted to the Tranche A Lenders (and
to other liens as to which such liens under the
shall be subject); (y) payment in cash.
throughout the pendency of the chapter 1 1
cases, of (i) reasonable fees and expenses
(including those of counsel and financial
advisor) incurred by Administrative Agent
Option A
on behalf of Tranche B Lenders and (ii) fees
ofthe Administrative Agent; and (z) a
superpriority claim as contemplated by
Section 507(b) of the Bankruptcy Code
junior only to the claims under Section
364( c)( 1) of the Bankruptcy Code held by
the agent and the lenders under the DIP
Revolver, in each case substantially in
accordance with Annex A hereto.
Termination of the Oneida Ltd. Plan PBGC receives
$3MM promissory note with the features described in
Annex D to Plan Support Agreement.
Option B
Termination of Oneida Ltd. Plan, Buffalo China
Salaried Employees Plan and Buffalo China Union
Plan. PBGC receives a $3MM, non-interest bearing
1 0-year note.
Subject to the Company's right to evaluate non-
essential trade payables, all prepetition trade payables
to be paid in full (i) in the ordinary course of business
or (ii) upon confirmation of the Plan.
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Deferred Compensation:
Existing Preferred and Common
Stock:
New Common Stock Issued:
Required Creditor Approval:
Required Shareholder Approval:
II. Financing
DIP Revolver:
1-NY/1991204.17
Oneida Ltd. Deferred Compensation Plan for Key
Employees, Restated Effective November 1, 1999 as
heretofore amended (the "Deferred Compensation
Plan"), to be reinstated in connection with confirmation
of the Plan; provided. however, that no Participant (as
defined in the Deferred Compensation Plan) shall be
entitled to or receive any increased or accelerated
payment of amounts otherwise payable to it under the
Deferred Compensation Plan as a result of the
occurrence of a Change of Control (as defined in the
Deferred Compensation Plan) or defaults arising or
resulting from the Chapter II or any matter related
thereto, including the consummation and effectiveness
of the Plan and the issuance of any shares of capital
stock of Oneida thereunder. In order to accomplish the
foregoing, either (i) each Participant (as defined in the
Deferred Compensation Plan) shall enter into an
agreement waiving any such entitlement to or receipt of
any increased or accelerated payment of amounts
otherwise payable to it or (ii) the Company shall, in
accordance with the terms of the Deferred
Compensation Plan, cause such plan to be amended or
modified the result of which will be to eliminate any
entitlement by a Participant (as defined in the Deferred
Compensation Plan) to any increased or accelerated
payment of amounts otherwise payable to it as a result
of the events and conditions listed above.
To be cancelled.
New common stock to be issued.
66 2/3% in dollar amount and 50% in number of the
holders, in the aggregate, of the Tranche B Term
Loans.
None.
Amount:
Administrative Agent
and Collateral Agent:
$40MM.
JPMorgan Chase Bank, N.A.
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L/Cs: No sublimit.
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Maturity: 12 months from closing.
Pricing: At the Borrower's option,
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one, two or three month
Adjusted LIBO (defined in
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the DIP Revolver agreement)
plus 3.75%, or JPMCB's
Base Rate (as defined in the
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DIP Revolver agreement)
plus 2.75%.
Security: 1
51
priority priming lien on
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all of the assets of Oneida
and its subsidiaries, with
such exceptions and
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agreed, including the Carve-
Out (as defined in the DIP
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Revolver).
Priority and Liens: Substantially on the terms set
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forth on Annex B attached
hereto.
Exit Revolver: Amount: $80-90MM
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New Working Capital
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Revolver Lenders: TBD
L/Cs: At least $25MM.
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Maturity: At least five years.
Pricing: LIBOR plus 2.00% or ABR
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plus 1.00%.
Security: I st priority lien on all of the
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assets of Oneida and its
subsidiaries, with such
exceptions and qualifications
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as mutually agreed.
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1-NY/1991204.17 I
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Exit Term Loan:
At no time shall the aggregate amoWlt
of the Exit Revolver in addition to the
Exit Term Loan exceed $170MM.
Representations and
Warranties, Affirmative
Covenants and
Negative Covenants:
Amount:
Amortization:
Maturity:
Pricing:
Security:
Representations and
Warranties, Affirmative
Covenants and
Negative Covenants:
Representations and warranties,
affinnative covenants and
negative covenants as are
customary for facilities of this
type, and for the Company's
operations and assets.
$80-90MM.
1% per annum.
At least 5 years.
LIBOR plus 8.00% or ABR
plus 7.00%.
2"d priority lien on all of the
assets of Oneida and its
subsidiaries, with such
exceptions and qualifications
as mutually agreed.
Representations and warranties,
affinnative covenants and
negative covenants as are
customary for facilities of this
type, and for the Company's
operations and assets.
III. Corporate Governance/Other Provisions
Corporate Governance:
Management Incentive Plan:
INY/1991204 17
Non-reporting company. Corporate Governance to be
set forth in restated certificate of incorporation, restated
bylaws and a stockholders' agreement, all as shall be
set forth in the Plan or one or more supplements to the
Plan.
Stock option or other similar program representing a
number of shares of restructured Oneida's new
common stock as shall be determined by the
Company's Board of Directors, and as will be set forth
in a supplement to the Plan, involving not more than
I 0% of restructured Oneida's new common stock.
Conditions to Effective Date:
Other Terms:
1-NY/1991204 17
Conditions customary to the effective date of
transactions of this nature, including but not limited to
confirmation of the Plan and entry of a final order by
the bankruptcy court.
The Plan shall provide for other matters customary
under chapter 11 plans of reorganization, including but
not limited to classification and treatment of claims,
releases of the Company's directors, officers and
advisors, releases for holders of outstanding amounts of
the Term Loans, a stockholders' agreement, and
restated certificate of incorporation and bylaws.
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ANNEX A TO PLAN SUPPORT AGREEMENT
1
ADEQUATE PROTECTION
The Orders shall have authorized the use by the Borrower and the Guarantors of any cash
collateral in which any Existing Lender under the Existing Agreement and the PBGC may have an
interest and shall have provided, as adequate protection for the use of such cash collateral and the
priming contemplated by the DIP Credit Agreement, for such protection that is satisfactory to the
Agent, including:
(A) with respect to Existing Tranche A Term Loans and in favor of Tranche A
Lenders (including, without limitation, such loans arising upon an unreimbursed draw under
the Bank of America L/C to the extent required by the first proviso to Section 2. I (a) of the
Existing Agreement), (i) the monthly payment in cash of current interest and lener of credit
fees (including any such interest and fees that are accrued and unpaid as of the
commencement of the Cases) at the nondefault contract rate applicable to Eurodollar Loans
or Base Rate Loans (as each term is defined in the Existing Agreement), as and when
applicable for such loans, plus the applicable margin, (ii) promptly following submission to
the Borrower of statements for services rendered, the reasonable fees and expenses
(including those of counsel and financial advisors and administration fees as provided in the
Existing Agreement) incurred by the Existing Agent on behalf of the Tranche A Lenders in
the amount reflected on such statements, (iii) a superpriority claim as contemplated by
Section 507(b) of the Bankruptcy Code immediately junior to the claims under Section
364(c)(l) of the Bankruptcy Code held by the Agent and the Lenders and pari passu with the
claim granted to Bank of America as referred to in clause (B)(ii) below and (iv) a Lien on
substantially all of the assets of the Borrower and the Guarantors having a priority
immediately junior to the priming and other Liens granted in favor of the Agent and the
Lenders under the DIP Credit Agreement and the other Loan Documents and pari passu with
such Lien granted to Bank of America as referred to in clause (B)(iii) below);
(B) with respect to the Bank of America L/C Obligations (to the extent such
obligations are secured to the same extent as other obligations of the Tranche A Lenders)
and in favor of Bank of America, as issuer, until such time as such obligations shaH become
Tranche A Tenn Loans (as a result of an unreimbursed draw), (i) the monthly payment in
cash of fees, expenses and other charges as may be required to be paid (including any such
fees, expenses and other charges that are accrued and unpaid as of the Filing Date) at the
applicable nondefault contract rate (pursuant to the Bank of America LIC Agreement (as
such term is defined in the Existing Agreement)), as and when applicable for such
obligations, (ii) a superpriority claim as contemplated by Section 507(b) of the Bankruptcy
Code immediately junior to the claims under Section 364(c)(l) of the Bankruptcy Code held
by the Agent and the Lenders and pari passu with the claim granted to the Existing Agent
and the Tranche A Lenders as referred to in the foregoing clause (A)(iii) and (iii) a Lien on
substantially all of the assets of the Borrower and Guarantors having a priority immediately
1
Capitalized terms used herein shall ha\'C the same meanings as given in the DIP Revolver agreement (the "DIP Credit
Agreement") or the Credit Agreement, as the context shall require. In the event of any inconsistency between such
defined tenns, the tenns as defined in the DIP Credit Agreement shall control.
1-NY/1991204.17
junior to the priming and other Liens granted in favor of the Agent and the Lenders under
the DIP Credit Agreement and the other Loan Documents and pari passu with such Lien
granted to the Existing Agent and the Tranche A Lenders as referred to in the foregoing
clause (A)(iv);
(C) with respect to Tranche B Term Loans and in favor of the Tranche B Lenders
and, without duplication, the Existing Agent, (i) promptly following submission to the
Borrower of statements for services rendered, the reasonable fees and expenses (including
those of counsel and financial advisor and administration fees as provided in the Existing
Agreement) incurred by the Existing Agent on behalf of the Tranche B Lenders in the
amounts reflected on such statements, (ii) a superpriority claim as contemplated by Section
507(b) of the Bankruptcy Code immediately junior to the claims under Section 364(c)(l) of
the Bankruptcy Code held by the Agent and the Lenders (but subordinated, pursuant to the
terms of the Existing Agreement, to such claim held by the Tranche A Lenders and, to the
extent provided in the foregoing paragraphs, Bank of America)and (iii) a Lien on
junior to the Liens granted in favor of the Tranche A Lenders and, to the extent provided in
the foregoing paragraphs and Bank of America; and
(D) with respect to the PBGC, (i) a superpriority claim as contemplated by Section
507(b) of the Bankruptcy Code junior to the claims under Section 364(c)(l) of the
Bankruptcy Code held by the Agent and the Lenders (but subordinated, pursuant to the
terms of the Subordination Letters, to such claim held by the Tranche A Lenders and, to the
extent provided in the foregoing paragraphs, Bank of America) and (ii) a Lien on
junior to the Liens granted in favor of the Tranche A Lenders, Tranche B Lenders and Bank
of America.
1-NY/1991204.17
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ANNEX B TO PLAN SUPPORT AGREEMENr
PRIORITIES AND LIENS
Subject to the Orders and the Security and Pledge Agreement, the Borrower and each of the
Guarantors, the Obligations of the Borrower and the Guarantors under the Loan Documents and in
respect of Indebtedness owing to JPMCB, any Lender and any of their banking Affiliates pennitted
by Section 6.03(vi) of the DIP Credit Agreement and to the Hedging Lender pennitted by Section
6.03(viii) of the DIP Credit Agreement:
(i) pursuant to Section 364(c)( I) of the Bankruptcy Code, shall at all times constitute
allowed administrative expense claims in the Cases having priority over all administrative
expenses of the kind specified in Sections 503(b) or 507(b) of the Bankruptcy Code;
(ii) pursuant to Section 364(c)(2) of the Bankruptcy Code, shall at all times be
secured by a perfected first priority Lien on all Unencumbered Property excluding (x) the
Borrower's and the Guarantors' rights in respect of Avoidance Actions and (y) any leases of
real property which, pursuant to the express provisions of such Leases, prohibit the granting
or taking of a Lien thereon (provided, however, that Unencumbered Property shall include
a11 proceeds o t ~ or property and interest, unencumbered or otherwise, recovered in respect
of, all of property described in the foregoing clauses (x) and (y));
(iii) pursuant to Section 364(c)(3) of the Bankruptcy Code, shaH be secured by a
perfected Lien upon a11 pre-petition and post-petition property of the Borrower and the
Guarantors (as more fully set forth in the Security and Pledge Agreement), other than such
property referred to in clause (iv) of this sentence and other than Excluded First Lien
Collateral (but including all proceeds of, or property and interests, recovered in respect of
such Excluded First Lien Collateral), that is subject to valid, perfected, non-avoidable and
enforceable Liens in existence on the Filing Date or to valid Liens in existence on the Filing
Date that are perfected subsequent to the Filing Date as pennitted by Section 546(b) of the
Bankruptcy Code or that is subject to Pennitted Liens, which Lien shall be immediately
junior to such valid, perfected, non-avoidable and enforceable Liens; and
(iv) pursuant to Section 364(d)(l) of the Bankruptcy Code, shall be secured by a
perfected first priority, senior priming Lien upon all pre-petition and post-petition property
of the Borrower and the Guarantors (as more fully set forth in the Security and Pledge
Agreement) that is subject to (x) existing Liens under or in connection with the Existing
Agreement (including without limitation, the Liens to secure the Existing Revolving Credit
Loans until the Existing Revolving Credit Loans shall have been satisfied in full) and any
Liens that are pari passu with or junior to such existing Liens pursuant to the Existing
Agreement or the Subordination Letters, (y) the existing Liens that secure the obligations of
the Borrower to the PBGC in care of the Pension Plans (other than the Excluded First Lien
Collateral) in connection with missed minimum funding obligations owed to the Pension
2
Capitalized terms used herein shall have the same meanings as given in the DIP Credit Agreement or the Credit
Agreement, as the context shall require. In the event of any inconsistency between such defined terms, the terms as
defined in the DIP Credit Agreement shall control.
lNY/1991204.17
Plans for the 2004 and 2005 plan years, which obligations have been subordinated to the
obligations owing to the Existing Agent and the Existing Lenders under the Existing
Agreement pursuant to the Subordination Letters and (z) any Liens granted after the Filing
Date to provide adequate protection in respect of such existing Liens, which first priority
priming Liens in favor of the Agent and the Lenders shall be senior in all respects to all such
existing Liens;
all ofthe foregoing subject only to the Carve-Out (provided that no portion of the Carve-Out
may be utilized to fund prosecution or assertion of any claims against the Agent, the Lenders, the
Issuing Lenders, the Existing Agent or the Existing Lenders (it being understood that, in the event
of the liquidation of the Borrower's and the Guarantors' estates, the amount of the Carve-Out shall
be funded into a segregated account prior to the making of distributions)).
1-NY/1991204.17
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ANNEXC
PLAN OF REORGANIZATION
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1-NY/1991204 17
L
S&S Draft
J/7v2/06
IMPORTANT: NO CHAPTER II CASE HAS BEEN COMMENCED AT THIS TIME. THE
SOLICITATION MATERIALS ACCOMPANYING THIS PLAN OF REORGANIZATION HAVE NOT
BEEN APPROVED BY THE BANKRUPTCY COURT AS CONTAINING "ADEQUATE INFORMATION"
WITHIN TUE MEANING OF BANKRUPTCY CODE SECTION J llS(A). IN THE EVENT THE
COMPANY DOES FILE CHAPTER II CASES, THE COMPANY EXPECTS TO SEEK AN ORDER OR
ORDERS OF THE BANKRUPTCY COURT THAT, AMONG OTHER THINGS, (J) APPROVES THE
SOLICITATION OF VOTES AS HAVING BEEN IN COMPLIANCE WITH BANKRUPTCY CODE
SECTION I 126(B); AND (2) CONFIRMS THE PLAN OF REORGANIZATION PURSUANT TO
BANKRUPTCY CODE SECTION I 129.
In re:
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRJCT OF NEW YORK
)
) Chapter II
ONEIDA L TO., ~ &_, )
NYDOCSOJ/794632 13
) Case No. 06-
Debtors. )
) Jointly Administered
DEBTORS' JOINT PRENEGOTIATED PLAN OF REORGANIZATION
UNDER CHAPTER II OF THE BANKRUPTCY CODE
Douglas P. Bartner, Esq.
Michael H. Torkin, Esq.
Bryan R. Kaplan, Esq.
SHEARMAN & STERLING LLP
(212) 848-4000
ATTORNEYS FOR DEBTORS AND
DEBTORS IN POSSESSION
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TABLE OF CONTENTS
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ARTICLE I
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DEFINED TERMS, RULES OF INTERPRETATION AND COMPUTATION OF TIME
Section 1.1. Defined Tenns ................................................................................................................................... I
Section 1.2. Rules of Interpretation and Computation of Time ............................................................................. 8
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ARTICLE II
ADMINISTRATIVE AND PRIORITY TAX CLAIMS
Section 2.1. Administrative Claims ....................................................................................................................... 8
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Section 2.2. Priority Tax Claims ........................................................................................................................... 9
Section 2.3. Professional Fees ............................................................................................................................... 9
Section 2.4. Claims Under DIP Credit Agreement ................................................................................................ 9
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ARTICLE III
I CLASSIFICATION AND TREATMENT OF CLAIMS AND ONEIDA EQUITY INTERESTS
Section 3.1. Classification ..................................................................................................................................... 9
Section 3.2. Acceptances and Rejections ............................................................................................................ I 0
Section 3.3. Treatment of Claims and Oneida Equity Interests ........................................................................... II
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Section 3.4. Miscellaneous .................................................................................................................................. 13
ARTICLE IV
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CRAM DOWN
ARTICLEV
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MEANS FOR IMPLEMENTATION OF THE PLAN
Section 5. I. Substantive Consolidation for Purposes of Voting, Confirmation and Distribution ........................ 14
Section 5.2. Restructuring Transactions .............................................................................................................. 14 I
Section 5.3. Continued Corporate Existence and Vesting of Assets in Reorganized Oneida .............................. 15
Section 5.4. Cancellation ofOneida Equity lnterests .......................................................................................... \5
Section 5.5. Execution of Related Documents .................................................................................................... 15
Section 5.6. Corporate Governance, Directors and Officers, and Corporate Action ........................................... I 5
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Section 5. 7. Sources of Cash for Plan Distribution ............................................................................................. I 6
Section 5.8. Elimination ofCiasses ..................................................................................................................... l6
Section 5.9. Issuance and Distribution ofTranche B Common Stock ................................................................. 16
Section 5.10. Management Incentive Plan .......................................................................................................... 16
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Section 5. II. Bank of America UC .................................................................................................................... 17
ARTICLE VI
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TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
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Section 6.1. Assumption of Executory Contracts and Unexpired Leases ............................................................ 17
Section 6.2. Claims Based on Rejection of Executory Contracts or Unexpired Leases ...................................... 17
Section 6.3. Cure of Defaults for Assumed Executory Contracts and Unexpired Leases ................................... 17
Section 6.4. Indemnification of Directors, Officers and Employees ................................................................... 18
Section 6.5. Compensation and Benefit Programs .............................................................................................. 18
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NYOOCSOJ/794632.13
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ARTICLE VII
PROVISIONS GOVERNING DISTRIBUTIONS
Section 7. I. Distribution for Claims Allowed as of the Effective Date ............................................................... 18
Section 7.2. Distribution by the Reorganized Debtors ........................................................................................ 18
Section 7.3. Delivery and Distributions and Undeliverable or Unclaime(j Distributions .................................... 18
Section 7.4. Timing and Calculation of Amounts to Be Distributed ................................................................... 19
Section 7.5. Setoffs and Recoupments ................................................................................................................ 19
Section 7.6. Surrender of Canceled Oneida Equity Interests ............................................................................... 20
Section 7. 7. Fractional Shares of Reorganized Oneida Common Stock .............................................................. 20
Section 7.8. Manner of Payment Under Plan of Reorganization ......................................................................... 20
ARTICLE VJII
PROCEDURES FOR RESOLVING DISPUTED CLAIMS
Section 8.1. Prosecution of Objections to Claims ............................................................................................... 20
Section 8.2. Estimation of Claims ....................................................................................................................... 20
Section 8.3. Payments and Distributions on Disputed Claims ............................................................................. 21
ARTICLE IX
CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVE DATE OF THE PLAN
Section 9.1. Conditions Precedent to Confirmation ............................................................................................ 21
Section 9.2. Conditions Precedent to Occurrence of the Effective Date ............................................................. 21
Section 9.3. Waiver ofConditions ....................................................................................................................... 22
Section 9.4. Effect ofNon-Occurrence of Effective Date Conditions ................................................................. 22
Section 9.5. Substantial Consummation ofPlan .................................................................................................. 22
ARTICLE X
RELEASE, INJUNCTIVE AND RELATED PROVISIONS
Section I 0.1. Subordination ................................................................................................................................ 22
Section 10.2. Releases ......................................................................................................................................... 23
Section I 0.3. Preservation of Rights of Action ................................................................................................... 24
Section 10.4. Exculpation .................................................................................................................................... 24
Section 10.5. lnjunction ....................................................................................................................................... 24
ARTICLE XI
RETENTION OF JURISDICTION
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1. Dissolution of Committees .......................................................................................................... 26
Section 12.2. Payment of Statutory Fees ............................................................................................................. 26
Section 12.3. Discharge ofDebtors ..................................................................................................................... 26
Section 12.4. Modification of Plan ...................................................................................................................... 27
Section 12.5. Revocation ofP1an ......................................................................................................................... 27
Section 12.6. Successors and Assigns ................................................................................................................. 27
Section 12.7. Reservation of Rights .................................................................................................................... 27
Section 12.8. Section 1145 Exemption ................................................................................................................ 27
Section 12.9. Headings ........................................................................................................................................ 28
NYDOCS031794632.13 ii
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Section 12.1 0. Governing Law ............................................................................................................................ 28
Section 12.11. Severability .................................................................................................................................. 28
Section 12.12.1mplementation ............................................................................................................................ 28
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Section 12.13. lnconsistency ............................................................................................................................... 28
Section 12.14. Further Assurances ...................................................................................................................... 28
Section 12.15. Service ofDocuments .................................................................................................................. 28
Section 12.16. Exemption from Certain Transfer Taxes ..................................................................................... 29
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Section 12.17. Compromise of Controversies ..................................................................................................... 29
Section 12.18. No Admissions ............................................................................................................................ 29
Section 12.19. Filing of Additional Documents .................................................................................................. 29
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Section 12.20. Allocation of Payments ............................................................................................................... 29
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DEBTORS' JOINT PRENEGOTIATED PLAN OF REORGANIZATION
UNDER CHAPTER II OF THE BANKRUPTCY CODE
Oneida, Sakura, Buffalo China, Delco, Kenwood, Oneida Food, Oneida International, Oneida Silversmiths
and THC, as debtors and debtors in possession in the above-captioned cases, hereby respectfully propose the
following Joint Prenegotiated Plan of Reorganization under chapter II of the Bankruptcy Code. The only Entities
and Persons entitled to vote on the Plan are Holders of Secured Prepetition Lender Claims and Secured PBGC
Claims and such Entities and Persons arc encouraged to read the Plan and the accompanying Disclosure Statement
and their respective exhibits in their entirety before voting to accept or reject the Plan. No materials other than the
Plan, the Plan Supplement, the Disclosure Statement and their respective exhibits and schedules, if any, attached
thereto or referenced therein have been authorized by the Debtors for use in soliciting acceptances or rejections of
the Plan.
ARTICLE I
DEFINED TERMS, RULES OF INTERPRETATION AND COMPUTATION OF TIME
Section 1.1. Defined Terms
Unless the context otherwise requires, the following terms shall have the following meanings when used in
capitalized form in the Plan:
"Administrative Claim" means a Claim for costs and expenses of administration under section 503(bXI) or
507(b) of the Bankruptcy Code, including tor: (a) the actual and necessary costs and expenses incurred after the
Petition Date of preserving the Estates and operating the businesses of the Debtors; (b) compensation for services
and reimbursement of expenses under section 330(a) or 331 oft he Bankruptcy Code and other Professional Fees; (c)
any indebtedness or obligations, other than under the DIP Credit Agreement, incurred by or assumed by the Debtors
during the Chapter II Cases; and (d) all fees and charges assessed against the Estates under 28 U.S.C. 1911-
1930.
"Allowed" means any Claim or portion thereof against any Debtor, (a) proof of which was filed within the
applicable period of limitation, if any, fixed by the Bankruptcy Court in accordance with Bankruptcy Rule
3003(c)(3) as to which (i) no objection to the allowance thereof, or action to equitably subordinate or otherwise limit
recovery with respect thereto, has been interposed within the applicable period of limitation fixed by the Plan, the
Bankruptcy Code, the Bankruptcy Rules or a Final Order, (ii) any objection has been settled, waived, withdrawn or
denied by a Final Order or (iii) if an objection has been interposed, such Claim as has been allowed (whether in
whole or in part) by a Final Order, (b) which, if no proof of claim was so filed, has been listed by a Debtor in its
Schedules, if any, as liquidated in an amount and not disputed or contingent and as to which (i) no objection to the
allowance thereof, or action to equitably subordinate or otherwise limit recovery with respect thereto, has been
interposed within the applicable period of limitation fixed by the Plan, the Bankruptcy Code, the Bankruptcy Rules
or a Final Order, (ii) any objection has been settled, waived, withdrawn or denied by a Final Order or (iii) if an
objection has been interposed, such Claim as has been allowed (whether in whole or in part) by a Final Order, (c)
which Claim arises from the recovery of property under section 550 or 553 of the Bankruptcy Code and is allowed
in accordance with section 502(h) of the Bankruptcy Code, (d) which Claim is expressly allowed under the Plan, (e)
which Claim is allowed by a Final Order or (f) which Claim is not otherwise objected to or disputed; provided,
however, that with reference to any Claim, the term "Allowed" for purposes of distribution under the Plan shall not
include, unless otherwise specified in the Plan, interest on such Claim from and after the Petition Date.
"Amended Oneida By-Laws" means the By-Laws of Reorganized Oneida, which shall become effective on
the Effective Date, substantially in the form attached to the Plan Supplement.
"Amended Oneida Ceniticate of Incorporation" means the Ceniticate of Incorporation of Reorganized
Oneida, which shall be filed on or before the Effective Date, substantially in the form attached to the Plan
Supplement.
NYDOCSOJ/794632. I J
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"Bank of America UC" means that certain letter of credit, in the amount of$10,950,747, issued by BofA in
favor of the Worker's Compensation Board, State ofNew York.
"Bankruptcy Code" means title II of the United States Code as in effect on the Petition Date, as it has been
or may after the Petition Date be amended to the extent applicable to the Chapter I I Cases.
"Bankruptcy Court" means the United States Bankruptcy Court for the Southern District of New York.
"Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure and the General Orders or local
rules of the Bankruptcy Court, each as in effect on the Petition Date and as each has been or may after the Petition
Date be amended to the extent applicable in the Chapter l I Cases.
"BofA" means Bank of America, N.A.
"Buffalo China" means Buffalo China, Inc., a New York corporation.
"Business Day" means any day, other than a Saturday, Sunday or a "legal holiday", as defined in
Bankruptcy Rule 9006(a).
"Cash" means legal tender of the United States of America or the equivalent thereof, including bank
deposits, checks and cash equivalents.
"BofA Cash Collateral" means any cash collateral held by BofA as security for the Bank of America L/C.
"Causes of Action" means all actions, causes of action, suits, debts, dues, sums of money, accounts,
reckonings, rights to legal remedies, rights to equitable remedies, rights to payment and claims, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises, variances or trespasses whether known or
unknown, reduced to judgment, not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured and whether asserted or assertable directly or indirectly or
derivatively, in law, equity or otherwise.
"Chapter I 1 Cases" means the cases under chapter I I of the Bankruptcy Code commenced by the Debtors
in the Bankruptcy Court.
"Claim" means a claim as defined in section I 01(5) of the Bankruptcy Code against any of the Debtors,
whether or not asserted.
"Class" means a class of Claims or Oneida Equity Interests as set forth in Article Ill of the Plan.
"Confirmation" means the confirmation of the Plan by the Bankruptcy Court pursuant to section 1129 of
"Confirmation Date" means the date upon which the Confirmation Order is entered by the Bankruptcy
Court in its docket, within the meaning of Bankruptcy Rules 5003 and 902 I.
"Confinnation Hearing" means the hearing to consider Confirmation of this Plan held pursuant to section
1128 ofthe Bankruptcy Code.
"Confirmation Order" means the order of the Bankruptcy Court confirming the Plan pursuant to section
1129 ofrhe Bankruptcy Code in form and substance satisfactory to the Debtors.
"D&O Releasees" means all officers, directors, employees, anomeys, financial advisors, accountants,
investment bankers, agents and representatives of the Debtors and their affiliates who served in such capacity as of
the Petition Date, in each case in their capacity as such.
NYD<X'S03n94632 13 2
"Debtors" means, collectively, Oneida, Sakura, Buffalo China, Delco, Kenwood, Oneida Food, Oneida
International, Oneida Silversmiths and THC, as debtors and debtors in possession in the Chapter II Cases.
"Deferred Compensation Plan" means the Oneida Ltd. Deferred Compensation Plan for Key Employees,
restated effective November I, 1999, as amended.
"Deferred Compensation Plan Participant" means any participant in the Deferred Compensation Plan.
"Delco" means Delco International, Ltd., a New York corporation.
"DIP Agent" means JPMCB, as administrative and collateral agent under the DIP Credit Agreement, or
any successor administrative agent thereunder.
"DIP Credit Agreement" means the Revolving Credit and Guaranty Agreement among Oneida, as
borrower, each of the other Debtors, as guarantors, the lenders party thereto from time to time and the DIP Agent, as
such may be amended or otherwise modified from time to time in accordance with the terms thereof.
"Disallowed" means, as to any Claim against the Debtors, one that has been disallowed, in whole or in part,
by a Final Order, or which has been withdrawn, in whole or in part, by the Holder thereof.
"Disclosure Statement" means that certain Disclosure Statement, dated March [ 19], 2006, as amended,
supplemented or modified from time to time, relating to the Plan, including, without limitation, any exhibits and
schedules thereto.
"Disputed" means, with respect to any Claim, any Claim: (a) that is listed on the Schedules as
unliquidated, disputed or contingent; (b) as to which the Debtors or any other party in interest has interposed a
timely objection or request for estimation in accordance with the Bankruptcy Code and the Bankruptcy Rules or is
otherwise disputed by the Debtors in accordance with applicable law, which objection, request for estimation or
dispute has not been settled, waived, withdrawn or determined by a Final Order; (c) during the period prior to the
deadline fixed by the Plan or the Bankruptcy Court for objecting to such Claim, that exceeds the amount listed on
the Schedules other than as unliquidated, disputed or contingent or (d) that is neither Allowed nor Disallowed.
"Effective Date" means the first Business Day on which all conditions specified in Article IX of the Plan
have been satisfied or, if capable ofbeing waived, have been waived in accordance with Section 9.3 hereof.
"Entity" means an entity as defined in section I 0 I ( 15) of the Bankruptcy Code.
"Equity Interest" means any equity interest of or in such Entity including, but not limited to, all issued,
unissued, authorized or outstanding shares, stock or other instruments evidencing an ownership interest in such
Entity, together with any Stock Rights.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder.
"Estates" means the estates of the Debtors created by section 541 of the Bankruptcy Code upon the
commencement of the Chapter II Cases.
"Exit Facility" means that certain $170 million credit facility to be provided to Reorganized Oneida
pursuant to the terms and conditions of the Exit Facility Commitment, substantially in the form attached to the Plan
Supplement.
"Exit Facility Agent" means Credit Suisse, as administrative agent under the Exit Facility.
"Exit Facility Commitment" means a commitment for a $170 million credit facility, a copy of which is
attached to the Disclosure Statement, containing substantially the terms and conditions set forth in that certain
NYDOCS031794632. 13 3
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commitment letter by and between Oneida and the Exit Facility Agent in fonn and substance otherwise satisfactory
to the Debtors and the Exit Facility Agent, as such commitment may be amended or otherwise Jll()dified from time
to time on terms and conditions satisfactory to the Debtors and the Exit Facility Agent.
"Exit Facility Documents" means the agreements, notes, certificates, documents and instruments and all
exhibits, schedules and annexes thereto entered into in connection with the Exit Facility, substantially in the form
attached to the Plan Supplement and in form and substance otherwise satisfactory to the Debtors and the Exit
Facility Agent.
"Final Order" means an order or judgment of the Bankruptcy Court, or other court of competent
jurisdiction with respect to the subject matter, which has not been reversed, stayed, modified or amended, and as to
which such order or judgment (or any revision, modification or amendment thereof) the time to appeal or seek
review, rehearing or certiorari has expired and no appeal or petition for review, rehearing or certiorari has been
timely taken, or as to which any appeal that has been taken or any petition for review, rehearing or certiorari that has
been or may be tiled has been resolved by the highest court to which the order or judgment was appealed or from
which review, rehearing or certiorari was sought.
"General Unsecured Claim" means any Claim against any of the Debtors that is not an Administrative
Claim, a Priority Tax Claim, an Other Priority Claim, an Other Secured Claim, a Secured PBGC Claim, a Specified
Unsecured Claim, a Secured Prepetition Lender Claim or a Subordinated Claim, but including, without limitation,
Claims arising from the rejection of an unexpired lease or executory contract pursuant to Article VI of the Plan or
otherwise.
''Holder" means the beneficial holder of any Claim or Oneida Equity Interest.
"Impaired" means a Claim or Oneida Equity Interest that is impaired within the meaning of section 1124 of
"Intercompany Claim" means (a} any account reflecting intercompany book entries by one Debtor or its
non-Debtor affiliate with respect to another Debtor or its non-Debtor affiliate, {b) any Claim that is not reflected in
such book entries and is held by one Debtor or its non-Debtor affiliate against another Debtor or its non-Debtor
affiliate, or (c) any Interest in a Debtor or non-Debtor affiliate held by another Debtor or non-Debtor affiliate.
"Interests" means (a) Oneida Equity Interests and (b) equity securities as defined in section J 01 ( 16) of the
Bankruptcy Code.
"Italian Guarantee" means Oneida's guarantee of that certain letter of credit, in the amount of
approximately 2,325,000, issued by Banca Nazionale Del Lavoro, Spa in favor of Oneida Italy SRL, approximately
1,000,000 of which was outstanding as of the Petition Date.
"Italian Guarantee Claim" means all Claims held by any Holder of the Italian Guarantee.
"JPMCB" means JPMorgan Chase Bank, N.A.
"Kenwood" means Kenwood Silver Company, Inc., a New York corporation.
"Lien" means a lien as defined in section I 0 1(37) of the Bankruptcy Code against property of any of the
Debtors.
"Management Incentive Plan" means the post-Effective Date incentive compensation plan, to be adopted
by the Reorganized Oneida Board of Directors, in the form of a stock option or other similar program representing a
number of shares of Reorganized Oneida Common Stock as shall be determined by the Board, and as will be set
forth in the Plan Supplement, involving not more than ten percent ( J 0%) of the Reorganized Oneida Common Stock.
"Oneida" means Oneida Ltd., a New York corporation.
NYDOCS031794632.13 4
"Oneida Common Stock" means the common stock of Oneida, $1.00 par value per share.
"Oneida Equity Interest" means each Equity Interest of Oneida, including without limitation, the Oneida
Common Stock and the Oneida Preferred Stock, existing immediately prior to the consummation of this Plan on the
Effective Date.
"Oneida Food" means Oneida Food Service, Inc., a New York corporation.
"Oneida International" means Oneida International Inc., a New York corporation.
"Oneida Plan" means the Retirement Plan for the Employees of Oneida Ltd. CFEINIPN: 15-0405700/00 I.
"Oneida Preferred Stock" means the six percent (6%) cumulative preferred stock of Oneida, par value
$25.00 per share.
"Oneida Silversmiths" means Oneida Silversmiths Inc., a New York corporation.
"Other Priority Claims" means any Claim accorded priority in right of payment under section 507(a) of the
Bankruptcy Code, other than a Priority Tax Claim or an Administrative Claim.
"Other Secured Claim" means a Secured Claim that is not a Secured Prepetition Lender Claim or a Secured
PBGCCiaim.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PBGC Liens" means any tax liens filed by the PBGC prior to the Petition Date pursuant to 26 U.S.C.
412(n) on behalf of any Pension Plan.
"PBGC Note" means, (x) in the event that Class 3 votes to accept, and does not object to, the Plan, a
variable interest promissory note in the principal amount of $3 million and (y) in the event that Class 3 votes to
reject, or objects to, the Plan, a non-interest bearing promissory note in the principal amount of $3 million, in either
case, substantially in the form attached to the Plan Supplement, to be issued to the PBOC pursuant to Article Ill
hereof.
"PBGC Senior Collateral" means all property of the Debtors which (x) is not subject to a Lien in favor of
the Prepetition Lenders and (y) is subject to a PBGC Lien.
"Pension Plans" means the following tax qualified single-employer defined benefit pension plans
maintained by Oneida and Buffalo China, as applicable: (i) the Oneida Plan, for which Oneida is the plan sponsor;
(ii) the Retirement Income Plan for Employees of Buffalo China, Inc. (FEIN/PN: 16-0979731/001 ), for which
Buffalo China is the plan sponsor; and (iii) the GMP - Buffalo China, Inc. Pension Plan for Employees Who Are
Members of Local 76A (FEINIPN: 16-0979731/003), for which Buffalo China is the plan sponsor.
"Person" means a person as defined in section I 0 J ( 41) of the Bankruptcy Code.
"Petition Date" means the date on which the Debtors filed their petitions for relief commencing the Chapter
II Cases.
"Plan" means this Joint Prenegotiated Plan of Reorganization under chapter I I of the Bankruptcy Code,
either in its present form or as it may be altered, amended, modified or supplemented from time to time in
accordance with the Plan, the Bankruptcy Code, the Bankruptcy Rules or a Final Order.
"Plan Documents" means the agreements, documents and instruments to be entered into on or as of the
Effective Date as contemplated by, and in furtherance of, the Plan, substantially in the forms contained in the
exhibits to the Plan, Disclosure Statement and Plan Supplement.
N YDOCSOJ/79463213 5
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"Plan Supplement" means the compilation of documents and forms of documents and exhibits substantially
in the forms tiled with the Bankruptcy Court not less than ten days prior to the Confirmation Hearing, as such
documents and exhibits may be altered, amended, modified or supplemented from time to time in accordance with
the terms hereof and in accordance with the Bankruptcy Code and the Bankruptcy Rules.
"?repetition Agent" means JPMCB, as administrative and collateral agent under the Prepetition Credit
Agreement.
"Prepetition Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of
August 9, 2004 among Oneida, the Prepetition Lenders and JPMCB, as administrative agent, as amended by an
Amendment No.1 to the Second Amended and Restated Credit Agreement dated as of October 15,2004, a Consent
and Amendment No. 2 to the Second Amended and Restated Credit Agreement dated as of February 2, 2005, a
Consent, Waiver and Amendment No.3 to the Second Amended and Restated Credit Agreement dated as of April7,
2005, and an Amendment No.4 to the Second Amended and Restated Credit Agreement dated as of June 23, 2005.
"Prepetition Credit Documents" means the Prepetition Credit Agreement, together with all related notes,
certificates, security agreements, mortgages, pledges, guaranties, instruments and other documents executed or
delivered by any Debtor in connection therewith, as each may have been amended, supplemented or modified from
time to time.
"Prepetition Lenders" means the financial institutions party to the Prepetition Credit Agreement.
"Priority Tax Claim" means a Claim of a governmental unit of the kind specified in section 507(a)(9) of the
Bankruptcy Code.
"Professional Fees" means all allowances of compensation and reimbursement of expenses allowed to (a)
Professionals pursuant to section 330 or 331 of the Bankruptcy Code or (b) any Person making a claim for
compensation under section 503(b) of the Bankruptcy Code.
"Professionals" means an Entity or Person employed pursuant to a Final Order in accordance with section
327 or II 03 of the Bankruptcy Code and to be compensated for services rendered prior to the Effective Date,
pursuant to section 327, 328, 329, 330 or 331 of the Bankruptcy Code.
"Ratable Portion" means, with reference to any distribution on account of any Allowed Claim in any Class,
a distribution equal in amount to the ratio (expressed as a percentage) that the amount of such Allowed Claim bears
to the aggregate amount of Allowed Claims in such Class.
"Reinstated" or "Reinstatement" means (i) leaving unaltered the legal, equitable and contractual rights to
which a Claim entitles the Holder of such Claim so as to leave such Claim Unimpaired or (ii) notwithstanding any
contractual provision or applicable law that entitles the holder of such Claim to demand or receive accelerated
payment of such Claim after the occurrence of a default (a) curing any such default that occurred before or after the
Petition Date, other than a default of a kind specified in section 365(b)(2) of the Bankruptcy Code, (b) reinstating the
maturity of such Claim as such maturity existed before such default, (c) compensating the holder of such Claim for
any damages incurred as a result of any reasonable reliance by such Holder on such contractual provision or such
applicable law and (d) not otherwise altering the legal, equitable or contractual rights to which such Claim or
Interest entitles the holder of such Claim.
"Reorganized Debtors" means the Debtors and any successors thereto, by merger, consolidation or
otherwise, as reorganized on or after the Effective Date.
"Reorganized Oneida" means Oneida, as reorganized on and after the Effective Date.
"Reorganized Oneida Board of Directors" means the board of directors of Reorganized Oneida, on and
after the Effective Date, the members of which are disclosed in the Plan Supplement.
NYDOCS03n94632.13 6
"Reorganized Oneida Common Stock" means the common stock of Reorganized Oneida, par value $10.0 II
per share, to be authorized pursuant to the Amended Oneida Certificate of Incorporation.
"Requisite Tranche A Holders" means Holders of greater than fifty percent (50%) of the Secured Tranche
A Claims.
"Requisite Tranche B Holders" means Holders of greater than fifty percent (50%) of the Secured Tranche
B Claims.
"Schedules" means the schedules, if any, of assets and liabilities, schedules of executory contracts, and the
statement of financial affairs of one or more of the Debtors filed pursuant to section 521 of the Bankruptcy Code, the
Official Bankruptcy Forms and the Bankruptcy Rules, as they may be amended or supplemented from time to time.
"Secured Claim" means, with respect to any Debtor, a Claim that is secured by a Lien on, or security
interest in, property of any such Debtor, or that has the benefit of rights of setoff under section 553 of the
Bankruptcy Code, but only to the extent of the value of the creditor's interest in such Debtor's interest in such
property, or to the extent of the amount subject to setoff, which value shall be detennined as provided in section 506
"Secured PBGC Claim" means the face amount of the PBGC Liens plus accrued interest from the date such
payment was due, which amount is owed to the Oneida Plan in respect of certain missed minimum funding
contributions for the 2004 and 2005 plan years pursuant to Section 302 of ERISA.
"Secured Prepetition Lender Claims" means the aggregate of the Secured Tranche A Claims and Secured
Tranche B Claims.
"Secured Tranche A Claims" means all amounts owing to Holders of Tranche A Loans under the
Prepetition Credit Documents, including all accrued but unpaid interest (at the nondefault rate), fees, expenses and
other charges in respect or such amounts as provided in the Prepetition Credit Documents.
"Secured Tranche B Claims" means all amounts owing to Holders of Tranche B Loans under the
Prepetition Credit Documents, including all accrued but unpaid interest (at the nondefault rate), fees, expenses and
other charges in respect of such amounts as provided in the Prepetition Credit Documents.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
"Specified Unsecured Claims" means the aggregate of the Unsecured PBGC Claims and the Italian
Guarantee Claim.
"Stock Rights" means (a) conversion, exchange, voting, participation and dividend rights; (b) liquidation
preferences; (c) options, warrants, calls, rights, puts, awards, and commitments; (d) share-appreciation rights; (e)
any other rights of a similar nature; and (t) any agreements granting any of the foregoing.
"Stockholders' Agreement" means a Stockholders' Agreement, substantially in the form attached to the
Plan Supplement.
"Subordinated Claim'' means any Claim arising in connection with any Oneida Equity Interest, including,
without limitation, Claims arising from the rescission of a purchase or sale of any Oneida Equity Interest, for
damages arising from the purchase or sale of such Oneida Equity Interest, or for reimbursement or contribution
under section 502 of the Bankruptcy Code on account of such Claim, and attorneys' fees associated therewith, to the
extent subordinated under section 51 O(b) ofthe Bankruptcy Code.
NYDOCSOJ/79463213 7
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"Substantive Consolidation Order" means the order, or provision of the Confirmation Order, substantively
consolidating the Chapter II Cases (for voting, confirmation and distribution purposes only and as more particularly
provided in Section 5.1 ofthis Plan).
"THC" means THC Systems, Inc., a New York corporation.
"Tranche A Distribution" means the distribution to Holders of Secured Tranche A Claims.
"Tranche A Loan" has the meaning set forth in the Prepetition Credit Agreement.
"Tranche B Common Stock" means a number of shares of Reorganized Oneida Common Stock equal to
100% of the issued and outstanding Reorganized Oneida Common Stock as of the Effective Date.
"Tranche B Distribution" means the distribution to Holders of Secured Tranche B Claims.
"Tranche B Loan" has the meaning set forth in the Prepetition Credit Agreement.
"Unimpaired" means a Claim that is not Impaired.
"Unsecured PBGC Claims" means the aggregate amount owed to the PBGC in connection with the
distressed termination of the Pension Plans pursuant to 29 U.S.C. 1341(c)(2)(B)(ii) and any deficiency claims of
the PBGC in respect of the Secured PBGC Claim.
Section 1.2. Rules of Interpretation and Computation of Time
(a) For purposes of the Plan: (i) whenever from the context it is appropriate, each term, whether
stated in the singular or the plural, shall include both the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, feminine and the neuter gender; (ii) any reference
in the Plan to a contract, instrument, release, indenture or other agreement or document being in a particular form or
on particular terms and conditions means that such document shall be substantially in such form or substantially on
such terms and conditions; (iii) any reference in the Plan to an existing document or exhibit filed, or to be filed, shall
mean such document or exhibit, as it may have been or may be amended, modified or supplemented; (iv) unless
otherwise specified, all references in the Plan to Sections, Articles and Exhibits are references to Sections, Articles
and Exhibits of or to the Plan; (v) the words "herein" and "hereto" refer to the Plan in its entirety rather than to a
particular portion of the Plan; (vi) captions and headings to Articles and Sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the interpretation of the Plan; (vii) the rules of
construction set forth in section 102 of the Bankruptcy Code shall apply; and (viii) any term used in capitalized fonn
in the Plan that is not defined herein but that is used in the Bankruptcy Code or the Bankruptcy Rules shall have the
meaning assigned to such term in the Bankruptcy Code or the Bankruptcy Rules, as the case may be.
(b) In computing any period of time prescribed or allowed by the Plan, the provisions of Bankruptcy
Rule 9006(a) shall apply.
ARTICLE II
ADMINISTRATIVE AND PRIORITY TAX CLAIMS
Section 2.1. Administrative Claims
Subject to the provisions of sections 330(a), 331 and 503(b) of the Bankruptcy Code, each Administrative
Claim that is Allowed shall be paid by the Debtors, in full, in Cash, in such amounts as are incurred in the ordinary
course of business by the Debtors, or in such amounts as such Administrative Claim is A II owed by the Bankruptcy
Court (a) upon the later of the Effective Date or, if such Claim is Allowed after the Effective Date, the date upon
which there is a Final Order allowing such Administrative Claim, (b) upon such other terms as may exist in the
ordinary course of such Debtor's business and in accordance with the terms of any agreement governing or
NYDOCS031794632.13 8
documents evidencing such Administrative Claim, or {c) as may be agreed upon between the Holder of such
Allowed Administrative Claim and the Debtors.
Section 2.2. Priority Tcu Claims
Each Allowed Priority Tax Claim shall be paid by the Debtors in full, in Cash, upon the later of {a) the
Effective Date, (b) the date upon which there is a Final Order allowing such Priority Tax Claim, (c) the date such an
Allowed Priority Tax Claim would have been due and payable if the Chapter I 1 Cases had not been commenced, or
(d) as may be agreed upon between the Holder of such an Allowed Priority Tax Claim and the Debtors.
Section 2.3. Professional Fees
All final applications for Professional Fees for services rendered in connection with the Chapter II Cases
prior to the Confirmation Date shall be filed with the Bankruptcy Court not later than sixty (60) days after the
Effective Date. Without limiting the foregoing, Oneida or Reorganized Oneida, as the case may be, may pay the
charges incurred by the Debtors on or after the Confirmation Date for Professionals' fees, disbursements, expenses,
or related support services without application to or approval by the Bankruptcy Court.
Section 2.4. Claims Under DIP Credit Agreement
On the Effective Date, all Obligations (as defined in the DIP Credit Agreement) under the DIP Credit
Agreement shall be paid in full in Cash or as otherwise provided in the DIP Credit Agreement.
ARTICLE Ill
CLASSIFICATION AND TREATMENT OF CLAIMS AND ONEIDA EQUITY INTERESTS
Section 3.1. Classification
The categories of Claims and Oneida Equity Interests listed below classify Claims and Oneida Equity
Interests for all purposes, including voting, confirmation and distribution pursuant to the Plan and pursuant to
sections 1122 and 1123(a)( I) of the Bankruptcy Code. A Claim or Oneida Equity Interest shall be deemed classified
in a particular Class only 'to the extent that the Claim or Oneida Equity Interest qualifies within the description of
that Class and shall be deemed classified in a different Class to the extent that any remainder of such Claim or
Oneida Equity Interest qualifies within the description of such different Class. A Claim or Oneida Equity Interest is
in a particular Class only to the extent that such Claim or Oneida Equity Interest is Allowed in that Class and has not
been paid or otherwise settled prior to the Effective Date. Intercompany Claims are not classified and shall be
reinstated or discharged in accordance with Section 5.1 hereof.
Summary of Classification and Treatment of Claims and Oneida Equity Interests
Class Claim Status Voting Right
I. Secured Tranche A Claims Unimpaired Deemed to Accept;
Not Entitled to Vote
2. Secured Tranche B Claims Impaired Entitled to Vote
3. Secured PBGC Claims Impaired Entitled to Vote
4. Other Secured Claims Unimpaired Deemed to Accept;
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Class Claim Status Voting Right
5. Other Priority Claims Unimpaired Deemed to Accept;
6. General Unsecured Claims Unimpaired Deemed to Accept;
7. Specified Unsecured Claims Impaired; not entitled to receive Deemed to Reject; Not
any distribution under the Plan Entitled to Vote
8. Subordinated Claims Impaired; not entitled to receive Deemed to Reject; Not
any distribution under the Plan Entitled to Vote
9. Oneida Equity Interests Impaired; not entitled to receive Deemed to Reject;
any distribution under the Plan Not Entitled to Vote
Claims (except for Administrative Claims and Priority Tax Claims, which are not required to be classified
pursuant to section 11 23(a)(i) of the Bankruptcy Code) are classified as follows:
Claims Against the Debtors and Oneida Equity Interests
(i) Class !-Secured Tranche A Claims
(ii) Class 2-Secured Tranche B Claims
(iii) Class J-Secured PBGC Claims
(iv) Class 4-0ther Secured Claims
(v) Class 5-0ther Priority Claims
(vi) Class ~ e n e r a l Unsecured Claims
(vii) Class 7-Specified Unsecured Claims
(viii) Class 8-Subordinated Claims
(ix) Class 9-0neida Equity Interests
Section 3.2. Acceptances and Rejections
(a) Each of Class I, Class 4, Class 5 and Class 6 is Unimpaired under the Plan and Holders of Claims
in such Classes are conclusively presumed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy
Code and are not entitled to vote on the Plan.
(b) Each of Class 2 and Class 3 is Impaired and is entitled to vote to accept or reject the Plan.
(c) Each of Class 7, Class 8 and Class 9 is Impaired under the Plan and Holders of Claims and Oneida
Equity Interests in such Classes are conclusively presumed to have rejected the Plan and, therefore, are not entitled
to vote on the Plan.
NYDOCS031794632 13 10
Section 3.3. Treatment of Claims and Oneida Equity Interests
(a) Class 1- Secured Tranche A Claims
(i) Treatment: Each Secured Tranche A Claim shall constitute an Allowed Secured Tranche
A Claim. On the EITective Date or as soon as practicable thereafter, each Holder of a
Secured Tranche A Claim shall receive Cash equal to the Secured Tranche A Claim held
by such Holder. Subject to Section 5.11 hereof, if the Bank of America L!C is
outstanding following the EITective Date, BofA shall receive (x) a cash deposit or (y) an
irrevocable letter of credit issued under the Exit Facility in an amount, in each instance,
equal to 105 percent (105%) of the face amount of the outstanding Bank of America L/C,
less any SofA Cash Collateral.
(ii) Voting: Class I is Unimpaired. Holders of Other Secured Claims are conclusively
presumed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code
and are not entitled to vote to accept or reject the Plan.
(b) Class 2- Secured Tranche 8 Claims
(i) Treatment: Each Secured Tranche B Claim shall constitute an Allowed Secured Tranche
B Claim. On the EITective Date or as soon as practicable thereafter, the Holders of
Secured Tranche B Claims, in the aggregate, shall receive the Tranche B Common Stock
and each Holder of a Secured Tranche B Claim or, in the case of any Holder of a Tranche
B Claim that is unable to hold shares of Reorganized Common Stock, the designee(s) of
such Holder, shall receive that number of shares of Reorganized Oneida Common Stock
equal to such Holder's Ratable Portion of the Tranche B Common Stock; provided,
however, that in no event shall there be more than [50] Holders of Tranche B Common
Stock upon the Effective Date.
(ii) Voting: Class 2 is Impaired. Holders of the Secured Tranche B Claims are entitled to
vote to accept or reject the Plan.
( ' ~ Class 3- Secured PBGC Claims
(i)
(ii)
Treatment: Each Secured PBGC Claim shall constitute an Allowed Secured PBGC
Claim up to the value of the PBGC Senior Collateral. On the Effective Date or as soon as
practicable thereafter, Holders of Secured PBGC Claims shall receive such Holder's
Ratable Portion of the PBGC Note.
Voting: Class 3 is Impaired. Holders of Secured PBGC Claims are entitled to vote to
accept or reject the Plan.
(d) Class 4- Other Secured Claims
(i)
(ii)
NY[XX:SOJ/79463213
Treatment: The legal, equitable and contractual rights of the Holders of Allowed Other
Secured Claims are unaltered by the Plan. Unless the Holder of such Claim and the
applicable Debtor agree to a different treatment, on the Effective Date, each Holder of an
Allowed Other Secured Claim shall have its Claim Reinstated.
Voting: Class 4 is Unimpaired. Holders of Other Secured Claims are conclusively
presumed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code
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(e) Class 5-0ther Priority Claims
(i) Treatment: The legal, equitable and contractual rights of Holders of Allowed Other
Priority Claims are unaltered by the Plan. Unless a Holder of an Allowed Other Priority
Claim and the Debtors agree to a different treatment, each Holder of an Allowed Other
Priority Claim shall receive one of the following alternative treatments, at the election of
the Debtors:
(A) to the extent then due and owing on the Effective Date, such Allowed Other
Priority Claim will be paid in full, in Cash, by the Reorganized Debtors;
(B) to the extent not due and owing on the Effective Date, such Allowed Other
Priority Claim will be paid in full, in Cash, by the Reorganized Debtors when
and as such Allowed Other Priority Claim becomes due and owing in the
ordinary course of business in accordance with the terms thereof; or
(C) such Allowed Other Priority Claim will be otherwise treated in any manner such
that Class 5 shall not be impaired pursuant to section 1124 of the Bankruptcy
Code.
(ii) Voting: Class 5 is Unimpaired. Holders of Other Priority Claims are conclusively
presumed to have accepted the Plan pursuant to section 1126(1) of the Bankruptcy Code
(f) Class 6--Genera/ Unsecured Claims
(i)
(ii)
Treatment: The legal, equitable and contractual rights of Holders of Allowed General
Unsecured Claims are unaltered by the Plan. Unless the Holder of an Allowed General
Unsecured Claim and the Debtors agree to a different treatment, each Holder of an
Allowed General Unsecured Claim shall receive one of the following alternative
treatments, at the election of the Debtors:
(A)
(B)
(C)
to the extent then due and owing on the Effective Date, such Allowed General
Unsecured Claim will be paid in full, in Cash, by the Reorganized Debtors in
accordance with the terms thereof;
to the extent not due and owing on the Effective Date. such Allowed General
Unsecured Claim will be paid in full, in Cash, by the Reorganized Debtors when
and as such Allowed General Unsecured Claim becomes due and owing in the
ordinary course of business in accordance with the terms thereof; or
such Allowed General Unsecured Claim will be otherwise treated in any other
manner such that Class 6 shall not be impaired pursuant to section 1124 of the
Bankruptcy Code.
Voting: Class 6 is Unimpaired, Holders of General Unsecured Claims are conclusively
presumed to have accepted the Plan pursuant to SC(;tion 1126(1) of the Bankruptcy Code
a11d are not entitled to vote to accept or reject the Plan.
(g) Class 7----Specijil!d Unsecured Claims
(i)
NYDOCSOJ/794632 13
Treatment: On the Effective Date, Specified Unsecured Claims will be discharged and
each Holder thereof shall not receive or retain any distribution or property on account of
its Specified Unsecured Claim.
12
(ii) Voting: Class 7 is Impaired. Holders of Specified Unsecured Claims are deemed to
reject the Plan pursuant to Section 1126(g) ofthe Bankruptcy Code and are not entitled to
vote to accept or reject the Plan.
(h) Class 8-Subordinated Claims
(i)
(ii)
Treatment: On the Effective Date, Subordinated Claims will be discharged and each
Holder thereof shall not receive or retain any distribution or property on account of its
Subordinated Claim.
Voting: Class 8 is Impaired. Holders of Subordinated Claims are deemed to reject the
Plan pursuant to Section 1126(g) of the Bankruptcy Code and are not entitled to vote to
(i) Class 9-0neida Equity interests
(i) Treatment: On the Effective Date, Oneida Equity Interests will be canceled and each
Holder thereof shall not be legally entitled to receive or retain any distribution on account
of its Oneida Equity Interests.
(ii) Voting; Class 9 is Impaired. Holders of Oneida Equity Interests are deemed to reject the
Plan pursuant to Section I 126(g) of the Bankruptcy Code and are not entitled to vote to
Section 3.4. Miscellaneous
(a) Notwithstanding any other provision of the Plan, any Allowed Claim shall be reduced by the amount,
if any, that was paid by the Debtors to the I-I older of such Claim prior to the Effective Date, including pursuant to
any Final Order entered by the Bankruptcy Court. Nothing in the Plan shall preclude the Reorganized Debtors from
paying Claims that the Debtors were authorized to pay pursuant to any Final Order entered by the Bankruptcy Court
prior to the Confirmation Date.
(b) Except as otherwise provided in the Plan, the Confirmation Order, any other order of the Bankruptcy
Court or any document or agreement entered into and enforceable pursuant to the terms of this Plan, nothing shall
affect the Debtors' or Reorganized Debtors' Causes of Action, rights and defenses, both legal and equitable, with
respect to any Unimpaired Claims, including, but not limited to, all rights with respect to legal and equitable
defenses to, setoffs or recoupments against, Unimpaired Claims and all Causes of Action for the affirmative relief
against the holders thereof.
ARTICLE IV
CRAM DOWN
If any Impaired Class of Claims entitled to vote shall not accept the Plan, the Debtors shall seek
confirmation of the Plan under section 1129(b) of the Bankruptcy Code or seek to amend or modify the Plan in
accordance with Section 12.4 hereof. With respect to any Impaired Class of Claims or Interests that is deemed to
reject the Plan, the Debtors shall request that the Bankruptcy Court confirm the Plan pursuant to section I I 29(b) of
NYDOCSOJ/794632.13 13
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ARTICLE V
MEANS FOR IMPLEMENTATION OF THE PLAN
Section 5.1. Substantive Consolidation for Purposes of Voting, Confirmation and Distribution
This Plan contemplates and is predicated upon substantively consolidating the Debtors solely for the
purposes of (i) voting, (ii) confirmation and (iii) distribution in respect of Class 2 and Class 3. This Plan does not
contemplate the substantive consolidation of the Debtors with respect to the other Classes of Claims or Equity
Interests set forth in this Plan, or for any other purpose. On the Effective Date, (i) all guarantees of any Debtor of
the payment, performance or collection of another Debtor with respect to Class 2 and Class 3 Claims shall be
deemed eliminated and canceled, (ii) any obligation of any Debtor and all guarantees with respect to Class 2 and
Class 3 Claims thereof executed by one or more ofthe other Debtors shall be treated as a single obligation, and (iii)
each Class 2 or Class 3 Claim against any Debtor shall be deemed to be against the consolidated Debtors and shall
be deemed a single Class 2 or Class 3 Claim against, and a single obligation of, the consolidated Debtors. On the
Effective Date, and in accordance with the terms of this Plan and the consolidation of the assets and liabilities of the
Debtors, all Class 2 or Class 3 Claims based upon guarantees of collection, payment, or performance made by the
Debtors as to the obligations of another Debtor shall be released and of no further force and effect. Except as set
forth in this Section 5.1, such substantive consolidation shall not (other than for purposes related to this Plan) (i)
affect the legal and corporate structures of the Reorganized Debtors, (ii) cause any Debtor to be liable for any Claim
under this Plan for which it otherwise is not liable, and the liability for any such Claim shall not be affected by such
substantive consolidation, (iii) affect Intercompany Claims or (iv) affect any obligations under any leases or
contracts assumed in this Plan or otherwise subsequent to the tiling of the Chapter II Cases.
On the Effective Date, (i) the Intercompany Claims of Debtors or their affiliates against Debtors shall be
reinstated or discharged and satisfied at the option of the Reorganized Debtors by contributions, distributions or
otherwise and (ii) the Interests of a Debtor in any Debtor or non-Debtor subsidiary shall remain outstanding.
Unless the Bankruptcy Court has approved the substantive consolidation of the Chapter II Cases by a prior
order, this Plan shall serve as, and shall be deemed to be, a motion for entry of an order substantively consolidating
the Debtors as provided in this Section 5.1. If no objection to substantive consolidation is timely tiled and served by
any Holder of a Claim that is Impaired by this Plan as provided herein on or before the deadline for objection to
Confirmation of this Plan, the Substantive Consolidation Order (which may be the Confirmation Order) may be
entered by the Bankruptcy Court. lf any such objections are timely tiled and served, a hearing with respect to the
substantive consolidation of the Chapter II Cases and the objections thereto shall be scheduled by the Bankruptcy
Court, which hearing shall coincide with the Confirmation Uearing.
Section 5.2. Restructuring Transactions
Prior to, on or after the Effective Date, the applicable Debtors may enter into such transactions and may
take such actions as may be necessary or appropriate to effect a corporate restructuring of their respective
businesses, to otherwise simplify the overall corporate structure of the Debtors, or to reincorporate certain of the
Debtors under the laws of jurisdictions other than the laws of which the applicable Debtors are presently
incorporated. Such restructuring may include one or more mergers, consolidations, restructures, dispositions,
liquidations or dissolutions, as may be determined by the Debtors to be necessary or appropriate (collectively, the
"Restructuring Transactions"). The actions to effect the Restructuring Transactions may include (i) the execution
and delivery of appropriate agreements or other documents of merger, consolidation, restructuring, disposition,
liquidation or dissolution containing terms that are consistent with the terms of the Plan and that satisfy the
applicable requirements of applicable state law and such other terms to which the applicable entities may agree,
(ii) the execution and delivery of appropriate instruments of transfer, assignment, assumption or delegation of any
asset, property, right, liability, duty or obligation on terms consistent with the terms of the Plan and having such
other terms to which the applicable entities may agree, (iii) the filing of appropriate certificates or articles of merger,
consolidation or dissolution pursuant to applicable state law and (iv) all other actions that the applicable entities
determine to be necessary or appropriate, including making lilings or recordings that may be required by applicable
state law in connection with such transactions. The Restructuring Transactions may include one or more mergers,
consolidations, restructures, dispositions, liquidations or dissolutions, as may be determined by the Debtors to be
NYDOCSOJ/794632.13 14
necessary or appropriate to result in substantially all of the respective assets, properties, rights, liabilities, duties and
obligations of certain of the Debtors vesting in one or more surviving, resulting or ae<juiring corporations. In each
case in which the surviving, resulting or acquiring corporation in any such transaction is a successor to a Debtor,
such surviving, resulting or acquiring corporation will perform the obligations of the applicable Debtor pursuant to
the Plan to pay or otherwise satisfy the Allowed Claims against such Debtor, except as provided in any contract,
instrument or other agreement or document effecting a disposition to such surviving, resulting or acquiring
corporation, which may provide that another Debtor will perform such obligations.
Section 5.3. Continued Corporate Existence and Vesting of Assets in Reorganized Oneida
Each of the Reorganized Debtors continue to exist after the Effective Date as a separate corporate entity,
with all the powers of a corporation under the laws of their respective states of incorporation and without prejudice
to any right to alter or terminate such existence (whether by merger or otherwise) under such applicable state law.
Except as otherwise provided in the Plan or any agreement, instrument or indenture relating thereto, on or after the
Effective Date, all property of the Estates of the Debtors, and any property acquired by the Debtors or the
Reorganized Debtors under the Plan, shall vest in the Reorganized Debtors, free and clear of all Claims, Liens,
charges or other encumbrances and Interests. On and after the Effective Date, the Reorganized Debtors may operate
their respective businesses and may use, acquire or dispose of property and compromise or settle any Claims or
Equity Interests, without supervision or approval by the Bankruptcy Court and free of any restrictions of the
Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly imposed by the Plan and the
Confirmation Order. Without limiting the generality of the foregoing, all rights, privileges, entitlements,
authorizations, grants, permits, licenses, easements, franchises and other similar items which constitute part of, or
are necessary or useful in the operation of the property of the Estates or the business of the Reorganized Debtors,
whether in the United States or elsewhere, shall be vested in the Reorganized Debtors on the Effective Date, and
shall thereafter be exercisable and usable by the Reorganized Debtors to the same and fullest extent they would have
been exercisable and usable by the Debtors before the Petition Date.
Section 5.4. Cancellation of Oneida Equity Interests
On the Effective Date, except to the extent provided elsewhere in the Plan or the Confirmation Order, and
provided that the treatments provided for herein and the distributions contemplated by Article Ill hereof are made,
all Oneida Equity lnterests shall be canceled and deemed terminated.
Section 5.5. Execution ofRelated Documents
On the Effective Date.. all Plan Documents, including, without limitation, the Exit Facility, the
Stockholders' Agreement and any other agreement entered into or instrument issued in connection with any of the
foregoing or any other Plan Document, shall be executed and delivered by the Reorganized Debtors and shall
become effective and binding in accordance with their respective terms and conditions upon the parties thereto and
as specified herein.
Section 5.6. Corporate Governance, Directors and Officers, and Corporate Action
(a) Amended Oneida Certificate of Incorporation; Amended Oneida By-Laws; Amendment of other
Debtors Constituent Documents. On the Effective Date, Reorganized Oneida shall file the Amended Oneida
Certificate of Incorporation with the Secretary of State of the State of New York in accordance with the applicable
sections of the New York Commercial Law. The Amended Oneida Certificate of Incorporation and the Amended
Oneida By-Laws, as applicable, will, among other things, prohibit the issuance of nonvoting equity securities to the
extent required by section ll23(a) of the Bankruptcy Code. The Amended Oneida Certificate of Incorporation and
Amended Oneida By-Laws, as applicable, shall provide for the number of authorized shares of Reorganized Oneida
Common Stock and provide that the par value of the Reorganized Oneida Common Stock shall be SJO.O lj. Prior to
the Effective Date, to the extent required by section I 123(a) of the Bankruptcy Code, each of the other Reorganized
Debtors shall amend their respective certificates of incorporation pursuant to and in accordance with applicable state
law to provide that such Reorganized Debtors shall be prohibited from issuing nonvoting equity securities.
Following the Effective Date, each of the Reorganized Debtors may amend and restate their respective certificates of
incorporation and other constituent documents as permitted by applicable state law.
NYDOCS03!79463213 15
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(
(b) Directors and Officers of the Reorganized Debtors. Subject to any requirement of Bankruptcy Court
approval pursuant to section 1129(a)(S) of the Bankruptcy Code, and except as otherwise disclosed in the Disclosure
Statement, as of the Effective Date, the initial officers of the Reorganized Debtors shall be the officers of the
Debtors immediately prior to the Effective Date. On the Effective Date, the directors who are identified in the Plan
Supplement to serve as directors of the Reorganized Debtors shall serve as the initial boards of directors of the
Reorganized Debtors. Pursuant to section 1129(a)(5), the Debtors will disc lose in the Plan Supplement, on or prior
to the Confirmation Date, the identity and affiliations of any Person proposed to serve on the initial boards of
directors of the Reorganized Debtors and, to the extent such Person is an insider, the nature of any compensation for
such Person. The classification and composition ofthe boards of directors of each ofthe Reorganized Debtors shall
be consistent with the Stockholders' Agreement, the amended and restated certificates of incorporation and other
constituent documents of each of the Reorganized Debtors, and any applicable state law.
(c) Corporate Action. On the Effective Date, the adoption of the Amended Oneida Certificate of
Incorporation, the adoption of the Amended Oneida By-Laws, the adoption of the applicable constituent documents
of the other Reorganized Debtors, the selection of directors and officers for the Reorganized Debtors and all other
actions contemplated by the Plan (whether to occur before, on or after Effective Date of the Plan) shall be authorized
and approved in all respects (subject to the provisions of the Plan). All matters provided for in the Plan involving
the corporate structure of the Debtors or the Reorganized Debtors, and any corporate action required by the Debtors
or the Reorganized Debtors in connection with the Plan, shall be deemed to have occurred and shall be in effect,
without any requirement of further action by the equity holders or directors of the Debtors or the Reorganized
Debtors. On the Effective Date, the appropriate officers of the Reorganized Debtors and members of the boards of
directors of the Reorganized Debtors are authorized and directed to issue, execute and deliver the agreements,
documents, securities and instruments contemplated by the Plan in the name of and on behalf of the Reorganized
Debtors. The authorizations and approvals of the corporate actions in this Section 5.6{c) shall be effective
notwithstanding any requirements under any applicable state law or other applicable non-bankruptcy Jaw.
Section 5.7. Sources of Cash for Plan Distribution
All Cash necessary for the Reorganized Debtors to make payments pursuant to the Plan shall be obtained
from existing Cash balances, the operations of the Debtors or Reorganized Debtors or post-Confirmation Date
borrowing under other available facilities of the Debtors or Reorganized Debtors, including, without limitation, to
the extent available, the Exit Facility.
Section 5.8. Elimination ofClasses
Any Class of Claims that is not occupied as ofthe date ofthe commencement of the Confirmation Hearing
by an Allowed Claim, or a Claim temporarily allowed under Rule 3018 of the Bankruptcy Rules, shall be deemed
deleted from the Plan for all purposes.
Section 5.9. Issuance and Distribution of Tranche B Common Stock
The issuance of Tranche B Common Stock by Reorganized Oneida is hereby authorized without the need
for any further corporate action or compliance with any applicable non-bankruptcy law. On or as soon as
practicable after the Effective Date, and with respect to Holders of Secured Tranche B Claims that have provided
appropriate registration infonnation prior to the Effective Date, no later than five (5) Business Days after the
Effective Date, Reorganized Oneida shall distribute, in accordance with the tenns of the Plan, the Tranche B
Common Stock to Holders of Secured Tranche B Claims or, in the case of any Holder of a Tranche B Claim that is
unable to hold shares of Reorganized Common Stock, to the designee{s) of such Holder; provided, however, that in
no event shall there be more than [50) Holders of Tranche B Common Stock upon the Effective Date.
Section 5.1 0. Managemenr/ncentive Plan
On or within 30 days after the Effective Date, the Management Incentive Plan shall be adopted by the
Reorganized Oneida Board of Directors and shall become effective. Such initial adoption of the Management
Incentive Plan by the Reorganized Oneida Board of Directors shall not be subject to the vote of the holders of
NYDOCSOJn946J2.1 J 16
Reorganized Oneida Common Stock, notwithstanding any provision ofthe Stockholders' Agreement. Following the
Effective Date, the Management Incentive Plan may be amended or modified by the Reorganized Oneida Board of
Directors in accordance with the terms thereof and any such amendment or modification shall not require an
amendment of this Plan.
Section 5.11. Bank of America UC
If, at any time, the BofA Cash Collateral together with the cash deposited with or letter of credit issued to
BofA pursuant to Section 3.3(aXi) hereof exceeds 105 percent (105%) of the face amount ofthe Bank of America
UC then outstanding, BofA shall promptly remit to the Reorganized Debtors that portion of the BofA Cash
Collateral, cash or letter of credit in excess of such amount.
ARTICLE VI
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
Section 6.1. Assumption of Executory Contracts and Unexpired Leases
Immediately prior to the Effective Date, all executory contracts or unexpired leases of the Debtors will be
deemed assumed in accordance with the provisions and requirements of sections 365 and 1123 of the Bankruptcy
Code except those executory contracts and unexpired leases that (I) have been rejected by order of the Bankruptcy
Court, (2) are the subject of a motion to reject pending on the Effective Date, (3) are identified on a list to be tiled
with the Bankruptcy Court on or before the Confirmation Date as to be rejected or (4) are rejected pursuant to the
terms of the Plan. Entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of such
assumptions and rejections pursuant to sections 365(a) and 1123 of the Bankruptcy Code. Each executory contract
and unexpired lease assumed pursuant to this Article VI shall revest in and be fully enforceable in accordance with
its terms by the respective Reorganized Debtor, except as modified by the provisions of the Plan, any order of the
Bankruptcy Court authorizing and providing for its assumption or applicable federal law.
Section 6.2. Claims Based on Rejection of Executory Contracts or Unexpired Leases
All proofs of claim with respect to Claims arising from the rejection of executory contracts or unexpired
leases, if any, must be filed with the Bankruptcy Court within thirty (30) days after the date of entry of an order of
the Bankruptcy Court approving such rejection. Any Claims arising from the rejection of an executory contract or
unexpired lease for which proofs of claim are not filed within such time will be forever barred from assertion against
the Debtors or Reorganized Debtors, their Estates and property unless otherwise ordered by the Bankruptcy Court.
All Allowed Claims arising from rejection of executory contracts or unexpired leases for which proofs of claim have
been timely filed will be, and will be treated as, Allowed General Unsecured Claims subject to the provisions of
Article Ill hereof, subject to any limitation on allowance of such Claims under section 502(b) of the Bankruptcy
Code or otherwise.
Section 6.3. Cure of Defaults for Assumed Executory Contracts and Unexpired Leases
Any monetary amounts by which any executory contract or unexpired lease to be assumed pursuant to the
Plan is in default shall be satisfied, pursuant to section 365(b)( I) of the Bankruptcy Code, by payment of the default
amount in Cash on the Effective Date or on such other terms as the parties to such executory contract or unexpired
lease may otherwise agree. In the event of a dispute regarding (I) the amount of any cure payments, (2) the ability
of the Reorganized Debtors or any assignee to provide "adequate assurance of future perfonnance" (within the
meaning of section 365 of the Bankruptcy Code) under the contract or lease to be assumed, or (3) any other matter
pertaining to assumption, the cure payments required by section 365(b)(l) of the Bankruptcy Code shall be made
following the entry of a Final Order resolving the dispute and approving the assumption.
NYIXX:S03n94632.13 17
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Section 6.4. Indemnification of Directors, Officers and Employees
The obligations of the Debtors to indemnify any Person serving at any time on or prior to the E f f e ~ t i v e
Date as one of their directors, officers or employees by reason of such Person's service in such capacity, or as a
director, officer, partner, trustee, employee or agent of any other corporation, partnership, joint venture, trust or
other enterprise, at the Debtors' request, including with respect to employee benefit plans, to the extent provided in
the Debtors' constituent documents, by a written agreement with the Debtors or applicable state law, each as
applicable, shall be deemed and treated as executory contracts that are assumed by the Debtors pursuant to the Plan
and section 365 of the Bankruptcy Code as of the Effective Date. Accordingly, such indemnification obligations
shall be treated as General Unsecured Claims and shall survive unimpaired and unaffected by entry of the
Confirmation Order, irrespective of whether such indemnification is owed for an act or event occurring before or
after the Petition Date, except if such claim or liability is determined pursuant to a Final Order to have resulted !Tom
the gross negligence, willful misconduct, fraud or criminal conduct of such indemnified Person.
Section 6.5. Compensation and Benefit Programs
Except as otherwise expressly provided hereunder, all employment and severance policies, and all
compensation and benefit plans, policies and programs of the Debtors applicable to their employees, retirees and
non-employee directors and the employees and retirees of its subsidiaries, including, without limitation, all savings
plans, retirement plans, healthcare plans, disability plans, severance benefit plans and life, accidental death and
dismemberment insurance plans are treated as executory contracts under the Plan and on the Effective Date will be
assumed pursuant to the provisions of sections 365 and 1123 of the Bankruptcy Code; provided, however, that the
transactions contemplated by the Plan shall not constitute a Change of Control (as defined on the Deferred
Compensation Plan) and no Deferred Compensation Plan Participant shall be entitled to or receive any increased or
accelerated payment of amounts otherwise payable under the Deferred Compensation Plan as a result of the
consummation of the Plan, including the issuance of any shares of Reorganized Onedia Common Stock or defaults
arising or resulting !Tom the Chapter 11 Cases, if any. The Debtors are not aware of, after having made diligent
inquiry, any obligation to pay "retiree benefits" as defined in section 1114(a) of the Bankruptcy Code.
ARTJCLE VII
PROVISIONS GOVERNING OISTRIBUTJONS
Section 7.1. Distribution for Claims Allowed as of the Effective Date
(a) Except as otherwise provided in this Article VII or as may be ordered by the Bankruptcy Court,
distributions to be made on the Effective Date on account of Claims that are Allowed as of the Effective Date and
are entitle<! to receive distributions under the Plan shall be made on the Effective Date or as soon as practicable
thereafter except as otherwise specified herein. Distributions on account of Claims that become Allowed Claims
after the Effective Date shall be made pursuant to Articles II and IJJ hereof.
(b) For purposes of determining the accrual of interest or rights in respect of any other payment !Tom and
after the Effective Date, the Tranche B Common Stock to be issued under the Plan shall be deemed issued as of the
Effective Date regardless of the date on which the Tranche B Common Stock is actually dated, authenticated or
distributed.
Section 7.2. Distribution by the Reorganized Debtors
Reorganized Oneida shall make all initial distributions required under the Plan.
Section 7.3. Delivery and Distributions and Undeliverable or Unclaimed Distributions
(a) Delivery of Distributions in General. Except as otherwise provided in this Section 7.3, distributions to
Holders of Allowed Claims shall be made at the address of the Holder of such Claim as indicated in the records of
NYDOCSOJ/794632. I 3 18
the Debtors. Distributions of the Tranche B Common Stock shall be made by Reorganized Oneida in accordance
with Section 5.9 hereof.
(b) Undeliverable Distributions.
(i) Holding of Undeliverable Distributions. If any Allowed Claim Holder's distribution is
returned as undeliverable, no further distributions shall be made to such Holder unless
and until the Reorganized Debtors are notified in writing of such Holder's then current
address. Undeliverable distributions shall remain in the possession of the Reorganized
Debtors pursuant to this Article VII until such time as a distribution becomes deliverable.
Undeliverable Cash shall not be entitled to any interest, dividends or other accruals of
any kind.
(ii) After Distributions Become Deliverable. Except as otherwise provided herein, within 20
days after the end of each calendar quarter following the Effective Date, the Reorganized
Debtors shall make all distributions that become deliverable during the preceding
calendar quarter.
(iii) Failure to Claim Undeliverable Distributions. The Reorganized Debtors will file with
the Bankruptcy Court, from time to time, a listing of the Holders of unclaimed
distributions. This list will be maintained until the entry of an order and/or final decree
closing the Chapter I I Cases. Any Holder of an Allowed Claim that does not assert a
Claim pursuant to the Plan for an undeliverable distribution within one year after the
Effective Date shall have Its Claim for such undeliverable distribution discharged and
shall be forever barred from asserting any such Claim against the Reorganized Debtors or
their property.
(iv) Compliance with Tax Requirements. Any federal, state or local withholding taxes or
amounts required to be withheld under applicable law shall be deducted from
distributions hereunder. All Entities holding Claims shall be required to provide any
information necessary to effect the withholding of such taxes.
Section 7.4. Timing and Calculation of Amounts to Be Distributed
On or as soon as practicable after the Effective Date (except as otherwise specified in the Plan), each
Holder of an Allowed Claim shall receive the full amount of the distributions that the Plan provides for such
Allowed Claims in the applicable Class. Beginning on the date that is 20 calendar days after the end of the calendar
quarter following the Effective Date and 20 calendar days after the end of each calendar quarter thereafter,
distributions shall also be made, pursuant to Section 8.3 below, to Holders of Disputed Claims in any such Class
whose Disputed Claims were allowed during the preceding calendar quarter. Such quarterly distributions shall also
be in the full amount that the Plan provides for Allowed Claims in the applicable Class.
Section 7.5. Setoffs and Recoupments
The Reorganized Debtors may, pursuant to applicable law, set off or recoup against any Allowed Claim
(other than Secured Prepetition Lender Claims (which Claims shall not be subject to set off, recoupment or
reduction of any kind, including pursuant to section 502(d) of the Bankruptcy Code) and the distributions to be made
pursuant to the Plan on account of such Claim (before any distribution is made on account of such Claim), the
claims, rights and Causes of Action of any nature that the Debtors or Reorganized Debtors may hold against the
Holder of such Allowed Claim; provided, however, that neither the failure to effect such a setoff or recoupment nor
the allowance of any Claim hereunder shall constitute a waiver or release by the Debtors or Reorganized Debtors of
any such claims, rights and Causes of Action that the Debtors or Reorganized Debtors may possess against such
Holder.
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Section 7.6. Surrender of Canceled Oneida Equity lnlerests
Holders of the Oneida Equity Interests shall be deemed to have surrendered the certificates or other
documents underlying such Oneida Equity Interests and all such certificates or other documentation shall be deemed
canceled as of the Effective Date.
Section 7. 7. Fractional Shares of Reorganized Oneida Common Stock
No fractional shares of Reorganized Oneida Common Stock shall be distributed under the Plan. Each
Person entitled to receive Reorganized Oneida Common Stock shall receive the total number of whole shares of
Reorganized Oneida Common Stock to which such Person is entitled. Whenever any distribution to a particular
Person would otherwise call for distribution of a fraction of a share of Reorganized Oneida Common Stock,
Reorganized Oneida shall allocate separately one whole share to such Person in order of the fractional portion of
their entitlements, starting with the largest such fractional portion, until all remaining whole shares have been
allocated. Upon the allocation of a whole share to a Person in respect of the fractional portion of its entitlement,
such fractional portion shall be canceled. If two or more Persons are entitled to equal fractional entitlements and the
number of Persons so entitled exceeds the number of whole shares which remain to be allocated, Reorganized
Oneida shall allocate the remaining whole shares by random lot or such other impartial method as Reorganized
Oneida deems fair. Upon the allocation of all of the whole shares authorized under the Plan, all remaining fractional
portions of the entitlements shall be canceled and shall be of no further force and effect.
Section 7.8. Manner of Paymenl Under Plan of Reorganization
At the option of Reorganized Oneida, any Cash payment to be made hereunder may be made by a check or
wire transfer or as otherwise required or provided in applicable agreements.
ARTICLE VIII
PROCEDURES FOR RESOLVING DISPUTED CLAIMS
Section 8. I. Prosecution of Objections to Claims
After the Confirmation Date, the Debtors and the Reorganized Debtors shall have the exclusive authority to
tile objections, settle, compromise, withdraw or litigate to judgment objections to Claims, and may settle or
compromise any Disputed Claim without approval of the Bankruptcy Court. All Disputed Claims shall be
determined, resolved or adjudicated in the manner in which such Claim would have been determined, resolved or
adjudicated if the Chapter I I Case had not been commenced, unless the Debtors or the Reorganized Debtors, as the
case may be, at its election, choose to determine, resolve or adjudicate such Disputed Claim in the Bankruptcy
Court.
Unless required by the Bankruptcy Court, Holders of Claims shall not be required to tile proofs of claim
with the Bankruptcy Court. The Debtors intend to make distributions as required by the Plan and in accordance with
the books and records of the Debtors.
Section 8.2. Eslimation of Claims
The Debtors or the Reorganized Debtors may, at any time, request that the Bankruptcy Court estimate any
contingent or unliquidated Claim pursuant to section 502(c) of the Bankruptcy Code regardless of whether the
Debtors or the Reorganized Debtors have previously objected to such Claim or whether the Bankruptcy Court has
ruled on any such objection, and the Bankruptcy Court will retain jurisdiction to estimate any Claim at any time
during litigation concerning any objection to any Claim, including during the pendency of any appeal relating to any
such objection. In the event that the Bankruptcy Court estimates any contingent or unliquidated Claim, that
estimated amount will constitute either the Allowed amount of such Claim or a maximum limitation on such Claim,
as determined by the Bankruptcy Court. If the estimated amount constitutes a maximum limitation on such Claim,
the Debtors or Reorganized Debtors may elect to pursue any supplemental proceedings to object to any ultimate
NYIXJCSOJ/794632.13 20
payment on such Claim. All of the aforementioned Claims objection, estimation and resolution procedures are
cumulative and not necessarily exclusive of one another. Claims may be estimated and subsequently compromised,
settled, withdrawn or resolved by any mechanism approved by the Bankruptcy Court.
Section 8.3. Payments arrd Distributions on Disputed Claims
Notwithstanding any provision in the Plan to the contrary, except as otherwise agreed by the Reorganized
Debtors in their sole discretion, no partial payments and no partial distributions will be made with respect to a
Disputed Claim until the resolution of such disputes by settlement or Final Order. Subject to the provisions of this
Article VIII, as soon as practicable after a Disputed Claim becomes an Allowed Claim, the Holder of such Allowed
Claim will receive all payments and distributions to which such Holder is then entitled under the Plan, without
payment of interest on such Allowed Claim. N<>twithstanding the foregoing, any Entity or Person who holds both an
Allowed Claim(s) and a Disputed Claim(s) will receive the appropriate payment or distribution on the Allowed
Claim(s), although, except as otherwise agreed by the Reorganized Debtors in their sole discretion, no payment or
distribution will be made on the Disputed Claim(s) until such dispute is rcS<>lved by settlement or Final Order.
ARTICLE IX
CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVE DATE OF THE PLAN
Section 9.1. Conditions Precedent to Confirmation
It shall be a condition to Confirmation of the Plan that (a) all provisions, terms and conditions of the Plan
shall have been approved in the Confirmation Order or waived pursuant to the provisions of Section 9.3 below and
(b) the identity of the individuals proposed to serve on the boards of directors of the Reorganized Debtors shall have
been disclosed to the Bankruptcy Court.
Section 9.2. Conditions Precedent to Occurrence of the Effective Date
It shall be a condition to the Effective Date of the Plan that the following conditions shall have been
satisfied or waived pursuant to the provisions of Section 9.3 of the Plan:
(a) the Confirmation Order shall have been approved by the Bankruptcy Court and duly entered on the
docket for the Chapter II Cases by the Clerk of the Bankruptcy Court, shall not have been modified without the
consent of the Debtors, shall not be subject to a pending motion pursuant to section 1144 of the Bankruptcy Code
and shall have become a Final Order;
(b) all Exit Facility Documents necessary to implement the Exit Facility shall have been duly executed and
delivered;
(c) all outstanding obligations of the Debtors under the DIP Credit Agreement shall have been paid in full
or otherwise satisfied, and such arrangements shall have been terminated;
(d) each Holder of a Secured Tranche A Claim shall have been paid the consideration required pursuant to
Section 3.3(a) of the Plan;
(e) the Tranche B Common Stock shall have been issued by Reorganized Oneida for distribution in
accordance with the terms hereof;
(f) the Amended Oneida Certificate of Incorporation shall have been filed with the Secretary of State of
New York and each other Reorganized Debtor shall have filed an amended certificate of incorporation with the
appropriate secretary of state of its respective jurisdiction in accordance with the terms hereof;
(g) there shall not be in effect any order, law or regulation staying, restraining, enjoining or otherwise
prohibiting or making i !legal the consummation of any of the transactions contemplated by the Plan;
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{h) all consents, approvals and actions of, filings with and notices to any governmental or regulatory
authority necessary to permit the Reorganized Debtors to perform its obligations under the Plan and to permit the
Reorganized Debtors to consummate the transactions contemplated hereby shall have been duly obtained, made or
given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any
governmental or regulatory authority necessary for the consummation of the transactions contemplated by the Plan
shall have occurred;
(i) all other actions and documents necessary to implement the provisions of the Plan on the Effective
Date shall have been, respectively, effected or duly executed and delivered.
Section 9.3. Waiver of Conditions
The Debtors may waive, subject to the approval of the Requisite Tranche A Holders and the Requisite
Tranche B Holders, any of the conditions precedent to Confirmation of the Plan set forth in Section 9.1 above, and
the conditions precedent to occurrence of the Effective Date set forth in Section 9.2{e)-(h) above, at any time,
without notice, without leave or order of the Bankruptcy Court, and without any formal action other than a
proceeding to confirm and/or consummate the Plan.
Section 9.4. Effect of Non-Occurrence of Effective Date Conditions
If the conditions to occurrence of the Effective Date have not been satisfied or waived in accordance with
this Article on or before the first Business Day that is more than 60 days after the Confirmation Date or by such later
date as is approved by the Bankruptcy Court after notice and a hearing, then on motion by the Debtors made, prior to
the time that all of the conditions have been satisfied or waived, the Bankruptcy Court may vacate the Confirmation
Order and the Confirmation Order shall be of no force and effect. Notwithstanding the foregoing, the Confirmation
Order shall not be vacated if all of the conditions to the occurrence of the Effective Date set forth in this Article are
either satisfied or waived, in accordance with the terms hereof, prior to entry by the Bankruptcy Court of an order
granting the relief requested in such motion.
If the Confirmation Order is vacated, the Plan shall be null and void in all respects and nothing contained in
the Plan or the Disclosure Statement shall: (I) constitute a waiver or release of any Claims by or against the Debtors
or any Oneida Equity Interest; (2) prejudice in any manner the rights of the Debtors; or {3) constitute an admission,
acknowledgment, offer or undertaking by the Debtors in any respect.
Section 9.5. Substantial Consummation of Plan
Substantial consummation of the Plan under Bankruptcy Code section II 0 I (2) shall be deemed to occur on
the Effective Date.
ARTICLE X
RELEASE, INJUNCTIVE AND RELATED PROVISIONS
Section I 0.1. Subordination
The classification and manner of satisfying all Claims and Interests and the respective distributions and
treatments under the Plan take into account or conform to the relative priority and rights of the Claims and Interests
in each Class in connection with any contractual, legal and equitable subordination rights relating thereto whether
arising under general principles of equitable subordination, section 51 O(b) of the Bankruptcy Code or otherwise, and
any and all such rights are settled, compromised and released pursuant to the Plan. The Confirmation Order shall
permanently enjoin, effective as of the Effective Date, all Entities and Persons from enforcing or attempting to
enforce any such contractual, legal and equitable subordination rights satisfied, compromised and settled pursuant to
this Article X.
NYDOCS03n94632. 13 22
Section I 0.2. Releases
In consideration of the contributions of certain parties to the Chapter II Cases and the waivers of Claims,
rights and Causes of Action in Section I 0.3, including, but not limited to, the waiver by certain parties (or their
affiliates) of rights against one or more of the Debtors, the Plan provides for certain waivers, exculpations, releases
and injunctions.
(a) Releases by Debtors and Reorganized Debtors. As of the Effective Date, for good and valuable
consideration, including, but not limited to, the service of the D&O Releasees, the Prepetition Agent, the Prepetition
Lenders, the DIP Agent and the DIP Lenders to facilitate the expeditious reorganization of the Debtors and the
implementation of the restructuring contemplated by the Plan, the adequacy of which is hereby confirmed, the
Debtors and the Reorganized Debtors hereby release:
(i) all D&O Releasees and their respective officers, directors, partners, members, employees,
attorneys, financial advisors, accountants, investment bankers, agents, professionals and
representatives, each in such capacity;
(ii) the Prepetition Agent, all Prepetition Lenders and each of the foregoing Entities' or
Persons' respective officers, directors, partners, members, employees, attorneys, tinancial
advisors, accountants, investment bankers, agents, professionals and representatives, each
in such capacity;
(iii)
(iv)
the DIP Agent, all parties to the DIP Credit Agreement and each of the foregoing
Entities' or Persons' respective officers, directors, partners, members, employees,
attorneys, financial advisors, accountants, investment bankers, agents, professionals and
representatives, each in such capacity; and
the property of each of the foregoing Entitles and Persons,
from any and all Claims and from all Causes of Action that the Debtors, the Reorganized Debtors or their respective
affiliates would have been legally entitled to assert in their own right (whether individually or collectively) or on
behalf of the Holder of any Claim or Oneida Equity Interest or other Entity or Person, based in whole or in part upon
any act or omission, transaction, agreement, event or other occurrence taking place on or before the Effective Date
for Claims or liabilities in connection with or related to the Debtors, the Reorganized Debtors, their respective
affiliates, the Chapter II Cases or the Plan; provided, however, that there shall be no such release on account of
claims or liabilities, (x) in respect of any loan, advance or similar payment by the Debtors or their affiliates to any
such Entity or Person, or (y) in respect of any contractual obligation owed by such Entity or Person to the Debtors or
their affiliates; provided,further, that the foregoing provisions of this Section I0.2(a) shall have no effect on the
liability of any Entity or Person that results from any such act or omission that is determined in a Final Order to have
constituted gross negligence, willful misconduct, fraud or criminal conduct.
(b) Releases by and of Holders of Claims. On and after the Effective Date, each Holder of a Claim who
has voted to accept the Plan and to accept the release set forth in this Section I 0.2(b) shall be deemed to have
released unconditionally the Debtors, the Reorganized Debtors and their respective affiliates, the D&O Releasees,
the Prepetition Agent, all Prepetition Lenders, the DIP Agent, all parties to the DIP Credit Agreement, and each of
the foregoing Entities' or Persons' respective officers, directors, employees, partners, members, attorneys, financial
advisors, accountants, investment bankers, agents, representatives and professionals, each in such capacity, and the
property of each of the foregoing Entities or Persons, from any and all Claims or Causes of Action based in whole or
in part upon any act or omission, transaction, agreement, event or other occurrence taking place on or before the
Effective Date in any way relating to or pertaining to (i) the Debtors. the Reorganized Debtors or their respective
affiliates, (ii) the Chapter II Cases and (iii) the negotiation, formulation and preparation of the Plan or the Plan
Documents; provided, however, that the foregoing provisions of this Section !0.2(b) shall have no effect on the
liability of any Entity or Person that results from any such act or omission that is determined in a Final Order to have
constituted gross negligence, willful misconduct, fraud or criminal conduct.
NYDOCS031794632.13 23
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Section 10.3. Preservation of Rights of Action
Except as otherwise provided in the Plan or in any contract, instrument, release, indenture or other
agreement entered into in connection with the Plan, in accordance with section 1123(b) of the Bankruptcy Code, the
Reorganized Debtors shall retain and may exclusively enforce any Claims, rights and Causes of Action that the
Debtors or Estates may hold against any Person or Entity. The Reorganized Debtors may pursue such retained
Claims, rights or Causes of Action, as appropriate, in accordance with the best interests of the Reorganized Debtors.
On the Effective Date, the Reorganized Debtors shall be deemed to waive and release any Claims, rights or Causes
of Action arising under sections 544, 545, 547, 548, 549, 550, 55 I and 553 of the Bankruptcy Code, or otherwise
arising under the Bankruptcy Code, held by the Reorganized Debtors against any Person or Entity, except for any
such action which may be pending on the Effective Date as to which the Reorganized Debtors' rights shall not be
waived and released and the Reorganized Debtors shall retain and may prosecute any such actions.
Section I 0.4. E:tculpation
The Debtors, the Reorganized Debtors, each of their respective affiliates, the D&O Releasees, the
Prepetition Agent, all Prepetition Lenders, the DIP Agent, all parties to the DIP Credit Agreement, and each of the
foregoing Entities' or Persons' respective members, partners, officers, directors, employees and agents (including
any attorneys, accountants, financial advisors, investment bankers and other representatives or professionals retained
by such Entities or Persons), and the property of each of the foregoing Entities or Persons, shall have no liability to
any Entity or Person, whether arising under contract, tort, federal or state securities laws, whether known or
unknown, foreseen or unforeseen, existing or arising in the future, for any pre-petition or post-petition act or
omission in connection with, or arising out of the Disclosure Statement, the Plan or any Plan Document, including
any Bankruptcy Court orders related thereto, the solicitation of votes for and the pursuit of Confirmation of this
Plan, the Effective Date of this Plan, or the administration of this Plan or the property to be distributed under this
Plan and, in all respects, shall be entitled to rely upon the advice of counsel with respect to their duties and
responsibilities under this Plan; provided, however, that the foregoing provisions of this Section 10.4 shall have no
effect on the liability of any Entity or Person that results from any such act or omission that is determined in a Final
Order to have constituted gross negligence, willful misconduct, fraud or criminal conduct (the acts or omissions
entitled to exculpation pursuant to this Section 10.4, the "Exculpated Acts").
The Reorganized Debtors shall, from and after the Effective Date, indemnify, hold harmless and reimburse
(on an as incurred basis), each of the D&O Releasees, the Prepetition Agent, all Prepetition Lenders, the DIP Agent,
all parties to the DIP Credit Agreement, and each of the foregoing Entities' or Persons' members, partners, officers,
directors, employees and agents (including any attorneys, accountants, financial advisors, investment bankers and
other representatives or professionals retained by such Entities or Persons) (collectively, the foregoing Entities and
Persons are the "Indemnified Parties"), and the property of each of the Indemnified Parties, from, against and for
any and all losses, claims (as defined in section 101(5) of the Bankruptcy Code), damages, liabilities, costs and/or
expenses (together, the "Damages") arising from, related to or that are in any manner connected with any
Exculpated Act, including without limitation, any Damages arising or resulting from or that are in any manner
connected with (i) any Cause of Action, suit, investigation or any other proceeding and (ii) the defense of any
Indemnified Party (or the involvement or participation of any Indemnified Party) in any Cause of Action, suit,
investigation or any other proceeding.
Section I 0.5. Injunction
Except as otherwise provided herein or the Confirmation Order, and in addition to the injunction
provided under sections 524(a) and I I 4 I of the Bankruptcy Code, the Confirmation Order shall provide that, on and
after the Effective Date, all persons who have held, currently hold or may hold a Claim against the Debtors or an
Equity Interest (whether directly or indirectly and whether as a beneficial holder of such Claim or Equity Interest or
as a holder of record of such Claim or Equity Interest or otherwise) that is discharged under the Plan are
permanently enjoined, on and after the Confirmation Date and subject to the occurrence of the Effective Date, from
taking any of the following actions on account ofany such Claim or Equity Interest: (a) commencing or continuing
in any manner (including by directly or indirectly assisting or facilitating the commencement or continuation ot) any
action or other proceeding of any kind with respect to any such Claim or Equity Interest, against the Debtors, the
Reorganized Debtors or their respective properties; (b) enforcing, attaching, collecting or recovering in any manner
NYDOCS03n9463213 24
any judgment, award, decree or order against the Debtors, the Reorganized Debtors or their respective properties on
account of any such Claim or Equity Interest; (c) creating, perfecting or enforcing any Lien or encumbrance of any
kind against the Debtors, the Reorganized Debtors, or their respective properties or interests in their respective
properties on account of any such Claim or Equity Interest; (d) asserting any setoff, right of subrogation or
recoupment of any kind against any obligation due from the Debtors, the Reorganized Debtors, or against the
properties or interests in property of the Debtors or the Reorganized Debtors on account of any such Claim or Equity
Interest; (e) authenticating, delivering or facilitating the delivery of any certificate: and (f) commencing, continuing
or in any manner taking part or participating in any action, proceeding or event (whether directly or indirectly) that
would be in contravention of the terms, conditions and intent of the Plan, including the releases and exculpations
provided in Sections I 0.2 and 10.4 of the Plan. The foregoing injunction wi II extend to the benefit of the successors
of the Debtors (including, without limitation, the Reorganized Debtors) and the Entities and Persons entitled to the
benefit of the releases and exculpations provided in Sections 10.2 and 10.4 of the Plan, and their respective
properties and interests in property. Any person injured by any willful violation of such injunction may recover
actual damages, including costs and attorneys' fee.s and, in appropriate circumstances, may recover punitive
damages from the willful violator.
All injunctions or stays contained in this Plan or the Confirmation Order shall remain in full force
and effect in accordance with their terms, or as provided in the Bankruptcy Code.
ARTICLE XI
RETENTION OF JURISDICTION
Notwithstanding the entry of the Confirmation Order or the occurrence of the Effective Date, the
Bankruptcy Court shall retain exclusive jurisdiction over all matters arising out of, and related to, the Plan, the
Confirmation Order and the Chapter II Cases to the fullest extent permitted by law, including, without limitation,
jurisdiction to:
(a) Allow, disallow, determine, liquidate, classify, estimate or establish the priority or secured or
unsecured status of any Claim or Oneida Equity Interest, including the resolution of any request for payment of any
Administrative Claim and the resolution of any and all objections to the allowance or priority of Claims or Oneida
Equity Interests;
{b) Grant or deny any applications for allowance of compensation or reimbursement of expenses
authorized pursuant to the Bankruptcy Code or the Plan, for periods ending on or before the Effective Date;
(c) Resolve any matters related to the assumption, assumption and assignment or rejection of any
executory contract or unexpired lease to which the Debtors are party or with respect to which the Debtors may be
liable and to hear, determine and, if necessary, liquidate, any Claims arising therefrom;
(d) Ensure that distributions to Holders of Allowed Claims are accomplished pursuant to the provisions of
the Plan, including ruling on any motion filed pursuant to Article VIII;
(e) Decide or resolve any motions, adversary proceedings, contested or litigated matters and any other
matters and grant or deny any applications involving the Debtors that may be pending on the Effective Date;
(f) Enter such orders and take other actions as may be necessary or appropriate to implement or
consummate the provisions of the Plan and the Confirmation Order, including, but not limited to, modification or
amendment thereof pursuant to Section 12.4 of the Plan, and all contracts, instruments, releases, indentures and
other agreements or documents created in connection with the Plan or the Disclosure Statement;
(g) Resolve any cases, controversies, suits or disputes that may arise in connection with the interpretation
or enforcement of the Plan or any Entity's or Person's obligations incurred in connection with the Plan;
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(h) Issue injunctions, enter and implement other orders or take such other actions as may be necessary or
appropriate to restrain interference by any Entity or Person with the occurrence of the Effective Date or enforcement
of the Plan, except as otherwise provided herein;
(i) Resolve any cases, controversies, suits or disputes with resp:t to the releases, injunction and other
provisions contained In Article X and enter such orders as may be necessary or appropriate to implement such
releases, injunction and other provisions;
G> Enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any
reason modified, stayed, reversed, revoked or vacated;
(k) Determine any other matters that may arise in connection with or relate to the Plan, the Disclosure
Statement, the Confirmation Order or any contract, instrument, release, indenture or other agreement or document
created in connection with the Plan or the Disclosure Statement;
(I) Enter an order or final decree concluding the Chapter 11 Cases;
(m) Resolve any disputes concerning whether an Entity or Person had sufficient notice of the Chapter II
Cases, the hearing on the approval of the Disclosure Statement as containing adequate information, the hearing on
the Confirmation of this Plan for the purpose of determining whether a Claim or Oneida Equity Interest is
discharged hereunder or for any other purpose;
(n) Recover all assets of the Debtors and property of the Estate, wherever located;
(o) Hear and resolve all matters concerning state, local, and federal taxes in accordance with sections 346,
505 and 1146 of the Bankruptcy Code;
(p) Hear and resolve all matters involving the nature, existence or scope of the Debtors' discharge;
(q) Effectuate performance of or payment of all obligations under the Plan; and
(r) Hear and resolve all matters involving modification of the Plan under section I 127 of the Bankruptcy
Code.
ARTICLE XII
MISCELLANEOUS PROVISIONS
S:tion 12.1. Dissolution of Committees
On the Effective Date, if any official committee is appointed in these Chapter II Cases, such official
committee shall dissolve and its members shall be released and discharged from all rights and duties arising from, or
related to, the Chapter II Cases.
Section 12.2. Payment of Statutory Fees
All fees payable pursuant to section 1930 of title 28 of the United States Code, as determined by the
Bankruptcy Court at the hearing pursuant to section 1128 of the Bankruptcy Code, shall be paid on or before the
Effective Date.
Section 12.3. Disc:harge of Debtors
Except as otherwise provided herein or in the Confirmation Order, pursuant to section 1141(d) of the
Bankruptcy Code, (I) the rights afforded in the Plan and the treatment of all Claims and Oneida Equity Interests
therein, shall be in exchange for and in complete satisfaction, discharge and release of Claims and Oneida Equity
NYDOCS031794632. 13 26
Interests of any nature whatsoever, known or unknown, including any interest accrued or expenses incurred on such
Claims from and after the Petition Date, against the Debtors, the Reorganized Debtors, or any of their Estates, assets
or properties, {2) on the Effective Date, all such Claims against, and Oneida Equity Interests in the Debtors shall be
satisfied, discharged and released in full and {3) all Entities and Persons shall be precluded from asserting against
the Reorganized Debtors, their successors or their assets or properties any other or further Claims or Oneida Equity
Interests based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the
Confirmation Date.
Section 12.4. Modification of Plan
The Debtors reserve the right to alter, amend or modify the Plan prior to the entry of the Confirmation
Order. After the entry of the Confirmation Order, the Debtors or the Reorganized Debtors, as the case may be, may,
upon order of the Bankruptcy Court, subject, in the event that the Tranche A Holders have not received the Tranche
A Distribution, to the consent of the Requisite Tranche A Holders and, in the event that the Tranche B Holders have
not received the Tranche B Distribution, to the consent of the Requisite Tranche B Holders, to amend or modify the
Plan, in accordance with section 1127{b) of the Bankruptcy Code, or remedy any defect or omission or reconcile any
inconsistency in the Plan in such manner as may be necessary to carry out the purpose and intent of the Plan.
Except as provided in the preceding paragraph, a Holder of a Claim that has accepted the Plan shall be
deemed to have accepted the Plan as altered, amended, modified or clarified in accordance with this Article, unless
the proposed alteration, amendment, modification or clarification adversely changes the treatment of the Claim of
such Holder.
Section 12.5. Revocation of Plan
The Debtors reserve the right to revoke and withdraw the Plan at any time prior to the Confirmation Date.
If the Plan is so revoked or withdrawn, or if the Effective Date does not occur, then the Plan shall be deemed null
and void, and of no force or effect.
Section I 2.6. Successors and Assigns
The rights, benefits and obligations of any Entity or Person named or referred to in the Plan shall be
binding on, and shall inure to the benefit of any heir, executor, administrator, successor or assign of such Entity or
Person.
Section 12.7. Reservation of Rights
Except as expressly set forth herein, the Plan shall have no force or effect unless the Bankruptcy Court shall
enter the Confirmation Order. None of the filing of this Plan, any statement or provision contained herein, or the
taking of any action by the Debtors with respect to this Plan shall be or shall be deemed to be an admission or
waiver of any rights of the Debtors with respect to Holders of Claims or Oneida Equity Interests prior to the
Effective Date.
Section 12.8. Section 1145 Exemption
Pursuant to section 1145(a) of the Bankruptcy Code, the offer, issuance, transfer or exchange of any
security under the Plan, or the making or delivery of an offering memorandum or other instrument of offer or
transfer under this Plan, shall be exempt from section 5 of the Securities Act or any similar state or local law
requiring the registration for offer or sale of a security or registration or licensing of an issuer or a security. All
shares of Reorganized Oneida Common Stock issued under the Plan and covered by section 1145(a){l) of the
Bankruptcy Code may be resold by holders thereof without registration, unless the holder is an "underwriter" (as
defined in section 1145(b)( I) of the Bankruptcy Code) with respect to such securities.
NYDOCS03n94632.13 27
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Section 12.9. Headings
Headings utilized in the Plan are for the convenience of reference only and shall not constitute a part of the
Plan for any other purpose.
Section 12.1 0. Governing Law
Except to the extent that the Bankruptcy Code or other federal law is applicable, the Plan shall be governed
by and construed in accordance with the laws of the State of New York, without giving effect to the principles of
conflict of laws thereof that would require application of the law of another jurisdiction.
Section 12.11. Severability
If, prior to entry of the Confirmation Order, any term or provision of the Plan is held by the Bankruptcy
Court to be invalid, void or unenforceable, the Bankruptcy Court, at the request of the Debtor, shall have the power
to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable,
consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term
or provision shall then be applicable as so altered or interpreted. Notwithstanding any such holding, alteration or
interpretation, the remainder of the terms and provisions of the Plan shall remain in full force and effect and shall in
no way be affected, impaired or invalidated by such holding, alteration or interpretation. The Confirmation Order
shall constitute a judicial determination and shall provide that each term and provision of the Plan, as it may have
been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms.
Section 12.12. Implementation
The Debtors shall take all steps, and execute all documents, including appropriate releases, necessary to
effectuate the provisions contained in this Plan.
Section 12.13./nconsistency
In the event of any inconsistency among the Plan, the Disclosure Statement, the Plan Documents, any
exhibit to the Plan or any other instrument or document created or executed pursuant to the Plan, the provisions of
the Plan shall govern.
Section I 2.14. Further Assurances
The Debtors, the Reorganized Debtors and all Holders of Claims and Oneida Equity Interests receiving
distributions under the Plan and all other parties in interest shall, from time to time, prepare, execute and deliver any
agreements or documents and take any other actions as may be necessary or advisable to effectuate the provisions
and intent of this Plan.
Section 12.1.5. Service of Documents
Any pleading, notice or other document required by the Plan to be served on or delivered to the
Reorganized Debtors shall be sent by first class U.S. mail, postage prepaid to:
Oneida Ltd.
163-181 Kenwood A venue
Oneida, NY 1342 I
Attn: General Counsel
with copies to:
Shearman & Sterling LLP
NYDOCS03179463213 28
New York, NY 10022
Attn: Douglas P. Bartner, Esq.,
Michael H. Torkin, Esq.
Section 12.16. Exemption[rom Certain Transfer Taxes
Pursuant to section 1146 of the Bankruptcy Code: (a) the issuance, transfer or exchange of any securities,
instruments or documents; (b) the creation of any other Lien; (c) the making or assignment of any lease or sublease
or the making or delivery of any deed or other instrument of transfer under, pursuant to, in furtherance of, or in
connection with the Plan, including, without limitation, any deeds, bills of sale or assignments executed in
connection with any of the transactions contemplated under the Plan or the reinvesting, transfer or sale of any real or
personal property of the Debtors pursuant to, in implementation of, or as contemplated in the Plan; and (d) the
issuance, renewal, modification or securing of indebtedness by such means, and the making, delivery or recording of
any deed or other instrument of transter under, in furtherance of, or in connection with, the Plan, including, without
limitation, the Confirmation Order, shall not be subject to any document recording tax, stamp tax, conveyance fee or
other similar tax, mortgage tax, real estate transfer tax, mortgage recording tax or other similar tax or governmental
assessment. Consistent with the foregoing, each recorder of deeds or similar official for any county, city or
governmental unit in which any instrument hereunder is to be recorded shall, pursuant to the Confirmation Order, be
ordered and directed to accept such instrument without requiring the payment of any filing fees, documentary stamp
tax, deed stamps, stamp tax, transfer tax, intangible tax or similar tax.
Section 12.17. Compromise a/Controversies
Pursuant to Bankruptcy Rule 9019, and in consideration for the classification, distribution and other
benefits provided under the Plan, the provisions of this Plan shall constitute a good faith compromise and senlement
of all Claims or controversies resolved pursuant to the Plan. The entry of the Confirmation Order shall constitute
the Bankruptcy Court's approval of each of the foregoing compromises or settlements, and all other compromises
and settlements provided for in the Plan, and the Bankruptcy Court's findings shall constitute its determination that
such compromises and settlements are in the best interests ofthe Debtors, the Reorganized Debtors, the Estates and
any Entity holding Claims against the Debtors.
Section 12.18. No Admissions
Notwithstanding anything herein to the contrary, nothing contained in the Plan shall be deemed as an
admission by an Entity with respect to any matter set forth herein.
Section 12. 19. Filing of Additional Documents
On or before the Effective Date, the Debtors may file with the Bankruptcy Court such agreements and other
documents as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the
Plan.
Section 12.20. Allocation of Payments
To the extent that any Allowed Claim entitled to a distribution under the Plan is comprised of indebtedness
and accrued but unpaid interest thereon, such distribution shall, to the extent permitted, be allocated for income tax
purposes to the principal amount of the Claim first and then, to the extent the consideration exceeds the principal
amount of the Claim, to the portion of such Claim representing accrued but unpaid interest.
[signatures on following page]
NYDOCSOJ/794632. 13 29
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Respectfully Submitted,
Dated as of March [19], 2006
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ONEIDA LTD.
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By: ________________________________ _
Name:
Title: President
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SAKURA, INC.
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By: ______________________________ __
Name:
Title: President
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BUFFALO CHINA, INC.
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By: ________________________________ _
Name:
Title: President
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DELCO INTERNATIONAL, LTD.
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By: ______________________________ ___
Name:
Title: President
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KENWOOD SILVER COMPANY, INC.
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By: ____________________________ _
Name:
Title: President
I NYDOCS03t79463213 30
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ONEIDA FOOD SERVICE, INC.
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By:
I Name:
Title: President
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ONEIDA INTERNATIONAL INC.
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By:
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Name:
Title: President
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ONEIDA SILVERSMITHS INC.
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By:
Name:
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Title: President
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THC SYSTEMS, INC.
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By:
Name:
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Title: President
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NYDOCS03n94632 I 3
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r---
Principal Amount:
Principal Amortization:
Payment Schedule:
Interest Rate:
Optional Prepayment:
1-NY/1991204 17
ANNEXD
PBGCNOTE
$3 million
10 years at $300,000 per year
Principal and interest due on last day of the Company's
fiscal year
FYE 07: Base Rate of 4.50%
FYE 08-16: Base Rate of 4.50%
Maximum Variable Rate of 10% (if projected
EBITDAR is exceeded by 20%)
Permitted
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In re Petroleum Geo-Services ASA, Case No. 03-14786 (Bankr. S.D.N.Y. 2003).
EXECUTION COPY
This PLAN SUPPORT AGREEMENT (this "Agreement") is made and entered into as
of June 18, 2003, by and among (i) Petroleum Geo-Services ASA ("PGS"), (ii) the persons
identified on Schedule 1-A (collectively, the "Supporting Noteholders"), (iii) the persons
identified on Schedule 1-B (collectively, the "Supporting TPrS"), (iv) the persons identified on
Schedule 1-C (collectively, the "'Supporting Banks", together with the Supporting Noteholders
and the Supporting TPrS, the "Supporting Creditors"), and (v) the persons identified on
Schedule 1-D (collectively, the "Supporting Shareholders", together with the Supporting
Noteholders, the Supporting TPrS and the Supporting Banks, the "Supporting Third Parties";
PGS and the Supporting Third Parties, collectively, the "Parties" and each individually, a
"Party"), each of whom is a signatory to this Agreement.
RECITALS
WHEREAS:
A. PGS issued from time to time the several series of notes described on Schedule 2-A
(collectively, the "Notes");
B. PGS guaranteed certain trust preferred securities, and certain PGS affiliates
entered into certain documentation, relating to the trust preferred securities, described on
Schedule 2-B (collectively, the "Trust Preferred Securities");
C. PGS is a borrower under the credit facilities described on Schedule 2-C (the
"'Bank Facilities");
D. PGS issued from time to time certain publicly traded ordinary shares that
currently trade on the Norwegian Stock Exchange (the "Shares", together with the Notes, the
Trust Preferred Securities, and the Bank Facilities, the "Relevant Documents");
E. PGS is currently contemplating a restructuring (the "Restructuring") of the
financial obligations set forth in the Relevant Documents through the prosecution of a chapter 11
case (the "Chapter 11 Case"; the court adjudicating the Chapter 11 Case is referred to as the
"Bankruptcy Court")
F. The Supporting Noteholders, Supporting Banks and Supporting TPrS have
formed an ad hoc committee, fairly chosen by such creditors, and representative of all the
creditor claims to be impaired pursuant to the Term Sheet (the "ad hoc Committee"). The
members of the ad hoc Committee are set forth on Schedule 1-E.
G. The Parties have reached an agreement in principle on the terms and conditions
for the Restructuring which agreement is summarized in that certain "Petroleum Geo-Services
ASA Summary of Proposed Terms for Balance Sheet Restructuring" (the "Term Sheet")
CTDOCS 1548687.7
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attached hereto as Exhibit A; the terms and conditions set forth in the Term Sheet are expressly
incorporated herein and made a part hereof;
H. Each of the Parties acknowledges and agrees that the best way to proceed to
effectuate the Restructuring is to do so in a way that would:
1. maximize the value of PGS, its subsidiaries and all of their operations for the
benefit of all interested persons; and
2. minimize the disruption to PGS and its subsidiaries resulting from the
commencement of the Chapter II Case, by seeking to conclude the Chapter II
Case as quickly as possible;
I. The Parties desire to express to each other their mutual support and commitment
in respect of the matters discussed in the Term Sheet; and
J. In expressing such support and commitment, the Parties do not desire and do not
intend in any way to derogate from or diminish the solicitation requirements of applicable
securities and bankruptcy laws, the fiduciary duties of PGS under Norwegian Jaw or as a debtor
in possession, or the fiduciary duties of any Supporting Creditor who is appointed to the official
committee ofunsecured creditors (the "Creditors' Committee") in the Chapter II Case.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
I. Defined Terms. All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Term Sheet.
2. Term Sheet Conditions. Without limiting the conditions set forth herein, each Party's
agreement to this Agreement and support for the Term Sheet is expressly conditioned on
satisfaction of each of the terms and conditions set forth in this Agreement. To the extent any
such conditions involve a time period or an outside date for satisfaction, the Parties acknowledge
and agree that time is o(the essence with respect to each such condition.
3. PGS Support. PGS believes that the implementation of the terms set forth in the
Term Sheet will best facilitate the Restructuring and that consummation of the settlements
described in the Term Sheet is in its best interests and in the best interests of its creditors and
other parties in interest. Accordingly, PGS hereby expresses its intention to file and seek
confirmation of a plan of reorganization (the "PGS Plan") consistent with the terms and
provisions ofthe Term Sheet. Without limiting the foregoing, PGS undertakes and commits, for
so long as this Agreement remains in effect:
CTDOCS 1548687 7
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a. to initiate the Chapter 11 Case promptly upon fulfillment of the conditions
precedent to this Agreement, subject to obtaining sufficient creditor support to implement
the Restructuring;
b. to submit for, and use its reasonable best efforts to obtain at the earliest
practicable date, Bankruptcy Court approval of a disclosure statement (as approved by
the Bankruptcy Court, the "Disclosure Statement") in form and substance reasonably
satisfactory to the ad hoc Committee;
c. to use its reasonable best efforts to solicit the requisite votes in favor of, and to
obtain confirmation by the Bankruptcy Court at the earliest practicable date of, the PGS
Plan consistent with the Term Sheet and otherwise in form and substance reasonably
satisfactory to the ad hoc Committee and approval by the Bankruptcy Court of the
settlements set forth in the Term Sheet;
d. subject to any requirements under Norwegian law, not to pursue, propose or
support, or encourage the pursuit, proposal or support of, any plan of reorganization for
PGS, or any PGS subsidiary or affiliate, that is not consistent with the Term Sheet and the
PGS Plan (for the avoidance of doubt, nothing in this Agreement shall in any way limit or
restrict PGS from filing a Norwegian composition proceeding);
e. to otherwise use its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things, necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the transactions
contemplated by the Term Sheet and by the PGS Plan at the earliest practicable date
(including opposing any appeal of the order confirming the PGS Plan);
f. to convene one or more general meetings of shareholders of PGS, either by
annual general meeting or at an extraordinary general meeting, and propose and
recommend the shareholder resolutions necessary to implement the Restructuring,
including, but not limited to a resolution to decrease and/or increase, as appropriate, the
share capital of PGS, a resolution to issue the new ordinary shares, a resolution to amend
the articles of association of PGS, a resolution to change the composition of the board of
directors of PGS and such other resolutions as may be reasonably required to implement
the Term Sheet;
g. support and otherwise use their reasonable best efforts to have the ad hoc
Committee recognized and appointed by the United States Trustee for the Southern
District of New York (the "US Trustee") as the Creditors' Committee in the Chapter 11
Case pursuant to 11 U.S.C. 1102(b); and
h. to pay, or procure the payment of, before the filing of the Chapter 11 Case, all
reasonable prepetition fees and expenses of PGS, the Supporting Third Parties and the
Indenture Trustee for the Noteholders and the Indenture Trustee for the TPrS
(collectively, the "Indenture Trustees") relating to the Restructuring, and of their legal
and financial advisors relating to the Restructuring, outstanding at the time of such filing
C'fDOCS 1548687.7
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and to undertake in the PGS Plan to pay, or procure the payment of, all reasonable
postpetition fees and expenses of PGS, the Supporting Third Parties and the Indenture
Trustees in the Chapter 11 Case, and of their legal and financial advisors in the Chapter
11 Case, upon the consummation of the PGS Plan;
in all events, expressly subject to the exercise by PGS and its officers and directors of their
respective fiduciary duties. Except with respect to the payment of prepetition fees set forth in
paragraph 3.h., the commitment set forth in 3.a. is a condition precedent to each and every other
commitment set forth in this paragraph 3.
4. Supporting Third Parties' Claims and Support. Each Supporting Noteholder
represents and warrants, on a several but not joint basis, that, as of the date hereof, it is the legal
or beneficial holder of, or holder of investment authority over, the Notes identified on its
signature page hereto (collectively, such Supporting Noteholder's "Relevant Notes") and has or
will have the authority to vote or direct the voting of claims relating to the Relevant Notes. Each
Supporting TPrS represents and warrants, on a several but not joint basis, that, as of the date
hereof, it is the legal or beneficial holder of, or holder of investment authority over, the Trust
Preferred Securities identified on its signature page hereto (collectively, such Supporting TPrS'
"Relevant Trust Preferred Securities") and has or will have the authority to vote or direct the
voting of claims relating to the Relevant Trust Preferred Securities. Each Supporting Bank
represents and warrants, on a several but not joint basis, that, as of the date hereof, it is the legal
or beneficial holder of claims pursuant to the Bank Facilities identified on its signature page
hereto (collectively, such Supporting Bank's "Relevant Debt") and has or will have the
authority to vote or direct the voting of claims relating to the Relevant Debt. Each Supporting
Shareholder represents and warrants, on a several but not joint basis, that, as of the date hereof, it
is the legal or beneficial holder of the number of shares of PGS identified on its signature page
hereto (collectively, such Supporting Shareholder's "Relevant Shares"; all Supporting Third
Parties' Relevant Notes, Relevant Trust Preferred Securities, Relevant Debt and Relevant Shares,
collectively, the "Relevant Interests")) and has or will have the authority to vote or direct the
voting of Relevant Shares. Each Supporting Third Party believes that consummation ofthe PGS
Plan consistent with the Term Sheet is in its best interests. Accordingly, each Supporting Third
Party will support the PGS Plan consistent with the terms and conditions of this Agreement
(including, without limitation, those contained in paragraph 8 relating to the Backstop
Agreement (as defined in paragraph 8 below)). Without limiting the foregoing, each Supporting
Third Party commits to, for so long as this Agreement remains in effect:
a. support the PGS Plan and use its reasonable best efforts to facilitate the filing
and confirmation of the PGS Plan at the earliest practicable date;
b. not pursue, propose, support, vote to accept or encourage the pursuit, proposal
or support of, any chapter 11 plan, or other restructuring or reorganization for PGS, or
any PGS subsidiary or affiliate, directly or indirectly in any jurisdiction, that is not
consistent with the Term Sheet and the PGS Plan;
CTDOCS: I 548687.7
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c. not, nor encourage any other person or entity, to interfere with, delay, impede,
appeal or take any other negative action, directly or indirectly, in any respect regarding
acceptance or implementation of the PGS Plan;
d. not commence any proceeding (including any bankruptcy (konkurs) under
Norwegian law), or prosecute any objection to oppose or object to the PGS Plan or to the
Disclosure Statement, and not to take any action that would delay approval or
confirmation, as applicable, of the Disclosure Statement and the PGS Plan; provided,
however, that the Supporting Third Party may object to the disclosure statement solely on
the basis that it does not contain adequate information as required by section 1125 of the
Bankruptcy Code;
e. support and use its reasonable best efforts to have the ad hoc Committee
recognized and appointed by the US Trustee as the Creditors' Committee in the Chapter
11 Case pursuant to 11 U.S.C. 1102(b);
f. only in the case of the Supporting Banks and any Supporting Noteholders who
are lenders under the Bank Facilities, to agree to abstain from exercising any rights in any
jurisdiction to enforce any default under the Bank Facilities that may have matured, to
abstain from directing or voting to direct the agent(s) under the Bank Facilities from
exercising any such rights, to direct the agent(s) under the Bank Facilities to not permit
the exercise of any such rights, and to vote in the consortium against any proposal to take
any enforcement action;
g. only in the case of the Supporting Shareholders, to vote in favor of any
resolutions put forward in a general meeting of shareholders of PGS, as required pursuant
to paragraph 3.f., relating to the implementation of the Restructuring;
h. to the extent it is the holder of one or more 8.28% First Preferred Mortgage
Notes Due 20 II issued pursuant to that certain Indenture, dated as of May 1, 1996, as
amended, among Oslo Seismic Services, Inc., Oslo Explorer PLC, Oslo Challenger PLC,
PGS and United States Trust Company of New York, as indenture trustee (the "Oslo
Seismic Notes"), (i) shall not take any action, or direct the indenture trustee thereof to
take any action, contrary to those actions set forth above in this paragraph 4; and (ii) shall
not transfer its holdings of the Oslo Seismic Notes unless the transferee agrees to be
bound by this Agreement;
i. in the event PGS files for a forced composition (tvangsakkord) under
Norwegian law, to vote in favor of solutions proposed by PGS to successfully conclude
such proceedings under Norwegian law, provided that such solutions reasonably comply
with the commercial terms of this Agreement and are recommended by the ad hoc
Committee;
J. to support consummation of the Backstop Agreement; and
k. with respect to and to the extent it is the legal or beneficial holder of, or holder
of investment authority over any claims against or interests in PGS, or any of its
CTDOCS 1548687.7
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affiliates, support the PGS Plan and not take any action inconsistent with the purposes of
this Agreement;
in each case consistent with the terms and provisions of the Term Sheet and this Agreement;
provided, however, that notwithstanding anything herein to the contrary, if any Supporting
Creditor is appointed to and serves on the Creditors' Committee, the terms of this Agreement
shall not be construed to limit such Supporting Creditor's exercise of its fiduciary duties in its
role as a member of the Creditors' Committee, and any exercise of such fiduciary duties shall not
be deemed to constitute a breach of the terms of this Agreement.
5. Acknowledgement.
a. No Solicitation. While the Supporting Third Parties commit herein to support
the PGS Plan and it is their intention to vote in favor of the PGS Plan, this Agreement is
not and shall not be deemed to be a solicitation for consent to the PGS Plan. The
acceptance of the Supporting Third Parties will not be solicited until the Supporting Third
Parties have received the Disclosure Statement and the related ballots in forms approved
by the Bankruptcy Court. The foregoing shall in no way limit any Party's rights under
paragraph 19.
b. No Norwegian Filing. Each Supporting Third Party hereby acknowledges that
PGS intends to file the Chapter 11 Case without concurrently filing for (a) voluntary
composition (gjeldsforhandlinger), (b) forced composition (tvangsakkord) or (c)
bankruptcy (konkurs) under Norwegian Jaw (each of (a), (b) and (c) being a "Norwegian
Filing") and accordingly each Supporting Third Party agrees that: (i) PGS does so with
its consent (and this Agreement shall be evidence of such consent for the purposes of
section 283a, first paragraph, item (2), of the Criminal Act (Straffeloven) of May 22,
1902 of the Kingdom of Norway); and (ii) it will not seek to hold the directors or officers
of PGS personally liable (whether under the Public Limited Companies Act of 1997 of
the Kingdom of Norway or otherwise) for any loss that it, or any other creditor of PGS,
may suffer as a result of PGS so filing the Chapter 11 Case and thereafter pursuing
confirmation and consummation of the PGS Plan without concurrently making a
Norwegian Filing and/or as a result of the confirmation and consummation of the PGS
Plan (or assist any other creditor of PGS to do the same) and/or for not making a
Norwegian Filing as of the date hereof or during the period this Agreement is effective
and/or for making a Norwegian Filing during the effective period of this Agreement.
PGS agrees to indemnify and hold harmless each Supporting Third Party, and their
respective affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact
(each an "Indemnified Person") from and against any and all liabilities, obligations,
losses, damages, penalties, claims, demands, actions, judgments, suits, costs, charges,
expenses and disbursements (including any reasonable attorney's fees and expenses) of
any kind or nature whatsoever that may at any time be imposed on, incurred by or
asserted against any such Indemnified Person in any way relating to or arising out of or in
connection with any acknowledgment or consent provided in this paragraph 5.b.
CTDOCS:1548687.7
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c. Full Satisfaction of Claims. Each Supporting Third Party acknowledges and
agrees that, upon consummation of the PGS Plan and subject to the terms of the PGS
Plan, the distributions to and treatment of each such Supporting Third Party under the
PGS Plan shall be in full and complete satisfaction of any and all rights that it may have
in respect of its Relevant Interest and PGS shall be released and discharged from any and
all further obligations in respect of such Relevant Interests.
d. Norwegian Filing. Subject to the provisions of paragraph 1 O.f. of this
Agreement, the Parties acknowledge and agree that if, in the opinion of PGS, a forced
composition filing (tvangsakkord) under Norwegian law is required or appropriate (such
filing events may include, without limitation, situations where (i) the implementation of
the Restructuring under Chapter 11 is not feasible or possible, (ii) PGS is under an
obligation under Norwegian law to file for such a composition, (iii) such a composition
filing may serve as a defense against a hostile creditor action against PGS in Norway or
elsewhere, and (iv) the implementation of the Restructuring through Chapter 11 would be
better accomplished with a simultaneous or subsequent such composition filing), then (1)
the Parties will cooperate for such a filing to take place to implement the terms of this
Agreement, as far as applicable and possible, and (2) PGS will notify the ad hoc
Committee three business days in advance of such a composition filing, unless such
notification is impossible or otherwise would be unreasonable under the circumstances.
Nothing in this Agreement shall limit or restrict PGS from filing for forced composition
(tvangsakkord) under Norwegian law.
6. Limitations on Tramfer. Each Supporting Third Party hereby agrees not to (a) sell,
transfer, assign, pledge, or otherwise dispose, directly or indirectly their right, title or interest in
respect of the Relevant Interests, in whole or in part, or any interest therein (collectively, the
"Relevant Claims"), or (b) grant any proxies, deposit any of its claims into a voting trust, or
enter into a voting agreement with respect to any such Relevant Claim (clauses (a) and (b),
collectively, a "Transfer") unless the recipient of such Relevant Claim (a "Transferee") agrees
in writing (such writing, a "Transferee Acknowledgment"), prior to such Transfer, to be bound
by this Agreement in its entirety without revisions (including with respect to any and all claims
or interests it already may hold against or in PGS prior to such Transfer) and to be bound by that
certain side letter dated the date hereof among the parties hereto. Upon the execution of the
Transferee Acknowledgment, the Transferee shall be deemed to constitute a Supporting
Noteholder, a Supporting TPrS, a Supporting Bank, or a Supporting Shareholder, as the case may
be. Any Transfer that does not comply with this paragraph shall be void ab initio. In the event
of a Transfer, the transferor shall, within three business days, provide written notice of such
transfer to PGS, together with a copy of the Transferee Acknowledgment. No Supporting Bank,
Supporting TPrS, Supporting Noteholder or Supporting Shareholder may create any subsidiary
or affiliate for the sole purpose of acquiring any Bank Facilities, Trust Preferred Securities,
Notes, or Shares without first causing such subsidiary or affiliate to become a party hereto, and a
party to that certain side letter referred to in the first sentence ofthis paragraph 6, as a Supporting
Bank, Supporting TPrS, Supporting Noteholder or a Supporting Shareholder, as the case may be.
7. Further Acquisition of Notes, Trust Preferred Securities, Shares and Bank Facilities.
This Agreement shall in no way be construed to preclude any Supporting Third Party from
CTDOCS 1548687 7
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acquiring additional Notes, Trust Preferred Securities, Shares or claims in respect of the Bank
Facilities. However, any such Notes, Trust Preferred Securities, Shares and claims so acquired
shall, whether or not the Supporting Third Party holds any Relevant Interests at the time of the
acquisition, automatically be deemed to be "Relevant Interests" and to be subject to all of the
terms of this Agreement hereof.
8. Backstop Agreement. The Parties acknowledge and agree that the agreement, the
terms of which are to be negotiated and agreed with the Supporting Shareholders, governing the
terms of the participation by the Supporting Shareholders in the backstop of the equity purchase
as contemplated by Section D ofthe Term Sheet (the "Backstop Agreement") shall include the
following provisions: (i) each Supporting Shareholder shall purchase a number of ordinary
shares of PGS as reorganized under the PGS Plan (the "New Shares") equivalent to at least 25%
of its commitment, with the total commitment of the Supporting Shareholders aggregating 30%
of the New Shares (the "Committed Shares"); (ii) all holders of Shares (including Supporting
Shareholders) shall have the right to purchase a number of New Shares equaling its pro rata
interest of the remaining 75% ofthe Committed Shares (after giving effect to paragraph 8.i., such
pro rata interest to be calculated as the quotient of the number of Shares held by the holder on a
cut-off date (the "Cut-off Date") to be determined and the total number of Shares issued and
outstanding on the Cut-off Date; (iii) any Committed Shares not purchased in accordance with
paragraph 8.ii. by holders of Shares other than the Supporting Shareholders shall be purchased
by the Supporting Shareholders; (iv) any acceptances of the offered New Shares without
payment (or proper payment arrangements) at the time of acceptance shall be rejected; (v) the
right to purchase Committed Shares shall not be transferable, the purchase right can only be
exercised for the number of Committed Shares calculated under paragraph 8.ii, and no over-
subscription of New Shares shall be allowed; (v) the rights offering shall be communicated (to
the extent permitted and by and in the manner required in the relevant jurisdiction(s)) to all
holders of Shares as of the Cut-off Date, with the notice specifying the period the rights offering
shall be held open and that payment shall be required to be made at the time such holder
exercises its right of acceptance.
9. Condition to each Party's Obligations. Each Party's obligations under this
Agreement are subject to the execution of this Agreement by each of the following persons:
CTDOCS 1548687.7
(i) PGS;
(ii) the Supporting Noteholders who shall represent not less than 56%
in principal amount outstanding ofthe Notes;
(iii) the Supporting TPrS;
(iv) the Supporting Shareholders; and
(v) the Supporting Banks, (a) who shall include (I) all of the members
of the steering committee of the Bank Facilities, and (2) each of
the Supporting Noteholders that also hold positions in the Bank
Facilities, and (b) who shall represent not less than 50% in
principal amount outstanding under each of the Bank Facilities.
8
l 0. Termination Events. The occurrence of each of the following events shall constitute a
''Termination Event":
a. PGS' Chapter 11 Case (other than an involuntary bankruptcy case for which
an order for relief has not been entered) shall have been dismissed or converted to a case
under chapter 7 of the Bankruptcy Code;
b. on or prior to the date of the commencement of the Chapter 11 Case, the
Backstop Agreement has not been executed in form and substance satisfactory to PGS
and the ad hoc Committee;
c. any court (including the Bankruptcy Court or any court in any jurisdiction
outside of the United States of America) shall declare, in a final, non-appealable, order,
this Agreement to be unenforceable;
d. the most current PGS Plan and the Disclosure Statement on file with the
Bankruptcy Court (and any amendments, supplements and documents related to such
pleadings) shall not be consistent with the Term Sheet or otherwise in form and substance
reasonably satisfactory to both a simple majority in number of the Supporting
Noteholders that are members of the ad hoc Committee and at least one Supporting Bank
that is a member of the ad hoc Committee (such a Supporting Bank and each such
Supporting Noteholder, from time to time, collectively, the "Special ad hoc Committee
Members"), ;
e. the earlier of (i) January 9, 2004, or such later date as contemplated by
paragraph ll.a. and (ii) the date of consummation of the PGS Plan;
f. any insolvency related proceedings with respect to PGS, or any of its
subsidiaries or affiliates, are filed by or assented to by PGS or any of its subsidiaries or
affiliates in any jurisdiction other than the Bankruptcy Court without the express written
consent of the ad hoc Committee;
g. the failure by PGS to obtain the reqms1te shareholder votes necessary to
implement the Restructuring as contemplated in the Term Sheet and the PGS Plan;
h. [intentionally omitted}
i. Umoe Invest AS, as a Supporting Shareholder, holds fewer Shares than the
amount set forth on its signature page attached hereto and made a part hereof; and
j. unless waived in writing by the Required Parties (defined below), any
representation or warranty of any Party made or deemed made herein is incorrect in any
material respect on or as of the date made or deemed made and such default (unless it is a
willful misrepresentation) shall continue unremedied for a period of thirty (30) days after
the earlier of (i) the date upon which the relevant Party knew of such failure or (ii) the
date upon which written notice thereof is given by any Party to the other Parties hereto.
croocs 1548687 7
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11. Termination of this Agreement. Upon the occurrence of a Termination Event, this
Agreement shall terminate as follows:
a. immediately upon the occurrence of the Termination Event set forth in
paragraph 1 0 .e. unless, prior to the expiration of the date referenced therein, such date is
extended in writing by each of (i) PGS, (ii) the Special ad hoc Committee Members, and
(iv) the holders of a simple majority in number of the Relevant Shares (the "Required
Shareholders," collectively, with PGS and the Special ad hoc Committee Members, the
"Required Parties");
b. upon the occurrence, and following written notice by either PGS or the
Special ad hoc Committee Members of such occurrence, of any of the Termination
Events set forth in paragraphs JO.a., IO.b., IO.c., IO.d., IO.f., 10.i., or 10.j. of this
Agreement (provided that (i) a breaching party shall not be entitled to terminate this
Agreement on account of its own breach of paragraphs 1 O.i. and 1 O.j. of this Agreement,
and (ii) PGS shall be entitled to a 1 0-day grace period following receipt of a termination
notice pursuant to paragraphs 1 O.b. and 1 O.d. to cure any such alleged Termination
Event); or
c. 30 calendar days after the occurrence of the Termination Event described in
paragraph 1 O.g. of this Agreement, unless either (i) the occurrence of the event giving
rise to the Termination Event is no longer continuing on such 30
1
h day or (ii) the Special
ad hoc Committee Members shall have waived in writing such Termination Event.
12. Effect of Termination. Upon termination of this Agreement pursuant to paragraphs I 0
and II, all obligations hereunder shall terminate and shall be of no further force and effect;
provided however, that any claim for breach of this Agreement, other than a claim for breach of
the representation set out in paragraph 13.f., shall survive termination and all rights and remedies
with respect to such claims shall not be prejudiced in any way; but provided further, that the
breach of this Agreement by one or more Supporting Third Parties shall not create any rights or
remedies against any non-breaching Supporting Third Party unless such non-breaching
Supporting Third Party has participated in or aided and abetted the breach by the breaching
Supporting Third Party/Parties. Except as set forth above in this paragraph 12 and for the
obligations set forth in paragraphs S.b., S.c. (with respect to paragraph S.c. only, solely after the
consummaton of the PGS Plan and not a termination of this Agreement), and 14 hereof, upon
such termination or upon consummation of the PGS Plan, any obligations of the non-breaching
Parties set forth in this Agreement shall be null and void ab initio and all claims, causes of
action, remedies, defenses, setoffs, rights or other benefits of such non-breaching Parties shall be
fully preserved without any estoppel, evidentiary or other effect of any kind or nature
whatsoever.
13. Representations and Warranties. PGS and each Supporting Third Party, on a several
but not joint basis, represents and warrants to each other Party that the following statements are
true, correct and complete as of the date hereof and to the extent applicable to such party:
CTDOCS 1548687.7
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a. Corporate Power and Authority. If not a natural person, it is duly organized,
validly existing, and, if applicable, in good standing under the laws of the jurisdiction of
its organization, and has all requisite corporate, partnership or other power and authority
to enter into this Agreement and to carry out the transactions contemplated by, and
perform its respective obligations under, this Agreement.
b. Authorization. If not a natural person, the execution and delivery of this
Agreement and the performance of its obligations hereunder have been duly authorized
by all necessary corporate, partnership or other action on its part.
c. Binding Obligation. This Agreement has been duly executed and delivered by
it and constitutes its legal, valid and binding obligation, enforceable in accordance with
the terms hereof.
d. No Conflicts. The execution, delivery and performance by it (when such
performance is due) of this Agreement do not and shall not (i) violate any provision of
law, rule or regulation applicable to it, or, if applicable, any of its subsidiaries or its
certificate of incorporation or bylaws or other organizational documents or those of any
of its subsidiaries or (ii) except with respect to PGS, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any material
contractual obligation to which it or, if applicable, any of its subsidiaries is a party.
e. Adequate Information. Although none of the Parties intends that this
Agreement should constitute, and they each believe it does not constitute, a solicitation
and acceptance of the PGS Plan, they each acknowledge and agree that, regardless of
whether its Relevant Interests constitute "securities" within the meaning of the Securities
Act of 1933, (i) each of the Supporting Third Parties is an "accredited investor" as such
term is defined in Rule 50l(a) ofthe Securities Act of 1933 and, in the case of Supporting
Creditors, a "qualified institutional buyer" as such term is defined in Rule 144A of the
Securities Act of 1933 and (ii) adequate information was provided by PGS and its
affiliates to each Supporting Third Party in order to enable it to make an informed
decision such that, were this Agreement to be construed as or deemed to constitute such a
solicitation and acceptance, such solicitation was (i) in compliance with any applicable
nonbankruptcy law, rule, or regulation governing the adequacy of disclosure in
connection with such solicitation, or (ii) if there is not any such law, rule, or regulation,
solicited after disclosure to such holder of "adequate information" as such term is defined
in section ll25(a) ofthe Bankruptcy Code.
f. Accuracy of Information. Accuracy of Information Provided. PGS represents
that, to the best of their knowledge, after reasonable inquiry, (i) information provided to
the Supporting Creditors by PGS in connection with the Restructuring, including without
limitation, the Business Plan (defined below), does not contain any material misstatement
of fact, nor does it fail to state a fact necessary to make the information not materially
misleading and (ii) the statements made by PGS in the various representations set forth
herein are true and accurate.
CTDOCS.I548687.7
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g. Operation of Business Pending Chapter 11 Filing. PGS represents that
pending the Chapter II filing, PGS undertakes, to the extent within PGS' control and
except as otherwise agreed to by the ad hoc Committee, to operate the business of PGS
and its subsidiaries in material compliance with that certain business plan provided to the
Supporting Creditors dated on or about January I5, 2003 (the Business Plan"), except as
otherwise disclosed in the press release announcing this Agreement.
I4. Confidentiality. PGS and each Supporting Third Party agrees to use its reasonable
best efforts to maintain the confidentiality of (a) the individual identities of the Supporting Third
Parties and (b) the individual holdings of the Supporting Third Parties; provided, however, that
such information may be disclosed (i) to the Parties' respective directors, trustees, executives,
officers, auditors, and employees and financial and legal advisors or other agents (collectively
referred to herein as the "Representatives" and individually as a "Representative"), (ii) to
persons in response to, and to the extent required by, (x) any subpoena, or other legal process or
other disclosure required by law or (y) the National Association of Insurance Commissioners,
any bank regulatory agency or any other regulatory agency or authority. If any Party or its
Representative receives a subpoena or other legal process as referred to in clause (ii)(x) above in
connection with the Agreement, such Party shall provide the other Parties with prompt written
notice of any such request or requirement, to the fullest extent permissible and practicable under
the circumstances, so that the other Parties may seek a protective order or other appropriate
remedy or waiver of compliance with the provisions of this Agreement. Notwithstanding the
provisions in this paragraph I4, (i) PGS may disclose (a) the existence of and nature of support
evidenced by this Agreement in one or more public releases that have first been sent to counsel
for the Supporting Noteholders and counsel for the Supporting Banks for review and comment,
and (b) in the context of any such releases, the aggregate holdings of the Supporting Third
Parties (but, as indicated above, not their identities or their individual holdings), (ii) any Party
hereto may disclose the identities of the Parties hereto and their individual holdings in any action
to enforce this Agreement or in an action for damages as a result of any breaches hereof, (iii) any
Party hereto may disclose, to the extent consented to in writing by a Supporting Third Party, such
consenting Supporting Third Party's identity and individual holdings and (iv) to the extent
required by the Bankruptcy Code, Bankruptcy Rules, Local Rules of the Bankruptcy Court or
other applicable rules, regulations or procedures of the Bankruptcy Court or the Office of the
United States Trustee, PGS may disclose the individual identities ofthe Supporting Third Parties
in a writing that has first been sent to counsel for the Supporting Noteholders and counsel for the
Supporting Banks for review and comment on such notice that is reasonable under the
circumstances.
I5. Preparation of Restructuring Documents. Notwithstanding anything to the contrary
contained in this Agreement, including specifically any obligation of a Party to use efforts to
cause an event to occur by the "earliest practical date," the obligations of the Parties hereunder
shall be expressly subject to the preparation of definitive documents relating to the transactions
contemplated by this Agreement and the Term Sheet, including without limitation, (a) the PGS
Plan, the Disclosure Statement, the order confirming the PGS Plan, and any related ballots,
releases and settlement documents, (b) all other agreements, instruments, orders or other
documents necessary or appropriate to consummate the transactions contemplated by this
CTDOCS 1548687.7
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Agreement, the Term Sheet or the PGS Plan, and (c) any "first day" orders and motions; each of
the documents referred to in subparagraphs (a), (b) and (c) of this paragraph 15 must be
reasonably acceptable to the ad hoc Committee.
16. Amendment or Waiver. Except as otherwise specifically provided herein, this
Agreement may not be modified, amended or supplemented without the prior written consent of
the Required Parties. No waiver of any of the provisions of this Agreement shall be deemed or
constitute a waiver of any other provision of this Agreement, whether or not similar, nor shall
any waiver be deemed a continuing waiver.
17. Notices. Any notice required or desired to be served, given or delivered under this
Agreement shall be in writing, and shall be deemed to have been validly served, given or
delivered if provided by personal delivery, or upon receipt of fax delivery, as follows:
a. if to PGS, to Matthew A. Feldman, Willkie Farr & Gallagher, 787 Seventh
Avenue, New York, New York 10019, fax: 212-728-8111;
b. if to the Supporting Noteholders or the ad hoc Committee, to Anthony J.
Smits, Bingham McCutchen LLP, One State Street, Hartford, CT 06103, fax: 860-240-
2800;
c. if to the Supporting TPrS, to Stephanie Wickouski, Gardner Carton &
Douglas LLC, 1301 K St., NW, East Tower- 900, Washington DC 20005, fax: 202-230-
5361, and
d. if to the Supporting Banks, to David C. L. Frauman, Allen & Overy, One New
Change, London EC4M 9QQ, United Kingdom, fax: +44 (207) 330-9999; and
e. if to any Supporting Shareholder, to the name and address set forth on the
relevant signature page below for such Supporting Shareholder.
18. Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PROVISION WHICH
WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.
By its execution and delivery of this Agreement, each of the Parties hereto hereby irrevocably
and unconditionally agrees for itself that any legal action, suit or proceeding against it with
respect to any matter under or arising out of or in connection with this Agreement or for
recognition or enforcement of any judgment rendered in any such action, suit or proceeding, may
be brought in the United States District Court for the Southern District of New York. By
execution and delivery of this Agreement, each of the Parties hereto irrevocably accepts and
submits itself to the nonexclusive jurisdiction of each such court, generally and unconditionally,
with respect to any such action, suit or proceeding, and waives any objection it may have to
venue or the convenience of the forum. Notwithstanding the foregoing consent to New York
jurisdiction, upon the commencement of the Chapter 11 Case, each of the Parties hereto hereby
CTDOCS 1548687.7
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agrees that the Bankruptcy Court shall have exclusive jurisdiction of all matters arising out of or
in connection with this Agreement.
19. Specific Performance. This Agreement, including without limitation the Parties'
agreement herein to support the PGS Plan and to facilitate its confirmation, is intended as a
binding commitment enforceable in accordance with its terms. It is understood and agreed by
each of the Parties hereto that money damages would not be a sufficient remedy for any breach
of this Agreement by any Party and each non-breaching Party shall be entitled to specific
performance and injunctive or other equitable relief as a remedy of any such breach.
20. Cooperation. Each Party shall cooperate with the other Parties to do or cause to be
done all things as may be reasonably necessary or desirable to confirm and carry out and to
effectuate fully the intent and purpose of this Agreement and shall not take any action contrary to
the essential intent and principles of this Agreement.
21. Resignation or Removal of ad hoc Committee Members/Substitution of the Creditors'
Committee. If a Supporting Bank or a Supporting Noteholder or either of the Trustees, as the
case may be, that is a member of the ad hoc Committee resigns or for any other reason is
removed as a member of such Committee, the remaining Supporting Noteholders (in the case of
resignation or removal of a Supporting Noteholder or any of the Trustees) or the remaining
Supporting Banks (in the case of resignation or removal of a Supporting Bank) on the ad hoc
Committee shall be entitled to select a replacement for such resigning member, provided such
replacement agrees to be bound by the terms of this Agreement. At any time following the
formation of the Creditors' Committee, upon the agreement in writing by the Creditors'
Committee to be bound by this Agreement and on written notice to PGS, the ad hoc Committee
may elect to have the Creditors' Committee substituted in place ofthe ad hoc Committee in this
Agreement and whereafter the Creditors' Committee shall automatically have all the rights and
obligations of the ad hoc Committee pursuant to this Agreement. Following any such election,
the ad hoc Committee shall be deemed dissolved and the Creditors' Committee shall send notice
of such dissolution to PGS.
22. Voting. Except as otherwise expressly provided herein, all votes of the ad hoc
Committee or the Creditors' Committee (following substitution pursuant to paragraph 21 above)
under this Agreement shall be made by a simple majority vote of all of the members of the ad
hoc Committee or Creditors' Committee at the time, as the case may be, unless the context
clearly indicates otherwise.
23. Headings. The headings of the sections, paragraphs and subsections of this
24. Interpretation. This Agreement is the product of negotiations of the Parties, and in
the enforcement or interpretation hereof, is to be interpreted in a neutral manner, and any
presumption with regard to interpretation for or against any Party by reason of that Party having
drafted or caused to be drafted this Agreement, or any portion hereof, shall not be effective in
regard to the interpretation hereof.
CTDOCS 1548687. 7
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25. Successors and Assigns. This Agreement is intended to bind and inure to the benefit
of the Parties and their respective successors, assigns (including, but not limited to, Transferees
under paragraph 6 above), heirs, executors, administrators and representatives.
26. No Third-Party Beneficiaries. Unless expressly stated herein, this Agreement shall
be solely for the benefit of the Parties hereto and no other person or entity shall be a third-party
beneficiary hereof.
27. No Waiver of Participation and Reservation of Rights. Except as expressly provided
in this Agreement and in any amendment among the Parties, nothing herein is intended to, or
does, in any manner waive, limit, impair or restrict the ability of each of the Parties to protect
and preserve its rights, remedies and interests, including without limitation, its claims against any
of the other Parties (or their respective affiliates or subsidiaries) or its full participation in any
bankruptcy case filed by PGS or any of its affiliates and subsidiaries. If the transactions
contemplated by this Agreement or in the PGS Plan are not consummated, or if this Agreement
is terminated for any reason, the Parties fully reserve any and all of their rights.
28. No Admissions. This Agreement shall in no event be construed as or be deemed to be
evidence of an admission or concession on the part of any Party of any claim or fault or liability
or damages whatsoever. Each of the Parties denies any and all wrongdoing or liability of any
kind and does not concede any infirmity in the claims or defenses which it has asserted or could
assert.
29. Counterparts. This Agreement may be executed in one or more counterparts, each of
Delivery of an executed signature page of this Agreement by facsimile shall be effective as
delivery of a manually executed signature page of this Agreement.
30. Representation by Counsel. Each Party acknowledges that it has been represented by,
or provided a reasonable period of time to obtain access to and advice by, counsel with this
Agreement and the transactions contemplated herein. Accordingly, any rule of law or any legal
decision that would provide any Party with a defense to the enforcement of the terms of this
Agreement against such Party based upon lack of legal counsel shall have no application and is
expressly waived.
31. Entire Agreement. This Agreement and the exhibits and schedules hereto, including,
without limitation, the Term Sheet, constitute the entire agreement between the Parties and
supersedes all prior and contemporaneous agreements, representations, warranties and
understandings of the Parties, whether oral, written or implied, as to the subject matter hereof.
32. Several not Joint. The agreements, representations and obligations of the Parties
under this Agreement are, in all respects, several and not joint
32. Tax Shelter Regulations. Notwithstanding anything herein to the contrary, any Party
to this Agreement (and any employee, representative, or other agent of any Party to this
Agreement) may disclose to any and all persons, without limitation of any kind, the tax treatment
and tax structure of the transactions contemplated by the Term Sheet or the PGS Plan and all
CTDOCS I 548687.7
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materials of any kind (including opinions or other tax analyses) that are provided to it relating to
such tax treatment and tax structure; provided, however, that no Party (nor any employee,
representative or other agent thereof) shall disclose (A) any information that is not relevant to an
understanding of the tax treatment of the transactions contemplated by the Term Sheet or the
PGS Plan, including the identity of any Party to this Agreement (or its employees,
representatives or agents) or other information that could lead any person to determine such
identity or (B) any information to the extent such disclosure could result in a violation of any
federal or state securities laws.
[Remainder of page intentionally blank; remaining pages are signature pages.]
CTDOCS 1548687.7
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IN WITNESS WHEREOF, the undersigned have each caused this Agreement to be
duly executed and delivered by their respective, duly authorized officers as of the date first above
written.
PETROLEUM GEO-SERVICES ASA
By: __________________________________ __
Name:
Title:
CTDOCS.1548687.7
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Issuance
6.250% Series A & B
Senior Notes
7.5% Senior Notes
6.625% Senior Notes
7.125% Senior Notes
8.15% Senior Notes
CTDOCS 1548687.7
Issue Amount
$250 million
$360 million
$200 million
$450 million
$200 million
Schedule 2-A
Notes
Indenture Date
April I, 1998
March 21 , 1997
April 1, 1998
April 1, 1998
April 1, 1998
Maturitv
November 19, 2003
March 31, 2007
March 30, 2008
March 30, 2028
July 15, 2029
Schedule 2-B
Trust Preferred Securities Related Documents
Aereement
$148.169M Junior Subordinated
Indenture
Preferred Securities Guarantee
Agreement
Credit A!!reement
$430M Revolving Credit Facility
$250M Bridge Facility
C'l'DOCS I 548687 7
Descriotion
Dated as of June 22, 1999 (as the same may have been
amended, supplemented or restated from time to time)
among PGS, as issuer, Manufacturers And Traders Trust
Company, as successor trustee, and PGS Trust I, as
noteholder (for benefit of holders ofholders ofTrust
Preferred Securities and common securities of PGS Trust
I) with a maturity date of June 30, 2039.
Dated as of June 22, 1999 (as the same may have been
amended, supplemented or restated from time to time)
executed by PGS, as guarantor, PGS Trust I, as issuer of
Trust Preferred Securities and common securities, PGS
Exploration (US) Inc., as holder of common securities of
PGS Trust I and the holders ofthe Trust Preferred
securities as beneficiaries.
Schedule 2-C
Bank Facilities
Descriotion
Revolving Credit Facility dated as of September 24, 1998
(as the same may have been amended, supplemented or
restated from time to time) among PGS, the financial
institutions party thereto, JP Morgan Europe Limited, as
administrative agent, with a maturity date of September
4, 2003.
$250 Amended and Restated Credit Facility dated as of
May 16, 2002 (as the same may have been amended,
supplemented or restated from time to time) among PGS,
the lenders party thereto and The Bank of Nova Scotia, as
administrative agent with a maturity date of June 16,
2003.
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In re Dana Corporation, Case No. 06-10354 (Bankr. S.D.N.Y. 2006).
THIS AGREEMENT IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR
A SOLICITATION OF ACCEPTANCES OF A CHAPTER 11 PLAN. SUCH OFFER OR
SOLICITATION ONLY WILL BE MADE IN COMPLIANCE WITH ALL
APPLICABLE SECURITIES LAWS AND/OR PROVISIONS OF THE
BANKRUPTCY CODE.
by and among
DANA CORPORATION,
UNITED STEEL WORKERS,
INTERNATIONAL UNION, UAW
and
CENTERBRIDGE CAPITAL PARTNERS, L.P.
Dated as of July 5, 2007
NYI-39980 ISv II
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TABLE OF CONTENTS
Page
RECITALS .......................................................................................................................... 2
ARTICLE I OVERVIEW OF CERTAIN DEFINED TERMS ........................................... 2
ARTICLE II OBLIGATIONS OF THE DEBTORS ............................................................. 4
ARTICLE III SUPPORT OBLIGATIONS OF THE USW, THE UA W AND
CENTERBRIDGE ........................................................................................... 5
ARTICLE IV PLAN FRAMEWORK .................................................................................... 6
ARTICLE V ADDITIONAL AGREEMENTS ..................................................................... 6
ARTICLE VI TERMINATION EVENTS ............................................................................. 6
ARTICLE VII GOVERNING LAW; JURISDICTION; VENUE ........................................... 7
ARTICLE VIII IMPLEMENTATION ...................................................................................... 7
ARTICLE IX GENERAL PROVISIONS .............................................................................. 7
EXHIBITS
Exhibit A: Plan Term Sheet
Exhibit B: New Investment Term Sheet
- 1 -
NYI-39980 15v II
This Plan Support Agreement (this ''Agreement"), is entered into as of July 5, 2007, by
and among Dana Corporation ("Dana"), on behalf of itself and its subsidiaries operating as
debtors and debtors-in-possession (together with Dana, the ''Debtors") in the Chapter 11 Cases
(as defined below); the United Steelworkers (the "USW"); the International Union, UA W (the
"UA W''); and Centerbridge Capital Partners, L.P. on behalf of itself and its affiliates
("Centerbridge"). Each of the Debtors, the USW, the UA Wand Centerbridge is referred to
herein individually as a ''Party," and collectively, as the "Parties". As used herein, the words
"this Agreement", "hereto", "hereunder" and words of like import shall mean this Agreement.
RECITALS
A. On March 3, 2006, the Debtors commenced jointly administered chapter 11 cases
(together, the ''Chapter I I Cases") in the Bankruptcy Court (as defined below). The Debtors'
successful reorganization as a sustainable, viable business requires the simultaneous
implementation of several distinct restructuring initiatives and the cooperation of all the Debtors'
key business constituencies: customers, vendors, employees and retirees.
B. The USW and the UAW have retained Centerbridge as an advisor.
C. On February 1, 2007, the Debtors filed the Motion and Memorandum of Law of
Debtors and Debtors in Possession to Reject their Collective Bargaining Agreements and to
Modify their Retiree Benefits Pursuant to Sections 1113 and 1114 of the Bankruptcy Code (the
''I 113/1114 Litigation").
NYI-J99H(ll Svll
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D. In March and April 2007, the trial with respect to the 1113/1114 Litigation took
place before the Bankruptcy Court.
E. Since April2007, the Debtors, the USW, the UAW and Centerbridge have
engaged in discussions regarding a possible consensual resolution of(i) the 1113/1114 Litigation
and (ii) all other issues between the Debtors and each of the USW and the UA W related to the
Debtors' restructuring (the "Global Settlement"). The Global Settlement includes, among other
things, these Parties' respective views of certain of the terms for a chapter 11 plan for the
Debtors. The Global Settlement is conditioned upon the Debtors, the USW, the UA Wand
Centerbridge reaching agreement on all documents pertinent in any way to the Global
Settlement, including Centerbridge's participation in the Plan (as defined below) and/or all
transactions contemplated thereby.
F. As a consequence of the discussions mentioned above, this Agreement sets forth
the Parties' agreement with respect to their support of a plan of reorganization for the Debtors in
order to implement the Global Settlement (the "Plan"), including the Plan Term Sheet and the
entry into the Investment Agreement (as defined below) and the Union Settlement Agreements
(as defined below).
G. Centerbridge will make the New Investment (as defined below) on the terms and
on the conditions set forth in the New Investment Term Sheet (as defined below), which sets
forth the obligations of Centerbridge to make the New Investment in exchange for certain
Convertible Preferred Shares (as defined below) to be issued by Reorganized Dana under a
confirmed Plan.
H. Subject to the terms of this Agreement, the Parties have agreed to work together
to attempt to complete the negotiation of the terms of the Plan, as well as to resolve other
outstanding issues, and to formulate and facilitate confirmation and consummation of the Plan
and the transactions contemplated hereby; provided, however, that Dana will be the sole
proponent of the Plan.
I. In so agreeing, the Parties do not desire and do not intend in any way to avoid,
violate or diminish (i) the disclosure, solicitation and other requirements of applicable securities
and bankruptcy laws or (ii) the fiduciary duties of the Debtors or any such other Party having
such duties.
AGREEMENT
ARTICLE I
OVERVIEW OF CERTAIN DEFINED TERMS
1113/1114 Litigation Has the meaning set forth in Recital C hereof
Agreement Has the meaning set forth in the Preamble hereof
NYI-3'198015vll 2
Bankruptcy Code
Bankruptcy Court
Bankruptcy Rules
Centerbridge
Chapter 11 Cases
Confirmation Order
Convertible Preferred Shares
Debtors
Disclosure Statement
Disclosure Statement Order
Effective Date
Global Settlement
Investment Agreement
Motion
New Investment
New Investment Term Sheet
:--JYI-.llJ98015\ II
Means the Bankruptcy Reform Act of 1978, as amended, and
codified at title 11 of the United States Code and as applicable
to the Chapter II Cases
Means the United States Bankruptcy Court for the Southern
District of New York
Mean the Federal Rules ofBankruptcy Procedure
Has the meaning set forth in the Preamble hereof
Has the meaning set forth in Recital A hereof
Means the order of the Bankruptcy Court approving the
Debtors' Plan
Means, collectively, the Series A Preferred and the Series B
Preferred (both as defined in the New Investment Term Sheet)
Means a disclosure statement with respect to the Plan tiled by
the Debtors with the Bankruptcy Court
Means the order of the Bankruptcy Court approving the
Debtors' Disclosure Statement, which shall be in form and
substance reasonably acceptable to the USW, the UAW and
Centerbridge
Means a day, as determined by the Debtors and reasonably
acceptable to Centerbridge, that is the business day as soon as
reasonably practicable after all conditions to the effective date
set forth in the Plan have been met or waived
Has the meaning set forth in Recital E hereof
Means the agreement to be entered into by the Debtors and
Centerbridge, conforming to the New Investment Term Sheet
Has the meaning set forth in section 2.1 hereof
Means the proposed investment in the Reorganized Company
by Centerbridge and other potential investors
Means that certain Terms of Centerbridge Investment," that,
among other things. sets forth certain indicative terms for the
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Party or Parties
Plan Term Sheet
Reorganized Company
Reorganized Dana
Reorganized Debtors
Termination Event
Unions
Union Settlement Agreements
New Investment and that is attached hereto as Exhibit B and
incorporated herein by reference
Has the meaning set forth in Recital F hereof and shall be in
form and substance reasonably acceptable to the US W, the
UAW and Centerbridge
Means the term sheet entitled "Dana Corporation, et al.
Critical Elements to be Included in a Plan of Reorganization,"
which is attached hereto as Exhibit A and incorporated herein
by reference
Means the Reorganized Debtors and their nondebtor
subsidiaries
Means a corporation that shalt be the successor of Dana under
a confirmed Plan
Means the Debtors, or any successor thereto, on or after the
Effective Date of the Plan
Has the meaning set forth in section 6.1 hereof
Means the authorized representatives of the USW and UA W
Means the settlement agreements reached by and among the
Debtors and each of the Unions as of July 5, 2007
ARTICLE II
OBLIGATIONS OF THE DEBTORS
The Debtors presently believe that, subject to the exercise of their fiduciary duties as
debtors and debtors-in-possession (after consultation with outside legal and financial advisors),
prompt consummation of the Plan wilt facilitate the Debtors' reorganization and is in the best
interests of their creditors, shareholders and other parties-in-interest. Accordingly, the Debtors
hereby agree, subject to the exercise of their fiduciary duties as debtors and debtors-in-
possession (after consultation with outside legal and financial advisors), to use reasonable best
efforts to propose the Plan and prosecute confirmation and consummation thereof. Subject to the
foregoing, for as long as this Agreement remains in effect, the Debtors agree to:
NYI-39980 ISv II 4
2.1 Prepare and file with the Bankruptcy Court a motion (the "Motion") seeking an
order, which shall be in form and substance reasonably acceptable to the USW, the UA Wand
Centerbridge. from the Bankruptcy Court (i) approving and authorizing the Debtors to enter into
the Union Settlement Agreements, the Investment Agreement and this Agreement; (ii)
authorizing payment ofthe Expense Reimbursement, the Commitment Fee and the Break-up Fee
(as such terms are defined in the New Investment Term Sheet) on the terms and conditions set
forth in the Investment Agreement; and (iii) determining that the Parties' entry into, and
performance of, their obligations under the Union Settlement Agreements, the Investment
Agreement and this Agreement do not violate any law, including the Bankruptcy Code, and do
not give rise to any claim or remedy against the Parties; and
2.2 Engage in good faith negotiations with the other Parties and other parties in
interest regarding the Plan, Disclosure Statement and other definitive documents that are
consistent with this Agreement and that resolve all unresolved items reflected herein and/or are
necessary to the implementation of the transactions contemplated by this Agreement; including,
without limitation;
a. Using reasonable best efforts to negotiate with parties in interest and
thereafter file the Plan and the Disclosure Statement by September 3, 2007;
b. Use reasonable best efforts to obtain entry by the Bankruptcy Court of the
Confirmation Order on or before February 28, 2008; and
c. Use reasonable best efforts to negotiate the Investment Agreement with
Centerbridge in order to execute the Investment Agreement on or before July 19, 2007.
ARTICLE III
SUPPORT OBLIGATIONS OF THE USW, THE UA W
AND CENTERBRIDGE
Unless and until this Agreement has been terminated in accordance with its terms, each
of the USW, the UA Wand Centerbridge agrees (and shall cause its respective affiliates to agree)
that:
3.1 It will support prosecution, confirmation and consummation of the Plan including
without limitation, (i) the entry of the Disclosure Statement Order and (ii) the entry of the
Confirmation Order, despite objection or the rejection of the Plan (whether by vote or operation
of section 1126(g) of the Bankruptcy Code) by any impaired class; provided, however, that, for
the avoidance of doubt, nothing in this subsection is an agreement by any of the USW or the
UA W to vote to accept or reject the Plan.
3.2 It will not, nor will it encourage any other person or entity to, (i) object to, delay,
impede, appeaL or take any other action, directly or indirectly, to interfere with, the entry of the
Disclosure Statement Order; (ii) commence any proceeding or prosecute, join in, or otherwise
support any action to oppose or object to the Plan or Disclosure Statement; and (iii) delay, object
to, impede. appeaL or take any other action. directly or indirectly. to interfere with the
NY 1-39980 15v I I 5
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acceptance or confirmation of the Plan, the entry of the Confirmation Order or the occurrence of
the Effective Date.
3.3 It will engage in good faith negotiations with the other Parties and other parties in
interest regarding the Plan, Disclosure Statement and other definitive documents that are
consistent with this Agreement and/or are necessary to the implementation of the transactions
contemplated by this Agreement; including, without limitation, in the case of Centerbridge, use
reasonable best efforts to negotiate the Investment Agreement with the Debtors in order to
execute the Investment Agreement on or before July 19, 2007.
3.4 Centerbridge hereby acknowledges and agrees that it has completed such due
diligence review as is required in order to commit to the New Investment and that its obligations
hereunder are not subject to any due diligence condition. Without limiting the foregoing, the
Debtors will continue to provide Centerbridge with such information and access as it reasonably
requests.
ARTICLE IV
PLAN FRAMEWORK
4.1 The Plan will contain the terms set forth in the Plan Term Sheet and the New
Investment Term Sheet, both of which are attached as Exhibits hereto and are incorporated
herein by reference.
ARTICLE V
ADDITIONAL AGREEMENTS
The Parties acknowledge and agree that as a critical and integral part of the Global
Settlement, the following agreements must be executed and delivered:
5.1 The Debtors will execute and deliver the Union Settlement Agreements.
5.2 The USW and the UAW will execute and deliver their respective Union
Settlement Agreement in accordance with their respective constitutions; and
5.3 The Debtors and Centerbridge will execute and deliver the Investment
Agreement.
ARTICLE VI
TERMINATION EVENTS
6.1 The occurrence of any of the following shall be a "Termination Event":
a. The Investment Agreement has not been executed on or before July 19,
2007;
NYI-3998015vll 6
b. The termination of the Investment Agreement once executed;
c. The termination of any one of the Union Settlement Agreements;
d. The Plan fails to become etTective on or before May 1, 2008;
e.
be unenforceable;
Any court shall declare, in a final, non-appealable order, this Agreement to
f. The Debtors obtain approval of a disclosure statement other than the
Disclosure Statement; or
g. The Motion is denied by the Bankruptcy Court.
6.2 All obligations hereunder of all Parties shall terminate and shall be of no further
force and effect:
a. Automatically, and without written notice, upon the occurrence ofthe
Termination Events described in Subsections 6.l(b), (c), (e), (t) and (g) above;
b. Unless waived in writing by all Parties, upon written notice by one Party
upon the occurrence of the Termination Events described in Subsection 6.1(d) above;
c. Upon written notice ofCenterbridge or Dana to the other Parties, upon the
occurrence of the Termination Event described in Section 6.l(a); and
d. Automatically, and without written notice, immediately prior to the
issuance of the common stock and Convertible Preferred Shares contemplated by the Plan and
the Investment Agreement.
ARTICLE VII
GOVERNING LAW; JURISDICTION; VENUE
This Agreement shall be governed and construed in accordance with the internal laws of
the State of New York without regard to any conflict of law provision that could require the
application of the law of any other jurisdiction. By its execution and delivery of this Agreement,
each Party hereby irrevocably and unconditionally agrees that the Bankruptcy Court will retain
exclusive jurisdiction over all matters related to the construction, interpretation or enforcement
of this Agreement. Each Party further agrees to waive any objection based on forum non
conveniens. Each Party waives any right it may have to a trial by jury and consents to the
Bankruptcy Court hearing and determining any matters related to the construction, interpretation
or enforcement of this Agreement and the Investment Agreement without regard to whether such
matter is a core matter within the meaning of28 U.S.C. 157(b).
NYI-3998015vll 7
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ARTICLE VIII
IMPLEMENTATION
8.1 After execution ofthis Agreement by all Parties, the Debtors will file the Motion
with the Bankruptcy Court. The USW and the UA W will timely tile statements in support of the
Motion with the Bankruptcy Court.
8.2 The Parties agree to negotiate in good faith all of the documents and transactions
described in, or in connection with, this Agreement.
ARTICLE IX
GENERAL PROVISIONS
9.1 It is an express condition to the effectiveness of this Agreement that (a) the
Bankruptcy Court shall have entered an order approving the Motion and (b) the Union
Settlement Agreements shall have been executed by the Debtors, and the relevant Union
Settlement Agreement shall have been approved, executed and delivered by the USW or the
UA W, as applicable, in accordance with their respective constitutions.
9.2 Except as expressly provided in this Agreement, nothing contained herein (a) is
intended to, or does, in any manner waive, limit, impair or restrict the ability of each of the
Parties to protect and preserve its rights, remedies, and interests; (b) may be deemed an
admission of any kind; or (c) effects a modification of any existing agreement until such time as
the Bankruptcy Court may have approved such modification. If the transactions contemplated
herein are not consummated, or if this Agreement is terminated for any reason, the Parties fully
reserve any and all of their rights. Pursuant to Federal Rule of Evidence 408 and any applicable
state rules of evidence, this Agreement and all negotiations relating thereto are not admissible
into evidence in any proceeding other than a proceeding to enforce the terms of this Agreement.
9.3 Centerbridge shall promptly deliver to the Debtors, the USW and the UA W
written notice upon the termination of the Investment Agreement. The Debtors shall promptly
deliver to Centerbridge, the USW and the UAW written notice upon the termination of the
Investment Agreement.
9.4 The USW and/or the UA W shall deliver to the Debtors, the USW or the UA W (as
applicable) and Centerbridge written notice upon the termination of any one of the Union
Settlement Agreements as and when provided therein.
9.5 Each Party hereby acknowledges that this Agreement is not, and shall not be
deemed to be, a solicitation to accept or reject a plan or the Plan in contravention of
section 1125(b) of the Bankruptcy Code. Each Party further acknowledges that no securities of
any Debtor are being offered or sold hereby and that this Agreement does not constitute an offer
to sell or a solicitation of an otTer to buy any securities of any Debtor.
NYI399801Svll 8
9.6 Each Party, severally and not jointly, represents, covenants, warrants and agrees
to each other Party, only as to itself and not as to each ofthe others, that the following
statements, as applicable. are true, correct and complete as of the date hereof:
a. It has all requisite power and authority to enter into this Agreement and to
perform its obligations hereunder;
b. It is duly organized, validly existing, and in good standing under the laws
of its state of organization and it has the requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
c. The execution and delivery ofthis Agreement and the performance of its
obligations hereunder have been duly authorized by all necessary action on its part; provided,
however, that the Debtors' authority to enter into this Agreement is subject to Bankruptcy Court
approval;
d. This Agreement has been duly executed and delivered by it and constitutes
its legal, valid, and binding obligation, enforceable in accordance with the terms hereof, subject
to entry of the order approving the Motion;
e. The execution, delivery, and performance by it (when such performance is
due) of this Agreement do not and shall not (i) violate any provision of law, rule, or regulation
applicable to it or any of its affiliates or its certificate of incorporation or bylaws or other
organizational documents or those of any of its affiliates or (ii) conflict with, result in a breach
of, or constitute (with due notice or lapse of time or both) a default under any material
contractual obligation to which it or any of its affiliates is a party; and
f. There are no undisclosed agreements or commitments between or among
the Parties regarding matters subject to the terms of this Agreement.
9.7 Except as otherwise specifically provided herein, this Agreement may not be
modified, waived, amended or supplemented unless such modification, waiver, amendment or
supplement is in writing and has been signed by each Party. No waiver of any of the provisions
of this Agreement shall be deemed or constitute a waiver of any other provision of this
Agreement, whether or not similar, nor shall any waiver be deemed a continuing waiver.
9.8 This Agreement is intended to bind and inure to the benefit ofthe Parties and their
respective successors, assigns, heirs, executors, administrators, and representatives; provided,
however, that nothing contained in this subsection shall be deemed to permit sales, assignments,
delegations or transfers of this Agreement or any Party's rights or obligations hereunder.
9.9 Nothing contained in this Agreement is intended to confer any rights or remedies
under or by reason of this Agreement on any person or entity other than the Parties hereto, nor is
anything in this Agreement intended to relieve or discharge the obligation or liability of any third
party to any Party to this Agreement, nor shall any provision give any third party any right of
subrogation or action over or against any Party to this Agreement.
NYI-39980 15v II 9
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9.10 All notices and other communications in connection with this Agreement shall be
in writing and shall be deemed given (and shall be deemed to have been duly given upon receipt)
if delivered personally, sent via electronic facsimile (with confirmation), mailed by registered or
certified mail (return receipt requested) or delivered by an express courier (with confirmation) to
the Parties at the following addresses:
a. If to the Debtors, to:
NYI-399&0 15v II
Dana Corporation
4500 Dorr Street
Toledo, OH 43615
Facsimile: ( 419) 535-4 790
Attention: Marc S. Levin, Esq.
with a copy to:
Jones Day
222 East 41st Street
New York, NY 10017
Facsimile: (212) 755-7306
Attention: Corinne Ball, Esq.
Marilyn W. Sonnie, Esq.
10
b. If to the USW, to:
United Steelworkers
Five Gateway Center
Pittsburgh, PA 15222
Facsimile: ( 412) 562-2429
Attention: David R. Jury, Esq.
c. Ifto the UAW, to:
International Union, UA W
Solidarity House
8000 East Jefferson A venue
Detroit, MI 48214
Facsimile: (313) 926-5240
Attention: Niraj R. Ganatra, Esq.
d. If to Centerbridge, to:
Centerbridge Partners, L.P.
31 West 52nd Street, 16th Floor
New York, NY 10019
Facsimile: (212) 301-6501
Attention: Jeff Aronson
Brent Buckley
with a copy to:
Willkie Farr Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Facsimile: (212) 728-8111
Attention: Matthew A. Feldman, Esq.
Jetlrey R. Poss, Esq.
9.11 This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which shall constitute one and the same Agreement. Delivery
of an executed signature page of this Agreement by facsimile or electronic transmission shall be
effective as delivery of a manually executed signature page of this Agreement.
9.12 This Agreement constitutes the entire agreement among the Parties with respect to
the subject matter hereof and supersedes all prior agreements, whether oral or written, with
respect to such subject matter, provided, however, that upon execution of the Investment
Agreement by the parties thereto, the Investment Agreement will supercede the New Investment
Term Sheet. This Agreement is the product of negotiations among the Parties and represents the
Parties' intentions. In any action to enforce or interpret this Agreemt:nt, this Agret:mt:nt shall bt:
NYI-3998015vll 11
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construed in a neutral manner, and no term or provision of this Agreement. or this Agreement as
a whole, shall be construed more or less favorably to any Party.
9.13 The agreements, representations and obligations of the Parties under this
Agreement are, in all respects, several and not joint. Any breach of this Agreement by any Party
shall not result in liability for any other non-breaching Party.
[Remainder of page intentionally blank; remaining pages are signature pages.]
NYI-39980 l5v II 12
IN WITNESS WHEREOF, the undersigned have each caused this Agreement to be duly
executed and delivered by their respective, duly authorized representatives as of the date first
above written.
NY i-3908015v I 0
DANA CORPORATION

Name: M -rctftf G L ...t , 8 v ,e. ;..) $

UNITED STEELWORKERS
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
13
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IN WITNESS WHEREOF, the undersigned haw each caused this Agreement to be duly
executed and delivered by their respective, duly authorized representatives as of the date tirst
above \Hitten.
DANA CORPORATION
By:
Name:
Title:
UNITED STEEL WORKERS
By:
Name: \)t,v 1 c.* R
Title: t, .. "'-tA....Q
By:
Name:
Title:
By:
Name:
Title:
15v II 13
L
IN WITNESS WHEREOF, the undersigned have each caused this Agreement to be duly
above written.
DANA CORPORATION
By:
Name:
Title:
UNITED STEELWORKERS
By:
Name:
Title:
By:
Name:
Title:
NYI-399801 Svll 13
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IN WITNESS WHEREOF, the undersignt:d have each caused this Agreement to be duly
above written.
DANA CORPORATION
By:
Name:
Title:
UNITED STEEL WORKERS
By:
Name:
Title:
By:
Name:
Title:
'Yl-1')'!80 I'" I il 13
EXHIBIT A TO PLAN SUPPORT AGREEMENT
IN RE DANA CORPORATION, ET AL.
CRITICAL ELEMENTS TO BE INCLUDED IN A
PLAN OF REORGANIZATION
This Term Sheet summarizes certain of the principal terms and conditions of a
chapter 11 plan of reorganization (the "Plan") of Dana Corporation ("Dana") and its debtor
subsidiaries (each, a "Debtor'' and, collectively, the "Debtors") to be proposed by the Debtors in
the Debtors' chapter 11 cases pending in the United States Bankruptcy Court for the Southern
District ofNew York as an integral part of the resolution and settlement of(a) the proceedings
under 11 U.S.C. 1113 and 1114 between (i) the Debtors and, respectively, (ii) the United
Steelworkers ("USW") and (iii) the International Union, UAW ("UAW"); and (b) all other issues
among the Debtors and each of the USW and the UA W (the "Global Settlement").
This Term Sheet is attached as Exhibit A to a plan support agreement (the "PSA")
among (a) the Debtors, (b) the Unions (as defined below), (c) Centerbridge Capital Partners, L.P.
("Centerbridge"). In the PSA, the Unions agree to support, and will commit to not oppose, a
Plan that includes the terms and conditions set forth in this Term Sheet. Upon execution of the
PSA, this Term Sheet is intended to be binding on the signatories of the PSA in accordance with
the terms of the PSA, which will be subject to Bankruptcy Court approval. Notwithstanding the
foregoing, this Term Sheet remains subject to, among other things, (a) resolution of any terms or
items set forth herein that are bracketed or indicated as "to be determined;" (b) acceptable
definitive documentation of all matters contemplated herein, including the Plan and any
agreements specifically contemplated in this Term Sheet; and (c) the fiduciary duties of the
Debtors. No vote in favor of any Plan is being solicited by or agreed to by this Term Sheet.
Notwithstanding anything to the contrary set forth herein, this Term Sheet is
being provided as part of settlement discussions and, therefore, shall be treated as such
pursuant to Federal Rule of Evidence 408 and all bankruptcy and state law equivalents until
such time as it is final and fully executed.
Bondholders
NYI-3998024v<J
1. Certain Defined Terms
Means, collectively, the holders of: (i) the $150 million of 6.5%
unsecured notes due March 15, 2008; (ii) the $350 million of 6.5%
unsecured notes due on March I, 2009; (iii) the $250 million of
10.125% unsecured notes due on March 15, 2010; (iv) the $575
million of9.0% unsecured notes due August 15, 2011; (v) the 200
million of9% unsecured notes due August 15, 2011; (vi) the $450
million of 5.85% unsecured notes due on January 15, 20 15; (vii) the
$200 million of 7.0% unsecured notes due on March 15, 2028; and
(viii) the $400 million of7.0% unsecured notes due on March 1,
2029.
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Consolidated Debtors
DB Plan
DIP Facility
EtTective Date
Emergence Liquidity
Excess Distributable
Cash
Exit Facility
New Investment Term
Sheet
Non-Core Businesses
Reorganized Company
Reorganized Debtors
NYI-3998024v9
[To be defined]
Means a defined benefit pension plan covering employees that are
represented by the USW or the UAW.
Means the Debtors' existing debtor-in-possession credit facility,
subject to any amendment thereto.
Means a day, as determined by the Debtors and that is reasonably
acceptable to Centerbridge, that is the business day as soon as
reasonably practicable after all conditions to the EtTective Date in the
Plan have been met or waived.
Means, as of the Effective Date, the sum of (i) cash and cash
equivalents of the Debtors and their subsidiaries and (ii) unused
commitments under the Exit Facility after giving efTect to all cash
distributions to be made on the Effective Date pursuant to the Plan.
Means cash of the Reorganized Debtors in excess of the minimum casr
required to operate the business on the Effective Date and thereafter.
Means a senior secured financing facility to be entered into on the
Effective Date by and among the Reorganized Debtors and the lenders
party thereto, as determined prior to emergence through a competitive
financing process run by the Debtors' financial advisor and investment
banker, Miller Buckfire & Co., LLC, subject to the covenant set forth
below.
Means that certain "Term Sheet of Centerbridge Investment," which,
among other things, sets forth certain indicative terms for the proposed
investment in the Reorganized Company by Centerbridge and its
affiliates and other potential investors, which will be attached as
Exhibit B to the PSA.
Means those businesses to be specified by the Debtors and disclosed in
confidence to the Unions, the Creditors' Committee and Centerbridge.
The Company represents that it has previously identified to the Unions
those Non-Core Businesses that include UA W or USW represented
facilities. Subject to any prepayment requirements set forth in the DIP
Facility, proceeds from the sale ofNon-Core Businesses will be used t<
fund operations or distributions under the Plan.
Means the Reorganized Debtors and their nondebtor subsidiaries.
Means the Debtors, or any successor thereto, on or after the Effective
2
Union Consent
Unions
Date of the Plan.
Unless otherwise expressly agreed, ''Union Consent" shall mean the
agreement of the respective International President of the UAW or
US W (or any designee of such officer).
Means the authorized representatives of the USW and the UA W.
Union Settlement Means the settlement agreements reached by and among the Debtors
Agreements and each of the Unions as of July 5, 2007.
Unsecured Claims Means unsecured nonpriority claims other than (i) convenience class
claims, (ii) asbestos personal injury claims and (iii) any claims of the
non-union retirees represented by the Official Committee of Non-
Union Retirees.
Unsecured Creditors Means the holders of Unsecured Claims against the Consolidated
Debtors.
2. New Investment
New Investment On the Effective Date, there shall be an investment made in the
Reorganized Company as described in the New Investment Term Sheet.
Termination Events
Leverage
Limitation
Minimum
Emergence
Liguidity
Exit Facility
NY J-J998024v9
3. Termination Events
The New Investment Term Sheet and the Union Settlement Agreements
shall each contain certain specified termination events and remedies
therefor.
4. Certain Emergence Covenants and Other Terms
The total amount of funded debt at emergence shall not exceed $1.5
billion.
Upon emergence, the Reorganized Debtors' Minimum Emergence
Liquidity will be reasonably acceptable to the Unions and Centerbridge.
The Debtors shall obtain an Exit Facility upon emergence to, among other
things, refinance the DIP Facility, provide liquidity through short-term
borrowings for working capital and general corporate purposes, and
permit the issuance of letters of credit. The Exit Facility will be with
3
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1
Union Settlement
Agreement
Obligations
Treatment of
Unsecured
Creditors
Initial Management
Tax Attributes To
Be Preserved
No Sale of Core
Businesses Prior to
Emergence
Successorship and
Sales Post
Emergence
Outside Effective
Date
NYI-3998024v9
parties and on market terms reasonably acceptable to Centerbridge;
provided, that the Debtors shall have the obligation to consult with
Centerbridge regarding such terms and parties.
The Plan will conform to the Union Settlement Agreements in terms of
providing reasonable certainty, acceptable to the Debtors and the Unions,
as to the source and the amount of cash required to meet the Debtors' cash
payment obligations as set forth in the Union Settlement Agreements. The
Plan shall provide for the Unions' Claim as described in the Union
Settlement Agreements.
Unsecured Creditors will receive, on account of their allowed Unsecured
Claims, their pro rata portion of shares of common stock of the
Reorganized Company and/or Excess Distributable Cash if it is
determined that Excess Distributable Cash is available. Distributions to
the Unions shall be governed by the terms of the Union Settlement
Agreements.
The Plan shall contain a process whereby the individuals who are expected
to serve on the New Board shall negotiate, in consultation with
Centerbridge, employment agreements with the senior management team
which shall be market employment agreements in form and substance
reasonably acceptable to Centerbridge, which employment agreements
will be subject to approval by the Board of Directors of the Reorganized
Company on the Effective Date.
Unless otherwise agreed by the New Investor and Debtors, the
investments under the Plan, as well as any relevant Plan provisions, will
be structured so as to preserve the ability of the Debtors and the
Reorganized Debtors to qualify for tax benefits available under IRC
section 382(1)(5).
Except for the sale of the Non-Core Businesses and in addition to any
requirements, or consents required by the lenders, under the DIP Facility,
the Debtors will not sell any business line within the Automotive Systems
Group or the Commercial Vehicles Group prior to the Effective Date
without Union Consent or the consent of Centerbridge.
The Debtors will emerge from chapter 11 with their businesses other than
the Non-Core Businesses (the "Core Businesses") intact. Limitations on
the Reorganized Debtors' ability to sell, transfer or distribute substantially
all of the stock or assets of any of the Core Businesses shall be addressed,
if at all, in the Union Settlement Agreement and related individual
collective bargaining agreements.
The PSA and this Term Sheet shall expire and be of no further effect if the
Plan fails to become effective on or before May I, 2008 (the 'Outside
4
Union VEBAs
LTD Claims
Acceptance and
Rejection
Provisions
Cramdown
Defined Benefit
Pension Plans
Collective
Bargaining
Agreements
NYI-3998024v9
Effective Date").
The Plan will provide that consideration will be paid into separate, Union-
specific voluntary employees' benefit associations to be established
pursuant to the Union Settlement Agreements in the amount set forth
therein and that, upon such funding, the Debtors shall have no further
obligation (whether ongoing or by claims against their estates) for the
provision of non-pension benefits to UAW and USW retirees.
The claims, ifany, ofthe members ofthe UAW or the USW that are
receiving Long Term Disability shall be deemed settled (in accordance
with the applicable Union Settlement Agreement) and shall not be entitled
to vote to accept or reject the Plan due to the provisions for funding the
Union VEBAs on account of such claims set forth in the Union Settlement
Agreements.
Other than as set forth herein, the Plan will contain customary provisions
regarding the acceptance of the Plan by impaired and unimpaired classes
and the deemed rejection by certain classes.
To the extent that any impaired class rejects the Plan or is deemed to have
rejected the Plan, the Debtors reserve the right to seek, and the Unions and
Centerbridge agree to support, confirmation of the Plan under 11 U.S.C.
1129(b).
The Plan will not provide for or be conditioned upon the distress
termination of any DB Plan pursuant to section 4041 (c) of ERISA,
29 U.S.C. 1341(c), nor shall the Debtors (or any Plan sponsored by the
Debtors) seek a standard termination of any DB Plan. In addition, the
Debtors agree to oppose any involuntary termination sought pursuant to
Section 4042 of ERISA, 29 U.S.C. 1342 of any DB Plan.
The Plan will provide for the (i) assumption by the Debtors of the new
collective bargaining agreements to be entered by the Debtors and the
UAW or USW as contemplated by the Union Settlement Agreement at the
following bargaining units: (a) Fort Wayne, IN- Local Union 903;
(b) Henderson, KY- Local Union 9443-02; (c) Marion, IN- Local Union
113; (d) Auburn Hills, MI- UAW Local771; (e) Rochester Hills UAW
Local 771; (f) Longview, TX UAW Local [TBD]; (g) Lima, OH- UAW
Local 1765; (h) Elizabethtown, KY- UAW Local 3047; and
(i) Pottstown, PA- UA W Local 644; (ii) the assumption of the respective
Neutrality Agreements as contemplated by the Union Settlement
Agreements, and (iii) the assumption of any and all other related
agreements necessary to effect the Union Settlement Agreements.
5
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Takeover
Protections
New Board
NYI-3998024v9
The Reorganized Company will have a customary rights plan but will not
have a classified Board of Directors.
The Board of Directors of the Reorganized Company shall be as set forth
in the New Investment Term Sheet.
6
July 5, 2007
Dana Corporation
Exhibit B to Plan Support Agreement
Terms of Centerbridge Investment
Set forth below iJ a q/ certain indicali!te temJJfor the propo.red inPes/men/ (the "fm;e.rtment'')
Capital Par/nen, L P. and il.r tU/iliale.r and other potential inPe.rtor.r into Dana Corporation. Thi.r
Jtllnmary iJ a/lac/Jed a.r an exhibit to a Plan S"ppo11 /1greemen/ among Centerbridge, Dana Corporation ("Dana'')
and its -debtor a.ffiliate.r, the U,11V and US I/ (,ollectif;e(y, the 'lJJJitllJ.l') and the other partiu thereto (the "Plan
Support Agreement''). The ln/JeJtmen/ iJ contemplated lo be made upon the iffedil'e dale qf a cOI!firmed Plan q/
Reorgani::;_ation for Dana C01poration and it.r debtor cifjiliate.r under chapter 11 q/ tbe L'nited Stales Bankruptq
Code 1vit/; tbe e:>.:preJJ J'ttpport of Dana Corporation and i!Jjinandal and legal ad11i.rm:r.
The lemJS Jet folth below are intended to pro1;ide a framework for a proposed /raflJadion and do not
constitute a binding C{greemmt with resped to the Jped)i /ram-action .rtmdure contemplated herein extept aJ Jpedficai!J
.ret foltb in the Plan Support Agreement. term.r u.red herein but not .rba/1 batJe the meaning
aHigned to them in the Plan Support Agreement and exhibit.r thereto.
Definitions
NY J-4002826v 2
Alternative Investment shall mean any alternative investment to the
Investment, which provides for the sale of a minority equity interest in the
Company that would be an alternative to the Investment, the terms of
which the board of directors of Dana (the "Board"), after consultation
with its outside legal counsel and its independent fmancial advisor,
determines in good faith to be superior to the terms of the Investment,
taking into account all legal, fmancial, regulatory and other aspects of such
Alternative Investment, the likely time to consummation of the Alternative
Investment, the termination rights of the Unions set forth in the separate
agreements between the Debtor and the Unions and any amendments to
the Investment proposed by Centerbridge during the five business day
period after the Debtor gives Centerbridge notice and information
concerning the proposed Alternative Investment.
Alternati\e MaJority Investment shall mean any alternative investment to
the Investment, other than an Alternative Investment, \vhich provides for
the sale of a majority equity interest in the Company that would be an
alternative to the Investment, the terms of which the Board, after
consultation with its outside legal counsel and its independent financial
advisors, determines in good faith to be more favorable to the bankruptcy
estate of the Debtor than the Investment and the Plan, taking into account
all legal, fmancial, regulatory and other aspects of such Alternative Majority
Investment, the likely time to consummation of the Alternative Majority
Imestment, and the termination rights of the l'nions set forth in the
separate agreements between the Debtor and the Unions.
Alternativ-e Transaction shall mean any transaction, other than an
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Dana Corporation
Ccntcrbridgc
N
:\lternative Investment or Alternative Investment, bct\veen the
Debtor and any party other than C:enterbridge, invoking the sale of all or
substantially all of the assets of the Debtor as a going concern and not as a
liquidation, the terms of which the Board, after consultation with its
outside legal counsel and its independent financial advisors, determines in
good faith to be more favorable to the bankruptcy estate of the Debtor
than the Investment and the Plan, taking into account all legal, tinancial,
regulatory and other aspects of such Alternative Transaction, the likely
time to consummation of the Alternative Transaction, and the termination
rights of the Unions set forth in the separate agreements between the
Debtor and the Unions.
Alternative Stand-Alone Plan shall mean any plan of reorganization, not
invoking any Alternative Investment, Alternative Majority Investment or
Alternative Transaction, proposed by the Debtor without any party
providing equity fmancing, which the Board, after consultation with its
outside legal counsel and its independent fmancial advisors, determines in
good faith to be more favorable to the bankruptcy estate of the Debtor
than the Investment and the Plan, taking into account all legal, financial,
regulatory and other aspects of such Alternative Stand-Alone Plan, the
likely time to consummation of the Alternative Stand-Alone Plan, and the
termination rights of the Unions set forth in the separate agreements
between the Debtor and the Unions.
Break-up Fee shall mean an amount equal to (a) $15 million (3% of the
aggregate of the Series A Preferred Liquidation Preference and the Series
B-1 Preferred Liquidation Preference) if payable in connection with an
Alternative Investment, or (b) $22.5 million (4.5% of the aggregate of the
Series A Preferred Liquidation Preference and the Series B-1 Preferred
Liquidation Preference) if payable in connection with an Alternative
Transaction, an Alternative Majority Investment or an I\lternative Stand-
Alone Plan. The Break-up Fee shall be a superpriority administrative
expense claim.
Commitment Fee shall mean a fee of $3,500,000 (1. 7 5% of the Series B-1
Preferred Liquidation Preference) in consideration of Centerbridge's
commitment to purchase the Series B-1 Preferred. The Commitment Fee
shall be a superpriority administrative expense claim.
Conversion Price shall mean the Distributable l\farket Equity Value Per
Share times 0.83. The Conversion Price will be subject to customary
adjustment provisions with respect to stock splits, re-combinations and
stock dividends and customary weighted average anti-dilution provisions in
the c\ent of, among other things, the issuance of rights, options or
convertible securities with an exercise or conversion or exchange price
below the Conversion Price and the issuance of additional shares at a price
less than the Conversion Price, hut excluding issuances of any of the
- 2-
Dana Corporation
Ccntcrbridgc

foregoing (i) to directors or employees of Dana so long as such issuance is
approved by the 1\"ew Board and (ii) as consideration for the acquisition of
a business that is approved by stockholders of the Company.
Distributable Market Equity Value Per Share shall mean the per share
value that is determined by calculating the 20-day volume weighted
average trading price of the New Common Stock, determined using the
closing trading price of the New Common Stock from the first business
day after the Effective Date through the twenty-third business day after
the Effective Date, after disregarding the highest and lowest closing
trading price during such period.
Distributable Shares equals the number of shares of Ne\v Common Stock
issued on the Effective Date of the Plan.
Expense Reimbursement shall mean payment by Debtor to Centerbridge
of an amount equal to up to $4 million for Centerbridge's reasonably
incurred out-of-pocket costs and expenses incurred in connection with the
Investment on or prior to the date the Expense Reimbursement is payable.
Tbe Expense Reimbursement shall be a superpriority administrative
expense claim.
Fully Diluted Shares shall mean the sum of Distributable Shares plus the
Number Of Shares Of Common Stock Equivalent Shares Of Preferred
Stock.
Liquidation Preference shall mean the aggregate of the Series A Preferred
Liquidation Preference and the Series B Preferred Liquidation Preference.
Liquidity Event shall mean any restructuring, judicial or non-judicial
liquidation or reorganization by the Company (but not including any
internal restructuring), any sale of all or substantially all of the assets of the
Company and its subsidiaries, taken as a whole, any merger or similar
transaction involving a change of control of the Company or any public
offering for cash (other than in connection with an acquisition) unless, in
the case of such public offering, the holders of Series A Preferred or Series
B Preferred, as applicable, are given the opportunity to participate in the
public offering on a pro rata basis.
New Common Stock shall mean the common stock of the Company
issued pursuant to the Plan.
Number Of Common Stock Equinlent Shares Of Preferred Stock shall
equal the aggregate of the Series A Preferred liquidation Preference and
the Series B Preferred Liquidation Preference divided by the Cotwersion
Price.
- 3 -
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Dana Corporation
Issuer:
Plan Investors:
Definitive
Agreements:
Securities to be
Ccntcrbndgc
....
Qualitied Creditors shall mean a tinite number, to be agreed upon by
Centerbridgc and the Company, of the largest holders of claims against the
Debtor, excluding the l'nions, with the size of such holdings determined
as of July 5, 2007, each of whom (a) is a "qualitied institutional buyer" as
such term is defined in Rule 144:\ promulgated under the Securities .\ct
and (b) has such other objective characteristics as reasonably determined
by Centerbridge.
Series A Nominating Committee shall mean a committee of the
Board that consists of three directors, two of whom shall be chosen by
Centerbridge.
Series A Preferred Liquidation Preference shall mean in the aggregate S300
million plus accrued but unpaid dividends.
Series B Preferred Liquidation Preference shall mean the sum of the Series
B-1 Preferred Liquidation Preference and the Series B-2 Preferred
Liquidation Preference.
Series B-1 Preferred Liquidation Preference shall mean in the aggregate
$200 million plus accrued but unpaid dividends.
Series B-2 Preferred T ,iquidation Preference shall mean in the aggregate up
to $250 million plus accrued but unpaid dividends.
New Dana Corporation (the "Company"), a corporation which shall be the
successor under a confirmed plan of reorganization (the "Plan") of Dana
Corporation and its debtor affiliates (collectively, the "Debtor"), as debtor-
in-possession in the chapter 11 reorganization case (the "Bankruptcy
Case"), pending in the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court").
Pot the Series A Preferred, an investment vehicle which will be owned by
certain funds and accounts to be designated and managed, directly or
indirectly, by Centerbridge Capital Partners, L.P. and its affiliates
(collectively, "Centerbridge") and for the Series B Preferred, Centerbridge
and the Qualified Creditors (collectively with Centerbridge, the "Plan
Investors").
The definitive agreements for the imestment described herein are
expected to include an Investment .\greement, to which documents that
will be effective as of the Effective Date will be attached as Exhibits: the
Preferred Stock Designations (part of the Company charter), a
Stockholders ,\greemcnt, a Registration Rights .\greement and other
agreements as specified in the Investment .\grecment. The Series B
Preferred will be purchased pursuant to Subscription .\greemcnts.
1\t the effective date (the 'Effective Date') of the Plan related to the
- 4 -
Dana Corporation
Issued:
Mandatory
Conversion into New
Common Stock:
Conversion of Series
A Preferred and
Series B Preferred to
New Common Stock
Ranking:
Debtor's chapter 11 proceedings, the 4o Series :\ Convertible Preferred
Stock, par Yalue per share to be detennined, (the "Series A Preferred") will
be purchased by Centerbridge for an amount equal to the Series :\
Preferred Liquidation Preference.
:\t the Effective Date, the 4% Series B-1 Convertible Preferred Stock, par
value per share to be determined, (the "Series B-1 Preferred") will be
purchased by Qualified Creditors or Centerbridge or its designees for an
amount equal to the Series B-1 Preferred Liquidation Preference, all in
transactions exempt from registration under the U.S. securities laws and
subject to the requirements of the Bankruptcy Code.
At the Effective Date, the 4% Series B-2 Convertible Preferred Stock, par
value per share to be determined, (the "Series B-2 Preferred" and together
with the Series B-1 Preferred, the "Series B Preferred") will be issued by
the Company in an amount equal to the Series B-2 Preferred Liquidation
Preference to the extent subscribed for by Qualifed Creditors and
Centerbridge shall use reasonable best efforts to identify Qualified
Creditors eligible to purchase shares of Series B-2 Preferred, but will not
itself purchase any shares of Series B-2 Preferred, all in transactions
exempt from registration under the U.S. securities laws and subject to the
requirements of the Bankruptcy Code,
The Company may convert all, but not less than all, of the outstanding
Series A Preferred and Series B Preferred on or after the fifth anniversary
of the Effective Date at the Conversion Price; provided, that no such
conversion may be made unless the trading value of New Common Stock
shall have exceeded 140% of the Distributable Market Equity Value Per
Share at the close of trading for at least 20 consecutive trading days
occurring on or after the fifth anniversary of the Effective Date. The
holders of Series A Preferred and Series B Preferred entitled to registration
rights will be given sufficient advance notice of the conversion in order to
permit them to exercise their registration rights.
Subject to the Lock Up described below, at any time the holders of the
Series A Preferred and Series B Preferred shall each have the right, without
any payment by the holder thereof, to convert such shares into New
Common Stock at the Conversion Price. Upon conversion, the holder of
a Series A Preferred or Series B Preferred shares will receive a number of
shares of common stock equal to the liquidation preference applicable to
such share di,ided by the Conversion Price.
The Series A Preferred shall rank senior to the Series B Preferred with
respect to any distributions upon liquidation, dissolution or winding up of
the Company. The Series A Preferred and the Series B Preferred shall
each rank senior to any other class or series of capital stock of the
Company, including New Common Stock, with respect to any
distributions upon liyuidation, dissolution or winding up of the Company.
Ccntcrbridgc _ s-
N ...
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Dana Corporation
Dividends:
Preference with
Respect to
Dividends:
Board of Directors:
Each share of Series A Preferred and Series B Preferred shall be entitled to
receive, on a pari passu basis, dividends and distributions ar an annual rate
of 4.0% of the Series :\ Preferred Liquidation Preference and the Series B
Preferred Liquidation Preference thereof, respectively, payable quarterly in
cash. Unpaid dividends shall accrue and be added to such liquidation
preference.
Each holder of Series A Preferred and Series B Preferred shall, prior to the
payment of any dividend or distribution in respect of the New Common
Stock or any other class of capital stock of the Company ranking junior to
such Preferred Stock, be entitled to be paid in full , on a pan passu basis,
the dividends and distributions payable in respect of such Preferred Stock.
So long as at least $150 million of the Series A Preferred Liquidation
Preference is owned by Centerbridge, the following provisions shall be
effective:
Initially, the board of directors (the "New Board") of the Company shall
consist of seven directors, (i) two of whom shall initially be chosen by
Centerbridge, (ii) one of whom shall be initially chosen by Centerbridge
who shall be "independent," (iii) two of whom shall initially be chosen by
representatives of the Debtor's official unsecured creditor's committee (the
"Creditors' Committee"), which shall be "independent," (iv) one of whom
shall be chosen by the Creditors' Committee from a list of at least three
candidates (all of whom shall be "independent") provided by Centerbridge
to the Creditors' Committee and (v) one of whom shall be the Chief
Executive Officer of the Company.
So long as at least $150 million of the Series A Preferred Liquidation
Preference is owned by Centerbridge, the following provisions shall be
effective, beginning at the next shareholders meeting at which directors arc
elected: the New Board shall consist of seven directors, (i) two of whom
may be designated by Centerbridge for nomination for election by the
Series A Preferred in a class vote, (ii) one of whom may be designated by
Centerbridge for election by the Series ;\ Preferred in a class vote but who
must be "independent," (iii) one of whom will be designated by a
unanimous vote of the Series A Nominating Committee for election by all
shareholders and (iv) the remainder of whom shall be nominated by the
New Board for election by all shareholders.
For the avoidance of doubt, any director designated by Ccnterbridge that is
required to be "independent" as set forth above must be "independent" as
defmed in the NYSE rules (or at such time after the Effective Date as the
Company's common stock is listed on another stock exchange that has an
independence requirement for directors, the rules of that stock exchange)
of both the Company and Centerbridge.
Series A and Series B Preferred will in any C\'Cnt each be entitled to elect
Ccntcrbndgc _ 6 _
NYJ,J00b8i!IWL
Dana Corporation
Voting Power:
Approval Rights:
directors in the event that their dividends are in default to the extent
required by stock exchange rule, provided that any director designated
pursuant to either the second or third paragraphs above under this section
"Board of Directors" will count toward this requirement.
The Series 1\ Preferred and Series B Preferred will vote together with the
New Common Stock, all as a single class, on an as-converted basis,
prmided, howe\er, that in the event that the Conversion Price would
result in Centerbridge beneficially owning Series :\. Preferred, Series B
Preferred or New Common Stock that in the aggregate has voting power
in excess of 40% of the voting power of the Fully Diluted Shares,
Centerbridge will vote such excess shares of Series A Preferred, Series B
Preferred or New Common Stock in the same proportion as the votes cast
by the non-Centerbridge-affiliated holders of Series A Preferred, Series B
Preferred and New Common Stock.
For as long as at least 50% of the aggregate of the Series A Preferred
Liquidation Preference is outstanding, the Company shall not, and shall
not permit its subsidiaries to, take any of the following actions (subject to
customary exceptions as applicable) unless (i) the Company shall provide
to the holders of the Series A Preferred at least 20 business days advance
notice and (ii) the Company shall not have received, prior to the 1Oth
business day after the receipt of such notice by a majority of the holders of
the Series A Preferred Liquidation Preference, written notice from the
holders of a majority of the Series A Preferred Liquidation Preference that
such holders object to such action:
a sale, transfer or other disposition of all or substantially all of the
assets of the Company and its subsidiaries, on a consolidated basis;
any merger or consolidation involving a change of control of the
Company;
any action to liquidate the Company;
any issuance of equity securities or rights to acquire equity securities at
less than fair market value;
declaration or payment of any dividends in cash or other assets (other
than additional shares of New Common Stock); and
any amendment of the Company's charter.
For as long as Centerbridge owns at least 50% of the aggregate of the
Series A Preferred Liquidation Preference, the Company shall not, and
shall not permit its subsidiaries to, take any of the following actions
(subject to customary exceptions as applicable) without the prior written
consent of Centerbridge:
any transaction with any officer, director or greater than 10%
stockholder other than officer and director compensation
arrangements and transactions that arc not material to the Company;
Ccntcrbridgc _ 7 _
NY 1-JOO:aBilM-J ...
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Dana Corporation
Registration Rights:
Ccntcrbridgc
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the issuance of any security senior to or pari passu with the Series .\
Preferred or the Series B Preferred subject to the paragraph below
immediately follO\ving these bullets (a "Senior/Pari Passu Issuance");
any amendment of the Company's by-laws that materially adversely
affects the rights of Centerbridge or the Company's shareholders
generally; and
other than pursuant to any conversion provisions set forth herein, any
redemption, repurchase or other acquisition of shares of capital stock
involving aggregate payments in excess of S 10 million during any 12
month period after the Effective Date; proYided, howeYer, any
repurchase of capital stock from a terminated employee shall not be
included in such aggregate payment limitations so long as such
repurchase is approved by the New Board, and any cashless exercises
pursuant to the terms of the underlying security shall be excluded
from the foregoing restriction.
The limitation on Senior/Pari Passu Issuances shall not apply to debt or
lease financing or guarantees or lien, mortgage or security interests which
constitute re-financings, replacements and extensions thereof that are (i)
on prevailing market terms with respect to the economics thereof, and (ii)
on substantially the same terms (including with respect to the obligors,
tenor, security and ranking) as the obligations being refmanced, replaced or
extended with respect to other terms.
Centerbridge and non-Centerbridge Plan Investors shall not receive
compensation or remuneration of any kind in connection with their
exercise or non-exercise of voting or other rights under the Series ;\
Preferred and Series B Preferred.
Holders of Series A Preferred and Series B Preferred shall be entitled to
registration rights as set forth below. The registration rights agreements
shall contain customary terms and provisions consistent with such terms,
including customary hold-back, cutback and indemnification provisions.
Demand Registrations. Following the time that the Company is eligible
to use Form S-3, the holder of the Series A Preferred shall be entitled to
four demand registrations and the holders of Series B Preferred shall be
entitled to four demand registrations. If the Company is not eligible to use
Form S-3, the holders of the Series A Preferred and the Series B Preferred
shall each be entitled to one demand registration. l\ny demand registration
may, at the option of the holder be a "shelf' registration pursuant to Rule
415 under the Securities Act of 1933 (the "Securities :\ct"); proYided,
however, that the Company will not be required to keep any "shelf'
registration effective for any period greater than three months. .\11
registrations will be subject to customary "windows."
Piggyback Registrations. In addition, the holders nf Registrable
- 8
Dana Corporation
Pre-emptive Rights:
LockUp:
Lcntcrbndgc
NYJ,M .. ...
Securities shall be entitled to unlimited piggyback registration rights,
subject to customary cut-back provisions.
Registrable Securities: The Series A Preferred, any shares of New
Common Stock issuable upon conversion of the Series A Preferred, the
Series B Preferred, any shares of New Common Stock issuable upon
conversion of the Series B Preferred, any other shares of common stock
held by the Plan Investors (including shares acquired upon the exercise of
preemptive rights), and any additional securities issued or distributed by
way of a dividend or other distribution in respect of any securities.
Securities shall cease to be Registrable Securities upon sale to the public
pursuant to a registration statement or Rule 144, or when all shares held by
a Plan Investor may be transferred without restriction pursuant to Rule
144(k) or are otherwise freely saleable under securities laws. Series B
Preferred and New Common Stock into which it is converted will only be
entitled to registration rights to the extent their securities were issued in a
private placement.
Expenses. All registrations shall be at the Company's expense (except
underwriting fees, discounts and commissions agreed to be paid by the
selling holders), including, without limitation, fees and expenses of one
counsel for all holders selling Registrable Securities in connection with any
such registration.
So long as Centerbridge beneficially owns, in the aggregate, at least 50% of
the shares of Series A Preferred, the holder of Series A Preferred shall be
entitled to participate pro rata in any offering of equity securities of the
Company, other than with respect to (i) shares issued or underlying
options issued to management and employees and (ii) shares issued in
connection with business combination transactions.
During the first two-month period after the Effective Date, the holders of
Series A Preferred and Series B Preferred shall not transfer or sell such
stock to any third party or convert any Series A Preferred or Series B
Preferred into New Common Stock, provided, however, that the holders
of such stock may transfer such stock to such holders' affiliates who agree
to be bound by the same agreements with the Company.
During the 34 months following the first two-month period after the
Effective Date, the holder of Series A Preferred shall not (i) transfer or sell
more than $150 million of Series A Preferred (measured by Series A
Liquidation Preference) to any third party; provided, however, the holder
of Series A Preferred may transfer such stock to such holders' affiliates
who agree to be bound by the same agreements with the Company; or (ii)
comert more than S 150 million of Series A Preferred (measured by Series
:\Preferred Liquidation Preference) to New Common Stock.
Notwithstanding the foregoing, in the event a Liquidity Event occurs, the
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Dana Corporation
Shorting of New
Common Stock
Reporting
Requirements:
Management:
Right to Match:
Commitment Fee:
Break-up Fee:
Ccntcrpridgc
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foregoing restrictions in this section shaH automatically terminate.
The holders of the Series .-\ Preferred and the Series B Preferred, either
directly or indirectly, shaH not engage in any natural or synthetic
transaction that has the economic effect of paying the holder of such stock
in event of a decrease in the nlue of the 1\:ew Common Stock.
The Company shall not deregister or suspend registration of its common
stock under Section 12 or 15 of the Securities Exchange ;\ct of 1934.
The Plan shall contain a process whereby the individuals who are expected
to serve on the New Board shaH negotiate, in consultation with
Centerbridge, employment agreements with the senior management team
which shall be (i) market employment agreements in form and substance
reasonably acceptable to Centerbridge, and (ii) subject to approval by the
New Board on the Effective Date.
Prior to the Board terminating the Investment Agreement in connection
with an Alternative Investment, Centerbridge shall have the right to offer
to amend the terms of the Investment and the Board will take that into
account as described in the definition of Alternative Investment above.
The Board will have the right to terminate the Investment Agreement in
connection with entering into definitive agreements with respect to an
Alternative Investment, an Alternative Majority Investment or an
Alternative Transaction or to pursue an Alternative Stand-Alone Plan,
subject to the Debtor's obligations under Break-up Fee and Expense
Reimbursement below.
The Commitment Fee shaH be payable immediately to Centerbridge upon
the earliest of (a) entry of an order by the Bankruptcy Court converting the
Bankruptcy Case to a liquidation or dismissing the Bankruptcy Case, (b) a
material breach of the Debtor's obligations under the Investment
Agreement, including any loss of the Debtor's exclusive right to file a plan
of reorganization, that results in the failure of any of the conditions to
Centcrbridge's obligations under the Investment ;\grcement), so long as
Centerbridge has not materially breached the Investment Agreement, or
(c) the occurrence of the Effective Date.
In the case of an Alternative Stand-L\lone Plan, the Break-up Fee shall be
payable upon entry of an order by the Bankruptcy Court apprm'ing a
disclosure statement in connection with an Alternative Stand-Alone Plan.
To the case of an Alternative Investment, Alterative lvfajority Investment or
Alternative Transaction, the Break-up Fcc shall be payable upon the
earliest of (a) provided that the Bankruptcy Court has not yet entered an
order denying the Debtor's motion to approve an ,\)ternatin Investment,
Alternative Majority lm'estmcnt or Alternative Transaction, 30 days after
- 10-
Dana Corporation
Expense
Reimbursement:
Conditions:
the Board approves the terms (whether pursuant to a letter of intent or
definitiYc agreements) of such AlternatiYe Investment, :\lternatiYe Majority
Investment or Alternative Transaction, and (b) entry of an order by the
Bankruptcy Court approving such Alternative Investment, Alternative
i\fajority lnYestmcnt or Alternative Transaction.
The Expense Reimbursement shall be payable upon the earlier date on
which the Commitment Fee is payable or the Break-up Fee is payable.
Centerbridge's obligation to close the purchase of Series A Preferred and
Series B Preferred as described in this Exhibit A shall be subject to the
satisfaction of customary closing conditions set forth in the Investment
Agreement, including the following:
1. There shall have occurred no material adverse change (as defined in
the defmitive Investment Agreement).
2. Finalization and approval by the Bankruptcy Court of the Debtor's
settlement negotiations with the l.Jnions on terms reasonably
acceptable to Centerbridge.
3. Confirmation of the Plan in a form reasonably acceptable to
Centerbridge consistent with the Plan Term Sheet in all respects.
4. Obtaining exit financing with parties and on market terms reasonably
acceptable to Centerbridge; provided, that the Debtor shall have the
obligation to consult with Centerbridge regarding such terms and
parties.
5. Filing of the Plan and a disclosure statement by September 3, 2007.
6. Obtain an order of the Bankruptcy Court conflmling the Plan by
February28,2008.
7. The Effective Date must be no later than May 1, 2008.
The Debtor's obligations under the Investment Agreement will be subject
to Bankruptcy Court approval of the Investment Agreement.
Standstill The Stockholders Agreement will contain a customary 10 year standstill
that will limit the ability of Centerbridge to acquire additional stock if it
would own more than 30% of the voting power of the Company's stock
after such acquisition and to take specified other actions to control the
Company after the Effective Date without consent of the New Board.
Transaction Structure Subject to the consent of Debtor, which shall not be unreasonably
withheld, Centerbridge shall structure the transaction in a manner most
advantageous to the Plan Investors so long as such structure does not
materially adversely affect the substance or economics of the Investment.
Governing Law:
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State ofNew York
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Dana Corporation
THESE TERMS DO NOT CONSTITUTE A BINDING CONTRACT BUT RATHER
ARE FOR THE PURPOSE OF OUTLINING TERMS PURSUANT TO WHICH
DEFINITIVE AGREEMENTS MAY BE ENTERED INTO. THESE TERMS DO NOT
IMPOSE ANY OBLIGATIONS OR DUTIES ON THE PARTIES, INCLUDING,
WITHOUT LIMITATION, ANY OBLIGATION OR DUTY TO NEGOTIATE THE
TRANSACTIONS, EXCEPT TO THE EXTENT SET FORTH IN AN EXECUTED
PLAN SUPPORT AGREEMENT. THIS TERM SHEET IS NOT AN OFFER WITH
RESPECT TO ANY SECURITIES OR A SOLICITATION OF ACCEPTANCES OF THE
PLAN. SUCH A SOLICITATION WILL ONLY BE MADE IN COMPLIANCE WITH
APPLICABLE PROVISIONS OF SECURITIES AND BANKRUPTCY LAWS.
Ccntcrbridgc
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In re Journal Register Company, Case No. 09-10769 (Bankr. S.D.N.Y. 2009).
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EXECUTION VERSION
This Plan Support Agreement (the "Agreement"), is made, as of the date hereof, by and
among (i) the Journal Register Company (the "Company"), on behalf of itself and the other
Debtors (as defined below), and (ii) the undersigned holders (each, a "Consenting Lender," and,
collectively, the "Consenting Lenders") each of which is a signatory hereto and a holder of
claims (as defined in section 101(5) of Title 11 of the United States Code, 11 U.S.C. 101-
1532 (as amended, the "Bankruptcy Code")) against the Debtors (the "Claims") arising under or
in connection with (a) that certain Amended and Restated Credit Agreement dated as of January
26, 2006 (as amended and modified from time to time, the "Credit Agreement") among the
Company, the Company's subsidiary guarantors (together with the Company, the "Debtors"),
JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (in such capacities, the
"Existing Agent"), and the lenders parties thereto from time to time and (b) related interest rate
hedging agreements (together with the Credit Agreement and all ancillary and related
documents, the "Credit Documents"). For the avoidance of doubt, the Consenting Lenders
hereunder, in the aggregate, (i) comprise more than 50% of holders of Claims, and (ii) hold more
than 66
2
/
3
% in amount of the Claims. The Debtors, the Consenting Lenders, and the Existing
Agent are each referred to herein as a "Party", and collectively, as the "Parties".
RECITALS
WHEREAS, the Company has determined that it would be in its best interests to engage
in a prompt restructuring or recapitalization concerning or impacting, inter alia, the Claims (the
"Transaction");
WHEREAS, the Existing Agent and certain of the Consenting Lenders have formed a
steering committee for the purposes of negotiating the Transaction and have agreed on the
material terms of the Transaction;
WHEREAS, the general terms of the Transaction are memorialized in the term sheet
attached hereto as Exhibit A (the "Term Sheet"), which is incorporated herein and is made part
of this Agreement, including, without limitation, all provisions thereof relating to the Lender
Termination Events and the Debtor Termination Events;
1
WHEREAS, the Parties intend to implement the Transaction through a plan of
reorganization for the Debtors to be confirmed in bankruptcy cases (the "Bankruptcy Cases") to
be commenced by the Debtors by filing voluntary petitions under chapter 11 of the Bankruptcy
Code in the United States Bankruptcy Court for the Southern District ofNew York (the
"Bankruptcy Court") substantially on the terms set forth in the Term Sheet (the "Plan"); and
WHEREAS, subject to execution of definitive documentation and, as required,
appropriate approvals of the Bankruptcy Court, the following sets forth the agreement between
the Parties concerning their respective obligations.
Capitalized terms used herein without definition shall have the meanings ascribed to such terms
in the Term Sheet.
NOW, THEREFORE, in consideration of the foregoing, the Parties agree as follows:
AGREEMENT
Section 1. Consenting Lenders' Commitments Regarding Transaction.
1.01. Voting on the Plan
Each Consenting Lender agrees that, for as long as it is a holder of a Claim, subject to the
conditions that (i) the material terms of any agreement implementing the Transaction, including,
without limitation, the Plan, embody and are consistent with the terms and conditions set forth in
the Term Sheet, (ii) the Plan, the Disclosure Statement, all pleadings seeking standard "first day"
relief, including, without limitation, applications for retention of the Debtors' professionals, and
the other documents contemplated in the Term Sheet are in form and substance reasonably
satisfactory to the Consenting Lenders, and (iii) no Lender Termination Event shall have resulted
in the termination of the Term Sheet in accordance with its terms (a "Lender Termination"), it
shall (i) when solicited, subject to the acknowledgements contained in Section 6 hereof, vote to
support the Plan and not revoke or withdraw such vote; (ii) not consent to, vote for or otherwise
support, either directly or indirectly, any other plan of reorganization or liquidation for the
Debtors, or dissolution, winding up, restructuring or merger of the Debtors; or (iii) not object to,
oppose or otherwise interfere with, and cause its controlled affiliates (as defined in the
Bankruptcy Code) to not object to, oppose or otherwise interfere with, the confirmation of the
Plan or other provisions of the Term Sheet; provided, however, that no Consenting Lender shall
be barred from (x) objecting to compliance with Bankruptcy Code section 1125 or other
applicable law relating to the sufficiency of the disclosures contained in the disclosure statement
accompanying the Plan (the "Disclosure Statement") or (y) taking any action that does not
directly or indirectly conflict with the provisions of this Agreement and the Term Sheet.
1.02. Forbearance from Exercising Remedies
Each Consenting Lender (including the Existing Agent or other Existing Agents under
the Credit Agreement, each in their capacity as such) hereby agrees, as long as the Debtors are in
compliance with the Term Sheet, including, without limitation, the various target dates for
certain actions and events set forth therein, to forbear (i) through the filing of the Bankruptcy
Cases (the "Petition Date"), from exercising any rights or remedies under the Credit Documents
on the same terms and conditions as the Forbearance Agreement and Amendment No.3 dated as
of July 24, 2008 (as amended by Amendment No. 1 thereto dated as of September 15, 2008,
Amendment No.2 thereto dated as of October 31, 2008 and Amendment No.3 thereto dated as
of December 5, 2008, the "Forbearance Agreement"); and (ii) after the Petition Date through the
Effective Date, from seeking the lifting of the automatic stay to exercise any rights or remedies
under the Credit Documents, provided, however, that the Consenting Lenders shall retain all
rights and remedies available to them under any document governing the Debtors' use of the
Cash Collateral.
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1.03. Transfer of Claims
For a period commencing as of the date hereof until the occurrence of a Lender
Termination, each of the Consenting Lenders hereby agrees not to (i) sell, assign, transfer,
hypothecate or othetwise dispose of, directly or indirectly, any Claim, unless the transferee (such
transferees, if any, to also be "Consenting Lenders" hereunder) agrees in writing, by delivering a
joinder to this Agreement to the Existing Agent and the Company, to be bound by this
Agreement and the Term Sheet; or (ii) grant any proxies, deposit its Claim into a voting trust, or
enter into a voting agreement or any similar agreement with respect thereto, unless any such
arrangement provides, in writing, in a form enforceable by, and satisfactory to, the Company, for
compliance with this Agreement and the Term Sheet or this Agreement (each action referred to
in the foregoing clauses (i) and (ii), a "Transfer"). Any Transfer that does not comply with the
preceding sentence shall be deemed void ab initio.
1.04. Representation of Holdings
Each of the Consenting Lenders represents that, as of the date hereof, (i) it is the holder
of the Claims set forth on the attached Schedule A; and (ii) it has full power to vote and dispose
of all of the aggregate principal amount of such Claims.
Section 2. The Debtors' Undertakings. The Debtors shall, so long as no Debtor
Termination Event has resulted in the termination of the Term Sheet in accordance with its
terms, (i) take all actions reasonably necessary to effectuate and consummate the transactions
contemplated by the Term Sheet and the Plan; (ii) implement all steps reasonably necessary and
desirable to obtain an order of the Bankruptcy Court confirming the Plan; and (iii) take no
actions inconsistent with the transactions contemplated by this Agreement, the Term Sheet and
the Plan or the timely confirmation and consummation of the Plan.
Section 3. The Debtors' Fiduciary Obligations. Notwithstanding anything to the
contrary in this Agreement, (i) nothing herein requires the Company to breach any fiduciary
obligations it has under applicable law; and (ii) to the extent such fiduciary obligations require
the Company to terminate its obligations under the Term Sheet, it may do so without incurring
any liability to the Consenting Lenders or the Existing Agent under this Agreement or the Term
Sheet.
Section 4. Mutual Representations, Warranties, and Covenants. Each of the Parties
represents, warrants, and covenants to the others the following, each of which is a continuing
representation, warranty, and covenant:
4.01. Enforceability.
This Agreement is a legal, valid, and binding obligation of the Party, enforceable against
it in accordance with its terms, except as enforcement may be limited by applicable laws relating
to or limiting creditor's rights generally or by equitable principles relating to enforceability.
3
4.02. No Consent or Approval.
Except as expressly provided in this Agreement, no consent or approval by any other
person or entity is required in order for it to carry out the provisions of this Agreement.
4.03 Power and Authority. It has all requisite power and authority to enter into
this Agreement and to carry out the transactions contemplated by, and perform its respective
obligations under, this Agreement, the Term Sheet and the Plan.
4.04 Authorization. The execution and delivery of this Agreement and the
part.
4.05 Governmental Consents. The execution, delivery and performance by it of
this Agreement do not and shall not require any registration or filing with, consent or approval
of, or notice to, or other action by, any federal, state or other governmental authority or
regulatory body, except such filings as may be necessary and/ or required under the federal and
state securities laws and, in connection with the commencement of the Bankruptcy Cases, the
approval of the Disclosure Statement and confirmation of Plan.
Section 5. No Waiver of Participation and Reservation of Rights. This Agreement
and the Plan are part of a proposed settlement of disputes among the Parties. Except as expressly
provided in this Agreement, nothing herein is intended to, or does, in any manner waive, limit,
impair, or restrict the ability of each of the Consenting Lenders to protect and preserve its rights,
remedies and interests, including without limitation, its Claims against the Debtors or its full
participation in the Bankruptcy Cases. If the Transaction is not consummated, or if this
Agreement is terminated for any reason, the Parties fully reserve any and all of their rights.
Section 6. Acknowledgment. This Agreement and the Term Sheet and the transactions
contemplated herein and therein are the product of negotiations between the Parties and their
respective representatives. This Agreement is not and shall not be deemed to be a solicitation of
votes for the acceptance of the Plan. Each of the Consenting Lenders' acceptance of the Plan
will not be solicited until it has received a copy of the Disclosure Statement approved by the
Bankruptcy Court.
Section 7. Effectiveness; Amendments. This Agreement shall not become effective and
binding upon any of the Parties until all Parties have delivered counterpart signatures hereto.
This Agreement cannot be amended, except by a writing executed by all Parties.
8.01. Further Assurances
The Parties agree to execute and deliver such other instruments and perform such acts, in
addition to the matters herein specified, as may be appropriate or necessary, from time to time, to
effectuate the agreements and understandings of the Parties, whether the same occurs before or
after the date of this Agreement.
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8.02. Complete Agreement
This Agreement (together with the Term Sheet) constitutes the entire agreement between
the Parties with respect to the subject matter hereof and supersedes all prior agreements, oral or
written, between the Parties with respect thereto.
8.03. Parties
This Agreement shall be binding upon, and inure to the benefit of, the Parties. No rights
or obligations of any Party under this Agreement may be assigned or transferred to any other
person or entity except as provided in Sections 1.03 and 8.08 hereof. Nothing in this Agreement,
express or implied, shall give to any person or entity, other than the Parties, any benefit or any
legal or equitable right, remedy or claim under this Agreement.
8.04. Governing Law
THIS AGREEMENT IS TO BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE, WITHOUT GIVING
EFFECT TO THE CHOICE OF LAWS PRINCIPLES THEREOF.
8.05. Execution of Agreement; Headings
This Agreement may be executed and delivered (by facsimile or otherwise) in any
number of counterparts, each of which, when executed and delivered, shall be deemed an
original, and all of which together shall constitute the same agreement. Except as expressly
provided in this Agreement, each individual executing this Agreement on behalf of a Party has
been duly authorized and empowered to execute and deliver this Agreement on behalf of said
Party. The headings of all sections of this Agreement are inserted solely for the convenience of
reference and are not a part of and are not intended to govern, limit or aid in the construction or
interpretation of any term or provision hereof.
8.06. Interpretation
This Agreement is the product of negotiations of the Parties, and in the enforcement or
interpretation hereof, is to be interpreted in a neutral manner, and any presumption with regard to
interpretation for or against any party by reason of that Party having drafted or caused to be
drafted this Agreement, or any portion hereof, shall not be effective in regard to the
interpretation hereof.
8.07 Confidentiality
All information obtained in the course of the negotiations leading up to this Agreement,
including but not limited to the identities of the Consenting Lenders and their respective holdings
of Claims, shall be treated by all Parties hereto as confidential information and not publicly
disclosed without the written consent of the Company, the Existing Agent, or the applicable
5
Consenting Lender, as applicable, based upon a given Party's rights in the information at issue,
except as (i) otherwise required with respect to the Term Sheet or (ii) may be required by law. In
no event shall the identities of the Consenting Lenders and their respective holdings of Claims be
referenced in public filings or press releases without the express written consent of the Party at
1ssue.
8.08. Successors and Assigns
This Agreement is intended to bind and inure to the benefit of the Parties and their
respective successors, assigns, heirs, executors, administrators and representatives, other than a
trustee or similar representative appointed in the Bankruptcy Cases. The agreements,
representations and obligations of the Consenting Lenders under this Agreement are, in all
respects, several and not joint.
8.09. Fees and Expenses
If any Party brings any action against any other Party for breach of such other Party of its
obligations hereunder, the prevailing Party shall be entitled to all reasonable expenses, including,
without limitation, reasonable attorneys' fees incurred in connection with such action.
8.10. Specific Performance
The Parties acknowledge and agree that money damages would not be an adequate or
sufficient remedy for any breach of this Agreement, and each non-breaching Party shall be
entitled to specific performance and/or injunctive or other equitable relief as a remedy for any
such breach.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day
Dated: 2009 JOURNAL REGISTER COMPANY
By:
Name:
Its:
[CONSENTING LENDER SIGNATURE PAGES FOLLOW]
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EXHIBT A
TERM SHEET
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JOURNAL REGISTER COMPANY
Summary of Principal Terms and Condition of Restructuring
February 19, 2009
The terms and conditions set forth in this term sheet (the "Restructuring
Term Sheet") are meant to be part of a comprehensive compromise, each element of
which is consideration for the other elements and an integral aspect of the proposed
restructuring. The Restructuring Term Sheet is in the nature of a settlement proposal in
furtherance of settlement discussions and is entitled to protection from any use or
disclosure to any party or person pursuant to Federal Rule of Evidence 408 and any other
rule of similar import.
This Restructuring Term Sheet does not constitute an offer or a legally
binding obligation of the Company (as defined below), the Existing Lenders (as defined
below), the Existing Agent (as defined below) or any other party in interest, nor does it
constitute an offer of securities or a solicitation of the acceptance or rejection of a chapter
11 plan for the Company. The transactions contemplated by this Restructuring Term
Sheet will be subject to the terms and conditions to be set forth in definitive documents
acceptable to the Company, the Existing Agent and the Consenting Lenders (as defined
below). This Restructuring Term Sheet is part of, and will be attached to, the Plan
Support Agreement (the "Plan Support Agreement") among the Company, the Existing
Agent and the Consenting Lenders and is subject to the terms thereof.
Until publicly disclosed by the Company, with the prior written consent of
the Existing Agent or except as otherwise permitted under the Plan Support Agreement,
this Restructuring Term Sheet is strictly confidential and may not be shared with any
person other than the Company, the Existing Agent and the Existing Lenders and each
such party's professionals and advisors.
Company: Journal Register Company ("JRC" and, as reorganized
pursuant to the Plan (as defined below), "Reorganized
JRC") and its subsidiaries (together with JRC, the
"Company" or the "Debtors" and, as reorganized pursuant
to the Plan, the "Reorganized Company").
Existing Lenders: The entities (the "Existing Lenders") that hold claims
against the Debtors under (i) that certain Amended and
Restated Credit Agreement dated as of January 25, 2006
(as amended by, among other amendments, the
Forbearance Agreement and Amendment No.3, dated as of
July 24, 2008 (as amended, the "Forbearance Agreement"),
and as thereafter amended or otherwise modified from time
to time, the "Existing Credit Agreement") among JRC, the
subsidiary guarantors party thereto, JPMorgan Chase Bank,
N.A., as administrative agent and collateral agent (the
Trade Claimants:
Other Unsecured
Claimants:
Restructuring
Transaction:
"Existing Agent"), and the Existing Lenders; and (ii)
related interest rate hedging arrangements. The claims
held by the Existing Lenders (inclusive of accrued and
unpaid principal and interest, fees, expenses and other
obligations and charges) shall be collectively referred to
herein as the "Lender Claims." JRC will agree, as part of
the Restructuring (as defined below), that all Lender
Claims shall be allowed in full in the Chapter 11 Cases (as
defined below), without setoff, subordination, or
recharacterization to be treated in accordance with the
Plan.
Holders of unsecured claims (the "Trade Claimants")
against any Debtor that supplied goods and services to the
Company and that are anticipated to continue to supply
such goods and services to the Reorganized Company. The
unsecured claims held by the Trade Claimants shall be
collectively referred to herein as the "Trade Claims."
Holders of all unsecured claims (the "Other Unsecured
Claimants") against any Debtor other than the Trade
Claims (the "Other Unsecured Claims"), including, without
limitation, claims arising out of the rejection of executory
contracts or unexpired leases by any Debtor, and claims, if
any, arising out of the termination of collective bargaining
agreements under section 1113 of the Bankruptcy Code (as
defined below).
Subject to the terms hereof, the Debtors shall restructure
their capital structure (the "Restructuring") through a plan
of reorganization (the "Plan"), the material terms and
conditions of which are set forth herein and which shall
otherwise be in form and substance reasonably satisfactory
to those Existing Lenders that (i) comprise more than 50%
in number of the Existing Lenders; (ii) hold more than 66
2/3% in amount of the Lender Claims; and (iii) have
executed the Plan Support Agreement (the "Consenting
Lenders") to be confirmed in cases (the "Chapter 11
Cases") to be commenced by the Debtors under chapter 11
of title 11 of the United States Code (the "Bankruptcy
Code") on or before February 22, 2009 (the "Petition
Date") in the United States Bankruptcy Court for the
Southern District of New York (the "Bankruptcy Court").
To effectuate the Restructuring, Reorganized JRC will
obtain from one or more lenders to be determined (which
may or may not include one or more of the Existing
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Cash Collateral:
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Lenders) (the "Revolving Lenders") a $25 million
revolving credit facility (the "Revolving Facility")
substantially on the terms set forth in Schedule A hereto
(the "Revolving Facility Term Sheet") or, if the Revolving
Facility shall be provided by Revolving Lenders other than
the Existing Lenders, on terms acceptable to the
Consenting Lenders.
The Debtors and the Consenting Lenders will enter into a
consensual stipulation (the "Cash Collateral Stipulation")
regarding the Debtors' postpetition use of cash claimed as
collateral by the Existing Lenders (the "Cash Collateral"),
allowing the Debtors to use Cash Collateral (i) in the
ordinary course of business and (ii) for restructuring
expenses, provided, however that no portion of the Cash
Collateral may be used to fund litigation against the
Existing Lenders or the Existing Agent, except with respect
to a purported breach of this Restructuring Term Sheet, the
Plan Support Agreement, or the Cash Collateral
Stipulation; provided further, however, that the Existing
Agent and the Consenting Lenders understand that
Bankruptcy Court may require that a portion of the Cash
Collateral be made available to a committee ofunsecured
creditors appointed in the Chapter 11 Cases to conduct an
investigation of the Lender Claims and the liens securing
such claims. As adequate protection for the Existing
Lenders' interests in the Cash Collateral the Debtors will
(a) grant replacement liens on certain unencumbered
property; (b) pay reasonable fees and expenses of the
Existing Lenders and the Existing Agent; and (c) continue
all of their obligations as required under the Forbearance
Agreement (as if the same were in effect immediately prior
to the Petition Date) and the Existing Credit Facility (as
modified by such Forbearance Agreement and in effect
immediately prior to the Petition Date) until the Effective
Date, other than the obligation to make the Monthly
Deposit (as defined in Section 4.1(a) of the Forbearance
Agreement). To the extent that the Debtors are in
compliance with the Cash Collateral Stipulation and this
Restructuring Term Sheet has not been terminated, the
Consenting Lenders agree not to seek additional adequate
protection pursuant to sections 363 and 361 of the
Bankruptcy Code or otherwise.
I. TREATMENT OF CLAIMS
AND INTERESTS UNDER THE PLAN
Administrative On or as soon as practicable after the effective date of the
Claims: Plan (the "Effective Date"), each holder of an allowed
administrative claim shall receive cash equal to the full
amount of its claim or otherwise be left unimpaired, unless
otherwise agreed to by such holder or permitted by the
Bankruptcy Code.
Lender Claims: On the Effective Date, in full and final satisfaction of the
Lender Claims: (i) all fees and expenses required to be paid
pursuant to the Existing Credit Agreement shall be paid in
full in cash; and (ii) each Existing Lender shall receive its
pro rata share (according to the respective amount of the
Lender Claims held by each Existing Lender) of (a) a $175
million Tranche A Term Loan Facility (the "Tranche A
Term Loan Facility"), on the terms set forth in Schedule B
hereto (the "Tranche A Term Loan Facilitv Term Sheet");
(b) a $100 million Tranche B Term Loan Facility, on the
terms set forth in Schedule C hereto (together with the
Tranche A Term Loan Facility Term Sheet, the "Term Loan
Facilities Term Sheets") (the "Tranche B Term Loan
Facility," and, together with the Tranche A Term Loan
Facility, the "Term Loan Facilities"); and (c) the equity of
Reorganized JRC, subject to dilution only by (i) the
options to purchase shares of the common stock of
Reorganized JRC (the "New Common Stock") to be issued
pursuant to the Post-Effective Date Management Incentive
Plan (as defined below), (ii) the Revolving Facility Stock
(as defined below), and (iii) the exercise of the Revolving
Facility Warrants (as defined below).
Other Secured Claims All allowed priority claims and secured claims (other than
and Priority Claims: the Lender Claims) shall, at the option of the Debtors with
the consent of the Consenting Lenders, be paid: (i) in cash
in full on the later of (x) the Effective Date and (y) the date
such claim becomes due and payable in the ordinary course
of business; (ii) in cash on such other terms and conditions
as may be agreed between the holder of each such claim,
on the one hand, and the Debtors and the Existing Agent,
on the other hand; or (iii) in deferred cash payments, to the
extent permissible under the Bankruptcy Code.
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Trade Claims:
Multiemployer
Withdrawal Liability:
Other Unsecured
Claims:
Existing Equity:
Retiree Benefits:
5
Trade Claims shall not be entitled to any distribution under
the Plan.
The principal amount of each Allowed Trade Claim that
has not been satisfied by the Debtors prior to the Effective
Date, shall be paid: (i) in cash in full on the later of (x) the
Effective Date, (y) the date such claim becomes an
Allowed Trade Claim, and (z) the date such claim becomes
due and payable in the ordinary course of business; or (ii)
in cash on such other terms and conditions as may be
agreed between the holder of each such claim, on the one
hand, and the Debtors and the Existing Agent, on the other
hand.
Allowed Trade Claims shall be paid from the distribution
otherwise payable under the Plan to the Existing Lenders
on account of the secured portion of the Lender Claims.
The Debtors may seek to modify certain collective
bargaining agreements or seek relief under section 1113 of
the Bankruptcy Code with respect to such collective
bargaining agreements. The treatment of any claims
arising from the Debtors' withdrawal from, or modification
of, certain related multiemployer pension plans may be
determined through a negotiated settlement and/or judicial
resolution.
The Other Unsecured Claimants shall not receive any
distributions or retain any property on account of their
Other Unsecured Claims.
The holders of the existing JRC capital stock and the
holders of any existing options, warrants or rights to
acquire any equity securities of JRC shall not receive any
distributions or retain any property on account of their
equity interests in JRC and all such capital stock, options,
warrants and rights shall be extinguished.
Pursuant to section 1129(a)(13) ofthe Bankruptcy Code,
after the Effective Date, the Reorganized Company shall
continue to pay all retiree benefits (within the meaning of
section 1114 of the Bankruptcy Code) for which the
Debtors are liable. Nothing in the Plan shall: (a) restrict
the right of the Debtors or the Reorganized Company to
modify the terms and conditions of the retiree benefits, if
any, as otherwise permitted pursuant to the terms of the
applicable plans or non-bankruptcy law; or (b) be
construed as an admission that any such retiree benefits are
owed by the Debtors.
Releases and The Plan will include derivative releases, mutual third-
Exculpations: party releases and exculpation provisions. Such releases
and exculpations shall be for the benefit of (as applicable)
and binding upon the Existing Agent, the Existing Lenders,
the Debtors (as debtors and debtors in possession) and the
Debtors' post-Petition Date directors, officers,
professionals, and agents that are reasonably satisfactory to
the Consenting Lenders (the "Released Parties"), to the
fullest extent permitted by law; provided, however, that a
non-Consenting Lender will only be a deemed Released
Party for purposes of the third-party release provisions if
such Existing Lender agrees to release all such claims
against the other Released Parties held by such Existing
Lender.
III. CORPORATE GOVERNANCE
AND MANAGEMENT
Board of Directors of The initial Board of Directors of Reorganized JRC shall
Reorganized JRC: consist of five members, each of which shall be selected by
the Consenting Lenders, at least ten ( 1 0) days prior to the
hearing to confirm the Plan. Successor directors will be
appointed and/or elected in accordance with Reorganized
JRC's charter and by-laws.
Company Status: Reorganized JRC shall be a private (non-reporting)
company. The New Common Stock will: (i) not be
registered; (ii) not be listed on any national exchange; and
(iii) be transferable by the recipients thereof under the Plan
pursuant to the exemption from registration granted by
section 1145( c) of the Bankruptcy Code (except with
respect to any such recipient deemed to be an
"underwriter").
New Common Stock:
The New Common Stock shall consist of (i) a class of full-
voting common stock (the "Class A Common Stock") and
(ii) a separate class of limited-voting common stock (the
"Class B Common Stock"). Each Existing Lender shall
have the option to choose to take its New Common Stock
in the form of Class A Common Stock or Class B Common
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Stock.
Each share of Class B Common Stock will be convertible
at the option of the holder, exercisable at any time, into one
share of Class A Common Stock; provided that, at all
times, there must be outstanding at least one share of Class
A Common Stock.
The economic rights of the Class A Common Stock and
Class B Common Stock shall be identical. The Class B
Common Stock will not be entitled to general voting
rights, but will be entitled to vote on an "as converted"
basis (together with the holders of the Class A Common
Stock, voting as a single class) on certain non-ordinary
course transactions, including (i) any authorization of, or
increase in the number of authorized shares of, any class of
capital stock ranking pari passu with or senior to the New
Common Stock as to dividends or liquidation preference,
including additional New Common Stock; (ii) any
amendment to Reorganized JRC's certificate of
incorporation or by-laws; (iii) any amendment to any
shareholders or comparable agreement; (iv) any sale, lease
or other disposition of all or substantially all of the assets
of Reorganized JRC through one or more transactions; (v)
any recapitalization, reorganization, consolidation or
merger of Reorganized JRC; (vi) to the extent that holders
of Class A Common Stock have the right to vote thereon,
any issuance or entry into an agreement for the issuance of
capital stock (or any options or other securities convertible
into capital stock) of Reorganized JRC, except as may be
provided for under the Post-Effective Date Management
Incentive Plan or any other management incentive plan;
and (vii) to the extent that holders of Class A Common
Stock have the right to vote thereon, any redemption,
purchase or other acquisition by Reorganized JRC of any
of its capital stock (except for purchases from employees
upon termination of employment).
The Class B Common Stock will be entitled to a separate
class vote on any amendment or modification of any rights
or privileges of the Class B Common Stock that does not
equally affect the Class A Common Stock. In any
liquidation, dissolution or winding up of the Company, all
assets will be distributed to holders of the New Common
Stock on a pro rata basis.
Charter Documents:
Chief Executive
Officer:
Post-Effective Date
Management
Incentive Plan:
Registration Rights
Agreement:
Indemnification:
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The charter documents for Reorganized JRC and each of
its subsidiaries shall be in a form reasonably satisfactory to
the Consenting Lenders and shall provide, among other
things, for limitations on the transfer of the New Common
Stock to ensure that Reorganized JRC remains a private
company.
The Chief Executive Officer of Reorganized JRC shall be
selected by the Board of Directors of Reorganized JRC.
The Plan shall provide for the adoption of a post-Effective
Date management incentive plan (the "Post-Effective Date
Management Incentive Plan"), pursuant to which up to
10% of the equity of Reorganized JRC shall be reserved
for the Board of Directors of Reorganized JRC to grant
options to purchase New Common Stock to the members
of such Board and the members of the management of the
Reorganized Company. The Post-Effective Date
Management Incentive Plan will contain terms and
conditions (including the form of equity grant) as
determined by the Board of Directors of Reorganized JRC.
On the Effective Date, Reorganized JRC and the Existing
Lenders shall enter into a Registration Rights Agreement,
which, without limitation, shall provide for (i) "piggy-
back" registration rights for the New Common Stock (with
customary exceptions, including Reorganized JRC's initial
public offering); (ii) following the initial public offering of
Reorganized JRC, for those holders of New Common
Stock that cannot sell freely under Rule 144 of the
Securities Act of 1933, as amended, S-3 or "short-form"
demand registration rights for the New Common Stock
(with customary limitations); (iii) information rights,
including the right of prospective purchasers of the New
Common Stock to obtain non-public information upon
execution of a confidentiality agreement; and (iv)
preemptive rights (with customary exceptions).
The Consenting Lenders and Reorganized Debtors shall
agree, and the Plan and confirmation order shall provide
that, all rights to exculpation, indemnification and
advancement of expenses for acts or omissions occurring at
or prior to the consummation of the Plan, whether asserted
or claimed prior to, at or after the consummation of the
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Plan (including any matters arising in connection with the
transactions contemplated by this Restructuring Term
Sheet and the Plan Support Agreement), existing as of the
Petition Date in favor of each of the directors and officers
(statutory or otherwise) of JRC or its subsidiaries as of the
Petition Date, (collectively, "Indemnitees"), in the
certificate of incorporation or by-laws (or comparable
organization documents) of JRC or any of its subsidiaries,
as applicable, or in any agreement shall survive the
Effective Date and shall continue in full force and effect
(and not be modified, amended or terminated in any
manner adverse to any Indemnitee without the written
consent of the affected Indemnitee) for a period of not less
than six years following the consummation of the Plan.
Separation Agreement The Consenting Lenders and the Existing Agent shall not,
With James Hall: as long as the Plan Support Agreement is in effect, initiate,
participate or cooperate in any manner in any proceeding
to avoid or seek disgorgement of, under chapter 5 of the
Bankruptcy Code or otherwise, the "Settlement Payment"
and the other payments provided for in that certain
Transition and Separation Agreement between JRC and
James Hall, dated as of January 20, 2009.
Pre-Effective Date Neither the Existing Agent nor the Consenting Lenders
Management Incentive shall, as long as the Plan Support Agreement is in effect,
Plan: oppose the Debtors' request for the Bankruptcy Court's
approval, or implementation of, the pre-Effective Date
management incentive plan as memorialized in the Journal
Register 2008 Management Incentive Plan.
Financial Advisor The Debtors shall retain Lazard as financial advisors in
Retention: connection with the Restructuring, on terms consistent with
those previously agreed to by the Existing Agent.
IV. EXIT FINANCING
Revolving Facility:
On the Effective Date, Reorganized JRC shall enter into
the Revolving Facility. As an inducement to providing a
commitment under the Revolving Facility, (i) each Existing
Lender that agrees to become a Revolving Lender may
receive its pro rata share ofup to 20% of the New
Common Stock outstanding as of the Effective Date (the
"Revolving Facility Stock"), subject to reduction for
warrants to purchase New Common Stock issued to
Revolving Lenders that are not Existing Lenders to the
extent authorized by (with such consent not to be
unreasonably withheld), and on terms acceptable to, the
Consenting Lenders (the "Revolving Facility Warrants");
and (ii) each non-Existing Lender that agrees to become a
Revolving Lender may, with the consent of the Consenting
Lenders (with such consent not to be unreasonably
withheld), receive its pro rata share of the Revolving
Facility Warrants.
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Term Loan
Facilities:
v. OTHER TERMS
Conditions Precedent
To Confirmation:
To Effective Date:
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The Tranche A Term Loan Facility and the Tranche B Term
Loan Facility will have the terms set forth in the respective
Term Loan Facilities Term Sheets.
(a) the Company shall have obtained a commitment
(for at least $25 million) for the Revolving
Facility, on terms and conditions that (i) are
substantially the terms and conditions set forth in
the Revolving Facility Term Sheet or, if the
Revolving Facility shall be provided by
Revolving Lenders other than the Existing
Lenders, on terms and conditions acceptable to
the Consenting Lenders; and (ii) support the
Debtors' demonstration that (x) the Plan is
feasible; and (y) Reorganized JRC will have the
ability to satisfy its obligations to pay current
interest and principal under the Term Facilities;
and
(b) reasonable, customary and appropriate severance
and other compensation agreements covering the
period commencing on the Effective Date of the
Plan, and lasting for a period of one year, will be
negotiated and agreed upon among JRC 's board
of directors and those current officers of the
Company that will continue with the
Reorganized Company (as identified at least ten
(1 0) days before the hearing on the confirmation
of the Plan). Such agreements, as well as the
identity of such officers, shall be in a form and
substance acceptable to the Consenting
Lenders.
Conditions precedent to the consummation of the Plan,
each of which may be waived in writing by the Consenting
Lenders, shall include, but not be limited to, the following:
(a) the disclosure statement with respect to the Plan
shall be consistent with the provisions of this
Restructuring Term Sheet and otherwise in
form and substance reasonably satisfactory to
the Consenting Lenders (such disclosure
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statement, the "Disclosure Statement");
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(b) an order confirming the Plan (the
"Confirmation Order"), in form and substance
reasonably satisfactory to the Consenting
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Bankruptcy Court and shall have become a
final order, not subject to a stay;
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(c) the Debtors shall have executed and delivered
appropriate definitive documentation regarding
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the Restructuring, including, without limitation,
(i) the Revolving Facility and all documents
ancillary thereto; (ii) each of the Term Loan
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Facilities and all documents ancillary thereto;
(iii) the amended and restated certificate of
incorporation and by-laws of Reorganized JRC
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and each of its subsidiaries (which documents
shall contain provisions requiring no more than
majority approval to amend such documents);
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and (iv) the Registration Rights Agreement,
each in form and substance reasonably
satisfactory to the Debtors and the Consenting
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(d) all material governmental, regulatory and third
party approvals, waivers and/or consents in
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have been obtained and shall remain in full
force and effect, and there shall exist no claim,
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action, suit, investigation, litigation or
proceeding, pending or threatened in any court
or before any arbitrator or governmental
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instrumentality, which would prohibit the
transactions contemplated by the Restructuring;
(e) there shall not have been any material adverse
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change (as measured against the information
provided to the Existing Agent and/or its
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advisors prior to the Petition Date) in the status
of any claims against the Debtors on account of
pension withdrawal liability;
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(f) there shall not have been any material adverse
change (as measured against the information
provided to the Existing Agent and/or its
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Lender Termination
Events:
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of any claims against the Debtors on account of
taxes assessed by the State of Connecticut with
respect to pending or completed audits (the
"Connecticut Tax Claims"), including the
Debtors' ability to pay the Connecticut Tax
Claims over an extended period of time in
accordance with section 1129(a)(9)(C) of the
Bankruptcy Code;
(g) the Debtors shall have cash on hand as of the
Effective Date of at least an amount to be
agreed;
(h) the Revolving Facility (i) shall have closed on
on substantially the terms and conditions set
forth in the Revolving Facility Term Sheet or, if
the Revolving Facility shall be provided by
Revolving Lenders other than the Existing
Lenders, on terms and conditions acceptable to
the Consenting Lenders; (ii) shall be in full
force and effect, and (iii) the extension of credit
thereunder shall be available upon (and subject
to) the Effective Date;
(i) all other conditions precedent relating to
Revolving Facility and the Term Loan
Facilities, as set forth in Schedule D hereto,
shall have been satisfied; and
(j) no Lender Termination Event or Debtor
Termination Event shall have occurred that
shall not have been waived by the Consenting
Lenders or the Debtors, as applicable.
This Restructuring Term Sheet shall be terminated and all
of the obligations of the parties hereto shall be of no
further force or effect, in the event (each, a "Lender
Termination Event") that any of the following occurs:
(a) the Company shall fail to file the Plan and the
Disclosure Statement no later than the week of
February 15, 2009;
(b) any of the pleadings filed by the Company
seeking customary "first day" relief, including,
without limitation, terms for retention of
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professionals in the Chapter 11 Cases
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(collectively, the "First Day Pleadings"), are
not, in form and substance, satisfactory to the
Existing Agent;
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approved by the Bankruptcy Court on or
before April 3, 2009;
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(d) the Plan shall not have been confirmed by the
Bankruptcy Court on or before June 3, 2009 or
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an event shall have occurred, or an order shall
have been entered by the Bankruptcy Court
and shall not have been vacated within 30 days
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thereof, that shall have the practical effect of
preventing confirmation of the Plan on or
before such date;
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(e) the Effective Date shall not have occurred on
or before July 1, 2009;
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(f) there shall be any material modification to any
terms of the Restructuring that is inconsistent
with (i) the terms and conditions set forth in
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financial projections provided to the Existing
Agent by the Company prior to the Petition
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Date, in each case, without the prior written
consent of the Consenting Lenders;
(g) JRC shall withdraw, or file a motion to
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withdraw, the Plan or submit an amended plan
of reorganization or liquidation that is
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materially adverse to the Existing Lenders or
materially inconsistent with the terms and
provisions of this Restructuring Term Sheet;
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(h) any event, development or circumstance (other
than any event, development or circumstance
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arising from or relating to (A) agreed-upon
operational restructuring as set forth in the
Company's business plan dated October 15,
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2008, or (B) the Chapter 11 Cases) shall have
occurred on or after January 1, 2009 that,
either alone or in combination, has had or
could reasonably be expected to have a
I material adverse effect on the business,
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Debtor Termination
Events:
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operations, assets, liabilities, condition
(financial or otherwise) or prospects of the
Company taken as a whole or the Reorganized
Company taken as a whole;
(i) a trustee, responsible officer, or an examiner
with powers beyond the duty to investigate and
report, as set forth in subclauses (3) and ( 4) of
clause (a) of section 1106 of the Bankruptcy
Code shall have been appointed under section
1104 or 1105 of the Bankruptcy Code for
service in the Chapter 11 Cases;
(j) the Chapter 11 Cases shall have been
converted to cases under chapter 7 of the
Bankruptcy Code; or
(k) the Debtors shall have breached any material
provision of this Restructuring Term Sheet or
the Plan Support Agreement.
The foregoing Lender Termination Events are intended
solely for the benefit of the Consenting Lenders.
Upon the occurrence of any of the Lender Termination
Events, this Restructuring Term Sheet shall terminate
automatically upon (x) the seventh (ih) business day after
the occurrence of such Lender Termination Event set
forth in subparagraphs (a), (d), (e), (f), (j), and (k) above,
unless waived in writing by the Consenting Lenders, in
their sole discretion before the expiration of such waiver
period; or (y) in case of the Lender Termination Events
set forth in subparagraphs (b), (c), (g), (h), and (i) above,
(i) written notice of such Termination Event provided to
the Debtors by the Existing Agent; provided that the
Debtors hereby agree to waive the requirement that the
automatic stay under section 362 of the Bankruptcy Code
be lifted in connection with giving such notice (and not to
object to the Consenting Lenders seeking to lift the
automatic stay in connection with giving such notice, if
necessary); and (ii) such Termination Event remaining
uncured for at least ten (10) days following the delivery
of notice thereof.
This Restructuring Term Sheet may be terminated by the
Company and all of the obligations of the parties hereto
shall be of no further force or effect, in the event (each, a
"Debtor Termination Event") that any of the following
occurs:
(a) the Board terminates the Plan Support Agreement
pursuant to Section 3 thereof; or
(b) the Consenting Lenders shall have breached any
material provision of this Restructuring Term
Sheet or the Plan Support Agreement.
The foregoing Debtor Termination Events are intended
solely for the benefit of the Debtors.
Upon the occurrence of any of Debtor Termination Event,
the termination of this Restructuring Term Sheet shall be
effective upon (i) written notice being provided to the
Existing Agent by the Debtors; and (ii) such breach (if
applicable) remaining uncured for at least ten (10) days
following the Existing Agent's receipt of such notice.
Expenses:
JRC will reimburse all fees and expenses required to be
paid under the Existing Credit Agreement in connection
with the Restructuring, including, but not limited to, the
fees and expenses of counsel (including but not limited to
Milbank, Tweed, Hadley & McCloy LLP) and financial
advisors (including but not limited to Loughlin Meghji &
Co.)
First Day Pleadings:
The Debtors shall furnish to the Existing Agent drafts of
all First Day Pleadings as promptly as possible, but in no
event later than the date of execution of the Plan Support
Agreement, and the Existing Agent shall promptly review
and return any comments on such drafts to the Debtors.
No Waiver:
Nothing in this Restructuring Term Sheet shall affect in
any way, or be deemed a waiver of, any of the rights of
(i) any of the holders of the Lender Claims or (ii) the
Company under any applicable instrument, document or
law, except as provided herein or the Plan Support
Agreement.
Governing Law:
State of New York.
16
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Borrower
Guarantors
Administrative Agent
Lenders
Facility
Availability
Letters of Credit
SCHEDULE A- REVOLVING FACILITY
Journal Register Company (the "Borrower"), a Delaware corporation.
Each of the Borrower's direct and indirect existing and future
wholly-owned subsidiaries (collectively, the "Guarantors"; the
Borrower and the Guarantors, collectively, the "Loan Parties").
An entity to be determined (in such capacity, the "Revolver
Administrative Agent").
One or more revolving credit lenders to be determined (collectively,
the "Revolving Lenders").
A three-year revolving facility (the "Revolving Facility"; the
commitments thereunder, the "Revolving Commitments") in the
amount of up to $25 million (the loans thereunder, the "Revolving
Loans").
The Revolving Facility shall be available on a revolving basis during
the period commencing on the Closing Date (as defined below) and
ending on the third anniversary thereof (the "Revolving Facility
Termination Date").
Availability under the Revolving Facility will be subject to the
Borrowing Base referred to below. "Availability" means, at any
time, an amount equal to (i) the lesser of the Revolving Commitment
and the Borrowing Base minus (ii) the sum of the aggregate
outstanding amount of borrowings under the Revolving Facility plus
the undrawn amount of outstanding Letters of Credit (as defined
below) issued for the account of the Borrower (and any
unreimbursed amounts in respect of drawings under such Letters of
Credit).
A portion of the Revolving Facility to be determined shall be
available for the issuance of letters of credit (the "Letters of Credit")
by one or more Revolving Lenders designated under the Revolving
Facility, and which have agreed to act, as an issuing bank thereunder
(in such capacity, each an "Issuing Lender"). No Letter of Credit
shall have an expiration date after the earlier of (a) one year after the
date of issuance and (b) five business days prior to the Revolving
Facility Termination Date; provided that any Letter of Credit with a
one-year tenor may provide for the renewal thereof for additional
one-year periods (which shall in no event extend beyond the date
referred to in clause (b) above).
A-1
Drawings under any Letter of Credit shall be reimbursed by the
Borrower (whether with its own funds or with the proceeds of
Revolving Loans) on the same or (subject to notice of such drawing
being given by a time to be agreed) the next business day. To the
extent that the Borrower does not so reimburse the relevant Issuing
Lender, the Revolving Lenders under the Revolving Facility shall be
irrevocably and unconditionally obligated to reimburse such Issuing
Lender on a illQ rata basis.
Outstanding letters of credit under the Existing Credit Facility as of
the Effective Date shall be continued as Letters of Credit under, and
constitute utilization of, the Revolving Facility.
Borrowing Base The "Borrowing Base" will equal the sum ofup to 85% of Loan
Parties' eligible accounts receivable, plus the lesser of (i) up to a
percentage to be determined of Loan Parties' eligible inventory
(valued at the lower of cost (FIFO) or market) and (ii) the product of
up to 85% multiplied by the net orderly liquidation value percentage
identified in the most recent inventory appraisal ordered by the
Revolver Administrative Agent multiplied by the Loan Parties'
eligible inventory (valued at the lower of cost (FIFO) or market),
less customary reserves established by the Revolver Administrative
Agent in its Permitted Discretion. "Permitted Discretion" means a
determination made in good faith and in the exercise of reasonable
(from the perspective of a secured asset based lender) business
judgment.
The definitions of eligible accounts receivable and eligible inventory
will be determined by the Revolver Administrative Agent in its
Permitted Discretion, but will exclude, without limitation, the
ineligible categories set forth below:
Ineligible Accounts Receivable: (i) accounts which remain unpaid
90 days after the invoice date or which have been written off the
books of the relevant Loan Party or otherwise designated as
uncollectible; (ii) accounts owing by an account debtor as to which
50% or more of the dollar amount of all accounts owing by such
account debtor are ineligible; (iii) accounts to any one account
debtor or group of affiliated account debtors that are in excess of
10% of total eligible accounts; ( iv) accounts which do not arise from
the sale of goods or performance of services in the ordinary course
of the Borrower's business; (v) accounts owing by a director, officer,
employee or affiliate of the Borrower; (vi) federal government
accounts which do not comply with the Assignment of Claims Act;
(vii) accounts owing by an account debtor outside of the U.S.; (viii)
accounts that are payable in any currency other than dollars; (ix)
contra accounts; (x) accounts which are the subject of a bill-and-
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hold, guaranteed sale, sale and return, sale on approval,
consignment, or other repurchase or return basis; (xi) accounts for
which the goods have not been shipped or for which the services
giving rise to such account have not been performed or if such
account was invoiced more than once; (xii) accounts which represent
a progress billing that are contingent upon the Borrower's
completion of any further performance or relate to payments of
interest; (xiii) accounts with respect to which an invoice has not
been sent to the applicable account debtor; (xiv) accounts which are
not subject to a first priority perfected security interest in favor of
the Revolver Administrative Agent; (xv) accounts which are subject
to liens other than a lien in favor of the Revolver Administrative
Agent and permitted encumbrances which do not have priority over
the lien in favor of the Revolver Administrative Agent; (xvi)
accounts with respect to which any covenant, representation, or
warranty contained in the Revolving Loan Documents (as defined
below) has been breached or is not true; (xvii) accounts owed by an
insolvent or bankrupt debtor or a debtor who has ceased operations;
(xviii) accounts in respect of subscriptions and/or classified ads
owing by an account debtor which is a natural person; and (xix) such
other categories as may be established by the Revolver
Administrative Agent in its Permitted Discretion.
Ineligible Inventory: (i) inventory which is slow moving, obsolete,
defective or unfit for sale; (ii) work-in-process inventory, bill-and-
hold goods or returned inventory, and finished goods (such as
newspapers); (iii) inventory outside the United States; (iv) inventory in
transit; (v) inventory at locations that are not owned by a Loan Party
(unless subject to reserves to be agreed); (vi) inventory which is not
owned by the relevant Loan Party free and clear of all liens and
rights except the liens in favor of the Revolver Administrative Agent
and permitted encumbrances which do not have priority over the lien
in favor of the Revolver Administrative Agent; (vii) inventory on
consignment; (viii) inventory which consists of display items or
packing or shipping materials, manufacturing supplies or
replacement parts; (ix) inventory which is not subject to a first
priority perfected security interest in favor of the Revolver
Administrative Agent; (x) inventory with respect to which any
covenant, representation, or warranty contained in the Revolving
Loan Documents has been breached or is not true; (xi) inventory
other than newsprint and printing plates; and (xii) such other
categories as may be established by the Revolver Administrative
Agent in its Permitted Discretion.
In addition, the Revolver Administrative Agent would retain the
right, from time to time, in its Permitted Discretion, to establish
additional standards of eligibility and reserves against eligibility,
adjust reserves and to reduce advance rates or reduce one or more of
A-3
the sub-limits (if applicable) used in computing the Borrowing Base.
Maturity All Revolving Loans shall be due and payable on the Revolving
Facility Termination Date.
Fees and Interest As set forth on Annex A-1 below.
Rates
Optional Prepayments Revolving Loans may be prepaid by the Borrower without premium
and Commitment or penalty (but subject to payment of break funding costs, if any, in
Reductions respect of Eurodollar Loans (as defined below)), and Revolving
Commitments may be reduced by the Borrower without premium or
penalty, in minimum amounts to be agreed in the Revolving Loan
Documents.
Mandatory In the event that the sum of the aggregate outstanding amount of
Prepayments borrowings under the Revolving Facility plus the undrawn amount of
outstanding Letters of Credit issued for the account of the Borrower
(and any unreimbursed amounts in respect of drawings under such
Letters of Credit) shall exceed the lesser of (a) the Revolving
Commitments and (b) the Borrowing Base, outstanding Revolving
Loans shall be prepaid (and/or Letters of Credit shall be cash
collateralized) in the amount of such excess.
Collateral The obligations of the Loan Parties in respect of the Revolving
Facility and all obligations of the Loan Parties in respect of cash
management services owing to any Revolving Lender or any affiliate
thereof shall be secured by (i) a first priority, perfected security
interest in substantially all accounts receivable, inventory, deposit
accounts and other related assets of the Loan Parties, except for those
assets as to which the Revolver Administrative Agent shall determine
in its sole discretion that the costs of obtaining such a security
interest are excessive in relation to the value of the security to be
afforded thereby and other customary exclusions acceptable to the
Revolver Administrative Agent (the "Revolving Facility Collateral");
and (ii) a second priority, perfected security interest in all other assets
of the Loan Parties securing the Tranche A Term Loan Facility (the
"Term Loan Facility Collateral" and, together with the Revolving
Facility Collateral, the "Collateral").
The liens securing the Revolving Facility will be subject to and
governed by an intercreditor agreement, on terms acceptable to the
Revolver Administrative Agent and the Revolving Lenders (in their
sole discretion), with the Tranche A Term Lenders (and/or the
Tranche A Term Administrative Agent) and the Tranche B Term
Lenders (and/or the Tranche B Term Administrative Agent).
A-4
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Use of Proceeds
Closing Date
Ongoing Conditions
Documentation
Representations
The proceeds of the Revolving Loans shall be used by the Borrower
for general corporate purposes (including working capital
requirements) of the Loan Parties in the ordinary course of business,
and to make payments required under the Plan not exceeding an
aggregate amount to be agreed.
The Revolving Facility shall become effective as of the date (the
"Closing Date", which shall be the same date as the Effective Date)
on which the conditions precedent described in Schedule D hereto
shall be satisfied or waived.
The making of each extension of credit under the Revolving Facility
on or after the Closing Date shall be conditioned upon: (a) the
accuracy of all representations and warranties in the Revolving Loan
Documents (including, without limitation, the material adverse
change representation) (or, if any such representation and warranty is
expressly stated to have been made as of a specific date, as of such
specific date); (b) there being no default or event of default in
existence at the time of, or after giving effect to the making of, such
extension of credit; and (c) after giving effect to such extension of
credit, the total extensions of credit under the Revolving Facility not
exceeding the lesser of the Revolving Commitments or Borrowing
Base then in effect. As used herein and in the Revolving Loan
Documents, a "material adverse change" shall mean any event,
development or circumstance that has had or could reasonably be
expected to have a material adverse effect on (i) the business, assets,
operations, prospects or condition, financial or otherwise, of the
Borrower and its subsidiaries taken as a whole (other than the filing
of the bankruptcy petition and the agreed upon operational
restructuring), (ii) the ability of any Loan Party to perform any of its
obligations under the Revolving Loan Documents to which it is a
party, (iii) the Collateral, or the Revolver Administrative Agent's
liens (on behalf of itself and the Revolving Lenders) on the Collateral
or the priority of such liens, or (iv) the rights of or benefits available
to the Revolver Administrative Agent, the Issuing Lenders or the
Revolving Lenders thereunder.
The credit documentation for the Revolving Facility (the "Revolving
Loan Documents") shall contain representations and warranties,
covenants and events of default relating to the Borrower and its
subsidiaries customary for financings of this type and other terms
deemed appropriate by the Revolving Lenders, including without
limitation the following:
Financial statements; absence of undisclosed liabilities; no material
adverse change; existence and standing, authorization and validity;
compliance with law; corporate power and authority; enforceability
A-5
of Revolving Loan Documents; no conflict with law or contractual
obligations; no material litigation; no default; ownership of property;
liens; intellectual property; no burdensome restrictions; taxes;
insurance; Federal Reserve regulations; ERISA; Investment Company
Act; subsidiaries; environmental matters; labor matters; accuracy of
disclosure; perfection and priority of security interests under the
Revolving Loan Documents; and enforceability of guarantees by the
Guarantors under the Revolving Loan Documents.
Affirmative Delivery of monthly, quarterly and annual financial statements (in
Covenants each case, within a time period to be agreed), quarterly compliance
certificates and annual projections, monthly collateral reporting
(including supporting information requested by the Revolver
Administrative Agent) (or more frequent such reports if excess
Availability shall be less than $10 million) , borrowing base certificates
and other information requested by the Revolving Lenders or the
Revolver Administrative Agent; payment of obligations; continuation
of business and maintenance of existence and material rights and
privileges; compliance with laws; maintenance of property and
insurance; maintenance ofbooks and records; right of the Revolving
Lenders and the Revolver Administrative Agent to inspect property
and books and records (including periodic field examinations and
inventory appraisals); notices of defaults, litigation and other material
events; compliance with environmental laws; casualty and
condemnation; use of proceeds; and further assurances (including
with respect to security interests in after-acquired property).
Financial Covenants So long as excess Availability shall be less than $7.5 million, a
minimum fixed charge coverage ratio of 1.1: 1.0, tested quarterly on a
trailing four-quarter basis; provided that the fixed charge coverage
ratio shall be reported quarterly regardless of excess Availability.
Negative Covenants Limitations on: indebtedness (including guarantee obligations and
preferred stock of subsidiaries); liens; mergers, consolidations,
liquidations and dissolutions; sales of assets; payment of restricted
payments (including dividends and other payments in respect of
capital stock); investments (including acquisitions), loans and
advances; sale and leaseback transactions; swap agreements; optional
payments and modifications of subordinated debt and certain other
debt to be determined; transactions with affiliates; changes in fiscal
year; negative pledge clauses and other restrictive agreements; and
amendment of material documents.
Events of Default Nonpayment of principal when due; nonpayment of interest, fees or
other amounts after a grace period to be agreed upon; material
inaccuracy of representations and warranties; violation of covenants
(subject, in the case of certain affirmative covenants, to a grace
period to be agreed upon); cross-default to occurrence of a default
A-6
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Voting
Assignments and
Participations
(whether or not resulting in acceleration) under any other agreement
governing indebtedness, in excess of an amount to be agreed upon, of
the Borrower or any of its subsidiaries; bankruptcy events; certain
ERISA events; material judgments; any of the Revolving Loan
Documents shall cease to be in full force and effect or any Loan Party
shall so assert; any security interests created by the security documents
shall cease to be enforceable and of the same priority purported to be
created thereby; and a change of control (the definition of which is to
be agreed).
Amendments, waivers and consents with respect to the Revolving
Loan Documents shall require the approval of Revolving Lenders
holding not less than a majority of the Revolving Commitments,
except that: (a) the consent of each Revolving Lender directly
affected thereby shall be required with respect to (i) reductions in the
amount or extensions of the scheduled date of maturity of any loan or
reductions in the amount or extensions of the payment date for any
required mandatory payments (if any), (ii) reductions in the rate of
interest or any fee or extensions of any due date thereof and (iii)
increases in the amount or extensions of the expiry date of any
Revolving Lender's commitment; (b) the consent of each Revolving
Lender shall be required to (i) modify the pro rata sharing
requirements of the Revolving Loan Documents, (ii) permit any Loan
Party to assign its rights under the Revolving Loan Documents, (iii)
modify any of the voting percentages or (iv) release all or
substantially all of the Guarantors or all or substantially all of the
Collateral, except as otherwise permitted in the Revolving Loan
Documents; and (c) the consent of Revolving Lenders holding not
less than 75% of the Revolving Commitments shall be required to (i)
increase the advance rates set forth in the definition of Borrowing
Base or (ii) modify the eligibility criteria with respect to the
Borrowing Base components if the effect thereof shall increase the
Borrowing Base.
The Revolving Lenders shall be permitted to assign all or a portion of
their loans and commitments under the Revolving Facility with the
consent, not to be unreasonably withheld, of the Revolver
Administrative Agent, each Issuing Lender and, so long as no event
of default under the Revolving Facility is continuing, the Borrower.
In the case of partial assignments (other than to another Revolving
Lender, an affiliate of a Revolving Lender or an approved fund, the
minimum assignment amount shall be $2 million, unless otherwise
agreed by the Revolver Administrative Agent. The Revolving
Lenders shall also be permitted to sell participations in their loans.
Participants shall have the same benefits as the Revolving Lenders
with respect to yield protection and increased cost provisions. Voting
rights of participants shall be limited to those matters with respect to
which the affirmative vote of the Revolving Lender from which it
A-7
purchased its participation would be required. Pledges of loans in
accordance with applicable law shall be permitted without restriction.
Each Revolving Lender may disclose information to prospective
participants and assignees. The Revolver Administrative Agent will
be entitled to a processing fee of $3,500 from the assignor or the
assignee in connection with any assignment.
Yield Protection The Revolving Loan Documents shall contain customary provisions
(a) protecting the Revolving Lenders against increased costs or loss
of yield resulting from changes in reserve, tax, capital adequacy and
other requirements of law and from the imposition of or changes in
withholding or other taxes and (b) indemnifying the Revolving
Lenders for "breakage costs" incurred in connection with, among
other things, any prepayment of a Eurodollar Loan (as defined below)
on a day other than the last day of an interest period with respect
thereto.
Field Examinations Field examinations will be conducted on an ongoing basis at regular
intervals at the discretion of the Revolver Administrative Agent, to
ensure the adequacy of Borrowing Base collateral and related
reporting and control systems. Up to two field examinations per year
will be conducted at the Borrower's expense; provided that there
shall be no limitation on the number or frequency of field
examinations if an event of default under the Revolving Facility shall
have occurred and be continuing or if excess Availability shall be less
than $1 0 million.
Appraisals Inventory appraisals will be conducted on an annual basis at the
discretion of the Revolver Administrative Agent. Up to one
inventory appraisal per year will be conducted at the Borrower's
expense; provided that there shall be no limitation on the number or
frequency of such appraisals if an event of default under the
Revolving Facility shall have occurred and be continuing or if excess
Availability shall be less than $10 million.
Cash Dominion Within 60 days after the Closing Date (which date may be extended
by the Revolver Administrative Agent in its sole discretion), the
Borrower and its subsidiaries will direct all account debtors (other
than account debtors paying in cash or via check at offices of the
Borrower and its subsidiaries) to forward payments directly to lock
boxes subject to lock box agreements with depositary institutions
reasonably satisfactory to the Revolver Administrative Agent
(provided that cash and check collections shall be deposited promptly
after collection into a blocked account by the relevant Loan Party).
During the existence of an event of default or at any time excess
Availability shall be less than $7.5 million, the Revolver
Administrative Agent may direct that all payments or deposits into
such lock boxes will be swept on a daily basis into a blocked account
A-8
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Expenses and
Indemnification
Governing Law and
Forum
with the Revolver Administrative Agent. The Revolver
Administrative Agent, any Revolving Lender to be designated and/or
another bank reasonably acceptable to the Revolver Administrative
Agent shall be the Borrower's principal depository and disbursement
bank(s). The appropriate documentation, including blocked account
and/or lockbox agreements reasonably acceptable to the Revolver
Administrative Agent, will be required for all depository accounts of
the Borrower and its subsidiaries at depository institutions other than
the Revolver Administrative Agent (other than payroll, zero balance,
trust, employee benefits and other customary excluded accounts).
The Borrower shall pay (a) all reasonable out-of-pocket expenses of
the Revolver Administrative Agent associated with the preparation,
execution, delivery and administration of the Revolving Loan
Documents and any amendment or waiver with respect thereto
(including the reasonable fees, disbursements and other charges of
counsel), (b) all out-of-pocket expenses of the Revolver
Administrative Agent and the Revolving Lenders (including the fees,
disbursements and other charges of counsel) in connection with the
enforcement of the Revolving Loan Documents and (c) fees and
expenses associated with collateral monitoring, collateral reviews and
appraisals (including field examination fees plus out-of-pocket
expenses), environmental reviews and fees and expenses of other
advisors and professionals engaged by the Revolver Administrative
Agent.
The Revolver Administrative Agent and the Revolving Lenders (and
their affiliates and their respective officers, directors, employees,
advisors and agents) will have no liability for, and will be
indemnified and held harmless against, any loss, liability, cost or
expense incurred in respect of the financing contemplated hereby or
the use or the proposed use of proceeds thereof (except to the extent
found in a final judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the
indemnified party).
State of New York.
A-9
Interest Rate
ANNEXA-1
INTEREST AND CERTAIN FEES
The Borrower may elect that the Revolving Loans comprising a
borrowing under the Revolving Facility bear interest at a rate per
annum equal to: (i) the Alternate Base Rate plus the Applicable
Margin; or (ii) the Adjusted LIBO Rate plus the Applicable Margin.
As used herein:
"ABR Loans" means Revolving Loans bearing interest based upon
the Alternate Base Rate.
"Adjusted LIBO Rate" means, for any Eurodollar Loan for an
interest period selected by the Borrower equal to one, two, three or
six months, a rate per annum determined by the Revolver
Administrative Agent to be equal to the quotient of the LIBO Rate
for such loan for such interest period divided by 1 minus the statutory
reserve rate for such loan for such interest period.
"Alternate Base Rate" means, with respect to any ABR Loan, for any
day, the greatest of (a) the Prime Rate in effect on such day, (b) the
Federal Funds Effective Rate in effect on such day plus Y2 of 1% and
(c) the Adjusted LIBO Rate for a one month interest period on such
day (or if such day is not a Business Day, the immediately preceding
Business Day) plus 1 %; provided that, for the avoidance of doubt, the
Adjusted LIBO Rate for any day shall be based on the rate appearing
on the Reuters Screen LIBOR01 Page (or on any successor or
substitute page of such page) at approximately 11 :00 a.m. London
time on such day. Any change in the Alternate Base Rate due to a
change in the Prime Rate, the Federal Funds Effective Rate or the
Adjusted LIBO Rate shall be effective from and including the
effective date of such change in the Prime Rate, the Federal Funds
Effective Rate or the Adjusted LIBO Rate, respectively.
"Applicable Margin" means (a) with respect to ABR Loans, 4.50%
per annum and (b) with respect to Eurodollar Loans, 5.50% per
annum.
"Eurodollar Loans" means Revolving Loans bearing interest based
upon the LIBO Rate.
"Federal Funds Effective Rate" means, for any day, the weighted
average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds
brokers, as published on the next succeeding business day by the
A-1-1
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Interest Payment
Dates
Commitment Fees
Letter of Credit Fees
Default Rate
Federal Reserve Bank ofNew York, or, if such rate is not so
published for any day that is a business day, the average of the
quotations for such day for such transactions received by the
Revolver Administrative Agent from three Federal funds brokers of
recognized standing selected by it.
"LIBO Rate" means, with respect to any Eurodollar Loan for any
interest period therefor, the rate appearing on the Reuters Screen
LIBOR01 Page (or on any successor or substitute page of such page)
at approximately 11 :00 a.m. London time, two London business days
prior to the commencement of such interest period, as the rate for
dollar deposits with a maturity comparable to such interest period.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by the entity acting as the Revolver
Administrative Agent (or other designated bank) as its prime rate in
effect at its principal office in New York City; each change in the
Prime Rate shall be effective from and including the date such
change is publicly announced as being effective.
In the case of ABR Loans, quarterly in arrears.
In the case of Eurodollar Loans, on the last day of each relevant
interest period and, in the case of any interest period longer than three
months, on each successive date three months after the first day of
such interest period.
Accrued interest on the Revolving Loans shall be payable in cash on
each interest payment date.
The Borrower shall pay a commitment fee on the Revolving Facility
calculated at a per annum rate equal to 1.00% on the average daily
unused portion of the Revolving Commitments, payable quarterly in
arrears.
The Borrower shall pay a letter of credit fee under the Revolving
Facility at a per annum rate equal to the Applicable Margin then in
effect with respect to Eurodollar Loans thereunder on the aggregate
undrawn amount of each outstanding Letter of Credit. Such fee shall
be shared ratably among the Revolving Lenders and shall be payable
quarterly in arrears.
A fronting fee in an amount to be agreed upon between the Borrower
and the Issuing Lenders on the aggregate undrawn amount of each
Letter of Credit shall be payable quarterly in arrears to the relevant
Issuing Lender for its own account. In addition, customary
processing, issuance, amendment, renewal and extension charges
shall be payable to each Issuing Lender for its own account.
At any time upon the occurrence and during the continuation of any
A-1-2
event of default under the Revolving Facility, all outstanding
Revolving Loans shall bear interest at 2% above the rate otherwise
applicable thereto. Without limiting the foregoing, overdue interest,
fees and other amounts under the Revolving Facility shall bear
interest at 2% above the rate applicable to ABR Loans.
Rate and Fee Basis All per annum rates shall be calculated on the basis of a year of 360
days (or 365/366 days, in the case of ABR Loans the interest rate
payable on which is then based on the Prime Rate) for actual days
elapsed.
Agency Fee An administrative agency fee payable to the Revolver Administrative
Agent in such amount and at such times as shall be agreed in writing
between the Borrower and the Revolver Administrative Agent.
A-1-3
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SCHEDULE B- TRANCHE A TERM LOAN FACILITY
Borrower Journal Register Company (the "Borrower"), a Delaware corporation.
Guarantors Same as for Revolving Facility.
Administrative Agent JPMorgan Chase Bank, N.A. (in such capacity, the "Tranche A Term
Administrative Agent").
Lenders The lenders under the Existing Facility as of the Closing Date
(collectively, the "Tranche A Term Lenders").
Facility A term loan facility (the "Tranche A Term Loan Facility") in an
aggregate principal amount of $1 7 5 million (the loans thereunder,
the "Tranche A Term Loans"), representing a conversion of a
portion of the Lender Claims into the Tranche A Term Loans as of
the Closing Date.
Amortization and The Tranche A Term Loans shall be repayable in consecutive equal
Maturity quarterly installments on the last business day of each fiscal quarter,
commencing with the fiscal quarter ending March 31, 2010, in an
aggregate annual amount of $10 million, with the final installment in
the amount of the then remaining aggregate principal amount of the
Tranche A Term Loans payable on the fourth anniversary of the
Closing Date.
Fees and Interest As set forth on Annex B-1 below.
Rates
Optional Prepayments Tranche A Term Loans may be prepaid by the Borrower without
premium or penalty (but subject to payment of break funding costs, if
any, in respect of Eurodollar Loans (as defined below)) in minimum
amounts to be agreed in the Tranche A Term Loan Documents (as
defined below).
Mandatory
The following amounts shall be applied to prepay the Tranche A
Prepayments
Term Loans:
(a) 100% ofthe net proceeds of any sale or other disposition of
assets (including as a result of casualty or condemnation) by the
Borrower or any of its subsidiaries (subject to certain customary
exceptions (including reinvestment rights) and minimum thresholds
to be agreed);
(b) 100% of the net proceeds of any debt incurrence by the Borrower
B-1
or any of its subsidiaries after the Closing Date (subject to certain
customary exceptions to be agreed); and
(c) a percentage to be agreed of excess cash flow for any fiscal year
of the Borrower (commencing with the fiscal year ending on or
nearest to December 31, 2010, and which will be defined to include
tax refunds and other extraordinary receipts received during such
fiscal year.)
Each such mandatory prepayment of the Tranche A Term Loans shall
be applied pro rata to the remaining installments of the Tranche A
Term Loans. Amounts prepaid in respect of Tranche A Term Loans
may not be reborrowed.
Collateral The obligations of the Loan Parties in respect of the Tranche A Term
Loan Facility shall be secured by (i) a first priority, perfected security
interest in all assets of the Loan Parties, whether consisting of real
property, personal, tangible or intangible property, including all of
the capital stock of the Borrower's subsidiaries) (other than the
Revolving Facility Collateral), except for those assets as to which the
Tranche A Term Administrative Agent shall determine in its sole
discretion that the costs of obtaining such a security interest are
excessive in relation to the value of the security to be afforded
thereby and other customary exclusions acceptable to the Tranche A
Term Administrative Agent, and (ii) a second priority, perfected
security interest in all of the Revolving Facility Collateral.
The liens securing the Tranche A Term Loans will be subject to and
Tranche A Term Administrative Agent and the Tranche A Term
Lenders (in their sole discretion), with the Revolving Lenders (and/or
the Revolver Administrative Agent) and the Tranche B Term Lenders
(and/or the Tranche B Term Administrative Agent).
Closing Date Same as for the Revolving Facility.
Documentation The credit documentation for the Tranche A Term Loan Facility (the
"Tranche A Term Loan Documents") shall contain representations
and warranties, covenants and events of default relating to the
Borrower and its subsidiaries customary for financings of this type
and other terms deemed appropriate by the Tranche A Term Lenders,
including without limitation the following:
Representations Substantially the same as for the Revolving Facility (except for those
which relate to the revolving asset-based nature of the Revolving
B-2
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Affirmative
Covenants
Financial Covenants
Negative Covenants
Events of Default
Voting
Assignments and
Participations
Facility).
Substantially the same as for the Revolving Facility (except for those
which relate to the revolving asset-based nature of the Revolving
Facility).
(i) Minimum EBITDA, (ii) a minimum fixed charge coverage ratio,
(iii) a maximum leverage ratio and (iv) maximum capital
expenditures.
Substantially the same as for the Revolving Facility (except for those,
if any, which relate to the revolving asset-based nature of the
Revolving Facility).
Substantially the same as for the Revolving Facility (except for those,
if any, which relate to the revolving asset-based nature of the
Revolving Facility).
Amendments, waivers and consents with respect to the Tranche A
Term Loan Documents shall require the approval of Tranche A Term
Lenders holding not less than a majority of the aggregate amount of
the Tranche A Term Loans, except that the consent of each Tranche A
Term Lender directly affected thereby shall be required with respect
to (i) reductions in the amount or extensions of the scheduled date of
amortization or final maturity of any Tranche A Term Loan,
(ii) reductions in the principal of any Tranche A Term Loan or the
rate of interest or any fee or extensions of any due date thereof,
(iii) modifications to any of the voting percentages,
(iv) modifications to the pro rata sharing requirements of the Tranche
A Term Loan Documents, (v) assignment by any Loan Party of its
rights under the Tranche A Term Loan Documents and (vi) release of
all or substantially all of the Guarantors, and release of all or
substantially all of the Collateral, except as permitted in the Tranche
A Term Loan Documents.
The Tranche A Term Lenders shall be permitted to assign all or a
portion of their Tranche A Term Loans with the consent, not to be
unreasonably withheld, of the Tranche A Term Administrative
Agent, unless the assignee is a Tranche A Term Lender, an affiliate
of a Tranche A Term Lender or an approved fund. In the case of
partial assignments (other than to another Tranche A Term Lender,
an affiliate of a Tranche A Term Lender or an approved fund, the
minimum assignment amount shall be $1,000,000, unless otherwise
agreed by the Tranche A Term Administrative Agent. The Tranche
A Term Lenders shall also be permitted to sell participations in their
loans. Participants shall have the same benefits as the Tranche A
B-3
Term Lenders with respect to yield protection and increased cost
provisions. Voting rights of participants shall be limited to those
matters with respect to which the affirmative vote of the Tranche A
Term Lender from which it purchased its participation would be
required. Pledges of loans in accordance with applicable law shall be
permitted without restriction. Each Tranche A Term Lender may
disclose information to prospective participants and assignees. The
Tranche A Term Administrative Agent will be entitled to a
processing fee of$3,500 from the assignor or the assignee in
connection with any assignment.
Yield Protection Substantially the same as for the Revolving Facility.
Expenses and Substantially the same as for the Revolving Facility.
Indemnification
Governing Law and State of New York.
Forum
B-4
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Interest Rate
ANNEX B-1
The Borrower may elect that the Tranche A Term Loans bear interest
at a rate per annum equal to: (i) the Alternate Base Rate plus the
Applicable Margin; or (ii) the Adjusted LIBO Rate plus the
Applicable Margin.
As used herein:
"ABR Loans" means Tranche A Term Loans bearing interest based
upon the Alternate Base Rate.
"Adjusted LIBO Rate" means, for any Eurodollar Loan for an
interest period selected by the Borrower equal to one, two, three or
six months, a rate per annum determined by the Tranche A Term
Administrative Agent to be equal to the quotient of the LIBO Rate
for such loan for such interest period divided by 1 minus the statutory
reserve rate for such loan for such interest period; provided that, for
purposes of the Tranche A Term Loan Facility, the Adjusted LIBO
Rate for any interest period shall in no event be less than 5.00% per
annum.
"Alternate Base Rate" means, with respect to any ABR Loan, for any
day, the greatest of (a) the Prime Rate in effect on such day, (b) the
Federal Funds Effective Rate in effect on such day plus 12 of 1% and
(c) the Adjusted LIBO Rate for a one month interest period on such
day (or if such day is not a Business Day, the immediately preceding
Business Day) plus 1 %; provided that, for the avoidance of doubt, the
Adjusted LIBO Rate for any day shall be based on the rate appearing
on the Reuters Screen LIBOR01 Page (or on any successor or
substitute page of such page) at approximately 11 :00 a.m. London
time on such day; and provided further that the Alternate Base Rate
shall in no event at any time be less than 4.00% per annum. Any
change in the Alternate Base Rate due to a change in the Prime Rate,
the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be
effective from and including the effective date of such change in the
Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO
Rate, respectively.
"Applicable Margin" means (a) with respect to ABR Loans, 4.50%
per annum and (b) with respect to Eurodollar Loans, 5.50% per
annum.
"Eurodollar Loans" means Tranche A Term Loans bearing interest
B-1-1
based upon the LIBO Rate.
"Federal Funds Effective Rate" means, for any day, the weighted
average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds
brokers, as published on the next succeeding business day by the
Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a business day, the average of the
quotations for such day for such transactions received by the Tranche
A Term Administrative Agent from three Federal funds brokers of
recognized standing selected by it.
"LIBO Rate" means, with respect to any Eurodollar Loan for any
interest period therefor, the rate appearing on the Reuters Screen
LIBOR01 Page (or on any successor or substitute page of such page)
at approximately 11:00 a.m. London time, two London business days
prior to the commencement of such interest period, as the rate for
dollar deposits with a maturity comparable to such interest period.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by the Tranche A Term Administrative
Agent (or other designated bank) as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate
shall be effective from and including the date such change is publicly
announced as being effective.
Interest Payment
In the case of ABR Loans, quarterly in arrears.
Dates
In the case of Eurodollar Loans, on the last day of each relevant
interest period and, in the case of any interest period longer than three
months, on each successive date three months after the first day of
such interest period.
Accrued interest on the Tranche A Term Loans shall be payable in
cash on each interest payment date.
Default Rate At any time upon the occurrence and during the continuation of any
event of default under the Tranche A Term Loan Facility, all
outstanding Tranche A Term Loans shall bear interest at 2% above
the rate otherwise applicable thereto. Without limiting the foregoing,
overdue interest, fees and other amounts under the Tranche A Term
Loan Facility shall bear interest at 2% above the rate applicable to
ABRLoans.
Rate and Fee Basis All per annum rates shall be calculated on the basis of a year of 360
days (or 365/366 days, in the case of ABR Loans the interest rate
payable on which is then based on the Prime Rate) for actual days
elapsed.
B-1-2
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Agency Fee An administrative agency fee payable to the Tranche A Term
Administrative Agent in such amount and at such times as shall be
agreed in writing between the Borrower and the Tranche A Term
Administrative Agent.
B-1-3
SCHEDULE C- TRANCHE 8 TERM LOAN FACILITY
Borrower Journal Register Company (the "Borrower"), a Delaware corporation.
Guarantors Same as for Tranche A Term Loan Facility.
Administrative Agent An entity to be determined (in such capacity, the "Tranche B Term
Administrative Agent" and, together with the Revolver
Administrative Agent and the Tranche A Term Administrative Agent,
the "Agents").
Lenders The lenders under the Existing Credit Facility as of the Closing Date
(collectively, the "Tranche B Term Lenders" and, together with the
Tranche A Term Lenders and the Revolving Lenders, the "Lenders").
Facility A term loan facility (the "Tranche B Term Loan Facility" and,
together with the Tranche A Term Loan Facility, the "Term Loan
Facilities"; and the Term Loan Facilities and the Revolving Facility,
collectively, the "Facilities") in an aggregate principal amount of
$100 million (the loans thereunder, the "Tranche B Term Loans"
and, together with the Tranche A Term Loans, the "Term Loans"),
representing a conversion of a portion of the Lender Claims into the
Tranche B Term Loans as of the Closing Date.
Maturity Date The Tranche B Term Loans shall be repayable in full on the fifth
anniversary of the Closing Date. There shall be no scheduled
principal amortization payments on the Tranche B Term Loans prior
to the final maturity date thereof.
Fees and Interest As set forth on Annex C-1 below.
Rates
Optional Prepayments Subject to the prior payment in full of the Tranche A Term Loans, the
Tranche B Term Loans may be prepaid by the Borrower without
premium or penalty in minimum amounts to be agreed in the Tranche
B Term Loan Documents.
Mandatory
Subject to the prior payment in full of the Tranche A Term Loans, the
following amounts shall be applied to prepay the Tranche B Term
Prepayments
Loans:
(a) 100% of the net proceeds of any sale or other disposition of
assets (including as a result of casualty or condemnation) by the
Borrower or any of its subsidiaries (subject to certain customary
exceptions (including reinvestment rights) and minimum thresholds
C-1
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Collateral
Closing Date
Documentation
Representations
Affirmative
Covenants
Financial Covenants
Negative Covenants
to be agreed) or receipt of tax refunds or other extraordinary receipts;
(b) 100% of the net proceeds of any debt incurrence by the Borrower
or any of its subsidiaries after the Closing Date (subject to certain
customary exceptions to be agreed); and
(c) a percentage to be agreed of excess cash flow for any fiscal year
of the Borrower (commencing with the fiscal year ending on or
nearest to December 31, 2010).
Each such mandatory prepayment shall be applied ratably to the
Tranche B Term Loans. Amounts prepaid in respect of Tranche B
Term Loans may not be reborrowed.
The obligations ofthe Loan Parties in respect of the Tranche B Term
Loan Facility shall be secured by a third priority, perfected security
interest in all of the Collateral securing the Tranche A Term Loans.
The liens securing the Tranche B Term Loans will be subject to and
Tranche B Term Administrative Agent and the Tranche B Term
Lenders (in their sole discretion), with the Tranche A Term Lenders
(and/or the Tranche A Term Administrative Agent) and the
Revolving Lenders (and/or the Revolver Administrative Agent).
Same as for the Tranche A Term Loan Facility.
The credit documentation for the Tranche B Term Loan Facility (the
"Tranche B Term Loan Documents") shall contain representations
and warranties, covenants and events of default relating to the
Borrower and its subsidiaries customary for financings of this type
and other terms deemed appropriate by the Tranche B Term Lenders,
including without limitation the following:
Substantially the same as for the Tranche A Term Loan Facility.
(i) A minimum fixed charge coverage ratio, (ii) a maximum leverage
ratio and (iii) maximum capital expenditures (but with greater
headroom than the corresponding covenant levels contained in the
Tranche A Term Loan Facility).
To be based substantially upon the negative covenants in the Tranche
C-2
Events of Default
Voting
Assignments and
Participations
Yield Protection
Expenses and
Indemnification
Governing Law and
Forum
A Term Loan Facility (but with less restrictive baskets and thresholds
to be agreed).
To be based substantially upon the events of default in the Tranche A
Term Loan Facility (but with less restrictive grace periods and
thresholds to be agreed).
State of New York.
C-3
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Interest Rate
Interest Payment
Dates
Default Rate
Rate Basis
Agency Fee
ANNEX C-1
The Tranche B Term Loans shall bear interest at a fixed rate of
15.00% per annum (the "Couoon Rate").
Interest payments shall be made quarterly in arrears.
Accrued interest on the Tranche B Term Loans shall be paid in cash
or in kind (i.e., by adding such accrued interest to principal) on each
applicable interest payment date on terms to be determined (including
that accrued interest shall be paid in kind if the Borrower fails to
meet a minimum liquidity requirement to be agreed).
At any time upon the occurrence and during the continuation of any
event of default under the Tranche B Term Loan Facility, all
outstanding Tranche B Term Loans shall bear interest at 2% above
the Coupon Rate. Without limiting the foregoing, overdue interest,
fees and other amounts under the Tranche B Term Loan Facility shall
bear interest at 2% above the Coupon Rate.
Interest payments will be calculated on the basis of a 360-day year of
twelve 30-day months.
An administrative agency fee payable to the Tranche B Term
Administrative Agent in such amount and at such times as shall be
agreed in writing between the Borrower and the Tranche B Term
Administrative Agent.
C-1-1
Conditions Precedent:
SCHEDULED- CONDITIONS PRECEDENTS
The occurrence of the Closing Date with respect to the Facilities is
subject to the satisfaction or written waiver of conditions that are
customary, necessary or appropriate for the loans of this type,
including, without limitation, the following:
(i) The Loan Parties shall have executed and delivered reasonably
satisfactory definitive financing documentation with respect to the
Facilities, including credit agreements, security documents,
intercreditor agreements and other legal documentation mutually
satisfactory to the Loan Parties, the respective Lenders party thereto
and the Agents, which shall reflect the terms and conditions of the
term sheets to which this ScheduleD is attached (the "Term Sheets").
(ii) All governmental and third party approvals necessary in
connection with the financing contemplated hereby and the
continuing operations of the Borrower and its subsidiaries (including
shareholder approvals, if any) shall have been obtained and shall be
in full force and effect.
(iii) The respective Agent under each Facility shall have received
such closing documents thereunder as are customary for transactions
of this type or as it may reasonably request, including but not limited
to resolutions, good standing certificates, incumbency certificates,
insurance certificates, loss payable and additional insured
endorsements, opinions of counsel, organizational documents, title
insurance policies, collateral releases (which releases may be effected
by the Confirmation Order), consents, landlord/mortgagee/bailee
waivers, financing statements and consignment or similar filings, all
in form and substance reasonably acceptable to such Agent and its
counsel.
(iv) The Revolver Administrative Agent shall have received and be
reasonably satisfied with inventory appraisals from appraisers
reasonably satisfactory to the Revolver Administrative Agent. The
appraisers shall be engaged directly by the Revolver Administrative
Agent and shall have no direct or indirect interest, financial or
otherwise, in the property or transaction.
(v) The Revolver Administrative Agent or its designee shall have
conducted and be reasonably satisfied with a field examination of the
accounts receivable, inventory and related working capital matters
and financial information of the Borrower and its subsidiaries and of
D-1
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the related data processing and other systems.
(vi) The Revolver Administrative Agent shall have received a
Borrowing Base certificate as of a date specified by the Revolver
Administrative Agent with customary supporting documentation and
supplemental reporting to be agreed upon between the Revolver
Administrative Agent and the Borrower.
(vii) Minimum excess Availability for the Borrower under the
Revolving Facility at closing only of an amount to be agreed.
(viii) The corporate and capital structure (including the terms of debt
other than the Facilities) of the Borrower and its subsidiaries shall be
acceptable to the Agents, which condition shall be deemed satisfied if
the corporate and capital structure of the Borrower and its
subsidiaries is consistent with the Term Sheets.
(ix) There shall not have been any material adverse change in the
information provided in the environmental review reports previously
provided to the Existing Agent or in the status of the environmental
hazards or liabilities affecting the properties of the Debtors.
(x) With respect to each Facility, the execution, delivery, and
performance by the Borrower of such facility, the borrowing of the
loans thereunder and the use of proceeds thereof shall be in
compliance with applicable law, including but not limited to
compliance with all applicable requirements of Regulations U, T and
X of the Board of Governors ofthe Federal Reserve System.
(xi) Liens creating security interests in the Collateral of the requisite
priority shall have been perfected.
(xii) The Existing Lenders, the Revolving Lenders, the Existing
Agents and the Revolver Administrative Agent shall have received
all fees required to be paid, and all expenses for which invoices have
been presented, on or before the Closing Date.
(xiii) The Borrower shall have issued New Common Stock to the
Existing Lenders as contemplated in the Restructuring Term Sheet.
(xiv) Satisfaction of all conditions precedent to the Effective Date.
D-2
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Summary of Plan Support Agreement
Requirements and Consequence of Default
Plan Support Agreement I Term Sheet
1# Consequence of Default
Requirement
Order assuming Plan Support
6(a)
Terminate Use of Lehman
Agreement 45 days after Petition Date
Cash Collateral
Fixed Rate DIP approved 45 days after
6(a)
Petition Date
Cash Collateral
Floating Rate DIP approved 45 days
6(a)
after Petition Date
Cash Collateral
Plan and OS filed 45 filed after Petition
Date 6(a)
Cash Collateral
Disclosure Statement approved 120
days after Petition Date 6(a)
Cash Collateral
Lehman & Debtors agree to Termination
Terminate Use of Lehman Event sale terms 120 days after Petition
6(a)
Cash Collateral Date
Order Confirming Plan entered 240 days Termination of stay for
after Petition Date foreclosure or expedited
6(a) sale process; termination of
Lehman cash collateral
Plan Effective Date 270 days after Termination of stay for
Petition Date foreclosure or expedited
6(a) sale process; terminate use
of Lehman cash collateral
F-284119 1 of 11
9
10
11
12
13
14
15
16
1J# Consequence of Default
Requirement
Lehman definitive sale agreements
signed for 50% of equity for at least
6(b)
$107.5 by 45 days after Petition Date Cash Collateral
Lehman consummates sale of new
equity by 270 days after Petition Date 6(c)
Cash Collateral
Cash Collateral Order Lehman not
acceptable to Lehman 6(d)
Cash Collateral
Relief from stay for any remedies by
lender special servicer to exercise
6(e)
remedies (other than default notices) Cash Collateral
Relief from stay for Marriott or any other
hotel brand to terminate Franchise
Agreement not shown on Exhibit E to 6(e)
Cash Collateral
Plan Term Sheet
Relief from stay to permit
Termination
termination of any franchise agreement
Events (E) in Terminate Use of Lehman
with Marriott or
any other hotel brand
Plan Term Cash Collateral
Sheet
Debtors file motion to dismiss, convert,
appoint trustee or examiner with
6(f)
expanded powers Cash Collateral
Debtors file motion to dismiss Terminate Use of Lehman
6(f) Cash Collateral
F-284119 2 of 11
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22
23
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25
1(# Consequence of Default :
Requirement
Debtors file motion to convert Terminate Use of Lehman
6(f) Cash Collateral
Debtors file motion to appoint examiner
with expanded powers under Sec. 11 04
6(f)
of Bankruptcy Code Cash Collateral
Debtors request extension of Plan
Milestones without Lehman's consent 6(g)
Cash Collateral
Debtors request modification or
alteration of remedies without Lehman's
6(g)
consent Cash Collateral
Debtors file pleading supporting
another's request for modification of
6(g)
Plan Milestones or remedies Cash Collateral
Debtors fail to oppose request by
another party for an extension of Plan
6(g)
Milestones Cash Collateral
Debtors violation of Milestones
Covenant 6(g)
Cash Collateral
Order dismissing any case Terminate Use of Lehman
6(h) Cash Collateral
Order converting any case Terminate Use of Lehman
~ - ~ ' ~ - - -
F-284119 3 of 11
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27
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29
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31
1(# Consequence of Default
Requirement
Order Appointing trustee in any case Terminate Use of Lehman
Order Appointing examiner with
6(h)
expanded powers in any case
Cash Collateral
Order making finding of fraud,
dishonesty or misconduct by any officer
6(h)
of Debtors regarding or relating to the
Cash Collateral
Debtors
Order making finding of fraud,
dishonesty or misconduct by any
6(h)
director of Debtors regarding or relating
Cash Collateral
to the Debtors
Withdrawal or amendment or
modification (or motion seeking same) of
the Plan Support Agreement filed by
6(i)
Debtors where change is materially
Cash Collateral
adverse to Lehman or not reasonably
acceptable to Lehman
Debtors file any pleading that is
inconsistent with terms of Plan Support
Agreement and not withdrawn within 3 6(i)
Cash Collateral
days after notice from Lehman
F-284119 4 of 11
32
33
34
35
36
37
Requirement
Debtors file motion to approve a
disclosure statement with capital
structure inconsistent with Plan Support 6U)
Cash Collateral
Agreement or Plan Term Sheet
Debtors file motion to approve a
disclosure statement with terms
inconsistent with Plan Support 6U)
Cash Collateral
Agreement or Plan Term Sheet
Debtors file motion to approve a plan
with capital structure inconsistent with
Plan Support Agreement or Plan Term 6U)
Cash Collateral
Sheet
Debtors file motion to approve a plan
with terms inconsistent with Plan
6U)
Support Agreement or Plan Term Sheet Cash Collateral
Order entered granting relief
inconsistent with Plan Support
6(k)
Agreement or Plan in any material way Cash Collateral
Issuance of ruling, determination or
order by court or regulator making
illegal, preventing or restricting
consummation of transaction described
6(1)
in Plan Support Agreement (that is not Cash Collateral
reversed or withdrawn in 5 business
days)
F-284119 5 of 11
38
39
40
41
42
43
44
45
Requirement
Entry of an order denying confirmation of
the Plan that is not vacated or reversed
6(1)
within 5 business days Cash Collateral
Default (after cure period) in Fixed Rate
DIP 6(m)
Cash Collateral
Default (after cure period) in Floating
Rate DIP 6(n)
Cash Collateral
Default in use of Lehman cash collateral
(after cure period) 6(o)
Cash Collateral
Material adverse effect on the use, value
or condition of the Company 6(p)
Cash Collateral
A material disruption or material adverse
change in financial, real estate, banking
6(p)
or capital markets Cash Collateral
Lehman, in its sole discretion, after tax
due diligence determines that
transaction cannot be structured in
6(q)
manner acceptable within 45 days after Cash Collateral
Petition Date
Material breach in undertakings,
representations, warranties or covenants
6(r)
in Plan Support Agreement Cash Collateral
F-284II9 6 of II
46
47
48
49
50
51
1J# Consequence of Default
Requirement
Parties agree to terminate Terminate Use of Lehman
6(s) Cash Collateral
Plan Term Sheet Additional
Provisions
All material pleadings filed by the
Company in connection with the
Means of
Chapter 11 Cases, including all first-day
lmplementati
motions, shall be in form and substance Cash Collateral
reasonably acceptable to Lehman.
on
Upon exit, funds sufficient to perform
Pro forma
Marriott CAP EX and operate the
Capital
business
Structure
Cash Collateral
Fixed Rate Debt Treatment of PV not Pro forma
more than $550M Capital
Structure &
Cash Collateral
Fixed Rate
Debt
Other Secured Debt Treatment of PV Pro forma
not more than $1OOM Capital
Structure &
Cash Collateral
Fixed Rate
Debt
Exit Funding of at least $75M Pro forma
Capital
Cash Collateral
Structure
F-284II9 7 of II
I
I
52
53
54
55
Requirement
Management Incentive Plan for up to 3% Management
of New Equity for management Equity Terminate Use of Lehman
Incentive Cash Collateral
Plan
Full discharge and release in favor of
Company and subsidiaries, Lehman,
Means of
everyone's agents and representatives,
I mplementati
claims and causes of action before or Cash Collateral
during the case
on
Issuance of New Equity and subsequent
transfer by Lehman prior to the Effective
New Equity
Date is exempt under 1145 (securities) Cash Collateral
Issuance of New Equity and subsequent
transfer by Lehman prior to the Effective
Date is exempt under 1146 (transfer New Equity
Cash Collateral
taxes)
Undertakings, representations,
warranties or covenants in Plan
Support Agreement- 6(r)
F-284119 8 of 11
56
57
58
59
Requirement
Debtor objects to confirmation of the
Plan or object to or otherwise
commence any proceeding to oppose,
alter, delay or impede or take any other
action, directly or
4(a)
indirectly, to interfere with entry of one or Cash Collateral
more orders approving the Plan or other
Plan Related
Documents
Debtors directly or indirectly seek, solicit,
negotiate, vote for, consent to, support
or participate in the formulation of any
4(a)
plan of reorganization or other Cash Collateral
restructuring other than the Plan
Debtors directly or indirectly seek,
solicit, negotiate, support or engage in
any discussions regarding any chapter 4(a)
Cash Collateral
11 plan other than the Plan
Debtors object to the Solicitation or
support any such objection by a third
4(a)
party Cash Collateral
F-284119 9 of 11
60
61
62
62
Requirement
Debtors take any other action not
required by law that is inconsistent with,
or that would materially delay, the
confirmation or consummation of the 4(a)
Cash Collateral
Plan or that is otherwise inconsistent
with this Agreement
Neither Party shall, directly or indirectly,
seek, solicit, negotiate, support or
engage in any discussions relating to or
enter into any agreements relating to,
any restructuring, plan of reorganization,
Terminate Use of Lehman dissolution, winding up, liquidation,
5(c)
reorganization, merger, transaction, sale Cash Collateral
or disposition (or all or substantially all of
their assets or equity) other than as set
forth in the Plan Term Sheet and the
Plan
Debtors fail to pay all reasonable
professional fees and expenses of
5(d)
Lehman in connection with the
Cash Collateral
Transaction
Debtors fail to comply with Floating Rate
Debt Agreement (except as to payment
5(e)
of principal, interest and fees absent an
Cash Collateral
order authorizing the payment)
F-284119 10 of 11
'
64
65
Requirement
Failure to notify Lehman of a
Termination Event "as soon as it
becomes aware that the Termination
7
Event will occur" and specifying the Cash Collateral
corrective action
Failure to comply with the good faith
cooperation and further assurances
provisions, including in negotiating 9
Cash Collateral
documents
--
F-284119 11 of 11
I

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