Exhibit 5
[FORM OF] ASSIGNMENT AGREEMENT
Assignment Agreement, dated as of December 30, 1997 (the
"Agreement"), by and between Varde Partners, Inc., a Delaware corporation
("Varde"), and ______________ (the "Executive").
W I T N E S S E T H :
Simultaneously with the execution and delivery of this
Agreement, a Restructuring and Override Agreement, dated as of December 30, 1997
(the "Restructuring Agreement"), by and among Varde, Pride Companies, L.P., a
Delaware limited partnership ("Pride"), Pride Refining, Inc., a Texas
corporation, as the managing general partner of Pride and Pride SGP, Inc., a
Texas corporation, as the special general partner of Pride, is being executed
and delivered. Capitalized terms used herein but not otherwise defined herein
shall have the meanings set forth in the Restructuring Agreement (including
terms defined therein by incorporation by reference of terms defined in the
Credit Agreement).
The Executive is an employee of Pride. Simultaneously with the
execution and delivery of this Agreement, the Executive and Pride are executing
and delivering an Employment Agreement, dated as of December 30, 1997, in the
form attached hereto as Exhibit A (the "Employment Agreement").
Varde wishes to provide certain incentives to the Executive,
and the Executive wishes to provide certain benefits to Varde, all to the extent
set forth herein.
I. BASIC AGREEMENT
1.1 Assignment. Effective upon, and subject to the occurrence
of, the Stage 1 Transactions, Varde hereby assigns, subject to the terms and
conditions set forth herein, an undivided interest in the securities and
indebtedness of Pride set forth on Schedule 1 hereto (such securities, including
any securities and indebtedness into which they may be converted or exchanged,
the "Executive Securities"). In consideration for such assignment, the Executive
shall execute and deliver to Varde his duly executed and delivered promissory
note in a principal amount equal to the purchase price for the Executive
Securities set forth on Schedule 1 (the "Purchase Price") and in the form
attached hereto as Exhibit B (the "Note"), and agrees to the terms and
conditions set forth herein.
1.2 Holding and Voting of Executive Securities. The Executive
acknowledges and agrees that the Executive Securities represent an undivided
interest in securities and indebtedness acquired by Varde under the
Restructuring Agreement and the agreements described therein. The Executive
acknowledges receipt of a copy of the Restructuring Agreement and the Credit
Agreement and consents to the terms
2
thereof. The Executive acknowledges and agrees that, until such time as the Note
is paid in full, he shall have no voting, disposition or other rights with
respect to the Executive Securities other than the right to receive
distributions and other payments thereon, subject to the provisions set forth
herein. Varde shall retain all voting rights in respect of the Executive
Securities, including, without limitation, the right to amend the terms thereof
(so long as any such amendment does not discriminate among securities of the
same class), and shall have no obligations whatsoever with respect to the
Executive Securities other than the payment obligations set forth herein;
provided, however, upon payment in full of the Note in accordance with the terms
and conditions of this Agreement, Varde shall (i) request Pride to deliver to
the Executive certificates or other evidences of his Executive Securities and
(ii) execute such other documents and instruments as may be necessary or
appropriate to evidence the transfer of record title in and to the Executive
Securities to the Executive.
1.3 Note and Security Agreement. Subject to the terms and
conditions hereof, the Note shall constitute a non-recourse obligation of the
Executive payable solely from the distributions and other payments with respect
to the Executive Securities. To secure the Executive's obligations under the
Note and this Agreement, the Executive shall execute and deliver simultaneously
with the execution and delivery of this Agreement a Security Agreement in the
form attached hereto as Exhibit C (the "Security Agreement") pursuant to which
the Executive shall grant to Varde a first priority, perfected security interest
in all of his right, title and interest in the Executive Securities.
1.4 Interest on Note. The Note shall constitute a cash flow
obligation only and interest shall be payable from time to time only from, and
in amounts equal to, all cash distributions on the Executive Securities (other
than distributions that constitute cash payments of principal on the Executive
Securities or cash redemptions of the Stated Value of Executive Securities that
constitute partnership units of Pride) net of the amount of federal income
taxes, if any, payable by the Executive with respect to the applicable cash
distribution (such net amount being referred to as an "Interest Payment"). All
Interest Payments shall be the property of Varde and shall be applied to the
payment of interest on the Note upon receipt by Varde.
Notwithstanding the foregoing provisions of this Section 1.4,
if the amount of interest payable under the Note on any interest payment date in
respect of the immediately preceding interest computation period would, if based
solely upon the provisions of this Section 1.4, exceed the maximum amount
allowed by law, the amount of interest payable on such interest payment date
shall be automatically reduced to the maximum amount allowed by law. If the
amount of interest payable under the Note in respect of any interest computation
period is reduced based upon the Maximum Rate (as hereinafter defined) or the
maximum amount of interest allowed by law and the amount of interest payable
under the Note in respect of any subsequent interest computation period would be
less than the maximum amount allowed by law, then the amount of interest payable
under the Note in respect of such subsequent interest computation period shall
be automatically increased to such
3
maximum amount allowed by law, until such time as the interest that would have
been payable under the immediately preceding sentence is fully paid.
For purposes hereof, "Maximum Rate" shall mean, on any day,
the highest nonusurious rate of interest (if any) permitted by applicable law on
such day that at any time, or from time to time, may be contracted for, taken,
reserved, charged or received on the indebtedness evidenced by the Note under
the laws which are presently in effect of the United States of America and the
State of Texas applicable to the holder of the Note and such indebtedness or, to
the extent permitted by law, under such applicable laws of the United States of
America and the State of Texas which may hereafter be in effect and which allow
a higher maximum nonusurious interest rate than applicable laws now allow. Varde
hereby notifies Executive that, and discloses to Executive that, for purposes of
Tex. Rev. Civ. Stat. Arm. Art. 5069-1.04, as it may from time to time be
amended, the "applicable rate ceiling" shall be the "indicated rate" ceiling
from time to time in effect as limited by Art. 5069-1.04(b); provided, however,
that to the extent permitted by applicable law, Varde reserves the right to
change the "applicable rate ceiling" from time to time by further notice and
disclosure to Executive; and, provided further, that the "highest nonusurious
rate of interest permitted by applicable law" for purposes of this Agreement and
the Note shall not be limited to the applicable rate ceiling under Art.
5069-1.04 if federal laws or other state laws now or hereafter in effect and
applicable to this Agreement and the Note (and the interest contracted for,
charged and collected hereunder or thereunder) shall permit a higher rate of
interest.
1.5 Principal Payments on Note. Until the Note is paid in
full, all cash payments of principal on the Executive Securities and cash
redemptions of the Stated Value of Executive Securities that constitute
partnership units of Pride shall be retained by Varde and applied to the payment
of the outstanding principal amount of the Note upon receipt by Varde. All
paid-in-kind distributions in respect of the Executive Securities shall
constitute Executive Securities and shall not be applied to the payment of
principal of or interest on the Note. The Note may not be paid or prepaid by the
Executive other than from the sources described in the first sentence of this
Section 1.5 without the prior written consent of Varde; provided, however, that
if the Note is not paid in full on the Maturity Date, either Varde or the
Executive may elect, upon not less than 30 days written notice to the other
party, to extend the Maturity Date for one year (as so extended, the "Extended
Maturity Date"). (In addition, if Varde extends the maturity date of the Series
B-1 Term Loan or the mandatory redemption date of the New Preferred Unit A to a
date later than the Extended Maturity Date, then the Extended Maturity Date
shall be deemed to be such later date.) On the Extended Maturity Date, the
Executive may pay the Note from any sources of funds unless no less than three
months prior to the Extended Maturity Date, Varde, at its option, elects to have
the Note paid by the assignment to Varde of all of the Executive's right, title
and interest in and to the Executive Securities that constitute the Series B-1
Term Loan or the New Preferred Unit A, whichever is outstanding, in satisfaction
of the amount outstanding under the Note. If Varde makes such election, the
Exective shall assign the securities free and clear of any Liens and Varde and
the Executive shall enter into appropriate documentation to
4
effect the foregoing. Nothwithstanding anything to the contrary herein, if the
Note is paid in full at a time when the Series A Term Loan remains outstanding
and held by Varde (or an affiliate of Varde) or a person (other than an
affiliate of Varde) that acquired the Series A Term Loan from Varde for a price
of less than par plus accrued but unpaid interest (or any transferee of such
person), all payments of cash on the Executive Securities shall be held by Varde
in escrow as collateral security for the payment of principal, interest and
other amounts payable with respect to the Series A Term Loan (the "Series A
Obligations"). If there occurs an Event of Default under the Credit Agreement
when Series A Obligations are outstanding, Varde may apply all such collateral
to the payment of the Series A Obligations until such Series A Obligations are
indefeasibly paid in full. Upon payment in full of the Series A Obligations, the
Executive shall be subrogated (together with certain other employees of Pride)
to Varde's rights with respect to the Series A Obligations to the extent of the
collateral applied hereunder to the payment thereof.
1.6 Other Payments on Varde's Securities. All payments
received by Varde in connection with (i) the Call Option, (ii) the DFSC Proceeds
paid to Varde other than the portion thereof applied to the payment of the
Series B-1 Term Loans or the New Preferred Unit A as provided in Section 1.4(a)
of the Restructuring Agreement or (iii) any sale, transfer, assignment or other
disposition to any person of all or a portion of the Outstanding Securities
shall be the exclusive property of Varde and the Executive shall have no rights
with respect thereto; provided, however, that the Executive's right, title and
interest in and to the Executive Securities (including, without limitation, the
right to receive a transfer of record title to the Executive Securities upon the
satisfaction of the conditions therefor set forth herein) shall continue
notwithstanding any such transaction (although the record owner thereof may be a
person other than Varde following such transaction). The Executive acknowledges
and agrees that if the portion of the DFSC Proceeds distributed to Varde
pursuant to clause (z)(ii) of Section 1.4(a) of the Restructuring Agreement is
applied to the redemption or payment of Outstanding Securities, the Executive
shall have no right to have the Executive Securities participate in such
redemption or payment and all such amounts shall be the exclusive property of
Varde.
1.7 Employment Agreement. To induce Varde to enter into this
Agreement, the Executive is entering into the Employment Agreement and covenants
to perform his duties and obligations thereunder. The Executive agrees that
Varde is intended to, and shall, be a third party beneficiary of the rights of
the Company thereunder. The Executive shall not agree to any amendment,
supplement, termination, modification or waiver of the Employment Agreement
without the prior written consent of Varde.
1.8 Consequences of Termination of Employment.
(a) Varde Repurchase Rights. If the Executive's
employment with the Company terminates (i) as a result of the Executive's
voluntary resignation or (ii) as a result of the Executive intentionally failing
to be ready and willing to perform his obligations under the Employment
Agreement (provided that
5
death or disability shall not constitute a failure to be ready and willing to
perform) (any of such events of termination being referred to as an "Employment
Termination Event"), then Varde may, at its option (but shall have no obligation
to), repurchase (x) two-thirds (2/3) of each class of the Executive Securities
if the Employment Termination Event occurs within eighteen (18) months of the
date hereof or (y) one-third (1/3) of each class of Executive Securities if the
Employment Termination Event occurs after eighteen (18) but within thirty-six
(36) months of the date hereof, for a repurchase price (the "Repurchase Price")
of two-thirds (2/3) or one-third (1/3), respectively, of the Purchase Price.
Varde, if it exercises its option, shall pay the Repurchase Price by cancelling
a principal amount of the Note equal to the Repurchase Price and paying the
balance, if any, in cash. The closing of any repurchase under this Section 1.8
shall occur at the offices of the Company ten Business Days after delivery of
written notice of exercise by Varde. At the closing, the Executive shall deliver
to Varde any certificates or other evidences of the Executive Securities free
and clear of any Lien and Varde shall acknowledge the reduction in the principal
amount of the Note and deliver a certified check in the amount of any cash
payment.
Varde's repurchase rights under this Section 1.8(a) shall
terminate upon (i) termination of the Executive's employment with the Company
for a reason other than an Employment Termination Event; (ii) constructive
termination by Pride of the Executive's employment that remains uncured 30 days
after notice to Pride and Varde, including, without limitation, for this
purpose, a material reduction in the annual salary of the Executive; (iii) a
material breach by Pride of the Employment Agreement that remains uncured 30
days after notice to Pride and Varde; (iv) death or incapacity of the Executive;
(v) a merger or consolidation in which Pride is a constituent party, or sale of
all or substantially all of the assets of Pride or a recapitalization of Pride,
if, in any such transaction, Varde receives cash for the Outstanding Securities;
(vi) any sale, transfer, assignment or other disposition by Varde to any person
(other than its affiliates) of a majority or more of the Outstanding Securities
(not including the Series A Term Loan); or (vii) the fifth anniversary of the
date hereof if an Employment Termination Event has not occurred prior to such
anniversary (any such event in clauses (i) through (vii) being referred to as a
"Repurchase Termination Event").
(b) Recourse/Non-Recourse Provisions of Note.
Notwithstanding anything to the contrary contained herein or in the Note, upon
the occurrence of (i) an Employment Termination Event, the Note shall
automatically, and without any further action by any party, become a full
recourse obligation of the Executive and the Executive shall have full personal
liability for the full payment thereof and (ii) a Repurchase Termination Event,
the Note shall automatically, and without any further action by any party,
irrevocably be a non-recourse obligation of the Executive subject only to the
payment obligations set forth herein, in the Note and in the Security Agreement.
1.9 Conversion to Common Units. If Unitholder approval
is obtained for the exchange of the Outstanding Securities into the New
Preferred Units
6
as contemplated by the Restructuring Agreement, the Executive shall have the
right (without the prior approval of Varde) to convert his right, title and
interest in the New Preferred Unit B and the New Preferred Unit C into Common
Units at any time after the second anniversary of the Stage 3 Closing, if at the
time of such conversion no event of default or material default shall have
occurred and be continuing under any of the Outstanding Securities.
Notwithstanding any provision herein to the contrary, if the Series A Term Loan
remains outstanding at the time of the Unitholder approval contemplated by the
Restructuring Agreement, the Executive shall have no interest whatsoever in any
conversion rights of the New Preferred Unit C to the extent such New Preferred
Unit C is convertible into more than 42% of the Common Units.
1.10 Priority of Payments. Any payments of principal or
redemptions of Preferred Units in respect of the Executive Securities shall be
applied in the following order: the Series B-1 Term Loans, the Series C Term
Loans, the Series A Unsecured Note, the Series B Units, the Series C Units and
the Series D Units (or the New Preferred Unit A, New Preferred Unit B and the
New Preferred Unit C, assuming Unitholder approval has been obtained for the
Stage 3 Transactions), in each case together with accrued but unpaid interest or
dividends on the principal amount or Stated Value paid.
1.11 Structure. Varde will cooperate with the Executive in
restructuring the interest of the Executive in the Executive Securities in order
to maximize the tax efficiency of the Executive's interest, but Varde shall not
be required to effect any restructuring that has adverse tax or other
consequences to Varde.
II. MISCELLANEOUS
2.1 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, neither this
Agreement nor any of the rights, interests or obligations hereunder or under the
Executive Securities, the Note or the Security Agreement may be assigned,
pledged, transferred or otherwise disposed of or encumbered by the Executive.
2.2 Notices. All notices, demands or other communications
between the parties hereto shall be in writing. Notices delivered personally or
by telecopier shall be deemed received on the same Business Day if delivered
personally or by telecopier before 3:00 p.m. (recipient's local time) on such
day, and otherwise on the next Business Day. Any notice, demand or other
communication so addressed to the relevant party shall be deemed to have been
received (i) if given or made by certified or registered mail, by hand delivery
or by courier service, when actually delivered to the relevant address (and such
location is open for business) and (ii) if given or made by facsimile, on the
date that the communication is received by the Executive or a responsible
employee of Varde, as the case may be, in legible form
7
(and being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's facsimile
machine).
All notices to Varde shall be given to:
Varde Partners, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
All notices to the Executive shall be given to him at
the address set forth on Schedule 1
2.3 Final Integration. This Agreement, together with the
exhibits and schedules attached hereto, the Note and Security Agreement shall
serve as the final integration and expression of all agreements between Varde
and the Executive with respect to the subject matter hereof, and any previous
agreement, representation or warranty, whether oral or written, shall have no
further force and effect.
2.4 Governing Law. The laws of the State of New York (without
regard to principles of conflict of laws that would cause the application of the
laws of any other jurisdiction) shall govern the construction, interpretation
and enforceability of this Agreement in any dispute, case or controversy arising
in or under or related to or connected with this Agreement or the relationship
between the parties hereto.
2.5 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HEREBY WAIVES, AND COVENANTS
THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY
RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH EITHER OF THEM IS A
PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT, DUTY IMPOSED BY LAW OR OTHERWISE) IN ANYWAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH THIS AGREEMENT, THE EXECUTIVE SECURITIES, THE NOTE OR THE
SECURITY AGREEMENT, OR THE RELATIONSHIP
8
ESTABLISHED HEREUNDER AND WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE DATE
HEREOF OR BEFORE OR AFTER THE PAYMENT, OBSERVANCE AND PERFORMANCE IN FULL OF ANY
OBLIGATIONS OF ANY PARTY UNDER THIS AGREEMENT, THE NOTE OR THE SECURITY
AGREEMENT.
2.6 Amendments. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Varde and the
Executive. No waiver of any provision of this Agreement nor consent to any
departure by a party therefrom, shall be effective unless it is in writing and
signed by the other party, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
2.7 Headings. The headings of the Sections of this Agreement
are for information purposes only and do not constitute a part of this
Agreement.
2.8 Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall be an original but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.
VARDE PARTNERS, INC.
By:
---------------------------------
Name:
Title:
---------------------------------
[Name of Executive]
9
Schedule I to the
Assignment Agreement
Executive Securities
--------------------
Series B-1 Term Loan $__________
Series C Term Loan $__________
Series A Unsecured Note $__________
Series B Units $__________
Series C Units $__________
Series D Units $__________
Upon Stage 3 Closing
--------------------
New Series A Preferred $__________
New Series B Preferred $__________
New Series C Preferred*/ $__________
Purchase Price - $______________
Address for notices:
--------
*/ Subject to the last sentence of Section 1.9 of the Assignment
Agreement.
