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EXHIBIT 2.1
Xxxxxx Services Corp.
000 Xxxx Xxxxxx Xxxx
X.X. Xxx 0000, LCD #1
Xxxxxxxx, Xxxxxxx X0X 0X0
(000) 000-0000
June 21, 1999
Lenders under a Credit Agreement dated as of August 11, 1997, as amended
c/o Canadian Imperial Bank of Commerce, as Administrative Agent for the Lenders
0xx Xxxxx
Xxxxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Dear Sirs:
RE: XXXXXX SERVICES CORP.
This letter agreement (this "Agreement") sets out the revised agreement
among Xxxxxx Services Corp ("PSC") on behalf of itself and each of its
Affiliates, and each of the lenders which is a signatory hereto (individually, a
"Consenting Lender" and collectively the "Consenting Lenders") in its capacity
as a lender under a credit agreement dated as of August 11, 1997 among PSC, as
borrower in Canada, Xxxxxx Services (Delaware) Inc., as borrower in the United
States, the persons from time to time parties to such agreement as lenders,
Canadian Imperial Bank of Commerce ("CIBC"), as administrative agent for the
lenders (the "Administrative Agent"), Bankers Trust Company ("BTCo"), as
syndication agent, CIBC and BTCo, as co-arrangers, as amended by amending
agreements dated as of October 31, 1997, February 19, 1998, June 24, 1998,
October 20, 1998 and December 4, 1998 (the "Existing Credit Agreement")
regarding the principal terms and conditions of a prearranged plan of
reorganization or arrangement (the "Plan") involving PSC and its Affiliates
under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code")
and under the Companies' Creditors Arrangement Act (Canada) (the "CCAA").
Capitalized terms used herein and not otherwise defined shall have the
meaning ascribed thereto in the Term Sheet (as defined in Section 1 below) or
the Existing Credit Agreement, as applicable. The Consenting Lenders, PSC and
its Affiliates are collectively referred to as the "Parties".
1. RESTRUCTURING AND SOLICITATION
(a) The principal terms and conditions of the Plan as agreed among the
Parties are set forth in the term sheet attached hereto as Schedule A
(the "Term Sheet"), which is incorporated herein and made a part of this
Agreement. In the case of a conflict between the provisions contained in
the text of this Agreement and Schedule A, the provisions of this
Agreement shall govern. References in this Agreement to the term "Plan"
include revisions thereto approved by the Consenting Lenders in
accordance with the terms of Section 4(a) hereof.
(b) Acceptances of the Plan from holders of claims arising out of the
Existing Credit Agreement and from holders (or representatives of such
holders) of all other classes of impaired claims and interests will be
solicited after the commencement of the Cases.
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2. REPRESENTATIONS AND COVENANTS OF EACH PARTY
Each of the Parties hereto represents and warrants to the other Parties
hereto that: (i) it is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with all requisite power
and authority to carry on the business in which it is engaged, to own its
property, to execute this Agreement and, subject to requisite approvals from the
Bankruptcy Courts in which the Cases are commenced, to consummate the
transactions contemplated hereby; (ii) the execution, delivery and performance
hereof has been duly authorized by all necessary corporate or other actions; and
(iii) no proceeding, litigation or adversary proceeding before any court,
arbitrator or administrative or governmental body is pending against it which
would adversely affect its ability to enter into this Agreement or to perform
its obligations hereunder.
3. CONSENTING LENDER REPRESENTATIONS
Each Consenting Lender represents severally and not jointly to each of the
other Parties that, as of the date of this Agreement:
(a) it is a lender under the Existing Credit Agreement and in that
capacity is owed the principal amount set forth next to such Consenting
Lender's name on Schedule B attached hereto (the "Consenting Lender's
Debt"). The amount of the Consenting Lender's Debt has been determined
without reference to any Participations granted by such Consenting
Lender;
(b) it holds its Consenting Lender's Debt free and clear of all liens,
security interests and other encumbrances of any kind and it has not
assigned or transferred, in whole or in part, any portion of its right,
title or interests in the Consenting Lender's Debt other than by way of
Participation in accordance with Section 12.01 of the Existing Credit
Agreement; and
(c) it is a sophisticated party with sufficient knowledge and experience
to evaluate properly the terms and conditions of this Agreement; it has
made its own analysis and decision to enter in this Agreement and has
obtained such independent advice in this regard as it deemed
appropriate; it qualifies as an "accredited investor" as such term is
defined in Rule 501(a) of Regulation D under the Securities Act of 1933,
as amended; and it has not relied in such analysis or decision on the
Administrative Agent or any other person other than its own independent
advisors.
4. CONSENTING LENDER COVENANTS AND CONSENTS
Each Consenting Lender agrees that, subject to Section 6 hereof and, as to
Sections 4(a) and 4(b) hereof, subject to the filing of the Plan and its receipt
of solicitation materials in respect of the Plan that are consistent with this
Agreement:
(a) it will vote both its secured and unsecured claims in respect of the
Consenting Lender's Debt and any claims under the Existing Credit
Agreement it acquires after the date hereof in favour of the Plan at or
prior to the deadline to be established for voting on the Plan and will
not change or withdraw (or cause to be changed or withdrawn) such
vote(s), provided that the terms of the Plan are consistent with the
terms of the Plan described in the Term Sheet, as modified by any
revisions thereto that have been agreed to in writing by such Consenting
Lender after the date hereof;
(b) it will not oppose the confirmation of the Plan, provided that the
terms of the Plan are consistent with the terms of the Plan described in
the Term Sheet, as modified by any revisions thereto referred to in
Section 4(a);
(c) it will not sell, transfer, pledge, participate or assign any of the
Consenting Lender's Debt or any voting interest therein during the term
of this Agreement, except in accordance with Section 12.01 of the
Existing Credit Agreement and then only to an Assignee that agrees in
writing prior to such acquisition, pledge or participation to be bound
by all the terms of this Agreement as if such Assignee had originally
executed this Agreement with respect to the Consenting Lender's Debt
being acquired by such Assignee;
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(d) it consents to the incurrence of the debtor-in-possession financing
(the "DIP Financing") on the terms described in the draft Term Sheet
attached hereto as Schedule C hereto (the "DIP Term Sheet") and the
granting of the security for the DIP Financing described under the
heading "Security" in the DIP Term Sheet;
(e) it consents to the entry of orders in the Cases effecting the
subordination of any Security delivered pursuant to the Existing Credit
Agreement to the DIP Security as provided in the DIP Term Sheet, and in
particular to the entry of orders in the Cases effecting the
subordination of the Security to:
(i) a priming lien pursuant to Section 364(d)(1) of the Bankruptcy
Code on all of the existing and after-acquired assets of the
Borrowers and the Guarantor Subsidiaries located in the United
States constituting collateral (the "Pre-Petition Collateral")
securing obligations to the Agents and the lenders under the
Existing Credit Agreement;
(ii) a security interest and charge in the Pre-Petition Collateral
located in Canada; and
(iii) the other liens and security interests referred to in the DIP Term
Sheet; and
all as provided in the DIP Term Sheet;
(f) it consents to the subordination of the security for the Senior
Secured Debt to the security for the exit/working capital financing
having the terms disclosed in Section 5 of the Term Sheet.
This Agreement relates only to the rights of the Consenting Lenders in their
capacity as the holders of the Consenting Lender's Debt and does not affect or
limit any rights or claims any Consenting Lender may have in any other capacity.
For greater certainty, nothing in the Term Sheet or this Agreement affects or
limits the priorities of the security of the Bank Account Service Providers, the
security for the Permitted LC Facility or the security held by the Cdn. LC
Issuer pursuant to section 5.06 of the Existing Credit Agreement, which will
rank in priority to the DIP Security and the security for the exit/working
capital facility.
5. PSC COVENANTS
PSC agrees on behalf of itself and its Affiliates that:
(a) it will use its best efforts to (i) comply with the Plan Timetable set
out in the Term Sheet (ii) obtain written agreements, to the extent
legally permissible, from holders (or representatives of such holders)
of claims of all classes of impaired claims in terms of amount of claims
and number of holders as required for the approval of the Plan by the
relevant classes of claims under the Bankruptcy Code and the CCAA; and
(iii) to identify to the satisfaction of the Consenting Lenders, prior
to commencing the Cases, those unsecured creditors whose claims will be
reinstated under or unaffected by the Plan and those executory contracts
that will be assumed;
(b) PSC and its Affiliates will cooperate fully with the Lenders' advisors
and permit them complete access to PSC, its subsidiaries and their books
and records, officers and personnel throughout the restructuring
process; and
(c) subject to the provisions of the Bankruptcy Code, at least 90% of the
cash balances and other near-cash financial instruments of the
Restricted Parties including term deposits and marketable securities
will be maintained with one or more Lenders (subject to exclusions
acceptable to the Majority Lenders (as defined below)).
6. TERMINATION
(a) Upon the occurrence of any Termination Event (as defined below) this
Agreement may be terminated upon the election to do so by Consenting
Lenders holding in the aggregate at least 51% of the aggregate amount of
claims under the Existing Credit Agreement held by the Consenting
Lenders (the "Majority Lenders").
For the purposes hereof, a "Termination Event" shall occur if:
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(i) any of the events described under "Plan Timetable" in the Term
Sheet have not occurred within 15 days of the deadline specified
for such event;
(ii) the Bankruptcy Courts have not granted final approval of the DIP
Financing within 30 days following commencement of the Cases;
(iii) in the opinion of the Majority Lenders PSC has disclaimed its
intention or otherwise acted in a manner materially inconsistent
with an intention to pursue the Plan or has otherwise breached the
Term Sheet or this Agreement;
(iv) in the opinion of the Majority Lenders there is any material
adverse change in the terms or the feasibility of the Term Sheet or
the Plan not previously consented to by the Majority Lenders, or in
the confirmability of the Plan in the United States or in the
likelihood of its approval by the required creditor majorities in
Canada; or
(v) PSC or any of its Affiliates is the subject of a voluntary or
involuntary petition or other proceedings under any insolvency
statute in any jurisdiction (other than the Cases contemplated by
the Term Sheet and the chapter 11 case of RESI Acquisition
Corporation); provided, however, that the filing of an involuntary
petition under an insolvency statute shall not be deemed to be a
Termination Event if the deadlines referred to in the Plan
Timetable are met within the time permitted by Section 6(a)(i)
above.
(b) Upon termination of this Agreement, each Consenting Lender, in its
sole discretion and without limiting its other rights, may change or
withdraw any votes previously cast by it in favour of the Plan. PSC and
its Affiliates will not contest any such decision by a Consenting Lender
to change or withdraw its vote or to oppose confirmation of the Plan by
reason of such termination, and will consent to any motion filed by a
Consenting Lender under Federal Rule of Bankruptcy Procedure 3018(a) in
the U.S. Cases.
(c) This Agreement may be terminated by PSC if one or more Consenting
Lenders have withdrawn or changed their votes pursuant to Section 4(a)
or Section 6(b) or have breached the Term Sheet or this Agreement, and
as a result there are no longer sufficient Lenders holding claims under
the Existing Credit Agreement which have agreed to vote in favour of the
Plan to ensure that the majorities of Lenders in number and amounts of
claims required under section 1126(c) of the Bankruptcy Code and section
6 of the CCAA will be satisfied.
(d) None of the Parties shall have any liability to any other Party in
respect of any termination of this Agreement in accordance with the
terms hereof.
7. CONDITIONS
The respective obligations of the Parties to consummate each of the
transactions contemplated by the Plan are also subject to the satisfaction of
each of the following conditions:
(a) negotiation, preparation and execution of mutually satisfactory
definitive transaction agreements and other documents including without
limitation the Plan and the Disclosure Statement, incorporating the
terms and conditions of each of the transactions contemplated by the
Plan set forth herein and in the Term Sheet and such other terms and
conditions as the Parties may mutually agree;
(b) all authorizations, consents and regulatory approvals required, if
any, in connection with Plan Implementation and the continuation of the
businesses of PSC and its Affiliates as currently conducted shall have
been obtained; and
(c) PSC shall have received commitments from bonding companies which are
sufficient for the reasonable operating requirements of PSC and its
Affiliates both prior to and following Plan Implementation.
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8. AMENDMENTS
Except as otherwise provided herein, this Agreement may not be modified,
amended or supplemented except in writing signed by each of the signing Parties
or their Assignees.
9. OTHER PROPOSALS
Notwithstanding anything in this Agreement or the Term Sheet to the
contrary, PSC and its Affiliates may at all times (both before and after the
execution of this Agreement and the filing of the Plan) respond to unsolicited
offers (but for greater certainty may not, directly or indirectly, seek,
solicit, encourage or initiate any discussions respecting any offers) relative
to potential transactions which (i) restructure substantially all of the equity
and debt of PSC and its Affiliates, and (ii) are demonstrably more favourable to
the Consenting Lenders and the other stakeholders in PSC than the transactions
set forth in the Term Sheet or in the Plan. Nothing in this Agreement binds any
of the Consenting Lenders to agree to or vote in favour of any such alternate
proposal.
10. INDEMNIFICATION OBLIGATIONS
PSC and its Affiliates jointly and severally agree to fully indemnify each
Consenting Lender, the Administrative Agent, the Other Agents, and their
respective Affiliates, directors, officers, employees, agents or representatives
including counsel (collectively, the "Indemnitees") against any manner of
actions, causes of action, suits, proceedings, liabilities and claims of any
nature, costs or expenses (including reasonable legal fees) which may be
incurred by such Indemnitee or asserted against such Indemnitee arising out of
or 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 Plan, other than any
liabilities to the extent arising from the gross negligence or wilful or
intentional 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 PSC, the Indemnitee shall promptly notify PSC in writing, and PSC may
assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnitee, and the payment of all costs and expenses. The
Indemnitee shall have the right to employ separate counsel in any such claim,
action or proceeding and to consult with PSC in the defense thereof, and the
fees and expenses of such counsel shall be at the expense of PSC unless and
until PSC shall have assumed the defense of such claim, action or proceeding. If
the named parties to any such claim, action or proceeding (including any
impleaded parties) include both the Indemnitee and PSC, and the Indemnitee
reasonably believes that the joint representation of PSC and the Indemnitee may
result in a conflict of interest the Indemnitee may notify PSC in writing that
it elects to employ separate counsel at the expense of PSC, and PSC shall not
have the right to assume the defense of such action or proceeding on behalf of
the Indemnitee. In addition, PSC shall not effect any settlement or release from
liability in connection with any matter for which the Indemnitee would have the
right to indemnification from PSC, unless such settlement contains a full and
unconditional release of the Indemnitee, or a release of the Indemnitee
satisfactory in form and substance to the Indemnitee.
11. SEVERAL AND NOT JOINT
Notwithstanding anything herein to the contrary, or in any document or
instrument executed and delivered in connection herewith, the Parties agree that
the representations, warranties, obligations, liabilities and indemnities of
each Consenting Lender hereunder shall be several and not joint, and no
Consenting Lender shall have any liability hereunder for any breach by any other
Consenting Lender of any obligation of such Consenting Lender set forth herein.
12. PUBLICITY
The Parties agree that all public announcements of the entry into or the
terms and conditions of this Agreement shall be mutually acceptable to the
Administrative Agent and PSC.
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13. NO THIRD PARTY BENEFICIARIES; SEPARATE RESPONSIBILITIES
This Agreement is only for the benefit of the undersigned Parties and
nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon any person or entity, other than such persons or
entities, any rights or remedies under or by reason of, and no person or entity,
other than such persons or entities, is entitled to rely in any way upon, this
Agreement.
14. GOVERNING LAW; JURISDICTION
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. By its
execution and delivery of this Agreement, each of the Parties hereby irrevocably
and unconditionally agrees for itself that, subject to the following sentence,
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 the recognition or
enforcement of any judgment rendered in any such action, suit or proceeding, may
be brought in any state or federal court of competent jurisdiction in New York
County, State of New York, and, by execution and delivery of this Agreement,
each of the Parties hereby irrevocably accepts and submits itself to the
nonexclusive jurisdiction of such court, generally and unconditionally, with
respect to any such action, suit or proceeding. Nothing in this section shall
limit the authority of the Bankruptcy Courts to hear any matter arising in the
Cases.
15. WAIVER OF JURY TRIAL
THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY JURISDICTION IN
ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE BETWEEN THE
PARTIES UNDER THIS AGREEMENT, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
16. 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 of the Parties and
the non-breaching Party shall be entitled to specific performance and injunctive
or other equitable relief as a remedy of any such breach.
17. EFFECT
This Agreement shall become effective and enforceable against each
Consenting Lender and against PSC and its Affiliates when it has been executed
by PSC and by Consenting Lenders in number and holding an aggregate amount of
claims outstanding under the Existing Credit Agreement sufficient to satisfy the
requirements of Section 1126(c) of the Bankruptcy Code and Section 6 of the CCAA
in respect of such claims.
18. CONFIRMATION
Notwithstanding this Agreement, PSC, on behalf of itself and its
Affiliates, acknowledges and agrees that the Existing Credit Agreement and all
of the Security delivered by PSC or any of its Affiliates to any one or more of
the Administrative Agent, the Security Agent, the LC Issuers or the Lenders in
connection with, or otherwise applicable to, the debts or liabilities of PSC or
any of its Affiliates to any one or more of the Administrative Agent, the
Lenders, the Other Agents and their Eligible Affiliates under the Existing
Credit Agreement, are hereby ratified and confirmed and remain in full force and
effect.
19. SURVIVAL
Notwithstanding any assignment or transfer of all or any part of the
Consenting Lender's Debt in accordance with Section 4(c), or the termination of
each Consenting Lender's obligations hereunder in accordance with Section 6
hereof, the agreements and obligations of PSC and its Affiliates in Sections
6(b),
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10, 13, 15, 16 and 18 shall survive such termination (other than the
indemnification provided for in Section 10, which shall terminate if this
Agreement is terminated by the Majority Lenders under Section 6) and shall
continue in full force and effect for the benefit of such Consenting Lender in
accordance with the terms hereof.
20. PLAN RELEASES
The Plan shall include releases by PSC and each of its Affiliates which is
included in the Cases, in their individual capacities and as debtors in
possession (collectively, the "Debtors"), the Consenting Lenders, and to the
fullest extent allowed by applicable law, all other creditors and shareholders
of the Debtors:
(a) in favour of each of the respective present officers, directors,
employees, agents and professionals (other than the Debtor's auditors)
of each of the Debtors ("Debtor Releasees") in form and substance and on
terms satisfactory to PSC and the Consenting Lenders; and
(b) in favour of each of the Consenting Lenders, the LC Issuers, the
Administrative Agent, the Security Agent and the Other Agents, and their
respective Affiliates, officers, directors, employees, agents and
professionals (the "Lender Releasees") from any and all claims or causes
of action existing as of Plan Implementation against any of the Lender
Releasees, including without limitation, statutory claims and causes of
action under the Bankruptcy Code or under similar laws of any state, of
Canada or of any province, and claims and causes of action relating to,
arising out of or in connection with the subject matter of, or the
transaction or event giving rise to the claims of the releasing party
affected by the Plan, the business and affairs of the Debtors, the Plan
and the Cases, including any act, occurrence or event in any manner
related to the claim of the releasing party, any activities of the
members of the informal Lender steering committee, and any activities
prior or subsequent to the filing of the Cases leading to the
promulgation and confirmation of the Plan.
The Plan shall also require the delivery to the Debtor Releasees and the Lender
Releasees of releases to the same effect from each of PSC's Restricted
Subsidiaries which is not a Debtor.
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 shall bind and enure to the benefit of the Parties and their
respective successors, assigns, heirs, executors, administrators and
representatives.
23. PRIOR NEGOTIATIONS
This Agreement (including the Term Sheet) amends and restates the letter
agreement dated April 5, 1999, which as amended and restated hereby constitutes
the entire agreement between the Parties with respect to the subject matter
hereof except as otherwise expressly agreed in writing executed by or on behalf
of PSC and the Consenting Lenders. All references in any other agreement to the
Letter Agreement dated April 5, 1999 shall be deemed to be references to this
agreement. There are no promises, undertakings, representations or warranties by
any of the Parties not expressly set forth or referred to herein or therein.
24. COUNTERPARTS
This Agreement (and any modifications, amendments, supplements or waivers
in respect hereof) may be executed in counterparts by manual or facsimile
signature of each undersigned Party, and all such counterparts shall be deemed
to constitute one and the same instrument.
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25. NOTICE PROVISIONS
All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by hand delivery, by confirmed facsimile, or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
Parties as follows:
IF TO EACH CONSENTING LENDER:
To the address set forth
For each Consenting Lender on
Schedule B annexed hereto
with copies to:
Canadian Imperial Bank of Commerce
as Administrative Agent
Risk Management Division
0xx Xxxxx, Xxxxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Vice-President
Facsimile: (000) 000-0000
Blake, Xxxxxxx & Xxxxxxx Xxxxx & Case LLP
Xxx 00, Xxxxx 0000, Commerce Court West 1155 Avenue of the Americas
Toronto, Xxxxxxx Xxx Xxxx, Xxx Xxxx
X0X 0X0 10036-2767 USA
Attention: Xxxxx X. Xxxxxx Attention: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
IF TO PSC:
Xxxxxx Services Corp.
000 Xxxx Xxxxxx Xxxx
X.X. Xxx 0000,
LCD #1
Hamilton, Ontario
L8N 4J6
Attention.: Xxxxx Xxxxx
Facsimile: (000) 000-0000
with copies to:
Stikeman Xxxxxxx Xxxxxxx, Arps, Slate, Xxxxxxx & Xxxx
Box 85, Commerce Court West 000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000 Xxxxxxx, Xxxxxxxx
Toronto, Xxxxxxx 00000 X.X.X.
X0X 0X0
Attention.: Xxxx Xxxxxx Attention: Xxxxx Xxxxx
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
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26. FURTHER ASSURANCES
From and after the date hereof, each of the Parties covenants and agrees to
execute and deliver all such agreements, instruments and documents and to take
all such further actions as the Parties may reasonably deem necessary from time
to time (at the requesting Party's expense) to carry out the intent and purposes
of this Agreement and to consummate the transactions contemplated hereby.
27. CONFIRMATION
Please confirm your agreement with the foregoing by signing and returning
the enclosed copy of this Agreement to the undersigned.
Very truly yours,
XXXXXX SERVICES CORP.
By:
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Accepted and Agreed as of the date first written above
CANADIAN IMPERIAL BANK OF COMMERCE (in CIBC INC
its capacity as a Lender)
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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name: title:
title:
BANKERS TRUST COMPANY BT BANK OF CANADA
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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----------------------------------------- name:
name: title:
title:
ABN AMRO BANK CANADA ACCORD FINANCIAL CORPORATION
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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----------------------------------------- name:
name: title:
title:
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AMERICAN REAL ESTATE HOLDINGS L.P. THE BANK OF EAST ASIA (CANADA)
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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----------------------------------------- name:
name: title:
title:
BANCO CENTRAL BANQUE NATIONALE DE PARIS
HISPANOAMERICANO, S.A.
MIAMI AGENCY
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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----------------------------------------- name:
name: title:
title:
BANQUE NATIONALE DE PARIS (CANADA) BEAR, XXXXXXX & CO. INC.
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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name: title:
title:
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XXXXX XXXX XX XXXXX, N.A. THE CHASE MANHATTAN BANK
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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name: title:
title:
XXX XXXXX XXXXXXXXX XXXX XX XXXXXX CITIBANK, N.A.
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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name: title:
title:
COMERICA BANK CREDIT SUISSE FIRST BOSTON
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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name: title:
title:
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CREDIT SUISSE FIRST BOSTON CANADA DAI-ICHI KANGYO BANK (CANADA)
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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----------------------------------------- name:
name: title:
title:
THE DAI-ICHI KANGYO BANK, LTD. DEUTSCHE BANK AG, NEW YORK AND OR CAYMAN
ISLAND BRANCHES
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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----------------------------------------- name:
name: title:
title:
DEUTSCHE BANK CANADA XXXXX XXXXX -- SENIOR DEBT PORTFOLIO
by: by:
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name: title:
title:
by: by:
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name: title:
title:
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FERNWOOD ASSOCIATES L.P. FOOTHILL CAPITAL CORPORATION
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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name: title:
title:
XXXXXXX SACHS CANADA CREDIT PARTNERS CO. XXXXXXX XXXXX CANADA CREDIT PARTNERS L.P.
by: by:
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name: title:
title:
by: by:
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name: title:
title:
HIGH RIVER LIMITED PARTNERSHIP KEYBANK NATIONAL ASSOCIATION
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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name: title:
title:
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XXXXXXXXX CORP. XXXXXXXXX LLC
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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----------------------------------------- name:
name: title:
title:
MELLON BANK CANADA MELLON BANK, N.A.
by: by:
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----------------------------------------- name:
name: title:
title:
by: by:
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name: title:
title:
THE MUTUAL LIFE ASSURANCE COMPANY OF MUTUAL SHARES FUND, a series of FRANKLIN
CANADA MUTUAL SERIES FUND INC.
by: by:
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name: title:
title:
by: by:
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name: title:
title:
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NATIONSBANK, N.A. PARIBAS
by: by:
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name: title:
title:
by: by:
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name: title:
title:
PNC BANK NATIONAL ASSOCIATION THE ROYAL BANK OF SCOTLAND
by: by:
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name: title:
title:
by: by:
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name: title:
title:
SAKURA BANK (CANADA) THE SAKURA BANK, LIMITED
by: by:
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name: title:
title:
by: by:
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name: title:
title:
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SOCIETE GENERALE SOCIETE GENERALE (CANADA)
by: by:
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name: title:
title:
by: by:
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name: title:
title:
SUMMIT BANK THE TORONTO-DOMINION BANK
by: by:
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name: title:
title:
by: by:
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name: title:
title:
THE TORONTO-DOMINION (NEW YORK), INC. TRI-LINKS INVESTMENT TRUST
by: by:
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name: title:
title:
by: by:
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name: title:
title:
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WACHOVIA BANK, N.A
by:
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name:
title:
by:
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name:
title:
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SCHEDULE A
XXXXXX SERVICES CORP.
RESTRUCTURING TERMS
This term sheet sets forth the principal terms and conditions for the
restructuring of Xxxxxx Services Corp. ("PSC") and its Affiliates under a
prearranged plan of reorganization (the "Plan") under Chapter 11 of the United
States Bankruptcy Code ("Bankruptcy Code") and under the Companies Creditors
Arrangement Act (Canada) ("CCAA").
This term sheet pertains only to the terms of a restructuring in the
context of the prearranged reorganization plan described in this term sheet and
is not an agreement or commitment to a restructuring on any other terms or in
any other context.
Capitalized terms used in this term sheet and not otherwise defined have
the meanings set forth in the Credit Agreement dated as of August 11, 1997 among
PSC and Xxxxxx Services (Delaware) Inc., as borrowers, Canadian Imperial Bank of
Commerce ("CIBC") as Administrative Agent, Bankers Trust Company ("BTCo") as
Syndication Agent, CIBC and BTCo as Co-Arrangers, and the various lenders from
time to time parties thereto, including all amendments and modifications thereto
(the "Existing Credit Agreement"). All amounts shown are in US Dollars.
1. EXISTING SENIOR SECURED LENDERS:
The obligations of the Borrowers to the Lenders under the Existing Credit
Agreement (the "Existing Syndicate Debt") will be restructured as of Plan
Implementation as follows:
(A) SENIOR SECURED DEBT: Subject to (vi)(C), $350 million of the Existing
Syndicate Debt will be restructured as senior
secured debt (the "Senior Secured Debt"), in two
tranches. One tranche will be $250 million of
senior secured term debt (the "Senior Secured Term
Debt") and the other tranche will be $100 million
of secured convertible payment in kind debt
("Secured PIK Debt"). PSC shall have the right to
prepay the Senior Secured Term Debt at any time
provided that at the time of such prepayment PSC
also pays all accrued and unpaid interest, fees and
other amounts payable with respect to the amount
prepaid, and any call premium payable under (iv)(C)
below.
(I) BORROWERS: PSC as to the Secured PIK Debt and Xxxxxx Services
(Delaware) Inc. (the "US Borrower") as to the
Senior Secured Term Debt.
(II) SENIOR SECURED
TERM DEBT: The terms of the Senior Secured Term Debt will be
set forth in a restatement of the Existing Credit
Agreement (the "Senior Term Credit Agreement") in
form and substance satisfactory to the Lenders and
PSC.
(A) AMOUNT: $250 million.
(B) INTEREST: 9% per annum.
Interest on the Senior Secured Term Debt will be
payable in cash, quarterly in arrears on the last
business day of each calendar quarter; provided,
however, that during the first 12 months subsequent
to the effective date of the Plan (such effective
date being "Plan Implementation"), the US Borrower
shall pay interest on the Senior Secured Term Debt
to the extent of the lesser of 9% per annum and
$20,000,000, and accrue the balance thereof
(subject to the mandatory prepayment
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obligations described below). Interest will also be
payable at the time of repayment of any Senior
Secured Term Debt and at maturity of such Senior
Secured Term Debt. All interest calculations shall
be based on a 360-day year and actual days elapsed.
The Senior Term Credit Agreement shall include
protective provisions for such matters as default
interest, capital adequacy, increased costs,
funding losses, illegality and withholding taxes.
(C) MATURITY: 5 years from Plan Implementation.
(D) COVENANTS: As in the Existing Credit Agreement on the date
hereof, with revisions as approved by the Lenders
and PSC. Financial covenants will be as set out in
Exhibit 1 hereto.
(III) SECURED PIK
DEBT: The Secured PIK Debt will be issued to the Lenders
pro rata in exchange for an equal amount of the
Existing Syndicate Debt.
(A) AMOUNT: $100 million.
(B) INTEREST: 10% per annum. Subject to (iv)(A) below, interest
will accrue and be compounded quarterly in arrears.
All interest calculations shall be based on a
360-day year and actual days elapsed.
(C) CONVERTIBILITY:
The Secured PIK Debt exchanged for the Existing
Syndicate Debt will be convertible until maturity
at the option of the holders into 25% of the common
shares of the restructured PSC, in the aggregate,
on a fully diluted basis as of Plan Implementation.
The Secured PIK Debt will contain the usual
anti-dilution provisions applicable in a public
offering of convertible debt, including giving
effect to the issuance of any common shares under
the shareholder rights plan referred to below. Any
Secured PIK Debt issued in respect of interest on
Secured PIK Debt will not be convertible.
(D) MATURITY: 5 years from Plan Implementation.
(E) REDEMPTION: The Secured PIK Debt will be redeemable by PSC in
the following circumstances:
(i) If (a) an offer is made to the common
shareholders of PSC to acquire all of the
common shares of PSC, or, in the case of an
offer by an existing beneficial owner or owners
of PSC common shares, to acquire all of the
common shares of PSC not already owned by such
owner(s) together with persons acting in
concert (the shares already owned being the
"Offeror's Existing Holdings"), (b) under the
offer the Offeror acquires (1) common shares
which together with the Offeror's Existing
Holdings amount to 67% or more of the common
shares of PSC, or (2) a majority of the common
shares of PSC other than the Offeror's Existing
Holdings, whichever is greater, and (c) the
person or persons making the offer (the
"Offeror") notifies PSC that it requires PSC to
exercise such redemption right, then, subject
to the following sentence, PSC will have the
right to redeem the Secured PIK Debt for a
price (the "Redemption Price") equal to 115% of
the face amount of such Secured PIK Debt plus
all accrued interest on the Secured PIK Debt.
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If the Offeror has notified PSC that it
requires PSC to exercise the redemption right
and the amount the holders of the Secured PIK
Debt would have received by converting the
convertible Secured PIK Debt to common shares
of PSC and tendering them to the Offeror under
its offer (the "Tender Price") would be greater
than the Redemption Price of such Debt, any
Secured PIK Debt which has not been converted
by the close of business on the day prior to
the redemption date set out in the redemption
notice issued by PSC will be deemed to have
been converted and tendered to the Offeror's
offer, and the holders of the convertible
Secured PIK Debt will be entitled to receive
the Tender Price.
(ii) The Secured PIK Debt may not be redeemed
prior to the end of the first full year after
Plan Implementation except as provided in (i)
above. Commencing in the second year after Plan
Implementation, PSC may redeem the Secured PIK
Debt upon payment of the following percentage
of the face amount of the Secured PIK Debt
during the periods following Plan
Implementation indicated below, plus all
accrued interest on the Secured PIK Debt:
Year 1................................. Not redeemable
Year 2................................. 125%
Year 3................................. 125%
Year 4................................. 116 2/3%
Year 5................................. 108 1/3%
Maturity............................... 100%
(F) COVENANTS: To be the same as for the Senior Secured Term Debt.
(IV) MANDATORY
PREPAYMENTS:
(A) 75% of Cash Flow Available for Debt Service will be
swept on an annual basis for the first two years
and will be swept each quarter thereafter based on
cumulative quarterly Cash Flow Available for Debt
Service in each subsequent annual period. The first
annual period for the cash sweep will be the period
from Plan Implementation until the end of the
fourth full Financial Quarter after Plan
Implementation, the second annual period for the
cash sweep will be the next four Financial
Quarters, and so on.
The cash sweep will be applied in the following
manner: (i) first, to pay any interest accrued
during the first 12 months subsequent to Plan
Implementation with respect to the Senior Secured
Term Debt, together with accrued interest on any
such deferred interest at the rate of 9% per annum;
(ii) second, to pay accrued but unpaid interest
with respect to the Secured PIK Debt; and (iii)
third, to repay the Senior Secured Term Debt.
"Cash Flow Available for Debt Service" will be
defined as PSC's consolidated EBITDA for the
applicable period (excluding asset sale proceeds)
less permitted capital expenditures and mandatory
cash payments of principal and interest on other
permitted fixed obligations as such amounts become
due and owing pursuant to applicable agreements,
cash taxes and interest on the Senior Secured Term
Debt and on the exit/working capital financing.
"Permitted capital expenditures" will be defined to
mean capital expenditures paid in cash during the
period plus
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amounts deposited to a reserve account to pay known
future capital expenditures, in each case to the
extent of the capital expenditures forecast for
such period in the most recent budget approved by
the Required Lenders.
(B) Subject to (vi)(C) below, the Senior Secured Term
Debt will be repaid from 75% of Net Asset Sale
Proceeds (as defined below), subject to the
following: (i) this repayment formula will apply to
the extent such Net Asset Sale Proceeds on a
cumulative basis, plus the $68,500,000 proceeds of
the sale of PSC's Aluminum division less required
post-closing adjustments to a maximum of
$4,000,000, exceed $93,000,000; and (ii) if PSC
sells its US Ferrous division the Net Asset Sale
Proceeds of such sale will not be part of the
$93,000,000 referred to in (i), and the Senior
Secured Term Debt will be repaid to the extent of
66 2/3% of the first $200,000,000 of Net Asset Sale
Proceeds of such division and then to the extent of
75% of the balance of the proceeds, if any.
"Net Asset Sale Proceeds" will be defined to mean
the cash proceeds of asset sales of PSC and its
Affiliates approved by the Lenders after the date
hereof, net only of reasonable costs and expenses
and of payment of indebtedness secured by such
assets senior to the security for the Existing
Syndicate Debt or the Senior Secured Term Debt, as
the case may be, on such assets.
(C) At the time of any optional prepayment of any
Senior Secured Term Debt, PSC shall also pay the
Call Premium, if any, on the amount prepaid. The
"Call Premium" on any such repayment under the
Senior Secured Term Debt shall be with respect to
any repayment made during the periods following
Plan Implementation indicated below, the
corresponding percentage of the amount repaid:
0-12 months............................................. 5%
13-24 months............................................ 4%
25-36 months............................................ 3%
37-48 months............................................ 2%
49-60 months............................................ 1%
(V) SECURITY: The Senior Secured Term Debt and the Secured PIK
Debt will be secured by guarantees and charges over
substantially all of the assets of PSC and its
Affiliates, ranking in priority to all claims other
than the exit/working capital financing, and
existing senior liens as may be applicable to
particular assets (including without limitation the
liens for any Permitted LC Facility and for the
Bank Account Service Liabilities). The guarantees
and security for the Existing Syndicate Debt will
be retained, with any appropriate modifications so
that they secure the Senior Secured Term Debt and
the Secured PIK Debt. The Senior Secured Term Debt
and the Secured PIK Debt shall rank pari passu
under such security.
(VI) OTHER TERMS:
(A) Events of default, remedies and other terms
acceptable to the holders of Senior Secured Debt
and PSC.
(B) The $26,600,000 of cash collateral held as part of
the Permitted LC Facility Cash Collateral Security
and as security for the benefit of the Bank Account
Service Providers (the "Cash Collateral") will be
released to PSC as such Cash Collateral is released
by the issuer of letters
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of credit under the Permitted LC Facility and the
Bank Account Service Providers following Plan
Implementation.
(C) The treatment in the Plan of undrawn letters of
credit issued under the Existing Credit Agreement
(which for greater certainty does not include
letters of credit issued under the Permitted LC
Facilities) will be as set out in Exhibit 2 hereto.
(B) EQUITY: The balance of the Existing Syndicate Debt will be
exchanged for a number of common shares to be
issued to the Lenders pro rata by PSC representing
(1) if the Voting Requirement (as defined herein)
is met, 90% or (2) if the Voting Requirement is not
met, 100%, of the common shares of the restructured
PSC, subject to dilution, inter alia, upon the
conversion of the Secured PIK Debt.
All common shares issued will be freely tradeable
(subject to the status of any Lender being an
"underwriter" or an "affiliate" pursuant to Section
1145 of the Bankruptcy Code). PSC will use its best
efforts to retain the listing of its common shares
on the Toronto, Montreal and New York stock
exchanges.
There will be a shareholder rights plan for the
restructured PSC which will give the shareholders
(other than the Acquiror, as defined below) rights
("Rights") attached to the common shares, but
redeemable at the option of PSC's board of
directors, to subscribe at 50% of the then current
trading price for one additional common share of
PSC for each common share held, but only where a
person (together with those acting in concert with
such person) (collectively, the "Acquiror")
acquires issued common shares which would bring the
Acquiror's beneficial ownership to 20% or more of
the common shares of PSC (a) through purchases from
non-residents of Canada or from persons whose PSC
shares are registered on PSC's books with a
non-Canadian address, or (b) through purchases
under the exemptions from the takeover bid
requirements of the Securities Act (Ontario)
applicable to purchases (i) from 5 or fewer
persons, or (ii) in transactions in any twelve
months which aggregate less than 5% of the issuer's
outstanding shares. These Rights will not be
triggered if the acquisition is made through a
takeover bid made to all common shareholders which
must remain open for at least 45 days and which
complies with Canadian takeover bid regulations and
policies. Holdings of common shares as of Plan
Implementation will be grandfathered. For greater
certainty, the Rights will not be triggered by
acquisitions of authorized but unissued shares or
treasury shares. Apart from the Rights, there will
be no other provisions of any charter, by-laws or
other agreement by which PSC is bound (other than
existing agreements) which would provide for or
could permit shareholder rights or rights to the
other party to such agreement as a result of the
ownership or proposed ownership of PSC common
shares by any person or group of persons or the
change of ownership or proposed change of ownership
of PSC common shares or control of PSC.
The Articles of the restructured PSC will not limit
the number of common shares of PSC that may be
issued from time to time and will provide that PSC
could adopt no rights plan or other poison pill
device other than as provided herein.
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The distributions of debt and equity to the Lenders
may be allocated between the US and Canadian Plans
as agreed between PSC and the Lenders.
2. EXISTING UNSECURED CLAIMANTS AND SENIOR SECURED CREDITORS:
Senior secured creditors shall be paid in full or have their claims and
liens preserved or reinstated. Furthermore, trade creditors who agree to
conduct ongoing business relationships with PSC in accordance with existing
trade terms shall have their claims paid in full in the ordinary course of
business. Subject to the Voting Requirements, certain other unsecured
creditors identified by PSC (as may be agreed by the Lenders in their sole
discretion) ("Impaired Unsecured Claims") shall have their claims exchanged
for a pro rata share of (a) up to $60 million in unsecured payment in kind
notes (the "Unsecured PIK Notes") and (b) up to 5% of the common shares of
the restructured PSC, subject to dilution, inter alia, upon the conversion
of the Secured PIK Debt. The Lenders will waive their right to receive
distributions in respect of their unsecured deficiency claims under the US
Plan if the Voting Requirement is satisfied in the US without regard to the
votes of the Lenders, and under the Canadian Plan if the Voting Requirement
is satisfied in Canada, without regard to the votes of the Lenders. The
"Voting Requirement" shall mean the acceptance of the US Plan or the
Canadian Plan, as the case may be, by the requisite holders of Impaired
Unsecured Claims in an amount and number sufficient to cause such class to
accept the Plan under the Bankruptcy Code, or the CCAA, as applicable.
UNSECURED PIK NOTES:
ISSUER: PSC
INTEREST: 6% per annum. Interest on the Unsecured PIK Notes
will accrue and compound. Provided the Senior
Secured Debt is not in default, cash interest will
be payable on the Unsecured PIK Notes and on
accrued unpaid interest following repayment in full
of the Secured PIK Debt.
MATURITY: 10 years from Plan Implementation.
AMORTIZATION: Commencing 5 years from Plan Implementation
provided the Senior Secured Debt is not in default,
in equal instalments at the end of years 6 to 10
after Plan Implementation.
SECURITY: None.
3. SECURITIES CLAIMS AND EXISTING EQUITY HOLDERS OF PSC:
The claims of the putative class action plaintiffs in the action previously
pending against PSC in the United States District Court for the Southern
District of New York and pending against PSC in the Ontario Court, General
Division (the "Securities Action") and all other claims against PSC and any
of its Affiliates arising out of securities fraud, recission and similar
claims will be discharged under the Plan and will share, together with the
existing shareholders of PSC, in 5% of the common shares of restructured
PSC, subject to paragraph 2 and subject to dilution. In addition, subject
to Bankruptcy Court approval, the settlement of the Securities Action may
include the payment on Plan Implementation of attorneys fees for counsel to
such plaintiffs in an amount not to exceed $575,000.
4. ALTERNATE PROPOSAL FOR IMPAIRED UNSECURED CLAIMS
In the alternative to the arrangements described in paragraphs 2 and 3
above, if prior to commencing the Cases PSC enters into an agreement with
representatives of the holders of the Allwaste 7 1/4% Convertible
Subordinated Debentures (the "Old Debentureholders") acceptable to the
Required Lenders on substantially the terms of this Term Sheet including
this paragraph 4, then, subject to the Voting Requirement, the treatment of
holders of Impaired Unsecured Claims will be as follows:
(a) subject to (b), distributions to holders of Impaired Unsecured Claims
in the US Plan and the Canadian Plan will be made on a pro rata basis
based on allowed Claims amounts from a pool of
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(i) $60 million of Unsecured PIK Notes and (ii) 5% of the common shares
of the restructured PSC, subject to dilution;
(b) the holders of Impaired Unsecured Claims in the US Plan will have
their claims exchanged for a pro rata share of the equity referred to in
(a)(ii) above and either a pro rata share of
(i) the $60 million of Unsecured PIK Notes; or
(ii) $18 million of unsecured convertible debt described below (the
"Convertible Debt")
provided that
(iii) the $60 million pool of Unsecured PIK Debt shall be reduced by
$1.00 for every $1.50 of Convertible Debt issued; and
(iv) if holders of more than $27.5 million of such Impaired Unsecured
Claims elect to receive Convertible Debt, the Convertible Debt
shall be issued to the holders who make such election pro rata and
the balance of their claims shall be exchanged for Unsecured PIK
Notes;
(c) The distributions to Impaired Unsecured Claims in the Canadian Plan
will not be affected by this election, and such claims will continue
to be exchanged for a pro rata share of the equity and Unsecured PIK
Notes referred to above.
CONVERTIBLE DEBT:
(A) AMOUNT: $18 million.
(B) INTEREST: no interest for the first 3 years after Plan
Implementation. Cash interest payable commencing in
Year 4 at 3% per annum.
(C) CONVERTIBILITY:
The Convertible Debt will be convertible or
exchangeable until maturity at the option of the
holders into common shares of the restructured PSC
at a price of $30 of Convertible Debt per share
based on the assumption that the outstanding equity
of restructured PSC immediately following
consolidation will be 24,000,000 common shares.
(D) MATURITY: 20 years from Plan Implementation.
In such case:
(d) the balance of the Existing Syndicate Debt referred to in paragraph
1(b) above will be exchanged for a number of common shares issued to the
Lenders pro rata by PSC representing (i) if the Voting Requirement is
met, 91% or (ii) if the Voting Requirement is not met, 100%, of the
common shares of the restructured PSC, subject to dilution; and
(e) the holders of claims or interests referred to in paragraph 3 will
share in 4% of the equity of the restructured PSC, subject to paragraph
4(b)(ii) and subject to dilution.
5. EXIT/WORKING CAPITAL FINANCING:
BORROWER: PSC and Xxxxxx Services (Delaware) Inc. (others to
be determined).
AMOUNT: $100 million.
If the resolution of the letter of credit issue
described in item (vi)(D) under "Senior Secured
Debt" above results in undrawn letters of credit
being transferred to the exit facility, the exit
lenders will give consideration, in their sole
discretion, to increasing the facility to as much
as $125 million to provide for such letters of
credit.
PURPOSE: To fund repayment of debtor-in-possession financing
provided to the Borrowers in the Cases (as defined
below), short-term working capital needs and
letters of credit within a sub-limit of the credit.
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SECURITY: Secured by guarantees and charges over the accounts
receivable and inventory and, if required,
substantially all of the other assets, of PSC and
its subsidiaries, senior to all other security
including the security for the Senior Secured Debt,
other than existing senior liens applicable to
particular assets as provided in 1(a)(v) above.
INTEREST RATE: To be discussed (intended to be a market rate at
the relevant time).
FEES: To be discussed.
MATURITY: Two years from Plan Implementation. The exit
facility may be refinanced in whole but not in part
by a replacement facility with the same priority
as, and in an amount equal to, the exit facility,
and having terms substantially the same as the exit
facility to the extent commercially available.
OTHER TERMS: To be negotiated.
6. PLAN TIMETABLE:
PSC and its Affiliates will use their best efforts to achieve the following
Plan Timetable:
PSC and its Affiliates in the United States and
Canada will commence, in a venue mutually agreeable
to PSC and the Required Lenders, voluntary
insolvency proceedings in the United States and
Canada (the "Cases"), including the filing of the
Plan not later than June 30, 1999.
The Disclosure Statement shall be approved by the
US and Canadian courts presiding over the Cases
(the "Bankruptcy Courts") not later than August 31,
1999. The Bankruptcy Courts shall confirm the Plan
not later than October 31, 1999.
Plan Implementation shall occur not later than
November 30, 1999 (the "Plan Implementation Date").
7. OTHER PLAN TERMS: (a) The Plan will include an employee and
management incentive plan acceptable to PSC and
the Lenders which may include the granting of
options, such incentive plan to be consistent
with customary practices involving restructured
companies.
(b) Notwithstanding anything in this term sheet to
the contrary, PSC and its Affiliates may at all
times (both before and after the execution of
the Lock-Up Agreement and the filing of the
Plan) respond to unsolicited offers (but for
greater certainty may not, directly or
indirectly, seek, solicit, encourage or
initiate any discussions respecting any offers)
relative to potential transactions which (i)
restructure substantially all of the equity and
debt of PSC and its Affiliates, and (ii) are
demonstrably more favourable to the Lenders and
the other stakeholders in PSC than the
transactions set forth in this term sheet or in
the Plan.
(c) The board of directors of the reorganized PSC
will consist of 9 directors, who will be
nominated by the Lenders. The Lenders agree
that their nominees will include two members of
the existing PSC board and will include two
members nominated by High River Limited
Partnership ("High River") provided that High
River and Lenders acting in concert with it
beneficially own at least 25% of the Existing
Syndicate Debt. If one or both of the nominees
from the existing board is a nominee on that
board of
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High River or persons acting in concert with
it, that person will be counted as a High River
nominee on the slate for the new board.
(d) It shall be a condition to confirmation of the
Plan that (i) the Lock-Up Agreement shall not
have been terminated, and (ii) each of the
conditions set out in Section 7 of the Lock-Up
Agreement shall have been satisfied.
8. PUBLIC ANNOUNCEMENTS: The parties hereto agree that all public
announcements of the entry into or the terms and
conditions of this term sheet shall be mutually
acceptable to the Administrative Agent and PSC.
DATED this 21st day of June, 1999.
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EXHIBIT 1
(Financial Covenants)
1. the ratio of (x) current assets to (y) current liabilities, at all times
from and after the first day of the first Financial Quarter commencing
after Plan Implementation, must be equal to or greater than 1.5 to 1.0.*
2. aggregate EBITDA for the third and fourth Financial Quarters commencing
after Plan Implementation must not be less than 80% of budgeted EBITDA as
approved by the Lenders.
3. the ratio of (x) Non PIK Debt to (y) EBITDA, at all times from and after
December 31, 2000 [INTENDED TO BE END OF FIRST FULL FINANCIAL YEAR AFTER
PLAN IMPLEMENTATION], must be equal to or less than 3.75 to 1.0.
4. the ratio of (x) Total Debt to (y) EBITDA, at December 31, 2000 [INTENDED
TO BE END OF FIRST FULL FINANCIAL YEAR AFTER PLAN IMPLEMENTATION], and from
that date until March 31, 2001, must be equal to or less than 5.5 to 1.0,
and at all times thereafter must be equal to or less than 5.0 to 1.0.
5. the ratio of (x) EBITDA to (y) Cash Interest Expense, at all times from and
after December 31, 2000 [INTENDED TO BE END OF FIRST FULL FINANCIAL YEAR
AFTER PLAN IMPLEMENTATION], must be greater than 3.5 to 1.0.
6. the ratio of (x) EBITDA to (y) Total Interest Expense, at all times from
and after December 31, 2000 [INTENDED TO BE END OF FIRST FULL FINANCIAL
YEAR AFTER PLAN IMPLEMENTATION], must be greater than 2.25 to 1.0.
For the purpose of these financial covenants:
(a) EBITDA, Total Interest Expense and Cash Interest Expense are intended
to be calculated on a rolling 4 quarter basis. The calculations of these
items will exclude the periods prior to the commencement of the third
full Financial Quarter following Plan Implementation with EBITDA under
covenants 3 and 4 being annualized until there are four full Financial
Quarters of EBITDA for such calculations.
(b) EBITDA will exclude any net extraordinary, unusual or non recurring
gains or net non cash extraordinary, unusual or non recurring losses,
and will be adjusted as provided in the definition of EBITDA in the
Existing Credit Agreement on any Sale approved by the Lenders.
(c) Total Interest Expense will be the existing definition of "Interest
Expense".
(d) Cash Interest Expense will be Total Interest Expense excluding any
accrued non-cash interest on the Senior Secured Term Debt and any
interest on the Secured PIK Notes or on the Unsecured PIK Notes.
(e) Total Debt will be the existing definition of Debt (which, for greater
certainty, includes contingent liabilities under letters of credit but
excludes contingent liabilities incurred in support of bonds or similar
arrangements delivered in support of goods or services provided by PSC
in the ordinary course of its business until such bonds or similar
arrangements are called upon or are required to be accrued as a charge
against income on PSC's financial statements).
(f) Non PIK Debt will be Total Debt other than Debt owing under the
Secured PIK Notes and the Unsecured PIK Notes.
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* If PSC (with the Lenders' approval) makes a significant asset disposition in
any Financial Year after Plan Implementation which could affect its compliance
with the working capital ratio requirements in covenant 1 above, the Lenders
in their sole discretion will consider such covenant.
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EXHIBIT 2
TREATMENT OF LCS OUTSTANDING UNDER THE EXISTING CREDIT AGREEMENT
1. For the purposes of the Plan, the aggregate claim of the LC Issuers and the
LC Lenders against PSC and the US Borrower with respect to LCs issued under
the Existing Credit Agreement ("Existing LCs") will be deemed to be the
greater of:
(a) $20 million; and
(b) the amount actually drawn under the Existing LCs on or before Plan
Implementation.
This amount will be the "Agreed LC Claim". (LCs issued under a Permitted LC
Facility are outside the Existing Credit Agreement and the claims of the
issuer(s) of such letters of credit will not be compromised.)
2. For greater certainty, references in this Exhibit to the claims of the LC
Lenders with respect to the Existing LCs are to the reimbursement claims
the LC Lenders would have against PSC or the US Borrower, as applicable,
under section 2.06(3) of the Existing Credit Agreement for drawings under
an Existing LC, following the purchase of such claims by the LC Lenders
from the LC Issuers under section 2.06(4) of the Existing Credit Agreement.
Each LC Lender's share of the Agreed LC Claim and of any Unfunded LC Claim
(as defined below) will be its pro rata share of such Claim based on its
respective Cdn. LC Commitment and US LC Commitment as a proportion of the
aggregate Cdn. LC Commitment and US LC Commitment.
3. To the extent that the Agreed LC Claim is greater than the amount actually
drawn under the Existing LCs on or before Plan Implementation (such
difference being the "Unfunded LC Claim"), this amount will be funded by
the LC Lenders. Each LC Lender will fund its share of the Unfunded LC Claim
either:
(a) in cash; or
(b) to the extent an LC Lender does not fund its share of the Unfunded LC
Claim in cash, by contributing distributions it receives in the Plan
equivalent to its share of the Unfunded LC Claim. This contribution will
be calculated by a formula reflecting these principles which will be set
out in the definitive documentation.
The contribution by the LC Lenders (whether in cash or as provided in (b)
above) will be included in calculating their share of the Existing
Syndicate Debt and in calculating the total amount of Existing Syndicate
Debt, and will be distributed to all of the Lenders on Plan Implementation
pro rata as a distribution on the Existing Syndicate Debt.
4. The arrangements described in this Exhibit will be the only effect of the
Plan on the respective rights and obligations of the LC Lenders, the LC
Issuers, PSC and the US Borrower in connection with the Existing LCs. The
obligations supported by the Existing LCs will not be impaired or
compromised in the Plan without the consent of the LC Lenders and the LC
Issuers. To the extent the Existing LCs are undrawn on Plan Implementation,
they will be transferred to the exit facility and will be deemed to be
outstanding under that facility on Plan Implementation. The obligations of
the PSC and the US Borrower to reimburse the LC Issuers and the LC Lenders
under section 2.06(3) of the Credit Agreement with respect to drawings made
under Existing LCs following Plan Implementation will be unimpaired and
will be included in the exit facility. On Plan Implementation, any cash
collateral held under section 5.06 of the Credit Agreement for the benefit
of the LC Lenders in respect of the Existing LCs will be paid to the LC
Lenders.
5. These arrangements will not in any way limit or discharge any of the
present or future liabilities of the LC Lenders to the LC Issuers. The Plan
and the exit facility will include acknowledgements to this effect.
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