Exhibit 99.1
Execution Copy
AGREEMENT
This Agreement (the "Agreement"), dated as of May 14, 1998, by and
among Mercury Finance Company, a Delaware corporation, ("Mercury") and each of
the undersigned institutional holders (each, a "Consenting Holder") of claims,
notes and/or commercial paper (each, a "Claim") issued by Mercury under one of
the credit agreement, note agreements or other agreements, instruments or other
documents listed on Schedule 1 (the "Existing Agreements").
WITNESSETH:
WHEREAS, Mercury and each of the Consenting Holders is a party to a
Forbearance Agreement, dated as of July 11, 1997, as amended by the First
Amendment thereto, dated as of November 6, 1997, by the Second Amendment
thereto, dated as of March 2, 1998, and by the Third Amendment thereto, dated as
of May 14, 1998 (collectively, the "Forbearance Agreement") pursuant to which
each of the Consenting Holders has agreed to forebear, on the terms and
conditions therein set forth, from the exercise of any rights or remedies it may
have under the Existing Agreements;
WHEREAS, while the Forbearance Agreement has been in effect, Mercury
and an Ad Hoc Steering Committee of Mercury Creditors (including certain of the
Consenting Holders) (the "Steering Committee") have engaged in good faith
negotiations with the objective of reaching an agreement with regard to
restructuring the indebtedness outstanding under the Existing Agreements;
WHEREAS, Mercury and the Consenting Holders now desire to implement a
financial restructuring of Mercury on the terms set forth on Appendix I hereto
(the "Financial Restructuring");
WHEREAS, in order to implement the Financial Restructuring, Mercury
has agreed, on the terms and conditions of this Agreement, to prepare and file a
disclosure statement (the "Disclosure Statement") and plan of reorganization
(the "Pre-Structured Plan") in a case filed (the "Chapter 11 Proceedings") under
chapter 11 of title 11 of the United States Code (the "Bankruptcy Code")
implementing the terms of the Financial Restructuring and to use its best
efforts to have such Disclosure Statement approved and such Pre-Structured Plan
confirmed by the Bankruptcy Court for such U.S. judicial District as may be
agreed between counsel to the Steering Committee and counsel to Mercury (so long
as venue in such District is proper)(the "Bankruptcy Court"), in each case as
expeditiously as possible under the Bankruptcy Code and the Federal Rules of
Bankruptcy Procedure (the "Rules");
WHEREAS, in order to expedite the implementation of the Financial
Restructuring, each of the Consenting Holders is prepared to commit, on the
terms and subject to the conditions of this Agreement, to vote to accept the
Pre-Structured Plan.
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 are hereby acknowledged,
Mercury and each Consenting Holder hereby agree as follows:
1. Forbearance. So long as no "Agreement Termination Event" or
"Mercury Termination Event" (each as defined in Section 4 of this Agreement)
shall have occurred and be continuing, each of the Consenting Holders hereby
agrees to forebear from the exercise of any rights or remedies it may have under
the Existing Agreements, applicable law or otherwise with respect to any default
arising under the Existing Agreements during the period commencing on the date
hereof and ending on the date on which the Chapter 11 Proceedings are commenced
(the "Commencement Date"), provided, that, during such period Mercury shall have
continued to comply with its obligations under the terms and conditions of the
Forbearance Agreement.
2. Voting; Restriction on Transfer. Each of the Consenting Holders
represents 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 such Claims on behalf of such beneficial owners) Claims
set forth on the schedule attached to its signature page (for each such
Consenting Holder, the "Relevant Claims"). Each of the Consenting Holders agrees
that, subject to the conditions that (i) the Disclosure Statement shall have
been approved by the Bankruptcy Court; (ii) the Disclosure Statement as so
approved contains information in respect of Mercury's business and operations
that is not materially inconsistent with the information heretofore provided by
Mercury to the Consenting Holders; and (iii) the material terms of the Pre-
Structured Plan contained in the approved Disclosure Statement are the terms set
forth in the Financial Restructuring, it shall timely vote its Relevant Claims
(and, so long as no Agreement Termination Event or Mercury Termination Event
shall have occurred, not revoke or withdraw such vote) to accept the Pre-
Structured Plan.
Each of the Consenting Holders hereby agrees that, so long as this
Agreement has not been terminated, it shall not sell, transfer or assign any of
the Relevant Claims or any option thereon or any right or interest (voting or
otherwise) therein, unless the transferee thereof agrees in writing to be bound
by all the terms of this Agreement by executing a counterpart signature page of
this Agreement and the transferor provides Mercury with a copy thereof, in which
event Mercury shall 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 Mercury shall confirm that acknowledgment in writing.
3. Mercury Agreements. Mercury hereby agrees (i) promptly to prepare
a draft Disclosure Statement and Pre-Structured Plan implementing the Financial
Restructuring; (ii) subject to prior written confirmation from counsel to the
Steering Committee that the Steering Committee does not believe that (a) the
information contained in such Disclosure Statement in respect of Mercury's
business and operations is materially inconsistent with the information provided
to the Steering Committee or its representatives prior to the date hereof or (b)
the terms of such Pre-Structured Plan are inconsistent with the terms of the
Financial Restructuring, (1) thereafter, to commence the Chapter 11 Proceedings
on or prior to July 15, 1998 and (2) to use its best efforts to obtain an order
of the Bankruptcy Court approving the Disclosure Statement and thereafter to
take all reasonable steps necessary and desirable to obtain an order of the
Bankruptcy Court confirming the Pre-Structured Plan, in each case, as
expeditiously as possible under the Bankruptcy Code and Rules.
4. Termination of Agreement. Except as set forth in Section 15
hereof, this Agreement shall terminate automatically upon the occurrence of any
"Mercury Termination Event" or any "Agreement Termination Event" (as hereinafter
defined), unless the occurrence of such Agreement Termination Event is waived in
writing by Consenting Holders representing 75% of the Relevant Claims; provided,
that no such waiver shall extend the time for performance of any of Mercury's
obligations under Section 3 hereof to a date after August 30, 1998 without the
consent of all of the Consenting Holders. If any Agreement Termination Event
occurs (and has not been waived) or any Mercury Termination Event occurs at the
time when permission of the Bankruptcy Court shall be required for a Consenting
Holder to change or withdraw (or cause to be changed or withdrawn) its votes to
accept the Pre-Structured Plan, Mercury shall not, subject to its fiduciary
duties as a debtor in possession, oppose any attempt by such Consenting Holder
to change or withdraw (or cause to be changed or withdrawn) such votes at such
time. Upon the occurrence of an Agreement Termination Event or a Mercury
Termination Event, each of the Consenting Holders shall have all rights and
remedies available to it under the Existing Agreements, applicable law or
otherwise with respect to any default under the Existing Agreement that may have
occurred at any time prior to such Event and which default is still continuing.
An "Agreement Termination Event" shall mean any of the following:
(a) Mercury fails to prepare and deliver to the Steering
Committee a Pre-Structured Plan and Disclosure Statement that meet the
standards of Section 3 of this Agreement by July 10, 1998;
(b) The Chapter 11 Proceedings to implement the Financial
Restructuring through confirmation of the Pre-Structured Plan shall
not have been commenced by July 15, 1998;
(c) The Disclosure Statement incorporating the Financial
Restructuring through the Pre-Structured Plan shall not have been
approved by the Bankruptcy Court by September 15, 1998;
(d) The Pre-Structured Plan or any plan of reorganization or
liquidation proposed by Mercury shall contain terms inconsistent with
the terms and provisions set forth in the Financial Restructuring or
shall have been changed or amended in any respect which makes it
inconsistent with the terms and provisions set forth in the Financial
Restructuring;
(e) The Pre-Structured Plan shall not have been confirmed by the
Bankruptcy Court and substantially consummated in accordance with its
terms by November 15, 1998;
(f) Prior to the Commencement Date, Mercury does not meet its
obligations under the Forbearance Agreement;
(g) There shall have occurred any material adverse change in the
business, assets, operations, or condition (financial or otherwise) of
Mercury and its subsidiaries, taken as a whole; or
(h) Mercury breaches any other material provision of this
Agreement, including, but not limited to, ceasing to use its best
efforts to obtain approval of the Disclosure Statement and/or
confirmation of the Pre-Structured Plan.
In addition, Mercury shall have the right to terminate this Agreement,
by the giving of written notice thereof to each of the Consenting Holders, upon
the receipt by Mercury of binding commitments for new debt and/or equity
financing from one or more creditworthy entities in amounts sufficient to repay
all amounts outstanding under the Existing Agreements in full and in cash (a
"Mercury Termination Event"). Upon the occurrence of any Agreement Termination
Event, unless such Agreement Termination Event is waived in accordance with the
terms hereof, or upon the occurrence of a Mercury Termination Event, this
Agreement shall terminate and no party hereto shall have any continuing
liability or obligation to any other party hereunder, except as otherwise
provided in Section 14; provided, that, no such termination shall relieve any
party from liability for its breach or non-performance of its obligations
hereunder prior to the date of such termination.
5. Good Faith Negotiation of Financial Restructuring Documents.
Mercury and each Consenting Holder which is a member of the Steering Committee
hereby further covenants and agrees to negotiate the definitive documents
relating to the Financial Restructuring, including, without limitation, the form
of the New Senior Secured Notes (as defined in the Financial Restructuring), the
indenture therefor and the documents relating to the collateral for such notes
(including with respect to all such documents, without limitation, normal and
customary default provisions), in good faith and Mercury agrees to attach such
definitive documents as exhibits to the Disclosure Statement. In addition,
Mercury agrees that, to the extent that there is any dispute between Mercury and
the Steering Committee with respect to the final form of the New Senior Secured
Notes, the indenture therefor or any of the other documents relating to the
collateral therefor (including, without limitation, any dispute concerning the
covenants to be included in the indenture and collateral documents and/or the
structuring of separate tranches for such notes), Mercury shall accept the
position of the Steering Committee with respect to such dispute so long as the
Steering Committee's position is not inconsistent with the economic terms set
forth in the Financial Restructuring.
6. Representations and Warranties. Mercury, on the one hand, and
each of the Consenting Holders on the other, represents and warrants to each
other that the following statements are true, correct and complete as of the
date hereof:
(a) Corporate Power and Authority. It has all requisite
corporate 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. The execution and delivery of this Agreement
and the performance of its obligations hereunder have been duly
authorized by all necessary corporate action on its part;
(c) No Conflicts. 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 subsidiaries or
its Certificate of Incorporation or bylaws or those of any of its
subsidiaries 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
subsidiaries is a party or under its certificate of incorporation or
by-laws;
(d) 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, except such filings as may be necessary
and/or required for disclosure by the Securities and Exchange
Commission and in connection with the commencement of the Chapter 11
Proceedings, the approval of the Disclosure Statement and confirmation
of the Pre-Structured Plan; and
(e) Binding Obligation. This Agreement is the legally valid and
binding obligation of it, enforceable against it in accordance with
its terms, except as 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.
7. Further Acquisition of Securities. This Agreement shall in no way
be construed to preclude the Consenting Holders from acquiring additional
Claims. However, any such additional Claims so acquired shall automatically be
deemed to be Relevant Claims and to be subject to the terms of this Agreement.
8. Effectiveness; Amendments; Consenting Holders. This Agreement
shall not become effective and binding on the parties hereto unless and until
counterpart signature pages hereto shall have been executed and delivery by
Mercury and Consenting Holders holding Claims which constitute in the aggregate
at least eighty percent of the principal amount of the indebtedness outstanding
under the Existing Agreements and constituting a majority in number of the
aggregate number of holders of Claims; provided, however, at Mercury's election,
the percentage Claims threshold for effectiveness of this Agreement may be made
any percentage greater than seventy percent; and provided, further, that
delivery of counterpart signature pages from Consenting Holders holding at least
seventy percent of the indebtedness outstanding under the Existing Agreements
shall be deemed to constitute delivery of counterpart signature pages from
holders of a majority in number of the aggregate number of holders of Claims.
Once effective, this Agreement may not be modified (except as provided in
Section 4), amended or supplemented except in writing signed by Mercury and each
of the Consenting Holders.
9. Disclosure of Individual Holdings. Unless required by applicable
law or regulation, Mercury shall not disclose any Consenting Holder's holdings
of Relevant Claims, without the prior written consent of such Consenting Holder;
and if such announcement or disclosure is so required by law or regulation,
Mercury shall afford the Consenting Holders a reasonable opportunity to review
and comment upon any such announcement or disclosure prior to Mercury's making
such announcement or disclosure. The foregoing shall not prohibit Mercury from
disclosing the approximate aggregate holdings of Claims by the Consenting
Holders as a group.
10. Impact of Appointment to Creditors Committee. Mercury shall
cooperate with the Steering Committee in seeking to cause the United States
Trustee for the Chapter 11 Proceedings to appoint the members of the Steering
Committee to be members of the official committee of creditors holding unsecured
claims pursuant to Section 1102 of the Bankruptcy Code. Notwithstanding
anything herein to the contrary, in the event that any Consenting Holder is
appointed to and serves on a committee of creditors in Mercury's Chapter 11
Proceedings, the terms of this Agreement shall not be construed so as to limit
such Consenting 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 Consenting Holder) of such fiduciary
duties shall not be deemed to constitute a breach of the terms of this Agreement
(but the fact of such service on such committee shall not otherwise affect the
continuing validity or enforceability of this Agreement). So long as no
Agreement Termination Event or Mercury Termination Event shall have occurred and
this Agreement remains in effect, the foregoing shall not modify or limit the
obligations of the Consenting Holders to vote their Relevant Claims and to take
the other actions set forth in Section 2 hereof.
11. [Intentionally Left Blank]
12. 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 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 U.S. District
Court for the Northern District of Illinois. 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 Illinois jurisdiction, upon the
commencement of Mercury's Chapter 11 Proceedings, each of the parties hereto
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 (other than a breach by Mercury of Section
14 hereof) and each non-breaching party shall be entitled to specific
performance and injunctive or other equitable relief as a remedy of any such
breach.
14. Fees and Expenses. Mercury shall reimburse each Consenting
Holder which is a member of the Steering Committee for all of its out of pocket
costs and expenses incurred through the earlier to occur of an Agreement
Termination Event or a Mercury Termination Event, in respect of such Steering
Committee member's reasonable travel expenses and in respect of the fees and
expenses of Xxxxxxxx Xxxxx Xxxxxx & Xxxxx, Xxxxxxxx & Manzo, Jones, Day, Xxxxxx
& Xxxxx and Cleary, Gottlieb, Xxxxx & Xxxxxxxx in accordance with Mercury's
respective agreements with such firms (the "Expenses"). To the extent necessary
to continue Mercury's timely payment of the Expenses after the Commencement
Date, Mercury agrees to assume this Agreement pursuant to Section 365(a) of the
Bankruptcy Code or to provide retainers in amounts to be mutually agreed to by
Mercury and each of the professionals retained by the Steering Committee. In
addition, in the event any party brings an action against any other party based
upon a breach by such other party of its obligations hereunder, the prevailing
party shall be entitled to all reasonable expenses incurred, including
reasonable attorneys', accountants' and financial advisers' fees in connection
with such action.
15. Survival. Notwithstanding the sale of the Relevant Claims in
accordance with Section 2 hereof or the termination of the Consenting Holders'
obligations hereunder in accordance with Section 4 hereof, Mercury's obligations
and agreements set forth in Sections 9 and 14 (with respect to Expenses incurred
through the date of such termination) hereof shall survive such termination and
shall continue in full force and effect for the benefit of the Consenting
Holders in accordance with the terms hereof.
16. Headings. The headings of the sections, paragraphs and
subsections of this Agreement are inserted for convenience only and shall not
affect the interpretation hereof.
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. The agreements,
representations and obligations of the Consenting Holders under this Agreement
are, in all respects, several and not joint.
18. Prior Negotiations. This Agreement and Appendix 1 supersede all
prior negotiations with respect to the subject matter hereof, except the
Forbearance Agreement which shall remain in full force and effect in accordance
with its terms.
19. 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.
20. 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.
21. Consideration. It is hereby acknowledged by the parties hereto
that no consideration shall be due or paid to the Consenting Holders for their
agreement to vote to accept the Pre-Structured Plan in accordance with the terms
and conditions of this Agreement other than Mercury's agreement to commence the
Chapter 11 Proceedings, to use its best efforts to obtain approval of the
Disclosure Statement and to take all steps necessary and desirable to confirm
the Pre-Structured Plan in accordance with the terms and conditions of this
Agreement.
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.
MERCURY FINANCE COMPANY
By:
Name:
Title:
000 Xxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (847)
CONSENTING HOLDER [Fill in name of entity below]:
By:____________________________
Name:
Title:
Address:
Telephone:
Facsimile:
APPENDIX I
TERM SHEET
MERCURY FINANCE COMPANY
RESTRUCTURING TERM SHEET
This is Appendix I to the Agreement, dated May 14, 1998, by and among Mercury
Finance Company (the "Company") and each of the Consenting Holders (the
"Agreement"). Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.
I.TREATMENT OF CLAIMS UNDER THE PRE-STRUCTURED PLAN
The Pre-structured Plan will classify and provide treatment for claims against
and interests in the Company as generally described below. Claims in each
such class will be satisfied in full by the delivery of the consideration
described below on the Effective Date of the Plan. None of the Company's
subsidiaries shall be included in the Chapter 11 Proceedings.
Priority and
Administrative Claims: All allowed administrative claims and priority
claims will be paid in full in cash.
Trade Debt: Trade debt shall remain unimpaired and be paid
in the ordinary course by the Company.
Senior Debt: Each holder of the Company's commercial paper, short-
term loans or senior term notes against the
Company excluding the subordinated notes (a
"Senior Lender") and any other allowed
unsubordinated unsecured claims other than
Indemnity Claims (the "Other Claims") will receive:
(a) Its pro rata share of new senior secured notes
to be issued by the Reorganized Company (the
"New Senior Secured Notes"). The New Senior
Secured Notes will be issued pursuant to
section 1145 of the Bankruptcy Code, secured by
the assets of the Reorganized Company and will
have the following terms.
Aggregate 75.0% of the face amount of the
Principal Senior Lenders Claims after
Amount: giving effect to the payment of
Excess Cash.
Maturity: Third Anniversary of the
Effective Date.
Interest 9.0% per annum (the "Rate")
Rate: payable quarterly. Interest on
the New Senior Secured Notes
shall begin to accrue at the
aforementioned interest rate 91
days following the Bankruptcy
Filing.
The Company is not aware of any material Other
Claims. To the extent that Other Claims turn
out to be material in the judgement of the
Steering Committee, the Steering Committee may
elect to leave the Other Claims unimpaired.
(b) Its pro rata share of 100% of the equity in the
Reorganized Company (the "New Common Stock")
(subject to dilution post-Effective Date by
options issued under the Management Incentive
Plan).
(c) Its pro rata share of Excess Cash as of the
Effective Date. Excess Cash shall be defined
as all cash at the Company in excess of $20
million on the Effective Date, after the
payment of all obligations required to be paid
in cash on the Effective Date under the Pre-
structured Plan.
(d) Its pro rata share of 100% of any cash received
by the Company from the exercise of the Debt
Purchase Option (as defined herein).
(e) The acceptance of the Pre-structured Plan by
the Class of Senior Debt shall constitute the
agreement by each member of the Class to
allocate (i) warrants for 15% of the New Common
Stock (the "New Warrants") to the Class of
Securities Class Actions and Existing Equity,
and (ii) $22.5 million in New Junior
Subordinated Notes to the Class of Subordinated
Notes, respectively.
Consumer/Non-Class
Litigation Claims: Consumer Litigation Claims to the extent
allowed against the Company shall remain
unimpaired and be paid in the ordinary course
by the Reorganized Company.
Subordinated Notes: Subject to acceptance of the Pre-structured
Plan by the Class of Subordinated Notes, the
Senior Lenders shall allocate to the Class of
Subordinated Noteholders $22.5 million in New
Junior Subordinated Notes. The New Junior
Subordinated Notes will be issued pursuant to
section 1145 of the Bankruptcy Code and be
subordinated unsecured obligations of the
Reorganized Company. The New Junior
Subordinated Notes will mature five years from
the Effective Date with interest payable
quarterly in cash at 9 percent per annum.
Indemnity Claims: (A) Allowed indemnity claims of eligible current
and former employees, officers and directors
against the Company shall be paid from the
proceeds of the Directors' and Officers'
Liability Policy Number NDA 1494742-96 (the
"Reliance Policy") which rights and claims
against the Reliance Policy or its proceeds
shall remain unimpaired.
(B) In addition to the foregoing, and in further
satisfaction of such indemnity claims, pursuant
to the terms of the Third Amendment to the
Forbearance Agreement, prior to the Bankruptcy
Filing, a cash escrow in the amount of $13
million shall be established by the Senior
Lenders (the "Settlement Contribution and
Indemnity Fund" or "SC&IF") for the benefit of
holders of allowed indemnity claims of current
and former officers, directors and employees
other than Xxxx X. Xxxxxxx (the
"Beneficiaries").
(C) In addition to the SC&IF, the Senior Lenders
shall waive and release any direct claim
they may have against the Beneficiaries.
(D) Except for the treatment contemplated in this
section on Indemnity Claims, all indemnity
claims against the Company of current and
former officers, directors, and employees shall
be fully discharged and released.
(E) Subject to the direction of the current board
of directors of the Company, the SC&IF shall be
controlled by the Beneficiaries.
(F) The Company and its creditors, including the
Senior Lenders, shall waive and release any and
all claims to the Reliance Policy and its
proceeds. To the extent the Company recovers
any proceeds from the Reliance Policy, such
proceeds shall be paid to the Beneficiaries.
(G) The escrow into which the SC&IF is deposited
shall provide that the Settlement Contribution
and Indemnity Fund shall revert to the Senior
Lenders in the event the Pre-structured Plan is
not confirmed by November 15, 1998. The
Reliance Policy proceeds shall not be subject
to such reversion.
(H) The Senior Lenders agree to use their
reasonable best efforts in cooperation with the
Company's efforts to settle the class
litigation pending against the Company and the
Beneficiaries for an amount up to the aggregate
of the Settlement Contribution and Indemnity
Fund and the proceeds from the Reliance Policy.
If so settled, the Senior Lenders agree to
permit the settlement to be incorporated into
the plan, provided such process does not delay
confirmation of the Pre-structured Plan beyond
the ninetieth day after the Bankruptcy Filing.
(I) The Beneficiaries will continue to be
indemnified and held harmless by the Company
from any claims and counterclaims that may
arise out of claims asserted by the Company
related to the subject matter of the Securities
Class Actions.
(J) All derivative and direct claims by or on
behalf of the Company against the Beneficiaries
shall be released under the Pre-structured Plan.
(K) Except as set forth in (I), the funding of
the Settlement Contribution and Indemnity Fund
and the assignment of the Company's interest, if
any, in the Reliance Policy shall constitute full
satisfaction of the Company's obligation to
indemnify the present and former officers,directors
and employees of the Company and its subsidiaries
and affiliates in respect of an costs or expenses
or damages incurred now or hereafter in connection
with any event or cause of action arising prior to
confirmation of the Pre-structured Plan (whether
by contract, under the Company's by-laws, certificate
of incorporation, applicable state law or otherwise)
and, in consideration of such payent and assignment,
the Pre-structured Plan shall provide that each of
the officers directors and employees (present and
former) shall be deemed to have waived any right to
any additional amounts in respect thereof.
Securities Fraud The Senior Lenders shall allocate and
Claims and Equity distribute to the holders of allowed Class of
Interests: Securities Fraud Claims and Equity Interests
warrants entitling the holders thereof to
purchase in the aggregate 15% of the New Common
Stock. The warrants shall be in three series
and have the terms outlined below.
Amount of Exercise Price (% recovery
Equity Term on Total Debt)
Series A 5.0% 3 years 100%
Series B 5.0% 4 years 110%
Series C 5.0% 5 years 120%
Senior Debt Under the Pre-structured Plan, the
Purchase Option holders of each share of Existing
Equity shall be granted the right to
purchase its pro rata amount of the
Senior Debt at a price, in cash, equal
to 98.5% of the then outstanding claim
plus all accrued and unpaid interest
thereon, (the "Debt Purchase Option").
The Debt Purchase Option shall be
exercisable by record holders of common
stock as of May 14, 1998 who continue
to hold such stock as of the Senior
Debt Purchase Option exercise date
under the Pre-structured Plan and shall
be non-transferable. Any existing
Equityholders choosing to exercise the
Debt Purchase Option must irrevocably
commit to such purchase in cash on or
before the last date of the Company's
solicitation period (as defined in
section 1125 of the Bankruptcy Code).
If the Pre-structured Plan is
confirmed, the Senior Debt must be
purchased no later than the Effective
Date of the Pre-structured Plan.
[FN]
Total Debt equals all Senior and Subordinated Note claims as of the
Petition Date plus all accrued and unpaid interest on such claims through
the Petition Date. Percentage recovery is calculated after giving effect
to the distribution of the aggregate amount of New Senior Secured Notes
and, if applicable, shares available for issuance upon the exercise of
options granted under the New Management Incentive Plan.
II.ADDITIONAL TERMS AND CONDITIONS
CEO Search: The Company shall actively continue its
existing CEO search (the "Search")
through Xxxxxxxx & Struggles. In
connection with the Search, three
members of the Steering Committee will
be allowed to interview the candidates
and actively participate in discussions
with the Company concerning the
selection of the new CEO. The new CEO
selected by the Company must be
acceptable to the Steering Committee.
Litigation Claims: All creditors, shareholders and the
Company will retain their respective
rights to pursue their direct claims
(not derivative claims) against third
parties other than current and former
officers, directors and employees of
the Company, including claims against
KPMG Peat Marwick.
Liquidity The Company shall take all reasonable
Provisions: efforts necessary to ensure an active
and fully-valued public market for the
New Common Stock, the New Warrants and
the New Senior Secured Notes of the
Reorganized Company including, but not
limited to, (i) issuing appropriate
releases of information and otherwise
complying with the requirements of
paragraph (c) of Rule 144 under the
Securities Act of 1933, as amended,
(ii) conducting informational meetings
with potential investors and research
analysts, (iii) registering the common
stock of the Reorganized Company under
the Securities and Exchange Act of
1934, as amended, so that the
Reorganized Company will be a public
reporting company and (iv) obtaining
the listing of the New Common Stock,
the New Warrants and the New Senior
Secured Notes on a national securities
exchange or NASDAQ NMS. Any creditor
who would be deemed following the
Effective Date of the Pre-structured
Plan to be an "affiliate" of the
Reorganized Company by reason of its
equity holdings in the Company or
otherwise would be granted demand
registration rights. The New Common
Stock, the New Warrants and the New
Senior Secured Notes shall be issued
pursuant to section 1145 of the
Bankruptcy Code.
Releases: Subject to the reservation of direct
claims against KPMG Peat Marwick, the
Pre-structured Plan also (i) will
include a full discharge and release of
liability, to the fullest extent
provided by law, in favor of the
Company and each of their respective
principals, employees, agents,
officers, directors, and professionals
from all claims and causes of action
arising prior to the Effective Date
(including, without limitation, all
claims relating to the pending class
litigation); and (ii) may include to
the fullest extent permissible a
release for the Company, the Steering
Committee and each of their respective
principals, employees, agents,
officers, directors and professionals
from any and all claims arising from
actions taken or omitted to be taken in
good faith in connection with the
restructuring, the Pre-structured Plan
and the Company's bankruptcy case;
including pre-petition activities
leading to the promulgation and
confirmation of the Pre-structured
Plan.
New Board of The New Board of Directors will consist
Directors: of 7 members; 6 members nominated by
the Steering Committee and the new
Chief Executive Officer.
Management The New Board of Directors will
Incentive Plan: implement a Management Incentive Plan
with a portion of the plan designed to
grant stock options to senior
management based upon performance
hurdles and time vesting.
