EXHIBIT 10.24
INVESTMENT AGREEMENT
October __, 2002
Sterling Chemicals Holdings, Inc.
Sterling Chemicals, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
Gentlemen:
This Investment Agreement (as the same may hereafter be
amended, modified or supplemented, this "Agreement") sets forth the agreement
among Sterling Chemicals Holdings, Inc., a Delaware corporation ("Holdings"),
Sterling Chemicals, Inc., a Delaware corporation (including, on or after the
Effective Date, as defined herein, its successor as reorganized pursuant to the
Bankruptcy Code, as defined herein, "Chemicals") (Holdings and Chemicals
collectively, the "Company"), and Resurgence Asset Management, L.L.C., a
Delaware limited liability company ("RAM") on behalf of itself and its
Affiliates' managed funds and accounts (such funds and accounts, collectively,
the "Investor").
The Company hereby agrees to issue and sell to Investor, and
RAM agrees to cause Investor to purchase from the Company, on the terms and
conditions contained herein and in the Plan (as defined below), and subject to
entry of the Confirmation Order (as defined below), 2,175 shares of the
Company's liquidation preference convertible preferred stock (the "New SCI
Preferred Shares"), convertible into 43.5% of the Company's common equity issued
and outstanding as of the Effective Date (assuming the conversion of all New SCI
Preferred Shares), for an aggregate of $30,000,000 in cash. In addition, on the
terms and conditions contained herein and in the Plan, and subject to the
procedures governing the proposed offering (the "Subscription Rights Offering")
to holders (collectively, the "Unsecured Holders") of General Unsecured Claims,
Old Unsecured Note Claims and Self-Insured Tort Claims (as such terms are
defined in the Plan) of subscription rights entitling the Unsecured Holders to
purchase up to 43.5% of the common stock of the Company assuming the conversion
of all New SCI Preferred Shares (the "Subscription Shares") for an exercise
price of $1,000 per right (the "Subscription Rights" and any Subscription Rights
not subscribed for by such Unsecured Holders for any reason, including, without
limitation, any Subscription Rights not subscribed for as a result of any
recalculation of the "Eligible Claim Amount", as such term is described in
Exhibit F to the Plan, the "Unsubscribed Subscription Rights"), RAM agrees to
cause Investor to subscribe for any Unsubscribed Subscription Rights, and to
purchase all Underwritten Subscription Shares (as defined below). RAM shall
cause Investor to pay to Chemicals for the Underwritten Subscription Shares an
amount in cash
determined by multiplying the Subscription Price (as defined below) by the total
number of Subscription Rights exercisable for the Underwritten Subscription
Shares. The terms of the New SCI Preferred Shares, the New SCI Common Shares (as
defined below) and the Subscription Rights shall be as set forth in the Plan and
in the Term Sheet attached as Appendix A hereto.
Investor's purchase of the New SCI Preferred Shares and the
Underwritten Subscription Shares (collectively, the "Investment") will be made
in connection with and as part of the transactions to be consummated pursuant to
the amended plan of reorganization of the Company dated October 11, 2002, as the
same may be later modified with the consent of RAM (the "Plan") and an order
confirming the Plan (the "Confirmation Order") issued by the Bankruptcy Court
(as defined in the Plan). The Plan will contain provisions called for by, or
otherwise consistent with, this Agreement.
SECTION 1. Definitions.
For purposes of this Agreement, except as expressly provided
herein or unless the context otherwise requires, the following terms shall have
the following respective meanings (capitalized terms not otherwise defined
herein shall have the meanings set forth for such terms in the Plan):
"Affiliate" shall mean (a) when used with reference to any
partnership, any Person that, directly or indirectly, owns or controls 10% or
more of either the capital or profit interests of such partnership or is a
partner of such partnership or is a Person in which such partnership has a 10%
or greater direct or indirect equity interest and (b) when used with reference
to any corporation, any Person that, directly or indirectly, owns or controls
10% or more of the outstanding voting securities of such corporation or is a
Person in which such corporation has a 10% or greater direct or indirect equity
interest. In addition, the term "Affiliate," when used with reference to any
Person, shall also mean any other Person that, directly or indirectly, controls
or is controlled by or is under common control with such Person. As used in the
preceding sentence, (x) the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of the entity referred to, whether through ownership of voting
securities, by contract or otherwise and (y) the terms "controlling" and
"controls" shall have meanings correlative to the foregoing. Notwithstanding the
foregoing, the Company will not be deemed to be an Affiliate of Investor or any
of its partners or assignees.
"Agreement" shall have the meaning specified in the first
paragraph of this Agreement.
"Alternate Bid" shall have the meaning specified in Section
17(b).
"Alternate Bid Procedures" shall have the meaning specified in
Section 17(b).
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"Alternative Plan" shall mean a plan of reorganization (other
than the Plan) that does not include Investor and/or funds managed by Investor
as the sole new money underwriter.
"Approvals" shall mean all approvals, permits, authorizations,
consents, licenses and agreements that are necessary or required in order to
consummate the Investment and the other transactions contemplated hereby and to
permit the Company to carry on its business after the Effective Date in a manner
consistent in all material respects with the manner in which it was carried on
prior to the Effective Date.
"Chemicals" shall have the meaning specified in the first
paragraph of this Agreement.
"Company" shall have the meaning specified in the first
paragraph of this Agreement.
"Deposit" shall have the meaning specified in Section 13(e).
"Designated Directors, Officers and Employees" shall mean (a)
each director, officer and employee of each of the Debtors that serves in such
capacity at any time on or after the date hereof and (b) each director, officer
or employee of each of the Debtors that serves as a fiduciary of any employee
benefit plan or program of any of the Debtors at any time on or after the date
hereof.
"Disclosure Statement" shall mean the disclosure statement
with respect to the Plan dated October 11, 2002, as the same may be later
modified with the consent of Investor.
"Eligible Claim Amount" shall mean $15,849.98, subject to
recalculation as set forth in the Plan and the Disclosure Statement.
"Escrow Agreement" shall have the meaning specified in Section
13(e).
"Governmental Authority" shall mean (a) any nation or
government, (b) any federal, state, county, locality, province, city, town,
municipality, commonwealth, territory, possession or other political subdivision
thereof, (c) any agency, authority, instrumentality, council, court, tribunal,
arbitrator, department, bureau, commission, board or other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and (d) any other governmental entity, agency or
authority having or exercising jurisdiction over any relevant Person, item or
matter.
"Holdings" shall have the meaning specified in the first
paragraph of this Agreement.
"Initial Order" shall mean the order or orders to be obtained
by the Company pursuant to Section 16 with respect to expenses and the break-up
fee.
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"Investment" shall have the meaning specified in the third
paragraph of this Agreement.
"Investor" shall have the meaning specified in the first
paragraph of this Agreement.
"Investor Securities" shall mean the New SCI Preferred Shares
and the Underwritten Subscription Shares.
"Outside Date" shall mean June 30, 2003.
"Permitted Transactions" shall have the meaning set forth in
Section 19(b).
"Plan" shall have the meaning specified in the third paragraph
of this Agreement.
"Preferred Shares Purchase Price" shall have the meaning
specified in Section 3.
"Present DIP Financing" shall have the meaning set forth in
Section 18(b)(F).
"Regulatory Approvals" shall mean all Approvals required to be
obtained from, or notices to or registrations or filings with, any Governmental
Authority.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Subscription Price" shall mean the $1,000 cash subscription
price per 72.5 New SCI Common Shares distributed upon exercise of each
Subscription Right.
"Subscription Rights" shall have the meaning set forth in the
second paragraph of this Agreement.
"Subscription Shares" shall have the meaning set forth in the
second paragraph of this Agreement.
"Term Sheet" shall mean the term sheet dated as of September
4, 2002, among Investor, the Company, the Unofficial Secured Noteholders
Committee and the Creditors Committee, a copy of which is included as Appendix A
hereto.
"Total Purchase Price" shall mean, collectively, (a) the
Preferred Shares Purchase Price and (b) the aggregate amount payable for the
purchase of the Underwritten Subscription Shares.
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"Underwritten Subscription Shares" shall mean all Subscription
Shares not purchased for any reason pursuant to the Subscription Rights
Offering, including, without limitation, (a) all Subscription Shares that RAM is
required to cause Investor to subscribe for pursuant to the Unsubscribed
Subscription Rights, (b) all Subscription Shares issued into reserve for the
benefit of a holder of a Disputed General Unsecured Claim, Disputed Old
Unsecured Note Claim or Disputed Self-Insured Tort Claim whose claim is found by
a final order of the Bankruptcy Court not to be an Allowed Claim or, if found to
be partially an Allowed Claim, to the extent found not to be an Allowed Claim,
and (c) all Subscription Shares not purchased by any other Person as a result of
any recalculation of the Eligible Claim Amount.
"Unsubscribed Subscription Rights" shall have the meaning set
forth in the second paragraph of this Agreement.
SECTION 2. Term Sheet Commitments.
The Company and RAM are parties, along with the Unofficial
Secured Noteholders Committee and the Creditors Committee, to the Term Sheet.
The Term Sheet contains commitments by the Company and RAM as to the treatment
under the Plan of the Old 12?% Secured Note Claims, a majority of whose holders
are believed to be represented by the Unofficial Secured Noteholders Committee,
the treatment under the Plan of General Unsecured Claims, Old Unsecured Note
Claims and Old Discount Note Claims, whose holders are represented by the
Creditors Committee, and as to other material terms and provisions of the Plan.
The Company and RAM acknowledge that this Agreement does not modify the
commitments of the Company or RAM under the Term Sheet to the Unofficial Secured
Noteholders Committee or the Creditors Committee, which commitments remain in
full and force effect.
SECTION 3. Commitment to Make Investment. Subject to the terms
and conditions of this Agreement, on the Effective Date, the Company shall issue
and sell to Investor, and RAM shall cause Investor to purchase from the Company,
the New SCI Preferred Shares and all Underwritten Subscription Shares. The New
SCI Preferred Shares shall be issued, sold and delivered to Investor (as
designated by RAM), and the $30,000,000 purchase price for the New SCI Preferred
Shares (the "Preferred Shares Purchase Price") shall be paid on the Effective
Date by one or more wire transfers of immediately available funds to an account
to be designated in writing by the Company prior to the Effective Date. RAM
shall cause Investor to (a) purchase all of the New SCI Preferred Shares, (b)
subscribe for all Unsubscribed Subscription Rights, (c) underwrite all other
Subscription Rights, (d) purchase all Underwritten Subscription Shares and (e)
pay the Deposit and the balance of the Total Purchase Price at the times
specified in this Agreement and the Plan by wire transfer(s) of immediately
available funds to an account to be designated in writing by the Company. The
New SCI Common Shares constituting Underwritten Subscription Shares shall be
issued and delivered to Investor (as designated by RAM) on or as soon as
practicable after the Effective Date. It is the parties' expressly agreed intent
that upon the consummation of the Rights Offering and of the transactions
contemplated hereunder the Company shall receive $60,000,000 in new capital and
that RAM shall cause Investor to fully underwrite such amount. For the avoidance
of doubt,
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no term of this Agreement shall prevent RAM (on behalf of itself and its
Affiliates' managed funds and accounts) from exercising its pro rata portion of
the Subscription Rights allocated to RAM (on behalf of itself and its
Affiliates' managed funds and accounts) in its capacity as a holder of Old
Unsecured Note Claims in Class 8.
SECTION 4. Plan of Reorganization.
The Plan shall (a) be proposed by the Company with the consent
of RAM, (b) be consistent with commitments made to the Unofficial Secured
Noteholders Committee and the Creditors Committee as set forth in the Term Sheet
unless otherwise agreed by such parties and (c) contain terms and conditions
reasonably satisfactory to Investor and the Company; provided that RAM and the
Company may, by mutual agreement, and with the consent of the Unofficial Secured
Noteholders Committee and the Creditors Committee, modify the Plan or otherwise
restructure the Investment in a manner consistent with the contemplated economic
consequences to the Company and RAM if necessary to achieve business or
financial objectives or to obtain confirmation of the Plan.
SECTION 5. Disposition of Non-Core Businesses.
(a) The Company shall market its pulp chemicals business for
sale, with the goal of closing such sale on the Effective Date but in
no event later than the Outside Date. The Company shall regularly
inform RAM as to the status of the sale process, shall consult with RAM
regarding the sale process and shall not accept any bid as the highest
and best bid without the written agreement of RAM and as otherwise
required by the Term Sheet unless pursuant to an order of the
Bankruptcy Court. The net proceeds of the sale shall be allocated as
provided in the Plan.
(b) The Company's acrylic fibers business will be transferred
to local senior management of the Company's acrylic fibers business for
little or no consideration; provided, however, that the Company shall
not enter into any definitive documentation for such transaction unless
and until RAM has approved the form and content of such definitive
documentation.
SECTION 6. Capitalization.
(a) Equity. As of the Effective Date, the Company's authorized
capital shall consist of 10,000,000 New SCI Common Shares and 25,000
New SCI Preferred Shares. Subject to the terms and conditions of the
Plan, the Company shall issue:
(i) 65,000 New SCI Common Shares to the holders of Allowed Old
Discount Note Claims;
(ii) 585,000 New SCI Common Shares to the holders of Allowed
General Unsecured Claims, Old Unsecured Note Claims and Self-Insured
Tort Claims;
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(iii) 2,175,000 New SCI Common Shares to the holders of
Allowed General Unsecured Claims, Old Unsecured Note Claims and
Self-Insured Tort Claims and Investor (as designated by RAM) pursuant
to the Subscription Rights Offering;
(iv) 2,175 New SCI Preferred Shares to Investor (as designated
by RAM); and
(v) New SCI Warrants to purchase 15% of the fully-diluted New
SCI Common Shares outstanding as of the Effective Date (assuming the
conversion of all New SCI Preferred Shares into New SCI Common Shares,
the exercise of all New SCI Warrants and the prior issuance of all
shares available for issuance under the SCI Management Incentive Plan)
to the holders of Allowed General Unsecured Claims, Old Unsecured Note
Claims and Self-Insured Tort Claims.
In addition, the Company shall reserve for issuance after the Effective Date the
maximum number of New SCI Common Shares available for issuance under the SCI
Management Incentive Plan and the number of New SCI Common Shares issuable upon
conversion of all New SCI Preferred Shares and the exercise of all New SCI
Warrants.
(b) Secured Notes Due 2009. Subject to the terms and
conditions of the Plan, the Company shall issue the New SCI Notes to
the holders of Old 12-3/8% Secured Note Claims and shall issue the New
UC Notes to the holders of Allowed General Unsecured Claims, Old
Unsecured Note Claims and Self-Insured Tort Claims.
(c) New Credit Agreement. On the Effective Date, the Company
shall enter into a new secured revolving credit facility in an amount
up to $100 million.
SECTION 7. Company's Board of Directors.
The Plan shall provide that, on the Effective Date, the
Company's Board of Directors shall consist of eight members, six of which shall
be designated by RAM (on behalf of Investor), one of which shall be designated
by the Unofficial Secured Noteholders Committee and one of which shall be
designated by the Creditors Committee. The Certificate of Incorporation of the
Company shall provide that, from and after the Effective Date, RAM (on behalf of
Investor and its Affiliates) shall continue to be entitled to designate a number
of directors of the Company in proportion to its equity ownership of the Company
(assuming the conversion of all New SCI Preferred Shares into New SCI Common
Shares), but in any event not less than a majority of such directors for so long
as Investor and its Affiliates hold, in the aggregate, at least 35% of the New
SCI Common Shares (on a fully diluted basis), and each such director may only be
removed (other than for cause) by, and any vacancy resulting from the death,
resignation or removal of any such director may only be filled by, a majority
vote of the New SCI Common Shares and New SCI Preferred Shares that are owned by
Investor and
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its Affiliates. During the period commencing on the Effective Date and
continuing thereafter until the New SCI Notes have been paid in full, the
holders of the New SCI Notes shall continue to have the right to designate one
member of the Board of Directors of the Company in the manner set forth in the
Plan and the member designated by the Unofficial Secured Noteholder Committee or
the holders of the New SCI Notes, as the case may be, may only be removed (other
than for cause) by, and any vacancy resulting from the death, resignation or
removal of such director may only be filled by, the holders of the New SCI Notes
in the manner set forth in the Plan. The Director designated by the Creditors
Committee shall serve for a period of two (2) years after the Effective Date,
and may only be removed (other than for cause) by, and any vacancy resulting
from the death, resignation or removal of such director may only be filled by,
the Creditors Committee in the manner set forth in the Plan. The Persons
designating initial board members of the Company shall file with the Bankruptcy
Court and give to the Debtors written notice of the identities of such members
on a date that is not less than five (5) days prior to the Confirmation Hearing;
provided, however, that if and to the extent that any such Person fails to file
and give such notice, the Debtors shall designate, after consultation with such
Person, the members of the Board of Directors of the Company which such Person
is entitled to designate by announcing their identities at the Confirmation
Hearing.
SECTION 8. Matters Affecting Securities.
(a) At all times during the period commencing with the
Effective Date and continuing thereafter for 18 months, the Company
shall cause the New SCI Common Shares to be registered under Section
12(g) of, and will timely file with the SEC all reports required to be
filed pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended, and applicable to a U.S. company subject to such sections,
within such time limits and periods provided therefor notwithstanding
that the Company may not be required to remain subject to the reporting
requirements of Section 13 of such act.
(b) The Company, RAM (on behalf of the Investor) and any
recipient of at least 5% of the fully diluted New SCI Common Shares on
the Effective Date will execute and deliver on the Effective Date a
registration rights agreement providing for normal and customary demand
registration rights for Investor and normal and customary piggyback
rights for such recipient.
(c) The Certificate of Incorporation of the Company shall
include provisions for, and RAM, on behalf of Investor, shall execute,
a tag-along agreement (the "Tag-Along Agreement") for the benefit of
all holders of New SCI Common Shares and holders of New SCI Warrants
(other than Investor and other Affiliates of RAM) prohibiting RAM and
Investor (and its Affiliates) from selling, in a single transaction or
related series of transactions (a "Proposed Transfer"), New SCI Common
Shares, New SCI Preferred Shares and/or New SCI Warrants representing,
in the aggregate, 50% or more of all Equity Securities (as defined
below) of Chemicals unless all other holders of New SCI Common Shares
and New SCI Warrants (other than Investor and its Affiliates) shall
have
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been given a reasonable opportunity to participate therein on a pro
rata basis and at the same price per share and on the same economic
terms and conditions applicable to such sale; provided, however, that
neither RAM nor Investor (or any of its Affiliates) shall be required
to provide the holders of New SCI Warrants an opportunity to
participate in such Proposed Transfer, and RAM, on behalf on Investor,
shall not be prohibited from selling New SCI Warrants, if the value of
the aggregate per share consideration offered for New SCI Common Shares
in such Proposed Transfer (including in such per share computation the
consideration being paid for any New SCI Preferred Shares to be sold on
the basis of the number of the New SCI Common Shares into which such
New SCI Preferred Shares are convertible) is less than the Minimum
Consideration (as defined below). For purposes of this Section 8(c),
"Equity Securities" shall mean (i) all New SCI Common Shares then
outstanding assuming the conversion of all New SCI Preferred Shares
and, in the event the value of the aggregate per share consideration
offered for New SCI Common Shares in the Proposed Transfer (including
in such per share computation the consideration being paid for any New
SCI Preferred Shares to be sold on the basis of the number of the New
SCI Common Shares into which such New SCI Preferred Shares are
convertible) is equal to or exceeds the exercise price of the New SCI
Warrants, the exercise of all New SCI Warrants (including New SCI
Warrants held by Investor and its Affiliates) or (ii) in the event the
value of the aggregate per share consideration offered for New SCI
Common Shares in the Proposed Transfer (including in such per share
computation the consideration being paid for any New SCI Preferred
Shares to be sold on the basis of the number of the New SCI Common
Shares into which such New SCI Preferred Shares are convertible) is
less than the exercise price of the New SCI Warrants, all New SCI
Common Shares outstanding assuming the conversion only of all New SCI
Preferred Shares. For purposes of this Section 8(c), "Minimum
Consideration" shall mean an amount equal to the exercise price of the
New SCI Warrants. Notwithstanding the foregoing, no sale, transfer or
other disposition of New SCI Common Shares, New SCI Preferred Shares
and/or New SCI Warrants by an Investor to any Affiliate of RAM shall
constitute a Proposed Transfer or shall otherwise be subject to this
Section 8(c); provided, however, that the Tag-Along Agreement shall
contain an acknowledgment by RAM, on behalf of any such proposed
transferee that, upon any such sale, transfer or other disposition,
such transferee shall be bound by the terms of the Tag-Along Agreement.
(d) The New SCI Common Shares and the New SCI Preferred Shares
acquired by Investor pursuant to this Agreement, the New SCI Common
Shares issued upon conversion of such New SCI Preferred Shares, and the
New SCI Warrants acquired by the Investor pursuant to the Plan shall be
conspicuously endorsed with an appropriate legend to the effect that
such securities may not be sold, transferred or otherwise disposed of
except in compliance with applicable securities laws. All New SCI
Common Shares, New SCI Preferred Shares and New SCI Warrants acquired
by the Investor pursuant to this Agreement or the Plan, and the New SCI
Common Shares issued upon conversion of such New SCI Preferred Shares
or exercise of such New SCI Warrants, and any Xxx XXX
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Xxxxxx Xxxxxx, Xxx XXX Preferred Shares or New SCI Warrants
transferred or disposed of to any Affiliates of RAM pursuant to the
last sentence of 8(c) shall be conspicuously endorsed with an
appropriate legend to the effect that such securities may not be sold,
transferred or otherwise disposed of except in compliance with the
terms of the Tag-Along Agreement and the Company's Certificate of
Incorporation.
SECTION 9. Conditions to Investor's Obligations Relating to
the Investment.
The obligations of RAM to cause Investor to consummate the
Investment and the other transactions contemplated herein shall be subject to
the satisfaction on or before the Effective Date, or the earlier date identified
below, or the written waiver by RAM, of the following conditions:
(a) the Disclosure Statement Order shall have been entered and
there shall not be in effect any stay of such Disclosure Statement
Order, nor shall such Disclosure Statement Order have been vacated or
reversed;
(b) the Confirmation Order shall have been entered in form and
substance reasonably satisfactory to Investor by December 4, 2002 (or
such date as soon thereafter as possible that accommodates the schedule
of the Bankruptcy Court, or by such later date as shall have been
agreed to in writing by the Company, RAM, the Unofficial Secured
Noteholders Committee Majority (or their advisors) or the Creditors
Committee Majority (or their advisors)), and there shall not be in
effect any stay of such Confirmation Order, nor shall such Confirmation
Order have been vacated or reversed;
(c) the outstanding amount of Allowed Administrative Claims
(excluding normal post-petition trade payables and amounts payable to
Investor under Section 16 or Section 23) shall not exceed $40 million
in the aggregate, provided, however, that this subsection is not
intended to, and shall not be deemed or construed to, prohibit or limit
the ability or right of RAM to object to any Administrative Claim;
(d) the documents necessary to implement the Plan, including
the Merger Agreement, the Certificate of Incorporation of the Company,
the Bylaws of the Company, the New Credit Agreement, the Purchase
Agreement, the New SCI Warrants, the New Indentures, the Registration
Rights Agreement, the Fibers Buyout Agreement and the SCI Management
Incentive Plan, shall be in form and substance reasonably acceptable to
RAM and shall be executed and delivered by the parties thereto;
(e) the Company shall have arranged for credit availability
under the New Credit Agreement in amount, form and substance reasonably
acceptable to RAM;
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(f) the Company shall have received at least one bid for, and
shall have executed a definitive agreement with respect to a sale of,
the Pulpco Business that would result in the receipt of an amount
greater than or equal to $300,000,000 in cash or other consideration
acceptable to the Ad Hoc Committee (such amount to be net of all fees
and expenses of the Pulpco Sale, the amount of funded debt of the
Pulpco Business repaid with the consideration received and a provision
for taxes or alternative minimum taxes, if any);
(g) all conditions precedent to the consummation of the
transactions contemplated by the Purchase Agreement shall have been
satisfied or waived by the parties thereto and the PulpCo Sale shall be
consummated on the Effective Date;
(h) the Company and Investor, as applicable, shall have
received all Regulatory Approvals, which shall have become final and
nonappealable or any period of objection by Governmental Authorities
shall have expired, as applicable;
(i) the Company shall have received all other material
Approvals from other Persons;
(j) there shall not be any application for, or in effect any,
injunction, stay, restraining order, appeal or decree pending before,
or issued by, any court of competent jurisdiction, whether foreign or
domestic, requesting a stay of or staying the effectiveness of any of
the Approvals, the Disclosure Statement Order or the Confirmation
Order; provided, however, that the foregoing condition shall not apply
to any such injunction, stay, order or decree requested, initiated or
supported by Investor, RAM or any of RAM's partners or other Affiliates
or to any such request or motion made, initiated or supported by
Investor, RAM or any of RAM's partners or other Affiliates;
(k) during the period commencing on the date hereof and
continuing thereafter until the Confirmation Date, there shall have not
been any Material Adverse Change. For purposes hereof, a "Material
Adverse Change" shall mean any material adverse change in the business
or financial condition of the Company (expressly excluding the pulp
chemicals business) as such shall exist on the date of execution of
this Agreement, excluding any change (i) resulting from general
economic conditions in the U.S. or elsewhere or the execution of the
Term Sheet or this Agreement or (ii) that affects the chemicals
industry as a whole;
(l) the Company shall have performed in all material respects
(i) all obligations on its part required to be performed on or before
the Effective Date under this Agreement and (ii) all obligations on its
part required to be performed on or before the Effective Date under all
orders of the Bankruptcy Court;
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(m) all representations and warranties of the Company under
this Agreement shall be true in all material respects as of the
Effective Date (except (i) to the extent such representations are
qualified as to materiality, in which case they shall be true and
correct in all respects (after giving effect to such qualifications)
and (ii) to the extent such representations are expressly made as of a
different date, in which case they shall be true and correct in all
respects as of such date);
(n) all other conditions precedent to the Effective Date as
set forth in the Plan shall have been satisfied on or before the
Effective Date or waived as provided for in the Plan; and
(o) the Effective Date shall have occurred on or prior to the
Outside Date unless the reason therefor shall be attributable to the
breach by RAM or Investor of any of its express representations,
warranties, covenants or obligations contained herein (regardless of
whether Investor is an express party hereto).
SECTION 10. Conditions to the Company's Obligations Relating
to Investment.
The Company's obligations to issue the Investor Securities
pursuant to this Agreement and to consummate or cause the consummation of the
other transactions contemplated hereby, shall be subject to the satisfaction on
or before the Effective Date, or the written waiver by the Company, of the
following conditions:
(a) the Disclosure Statement Order shall have been entered and
there shall not be in effect any stay on such Disclosure Statement
Order, nor shall such Disclosure Statement Order have been vacated or
reversed;
(b) the Confirmation Order shall have been entered in form and
substance reasonably satisfactory to the Company by December 4, 2002
(or such date as soon thereafter as possible that accommodates the
schedule of the Bankruptcy Court, or by such later date as shall have
been agreed to in writing by the Company, RAM, the Unofficial Secured
Noteholders Committee Majority (or their advisors) or the Creditors
Committee Majority (or their advisors)), and there shall not be in
effect any stay of such Confirmation Order, nor shall such Confirmation
Order have been vacated or reversed;
(c) the documents necessary to implement the Plan, including
the Merger Agreement, the Certificate of Incorporation of the Company,
the Bylaws of the Company, the New Credit Agreement, the Purchase
Agreement, the New SCI Warrants, the New Indentures, the Registration
Rights Agreement, the Fibers Buyout Agreement and the SCI Management
Incentive Plan, shall be in form and substance reasonably acceptable to
the Company and shall be executed and delivered by the parties thereto;
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(d) the payment of the Total Purchase Price by Investor at the
times and in the manner contemplated hereby;
(e) the Company shall have arranged for credit availability
under the New Credit Agreement in amount, form and substance acceptable
to the Company;
(f) the sale of the Company's pulp chemicals business shall
have been consummated and the Company shall have retained $80 million
from the proceeds of such sale;
(g) the Company and Investor, as applicable, shall have
received all Regulatory Approvals, which shall have become final and
nonappealable or any period of objection by Governmental Authorities
shall have expired, as applicable;
(h) the Company shall have received all other material
Approvals from other Persons;
(i) there shall not be any application for, or in effect any,
injunction, stay, restraining order, appeal or decree pending before,
or issued by, any court of competent jurisdiction, whether foreign or
domestic, requesting a stay of or staying the effectiveness of any of
the Approvals, the Disclosure Statement Order or the Confirmation
Order; provided, however, that the foregoing condition shall not apply
to any such injunction, stay, order or decree requested, initiated or
supported by the Company or to any such request or motion made,
initiated or supported by the Company;
(j) RAM shall have, and shall have caused Investor to, perform
in all material respects (i) all obligations of RAM and Investor
required to be performed on or before the Effective Date under this
Agreement and (ii) all obligations of RAM and Investor required to be
performed on or before the Effective Date under all orders of the
Bankruptcy Court;
(k) all representations and warranties of RAM and Investor
under this Agreement shall be true in all material respects as of the
Effective Date (except (i) to the extent such representations are
qualified as to materiality, in which case they shall be true and
correct in all respects (after giving effect to such qualifications)
and (ii) to the extent such representations are expressly made as of a
different date, in which case they shall be true and correct in all
respects as of such date);
(l) all other conditions precedent to the Effective Date as
set forth in the Plan shall have been satisfied on or before the
Effective Date or waived as provided for in the Plan; and
(m) the Effective Date shall have occurred on or prior to the
Outside Date unless the reason therefor shall be attributable to the
breach by the
13
Company of any of its representations, warranties, covenants or
obligations contained herein.
SECTION 11. Representations, Warranties and Agreements of the
Company.
The Company represents and warrants to RAM and Investor as
follows:
(a) Subject to the Bankruptcy Code, the Company has the
requisite power and authority to execute and deliver this Agreement and
to perform its obligations hereunder, and the execution, delivery and
performance of this Agreement and the consummation by the Company of
the transactions contemplated hereby have been authorized by all
requisite action on the part of the Company. This Agreement has been
duly and validly executed and delivered by the Company and, upon entry
of the Confirmation Order (assuming this Agreement constitutes a valid
and binding obligation of RAM), shall constitute a legal, valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting
creditors' rights generally from time to time in effect and to general
equitable principles.
(b) The Company has complied in all material respects with the
terms of all orders of the Bankruptcy Court in respect of the
Investment and this Agreement.
(c) The Company has delivered to RAM copies of the audited
balance sheets, statements of income, stockholders' equity and cash
flows of the Company and its affiliates, on a consolidated basis, for
the fiscal year ended September 30, 2001 and for the three years then
ended, together with the notes thereto; and unaudited balance sheets,
statements of income, stockholders' equity and cash flows of the
Company and its affiliates, on a consolidated basis, for the three and
nine-month periods ending June 30, 2002. Such financial statements
present fairly, in accordance with generally accepted accounting
principles (applied on a consistent basis except as disclosed in the
footnotes thereto), the financial position and results of operations of
the Company as of the dates and for the periods therein set forth.
(d) No written statement, memorandum, certificate, schedule or
other written information provided to Investor by or on behalf of the
Company in connection with the transactions contemplated hereby, when
viewed together with all other written statements and information
provided to Investor by or on behalf of the Company, in light of the
circumstances under which they were made, (i) contains any materially
misleading statement or (ii) omits to state any material fact necessary
to make the statements therein not misleading.
(e) Except as disclosed on Schedule I, there is no suit,
claim, action, proceeding, or investigation pending or, to the
knowledge of the
14
Company, threatened against or directly affecting the Company, any
subsidiary of the Company or any of the directors or officers of the
Company or any of its subsidiaries in their capacity as such which
would have a material adverse effect on the Company.
The Company agrees that:
(i) the Company shall promptly notify, but in any event within
5 (five) days, RAM of receipt of information that there is a suit, claim,
action, proceeding, or investigation pending or threatened against or directly
affecting the Company, any subsidiary of the Company or any of the directors or
officers of the Company or any of its subsidiaries in their capacity as such, in
which the damages sought exceed $175,000 individually or $1,000,000 when taken
in the aggregate; and
(ii) RAM or its agents shall have reasonable access to all
facilities used for the conduct of the Company's businesses during normal
business hours, and the Company shall make its management available to RAM or
its agents upon its reasonable request and notice.
SECTION 12. Representations and Warranties of RAM.
RAM, as to itself or on behalf of Investor (as applicable),
represents and warrants to the Company as follows:
(a) RAM has the requisite power and authority to execute and
deliver this Agreement and to perform its obligations hereunder, and
the execution, delivery and performance of this Agreement and the
consummation by RAM of the transactions contemplated hereby have been
authorized by all requisite action on the part of RAM. This Agreement
has been duly and validly executed and delivered by RAM on it own
behalf and on behalf of its Affiliates' managed funds and accounts and,
constitutes a legal, valid and, upon entry of the Confirmation Order
(assuming this Agreement constitutes a valid and binding obligation of
the Company), binding obligation of RAM and the Investor enforceable
against RAM and the Investor in accordance with its terms, subject to
applicable bankruptcy, reorganization, insolvency, moratorium and other
laws affecting creditors' rights generally from time to time in effect
and to general equitable principles.
(b) RAM has full legal authority and power of attorney to bind
Investor to consummate the transaction contemplated herein in all
respects, and RAM has such knowledge of Investor and its affairs to
have a reasonable basis for making the representations and warranties
of Investor made on its behalf by RAM herein.
(c) Investor has, or has binding commitments for, sufficient
funds to pay the Total Purchase Price and to consummate the
transactions contemplated by this Agreement.
15
(d) No written statement, memorandum, certificate, schedule or
other written information provided to the Company or any of its
representatives by or on behalf of RAM when viewed together with all
other written statements and information provided to the Company and
its representatives by or on behalf of RAM, in light of the
circumstances under which they were made, (i) contains any materially
misleading statement or (ii) omits to state any material fact necessary
to make the statements therein not misleading.
(e) No Approvals (other than those which have been applied for
and obtained) are required for the execution, delivery and performance
of this Agreement and the consummation by RAM or the Investor of the
transactions contemplated hereby.
(f) The Investor Securities will be acquired for investment
for the account of such Investor, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof; and
Investor has no present intention of selling, granting any
participation in or otherwise distributing the same.
(g) Investor does not have any contract, undertaking,
agreement or arrangement with any Person to sell, transfer or grant
participations to such Person or to any third Person with respect to
any of the Investor Securities.
(h) RAM, as agent and on behalf of Investor, participated
fully in the formulation of the Plan of which the acquisition of the
Investor Securities hereunder is a part. RAM, as agent and on behalf of
Investor, has received all information it considers necessary or
appropriate for deciding whether to cause Investor to purchase the
Investor Securities, and RAM, as agent and on behalf of Investor, has
had an opportunity to ask questions of, and receive answers from, the
Company regarding the terms and conditions of the offering of the
Investor Securities and the business, properties, prospects and
financial condition of the Company.
(i) RAM, on behalf of the Investor or its Affiliates, has
invested in securities of numerous companies undergoing restructuring
through bankruptcy proceedings and represents that (i) Investor can
bear the economic risk and the total loss of the Investment and (ii)
RAM has such knowledge, experience and sophistication in financial or
business matters that it is capable of evaluating the merits and risks
of the Investment in the Investor Securities. RAM further represents
that Investor has not been organized for the purpose of acquiring the
Investor Securities or, in such case, that the equity holders of such
Investor are "accredited investors" within the meaning of Rule 501 of
Regulation D, as promulgated by the SEC and as presently in effect
("Rule 501").
(j) Investor is an "accredited investor" within the meaning of
Rule 501.
16
(k) Investor understands that the Investor Securities are
characterized as "restricted securities" under the federal securities
laws (as they are being acquired from the Company in a transaction not
involving a public offering pursuant to Section 4(2) of the Securities
Act), and that under such laws and applicable regulations the Investor
Securities may be resold without registration under the Securities Act
only in certain limited circumstances. In the absence of an effective
registration statement covering the Investor Securities (or the New SCI
Common Shares issued on conversion or exercise thereof, as applicable)
or an available exemption from registration under the Securities
Exchange Act of 1934, as amended, the Investor Securities (and any New
SCI Common Shares issued on conversion or exercise thereof, as
applicable) must be held indefinitely. In this connection, such
Investor represents that it is familiar with Rule 144 under the
Securities Act of 1933, as amended, as presently in effect, and
understands the resale limitations imposed thereby, and to the extent
applicable, by the Securities Exchange Act of 1934, as amended.
SECTION 13. Undertakings of RAM.
(a) RAM shall cause Investor to take all actions necessary to
consummate the Investment. It is expressly understood and agreed that
payment of the Total Purchase Price is a material element of the Plan,
and that upon the failure to pay all or any portion of the Total
Purchase Price in accordance with the terms of this Agreement, the
Company shall be entitled to pursue all available remedies in law or at
equity.
(b) RAM shall provide sufficient evidence of its authority to
execute this Agreement on behalf of Investor as the Company may
reasonably request; provided, however, that the Company shall maintain
as confidential all such information provided.
(c) The obligations of RAM and Investor hereunder shall not be
subject to any due diligence or other conditions other than those
expressly set forth herein.
(d) On or before the close of business on October 25, 2002,
RAM shall provide to the Company a schedule identifying (i) the names
of the funds and/or accounts constituting Investor, (ii) the amounts to
be invested by such funds and/or accounts, (iii) entity status of such
funds and/or accounts, and (iv) the addresses of each such fund and/or
account; provided, however, that no term of this Agreement shall
prevent RAM from designating additional or substitute funds
constituting Investor at any time prior to the Effective Date. The
Company hereby agrees to maintain as confidential all such information.
(e) On or before the close of business on October 25, 2002,
and subject to the terms of an escrow agreement to be executed between
the Company and RAM in form and substance reasonably acceptable to RAM
(the "Escrow Agreement"), RAM shall cause Investor to transfer to a
segregated, interest
17
bearing account of the Company a deposit equal to $9,000,000 (the
"Deposit"), which amount is equal to 15% of the new capital commitment
contemplated by Section 3 hereof. The Escrow Agreement shall provide,
among other things, that the Deposit, subject to customary terms and
conditions terms with respect to retention of the Deposit by the
Company in the event of certain breaches of the Agreement by RAM or
Investor to be mutually agreed upon by the Company and RAM, together
with the interest earned thereon, shall be released (i) to RAM promptly
after the date of any termination of this Agreement by RAM pursuant to
Section 34(a) or (ii) to the Company on the Effective Date as partial
payment of the total amount due and payable to the Company on the
Effective Date pursuant to this Agreement.
SECTION 14. Financial Information.
(a) The Company shall provide RAM with reports of the
Company's operating performance, in form and substance reasonably
satisfactory to Investor, on a monthly basis no later than 30 (thirty)
days after the end of each month.
(b) The Company shall deliver to RAM, as soon as it is
available, a copy of the unaudited balance sheet of the Company as of
the end of each fiscal quarter of the Company prior to the Effective
Date and the unaudited statements of income and cash flows for the
periods then ended.
(c) The Company shall deliver to RAM, no later than December
24, 2002, copies of the audited balance sheets, statements of income,
stockholders' equity and cash flows of the Company on a consolidated
basis, for the fiscal year ended September 30, 2002 and for the three
years then ended, together with the notes thereto. Such financial
statements shall present fairly, in accordance with generally accepted
accounting principles (applied on a consistent basis except as
disclosed in the footnotes thereto), the financial position and results
of operations of the Company as of the dates and for the periods
therein set forth.
(d) The Company shall notify RAM promptly upon any material
change in its ability to operate any of its assets.
(e) The Company shall promptly furnish to RAM such other
information and in such form as RAM may reasonably request.
SECTION 15. Certain Taxes.
The Company shall bear and pay all transfer, stamp or other
similar taxes (if any are not exempted under Section 1146 of the Bankruptcy
Code) imposed in connection with the issuance and sale of the Investor
Securities.
18
SECTION 16. Break-Up Fee; Expense and Fee Reimbursements.
(a) Subject to approval of the Bankruptcy Court, and after the
date of execution of this Agreement, if the Company files an
Alternative Plan, RAM shall be entitled to a break-up fee from the
Company in the amount of $1,800,000 plus an amount equal to all
documented out-of-pocket expenses incurred by RAM in connection with
the Plan, payable by wire transfer of same day funds; provided however,
that the aggregate amount of out-of-pocket expenses reimbursed to RAM,
together with all other expenses for which RAM is reimbursed pursuant
to Section 16(b), shall not exceed $1,000,000 in the aggregate.
(b) Subject to approval of the Bankruptcy Court, the Company
shall, from time to time, upon request and upon receipt of an
accounting reasonably acceptable to the Company, promptly reimburse RAM
for all reasonable out-of-pocket expenses actually paid or incurred by
RAM on behalf of Investor in connection with its due diligence in
pursuit of the Investment (including up to $250,000 as provided for in
that certain letter from the Company to RAM dated May 13, 2002
(adequate documentation for which the Company hereby acknowledges
having previously been provided) and all out-of-pocket fees incurred in
connection with the sale of the Company's pulp chemicals business,
including without limitation the fees of Xxxxxx Xxxxxxxxx; provided,
however, that in the event that the break-up fee becomes payable to RAM
in accordance with Section 16(a), the aggregate amount of expenses to
be reimbursed by the Company, including the expenses referred to in
this paragraph (b) and the expenses included within the break-up fee,
shall not exceed $1,000,000 in the aggregate.
(c) The Company shall use commercially reasonable efforts, and
endeavor in good faith and without unreasonable delay, to obtain an
order of the Bankruptcy Court approving the break-up fee and the
reimbursement of expenses provided for in Sections 16(a) and 16(b)
above.
(d) Notwithstanding any provision of this Agreement to the
contrary, the Company shall have no obligation under this Agreement to
pay, or reimburse RAM or any other Person for, any expenses or fees
unless approved by the Bankruptcy Court either by specific order or
pursuant to the Plan as confirmed.
SECTION 17. No Solicitation; Alternate Bid Procedures; etc.
(a) Prior to the termination of this Agreement, but subject to
its fiduciary duties, the Company shall not, directly or indirectly,
solicit or knowingly encourage the initiation of any inquiries or
proposals regarding any transaction that if consummated would
constitute an Alternative Plan; provided, that the Company may answer
questions and furnish information in response to unsolicited inquiries.
(b) Notwithstanding the foregoing, the Company may provide
information to and enter into negotiations with potential alternate
bidders
19
regarding unsolicited proposals for an Alternative Plan ("Alternate
Bids") in accordance with the agreement reached on October 7, 2002,
among the Company, the Creditors Committee, the Unofficial Secured
Noteholders Committee, Phoenix Acquisition Corporation, Mariner
Investment Group, Inc. and Trilogy Capital LLC as to procedures (the
"Alternate Bid Procedures") to allow for consideration of Alternate
Bids as set forth in this Section 17(b) and as described in the
Disclosure Statement, as such description may be modified and amended
from time to time. Any Alternate Bid (together with any and all related
documents) must be submitted to the Company and RAM prior to 9:00 a.m.
New York time on October 28, 2002. The Company shall also provide to
RAM copies of any written proposals, and summaries of any oral
proposals, received prior to 9:00 a.m. on October 27, 2002 within 24
hours after the receipt of such proposals. Any Alternate Bid must be
without contingencies and conditions (other than substantially similar
contingencies and conditions to those to RAM's and the Investor's
obligations under this Agreement), must be fully financed (and evidence
of committed financing must be provided to RAM and the Company at the
time such proposal is made) and must be capable of being consummated by
December 31, 2002. The Company shall advise RAM by 9:00 a.m. New York
time on October 29, 2002 whether any Alternate Bid is considered more
favorable to the Estates and the Creditors, together with an analysis
of the basis for such conclusion. No later than 9:00 a.m. New York time
on October 30, 2002, the Company shall notify RAM if the Company, in
consultation with the Creditors Committee and the Unofficial Secured
Noteholders Committee, has determined to accept a more favorable
Alternate Bid. In the event the Company notifies RAM of its
determination to accept a more favorable Alternate Bid, RAM shall be
entitled to, until 12:00 p.m. New York time on October 30, 2002, either
(i) submit to the Company a counter-proposal to such more favorable
Alternate Bid or (ii) immediately terminate this Agreement pursuant to
Section 34(a). A meeting will be held on October 30, 2002 commencing at
9:00 a.m. New York time, to be attended by the Company, the Creditors
Committee, the Unofficial Secured Noteholders Committee, RAM and any
party who timely submitted an Alternate Bid, at which (A) any proponent
of an Alternate Bid shall be entitled to submit one or more
counter-proposals to any existing Alternate Bid or any
counter-proposal(s) submitted by RAM, and (B) RAM shall be entitled to
submit one or more counter-proposals to any counter-proposal(s)
submitted by any proponent of an Alternate Bid, provided, that, RAM and
each of such other parties shall have the right to make topping
counter-proposals until 1:30 p.m. Central Time on October 31, 2002 (the
"Bidding Deadline"). At the Bidding Deadline, the Company, in the
exercise of its business judgment and in consultation with the
Creditors Committee and the Unofficial Secured Noteholders Committee,
will determine which among the proposal of RAM as set forth in this
Agreement (including any counter-proposal) and any Alternate Bids
submitted is most favorable to the Estates and the Creditors, taking
into account the factors listed above and such other factors as may be
deemed relevant, including the existence, or absence, and the amount of
any deposit to secure the performance of any Alternate Bid. The Company
will submit its determination as to which bid is
20
most favorable to the Bankruptcy Court for approval on October 31,
2002. If at the Bidding Deadline the Company, in consultation with the
Creditors Committee and the Unofficial Secured Noteholders Committee,
has determined to accept an Alternate Bid, RAM shall be entitled to
immediately terminate this Agreement in accordance with Section 34(a).
The Company shall be entitled to terminate this Agreement, with the
consent of the Creditors Committee Majority (or its advisors) and the
Unofficial Secured Noteholders Committee Majority (or its advisors)
upon acceptance of an Alternate Bid in accordance with Section 34(a).
To the extent of any inconsistency between this Section 17(b) and the
description of the Alternate Bid Procedures in the Disclosure
Statement, the description in the Disclosure Statement shall govern and
is incorporated herein by reference.
(c) Notwithstanding anything to the contrary in this
Agreement, the Company and RAM agree and acknowledge that in the event
that the Company accepts a RAM counter-proposal in accordance with
Section 17(b) above, (i) this Agreement shall be deemed to be amended
to include the terms of such more favorable counter-proposal and (ii)
RAM and the Company shall take all such actions as are commercially
reasonable to effect such counter-proposal, subject to Bankruptcy Court
approval.
(d) Notwithstanding anything to the contrary in this
Agreement, in the event the Company (i) elects to accept an Alternate
Bid or files an Alternative Plan and (ii) elects to terminate this
Agreement, or if RAM shall terminate this Agreement pursuant to Section
34(a) hereof, RAM and the Investor shall (i) be released from their
obligations hereunder with the exception of their obligations set forth
in Sections 21(b), 27, 33, 34 and 35, (ii) not be obligated to vote to
approve any such Alternative Plan, (iii) be able to rescind any prior
vote and may vote to reject the Plan and (iv) retain all their rights
under the Bankruptcy Code.
SECTION 18. Interim Period.
The Company covenants as follows with respect to the period
prior to the earlier of the Effective Date and the termination of this
Agreement:
(a) The Company shall use commercially reasonable efforts and
take all actions reasonably necessary or appropriate to preserve the
business, assets and goodwill of the Company's petrochemicals and pulp
chemicals businesses and to operate the petrochemicals and pulp
chemicals businesses of the Company in the ordinary and normal course
consistent in all material respects with prior practices.
(b) Except as expressly permitted hereunder or with the
written consent of RAM (which consent shall not be unreasonably
withheld, delayed or conditioned), the Company (i) shall not implement
any material changes to the operation of its petrochemicals business,
(ii) shall not enter into any new material contracts (such as labor
union contracts and employment contracts) or amend, modify or terminate
any such contracts, or waive any of its material rights
21
thereunder and (iii) shall not modify its petrochemicals business plans
or budgets in any material respect; provided, however, that nothing in
this Agreement shall be construed to prohibit the Company from taking
any of the following actions (collectively, the "Permitted
Transactions"):
(A) operating its businesses or managing its properties in the
ordinary course, and paying obligations that arise in connection
therewith;
(B) complying with its obligations as a debtor-in-possession
under the Bankruptcy Code, the Bankruptcy Rules and orders of the
Bankruptcy Court;
(C) renewing or extending existing contracts for products and
services, or entering into replacement contracts for such products and
services, in the ordinary course of business and upon terms and
conditions available in the market place in arms'-length transactions
with non-Affiliates;
(D) reconciling, objecting to and litigating or resolving
claims asserted against the Company;
(E) paying administrative obligations that arise in the
ordinary course or are authorized to be paid by order of the Bankruptcy
Court, including obligations for fees and expenses owed to
professionals employed by the Company and the Creditors Committee, and
compromising any of such obligations as may be appropriate;
(F) amending the Company's existing debtor-in-possession
credit facility ("Present DIP Financing") as necessary to insure the
availability of funding through the Effective Date;
(G) selling the Company's pulp chemicals business as
contemplated by the Plan but subject to compliance with Section 5(a);
(H) disposing of the Company's acrylic fibers business as
contemplated by the Plan but subject to compliance with Section 5(b);
or
(I) selling or otherwise disposing of surplus assets within
the limits specified in the Present DIP Financing.
(c) The Company shall provide RAM with (i) access to
all of the Company's data (as reasonably requested by Investor), (ii)
access to the Company's officers and (iii) full opportunity to
investigate the Company's businesses and assets. The Company shall keep
RAM fully informed in reasonable detail and with all reasonable
promptness regarding (A) negotiations with its creditors, employees,
labor unions and other interested parties in the Company's chapter 11
case and (B) the nature of, and any material changes to, its
22
condition (financial or other), businesses, assets, liabilities
(including contingencies), properties, results of operations and cash
flows.
(d) The Company will promptly advise RAM, and will afford RAM
with reasonable and timely opportunities to consult, regarding any
material actions to be taken or omitted by the Company with respect to
the proceedings in the Bankruptcy Court or with respect to any material
changes in its charter or bylaws, material capital commitments,
material capital expenditures, material financing transactions
(including renegotiations or other modifications to existing material
debt, credit or lease liabilities or arrangements, material purchases
or sales of assets, material contracts or material litigation);
provided, however, that, notwithstanding anything to the contrary
contained in this Agreement, ultimate control of the business of the
Company shall remain exclusively with the Company until the Effective
Date.
(e) As soon as practicable, the Company and RAM will make, and
cooperate in making, all filings, applications, requests for consents
or similar authorizations for any Regulatory Approvals.
SECTION 19. Cooperation.
(a) The Company and RAM shall use commercially reasonable
efforts and endeavor in good faith and without unreasonable delay to
(i) file any modifications to the Plan as may be necessary (and which
are in, any event, consistent with the provisions of the Term Sheet and
this Agreement), (ii) obtain the Initial Order, the Disclosure
Statement Order and the Confirmation Order; (iii) subject to the entry
of the Confirmation Order, consummate the transactions contemplated by
this Agreement, and (iv) obtain all necessary Approvals, all within the
respective time periods set forth in this Agreement. RAM agrees to
cooperate in good faith with all reasonable requests of the Company in
performing the obligations under this paragraph (a).
(b) The Company shall consult and coordinate with RAM with
respect to all material filings, hearings and other proceedings in the
Bankruptcy Court, including, without limitation, those that are
pertinent to (i) the Company's performance of its obligations under
this Agreement or to the satisfaction of the conditions to the
consummation of the transactions contemplated hereby or (ii) the entry
of the Initial Order, the Disclosure Statement Order and the
Confirmation Order. Such consultation and coordination shall include
providing RAM with reasonable opportunity to review and comment on all
significant drafts of the Initial Order, the Disclosure Statement Order
and the Confirmation Order, which documents shall be in form and
substance satisfactory to RAM.
(c) Notwithstanding anything to the contrary contained in this
Agreement, neither the refusal or failure of the Bankruptcy Court to
enter the Initial Order, the Disclosure Statement Order or the
Confirmation Order, nor the confirmation of a plan of reorganization
relating to the Company other than the
23
Plan, shall constitute a breach of this Agreement by either party,
except to the extent that such refusal or failure resulted primarily
from a breach by such party of one or more of its obligations under
this Agreement.
SECTION 20. Public Announcements.
Unless otherwise mutually agreed, neither party hereto shall
make or authorize any public release of information regarding the matters
contemplated by this Agreement, except that (a) the parties may communicate with
employees, creditors and other parties in interest in the Company's chapter 11
case, customers, suppliers, stockholders, bondholders, lenders, lessors,
Governmental Authorities, analysts, stock exchanges and other particular groups,
including prospective lenders and investor groups, as may be necessary or
appropriate and not inconsistent with the prompt consummation of the
transactions contemplated by this Agreement, it being understood that each party
hereto will keep the other reasonably informed with respect to such
communications which are material and not confidential, and (b) either party, on
advice of legal counsel, may make such press releases and other public
disclosures as it deems necessary to comply with applicable law.
SECTION 21. Liability.
(a) RAM or Investor and its permitted assigns (including any
Affiliate, stockholder, director, officer, agent, advisor or
Representative (as defined below) thereof shall not have nor be under
any liability of any nature whatsoever to the Company arising out of or
in any manner connected with this Agreement, or any actions, inactions
or omissions in any manner relating hereto or to any actions or
transactions contemplated hereby, whether occurring prior to or after
the date hereof, except to the extent that RAM or Investor is liable to
the Company for damages which are found in a final judgment by a court
of competent jurisdiction to have resulted from any material breach by
RAM or Investor of an express obligation or undertaking contained in
this Agreement (regardless of whether Investor is an express party
hereto) or any material breach (as of the date made) by RAM or Investor
of an express representation or warranty contained in this Agreement
(regardless of whether Investor is an express party hereto) or for any
act of bad faith or willful or deliberate wrongdoing by RAM or
Investor, which bad faith, breach or wrongdoing is not discontinued or
remedied promptly (and in any event within 7 (seven) days) after
written notice thereof specifying the same in reasonable detail from
the Company.
(b) The Company and its permitted assigns (including any
Affiliate, stockholder, director, officer, agent, advisor or
Representative thereof (as defined in 21(d) below)) shall not have nor
be under any liability of any nature whatsoever to Investor arising out
of or in any manner connected with this Agreement, or any actions,
inactions or omissions in any manner relating hereto or to any actions
or transactions contemplated hereby, whether occurring prior to or
after the date hereof, except to the extent that the Company is liable
to Investor for damages which are found in a final judgment by a court
of competent
24
jurisdiction to have resulted from any material breach by the Company
of an express obligation or undertaking contained in this Agreement or
any material breach (as of the date made) by the Company of an express
representation or warranty contained in this Agreement or for any act
of bad faith or willful or deliberate wrongdoing by the Company, which
bad faith, breach or wrongdoing is not discontinued or remedied
promptly (and in any event within 7 (seven) days) after written notice
thereof specifying the same in reasonable detail from RAM or Investor.
(c) The Plan shall contain standard exculpations (i) providing
that neither RAM nor Investor nor the Company (nor other appropriate
parties as identified in the Plan) shall have or incur any liability to
any holder of a Claim or an Interest, or any other party in interest,
or any of their respective agents, employees, representatives,
advisors, attorneys or affiliates, or any of their successors or
assigns, for any act or omission in connection with, relating to or
arising out of, the Company's chapter 11 case, the formulation,
negotiation or implementation of the Plan, the solicitation of
acceptances of the Plan, the pursuit of confirmation of the Plan, the
Confirmation of the Plan, the consummation of the Plan or the
administration of the Plan or the property to be distributed under the
Plan, except for their willful misconduct, and in all respects shall be
entitled to reasonably rely upon the advice of counsel with respect to
their duties and responsibilities under the Plan, and (ii) providing
that no holder of a Claim or an Interest, no other party in interest,
none of their respective agents, employees, representatives, advisors,
attorneys or affiliates, and none of their respective successors or
assigns, shall have any right of action against RAM or Investor or the
Company (or other appropriate parties as identified in the Plan), or
any of their respective present or former members, officers, directors,
employees, advisors or attorneys, for any act or omission in connection
with, relating to or arising out of, the Company's chapter 11 case, the
formulation, negotiation or implementation of the Plan, solicitation of
acceptances of the Plan, the pursuit of confirmation of the Plan, the
Confirmation of the Plan, the consummation of the Plan or the
administration of the Plan or the property to be distributed under the
Plan, except for their willful misconduct.
(d) "Representative" shall include (i) any and all officers,
directors, employees, Affiliates, agents, partners and representatives
of a Person, (ii) all lawyers, financial advisers, appraisers,
accountants, other professionals or consultants (and their respective
officers, directors, employees, Affiliates, agents, partners and
representatives) engaged by a Person and (iii) any prospective
purchaser of any Investor Securities and any prospective lender that is
considering making a loan to the Investor to assist in the consummation
of the transactions contemplated hereby and their respective lawyers,
financial advisers, appraisers, accountants, other professionals or
consultants (and their respective officers, directors, employees,
Affiliates, agents, partners and representatives) engaged by such
prospective purchaser or lender.
25
SECTION 22. Assumption and Rejection Decisions.
(a) RAM agrees that Company may assume all plans, programs and
policies benefiting the Company's current and former employees existing
as of the date hereof (the "Existing Plans"); provided, however, that
the assumption of any Existing Plan will not impair or infringe upon
the right of the Company to thereafter terminate or modify the same in
accordance with the provisions thereof. At any time prior to the
Effective Date, RAM may suggest revisions to the Existing Plans based
on prudent business considerations and, if such suggestions are made,
the Company will consider such suggestions in good faith.
(b) Except with respect to Existing Plans, the Company's
decisions with respect to assumption or rejection of prepetition
executory contracts and unexpired leases shall be subject to approval
by RAM.
SECTION 23. Administrative Expense.
All amounts owed to RAM or its assignees by the Company under
this Agreement and approved by order of the Bankruptcy Court in respect thereof
shall be treated as an allowed administrative expense priority claim under
Section 507(a)(1) of the Bankruptcy Code.
SECTION 24. Notices.
All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
or by prepaid express courier to the parties at the following addresses or
facsimile numbers:
If to the Company: Sterling Chemicals, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax Number: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
Fax Number: (000) 000-0000
with a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: X.X. Xxxxx
Fax Number: (000) 000-0000
If to RAM or Investor: Resurgence Asset Management, L.L.C.
00 Xxx Xxxx Xxxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx
Fax Number: (000) 000-0000
Attention: Xxxx Xxxxxxxxx
Fax Number: (000) 000-0000
26
with a copy to: Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Fax Number: (000) 000-0000
All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section 24 be deemed given upon
delivery, (b) if delivered by facsimile transmission to the facsimile number as
provided in this Section 24, be deemed given upon receipt, and (c) if delivered
by mail or by express courier in the manner described above to the address as
provided in this Section 24, be deemed given upon receipt (in each case
regardless of whether such notice is received by any other Person to whom a copy
of such notice, request or other communication is to be delivered pursuant to
this Section 24). Either party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other party hereto.
SECTION 25. Governing Law.
Except to the extent inconsistent with the Bankruptcy Code,
this Agreement shall in all respects be governed by and construed in accordance
with the laws of the State of New York, without reference to principles of
conflicts or choice of law under which the laws of any other jurisdiction would
apply.
SECTION 26. Amendment and Waivers.
No amendment, modification, restatement or supplement of this
Agreement shall be valid unless the same is in writing and signed by the
parties. No waiver of any provision of this Agreement shall be valid unless in
writing and signed by the party against whom that waiver is sought to be
enforced. No failure or delay on the part of either party in exercising any
right, power or privilege hereunder, and no course of dealing between the
parties, shall operate as a waiver of any right, power or privilege hereunder.
No single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. No notice to or demand on either party in
any case shall entitle such party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of either
party to any other or further action in any circumstances without notice or
demand.
SECTION 27. No Third Party Beneficiary.
This Agreement is made solely for the benefit of the Company,
RAM and Investor and their respective permitted assigns, and no other Person
(including, without limitation, employees, customers, suppliers, contract
parties, stockholders and creditors of the Company) shall have any right, claim
or cause of action under or by virtue of this
27
Agreement, except to the extent such Person is entitled to protection as
contemplated by Section 31.
SECTION 28. Assignment.
Except as otherwise provided herein and by the terms of the
Investor Securities, RAM may assign all or part of its rights under this
Agreement to any of its Affiliates and may assign any Investor Securities (or
the right to purchase any Investor Securities) to any lawfully qualified Person
or Persons, and the Company may assign this Agreement to any Person with which
it may be merged or consolidated or to whom substantially all of its assets may
be transferred in facilitation of the consummation of the Plan and the
effectuation of the issuance and sale of the Investor Securities as contemplated
hereby. None of such assignments shall relieve the Company, RAM or Investor of
any obligations hereunder.
SECTION 29. Counterparts.
This Agreement may be executed by the parties hereto in
counterparts and by telecopy, each of which shall be deemed to constitute an
original and all of which together shall constitute one and the same instrument.
With respect to signatures transmitted by telecopy, upon request by either party
to the other party, an original signature of such other party shall promptly be
substituted for its facsimile.
SECTION 30. Invalid Provisions.
If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future laws, rules or regulations,
and if the rights or obligations of Investor and the Company under this
Agreement will not be materially and adversely affected thereby, (a) such
provision will be fully severable, (b) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom and (d) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.
If the rights and obligations of Investor or the Company will be materially and
adversely affected by any such provision held to be illegal, invalid or
unenforceable, then unless such provision is waived in writing by the affected
party in its sole discretion, this Agreement shall be null and void.
SECTION 31. Directors' Liability and Indemnification.
(a) RAM shall permit the Company to seek to assume, and
subject to the entry of the Confirmation Order the Plan shall provide
for the assumption of, the prepetition indemnification agreements
between the Company and the Designated Directors, Officers and
Employees. In addition, (i) RAM agrees that the Plan shall include
releases in favor of the Designated Directors, Officers and Employees
and the Company's present agents, equity holders, financial advisors,
28
representatives, affiliates and professionals (including Professionals
(as such term is defined in the Plan) retained by the Company) as of
the Effective Date, excluding, in each case, any Person who has, on or
before the Effective Date, asserted any claim (other than a Proof of
Claim as to which the Company has not made any objection on or before
the Effective Date) or initiated any suit, action or similar proceeding
against the Company that has not been waived by such Person in its
entirety on or prior to the Effective Date (the "Releases") and (ii)
RAM shall permit the Company to enter agreements and take such other
action as necessary to effectuate the Releases as contemplated under
the Plan.
(b) RAM, on behalf of itself and Investor, agrees that no
recourse or liability whatsoever shall be had, directly or indirectly,
against any Person who is a director or executive officer of the
Company on the date hereof with respect to this Agreement, the Plan or
the consummation of the transactions contemplated hereby or thereby,
such recourse and liability, if any, being expressly waived and
released by RAM, on behalf of itself and Investor, as a condition of,
and in consideration for, the execution and delivery of this Agreement
provided, however, that if (i) the Company files an Alternate Plan or
(ii) RAM terminates this Agreement pursuant to Section 34(a), this
Section 31(b) shall be null and void and RAM shall retain all of its
rights, remedies and causes of action.
(c) Upon, and at all times after the Effective Date, the
Certificate of Incorporation and Bylaws of the Company shall contain
provisions which (i) eliminate the personal liability of the Company's
present and future directors for monetary damages resulting from
breaches of their fiduciary duties to the fullest extent permitted by
applicable law and (ii) require the Company subject to appropriate
procedures, to indemnify the Designated Directors, Officers and
Employees and the Debtors' present and future directors, officers and
other key employees to the fullest extent permitted by applicable law,
including, without limitation, for pre-Effective Date acts and
occurrences.
(d) The Company shall be permitted to enter into written
agreements with each person who is a director, officer or member of
management of the Company as of the Effective Date providing for
similar indemnification of such person and providing that no recourse
or liability whatsoever with respect to the Plan, the Investment
Agreement or the consummation of the transactions contemplated hereby
or thereby shall be had, directly or indirectly, by or in the right of
the Company against such person.
SECTION 32. Jurisdiction of Bankruptcy Court.
The parties agree that the Bankruptcy Court shall have and
retain exclusive jurisdiction to enforce and construe the provisions of this
Agreement.
29
SECTION 33. Interpretation.
In this Agreement, unless a contrary intention appears, (a)
the words "herein", "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Section or other
subdivision and (b) reference to any Section means such Section hereof. The
Section headings herein are for convenience only and shall not affect the
construction hereof. No provision of this Agreement shall be interpreted or
construed against either party solely because such party or its legal
representative drafted such provision.
SECTION 34. Termination.
(a) Notwithstanding anything to the contrary contained in this
Agreement, this Agreement may be terminated at any time prior to the
Effective Date:
(i) by mutual consent of RAM and the Company (with the consent
of the Creditors Committee Majority and the Unofficial Secured
Noteholders Committee Majority or their respective advisors);
(ii) by either RAM or the Company (with the consent of the
Creditors Committee Majority and the Unofficial Secured Noteholders
Committee Majority or their respective advisors) if a domestic court of
competent jurisdiction or a domestic Regulatory Authority of competent
jurisdiction shall have issued an order, decree or ruling or taken any
other action, in each case permanently restraining, enjoining or
otherwise prohibiting the Investment, and such order, decree or ruling
or other action shall have become final and non-appealable;
(iii) by RAM if:
(A) any of the conditions specified in Sections 9(b)
or 9(o) hereof has not been satisfied by the respective deadlines (as
extended from time to time) set forth with respect thereto in such
clauses for any reason other than a material breach by RAM or Investor
of any of its express representations, warranties, covenants or
obligations under this Agreement (regardless of whether Investor is an
express party hereto);
(B) any of the other conditions specified in Section
9 hereof has not been or, in the reasonable good faith determination of
RAM, will not be able to be satisfied by the Outside Date for any
reason other than a material breach by RAM or Investor of any of its
express representations, warranties, covenants or obligations under
this Agreement (regardless of whether Investor is an express party
hereto);
(C) the Initial Order is not approved at the hearing
convened for the purpose of considering the Initial Order and RAM
provides written notice to the Company of its election to terminate
this Agreement within 10 (ten) days of such hearing provided, that,
absent such timely notice, RAM shall not be entitled to terminate this
Agreement under this Section 34(a)(iii)(C);
30
(D) an order is entered by a court of competent
jurisdiction reversing or staying the Initial Order;
(E) the Company has breached in any material respect
any of its covenants or obligations hereunder;
(F) any of the Company's representations or
warranties made herein prove to have been inaccurate in any material
respect when made; or
(G) in accordance with Section 17(b) hereof, if the
Company notifies RAM of its determination to accept an Alternate Bid;
provided, however, that RAM shall not be entitled to terminate this
Agreement pursuant to this clause (iii) at a time when RAM (or it
Affiliates, including Investor) shall be in material breach of any of
its representations, warranties, covenants or obligations under this
Agreement (regardless of whether Investor is an express party hereto);
and, provided further, however, that upon RAM becoming aware of any
breach by the Company of any of its representations, warranties,
covenants or obligations under this Agreement, or the failure of
conditions or the occurrence or nonoccurrence of any other event, in
any such case which would give RAM the ability to terminate this
Agreement pursuant to the provisions of this clause (iii), RAM promptly
shall notify the Company, the Unofficial Secured Noteholders Committee
and the Creditors Committee in writing of its intention to terminate
this Agreement, specifying the provision hereof under which RAM is
exercising such right and, in the case of proposed termination under
clause (B), (C) or (D) above, shall provide the Company 7 (seven)
business days to cure such breach or remedy such occurrence or
nonoccurrence;
(iv) by the Company if:
(A) any of the conditions specified in Sections 10(b)
or 10(m) hereof has not been satisfied by the respective deadlines (as
extended from time to time) set forth with respect thereto in such
clauses for any reason other than a material breach by the Company of
any of its representations, warranties, covenants or obligations under
this Agreement;
(B) any of the other conditions specified in Section
10 hereof has not been or, in the reasonable good faith determination
of the Company, will not be able to be satisfied by the Outside Date
for any reason other than a material breach by the Company of any of
its representations, warranties, covenants or obligations under this
Agreement;
(C) RAM has breached in any material respect any of
its covenants or obligations hereunder; or
(D) any of RAM's representations or warranties made
herein prove to have been inaccurate in any material respect when made;
31
provided, however, that the Company shall not be entitled to terminate
this Agreement pursuant to this clause (iv) at a time when the Company
shall be in material breach of any of its representations, warranties,
covenants or obligations under this Agreement; and, provided further,
however, that upon the Company becoming aware of any breach by Investor
of any of its representations, warranties, covenants or obligations
hereunder or under this Agreement, or the failure of conditions or the
occurrence or nonoccurrence of any other event, in any such case which
would give the Company the ability to terminate this Agreement pursuant
to the provisions of this clause (iv), the Company promptly shall
notify RAM, the Unofficial Secured Noteholders Committee and the
Creditors Committee in writing of its intention to terminate this
Agreement, specifying the provision hereof under which the Company is
exercising such right and, in the case of a proposed termination under
clause (B), (C) or (D) above, shall provide RAM 7 (seven) business days
to cure such breach or remedy such occurrence or nonoccurrence; or
(v) by the Company, with the consent of the Creditors Committee
Majority and the Unofficial Secured Noteholders Committee Majority or
their respective advisors, in the event of an acceptance of an
Alternate Bid as contemplated in Section 17(b);
(b) In the event of the termination of this Agreement
by either party pursuant to paragraph (a) above, written notice thereof
shall be promptly given to the other party and, subject to paragraph
(d) below, this Agreement shall terminate and the transactions
contemplated hereby and thereby shall be abandoned without further
action by Investor or the Company.
(c) This Agreement shall automatically terminate upon
confirmation of an Alternative Plan.
(d) In the event of the termination of this Agreement
as provided in paragraph (a) or (c) above, (i) this Agreement shall
forthwith become null and void, (ii) RAM shall have no further
obligations under the Term Sheet. or any other agreements entered into
in connection therewith and (iii) there shall be no liability on the
part of RAM or the Company or any of their respective partners,
officers, directors, employees, agents or stockholders, except for
fraud or for willful breach of this Agreement (but only if the
Confirmation Order is entered) provided, however, that, that the
parties shall continue to be obligated as set forth in Sections 16,
21(a), 21(b), 27, 33 and 35, and this Section 34, all of which Sections
shall survive the termination of this Agreement, and RAM shall retain
its consent rights under Section 10.4 of the Plan.
(e) The termination of this Agreement pursuant to
paragraph (a) above shall become effective when (i) in the case of a
termination pursuant to clause (i) of paragraph (a) above, the required
consent is executed, and (ii) in the case of a termination pursuant to
any other clause of paragraph (a) above, the required notice is given
by the terminating party and any applicable cure period
32
has passed without cure of the relevant breach or remedy of the
relevant occurrence or non-occurrence.
(f) No termination of this Agreement pursuant to this Section
34 shall constitute a breach of this Agreement. The termination of this
Agreement shall not cause or constitute a termination of any existing
confidentiality agreement between the Company and Investor or one or
more Affiliates of Investor.
SECTION 35. Privileged Communication.
The parties hereto anticipate that, being similarly situated
and having a common interest in the Company's chapter 11 case with respect to
the Plan, and in anticipation of potential litigation with other constituents of
the Company, they may share certain documents, information, factual materials,
mental impressions, memoranda, reports and attorney-client communications that
may be privileged from disclosure to adverse or other parties as a result of the
attorney-client privilege, the attorney work product privilege or other
applicable privileges. The parties hereto agree that the sharing of such
information or materials shall not diminish in any way the confidentiality of
such information or materials and shall not constitute a waiver of any
applicable privilege.
SECTION 36. Entire Agreement.
This Agreement sets forth all of the promises, agreements,
conditions, understandings, warranties and representations between the parties
with respect to the matters contemplated hereby, and supersedes all prior
agreements, arrangements and understandings between the parties with respect
thereto, whether written, oral or otherwise. There are no promises, agreements,
conditions, understandings, warranties or representations, oral or written,
express or implied, between the parties concerning the subject matter hereof
except as set forth herein.
[Signature page follows]
33
RESURGENCE ASSET MANAGEMENT, L.L.C.,
on behalf of itself and its
Affiliates' Managed Funds and Accounts
By:
By:
------------------------------------
Title:
---------------------------------
Accepted and Agreed to
this day of , .
-- ----- -----
STERLING CHEMICALS HOLDINGS, INC.,
as Debtor and Debtor-in-Possession
By:
---------------------------------
Title:
-------------------------------
STERLING CHEMICALS, INC.,
as Debtor and Debtor-in-Possession.
By:
---------------------------------
Title:
-------------------------------
34
APPENDIX A
Term Sheet for Proposed Plan of Reorganization (the "Plan") of Sterling
Chemicals Holdings, Inc. ("Holdings") and certain of its subsidiaries
dated as of September 4, 2002 among Resurgence Asset Management, L.L.C.
("Resurgence"), the Ad Hoc Committee (the "Ad Hoc Committee") of Holders of
12-3/8% Senior Secured Notes ("Secured Noteholders"), the Official Committee
of Unsecured Creditors (the "Unsecured Creditors Committee") and Sterling
Chemicals, Inc. ("SCI")
1. Upon the execution of this Term Sheet by Resurgence, the Ad Hoc
Committee, the Unsecured Creditors Committee and SCI, SCI shall
continue to market its pulp chemicals operations ("PulpCo Business")
for sale, with the goal of closing such sale at the time SCI
consummates the Plan (the "Effective Date"); provided, however, that in
no event will the Effective Date be later than June 30, 2003. A motion
(in form and substance satisfactory to Resurgence, the Unsecured
Creditors Committee and the Ad Hoc Committee) seeking approval of
bidding procedures ("Procedures Motion") for the sale of the PulpCo
Business will be filed with the Bankruptcy Court as soon as is
reasonably practicable.
SCI shall regularly inform representatives of Resurgence, the Unsecured
Creditors Committee and the Ad Hoc Committee as to the status of the
foregoing sale process, and SCI shall consult with such representatives
regarding such sale process. If there are no bids for an amount at
least equal to $300 million of Proceeds (as defined below), this Term
Sheet shall be null and void unless Resurgence, the Unsecured Creditors
Committee and the Ad Hoc Committee agree to a revised Term Sheet. If
there are competing bids received by SCI for an amount of Proceeds in
excess of $300 million, SCI, Resurgence, the Unsecured Creditors
Committee and the Ad Hoc Committee shall mutually agree as to the
highest and best bid for SCI to accept. If SCI, Resurgence, the
Unsecured Creditors Committee and the Ad Hoc Committee disagree as to
the highest and best bid, the dispute shall be submitted by any of such
parties to the Bankruptcy Court to resolve, upon notice to the other of
such parties and all other parties entitled to notice.
As of the Effective Date, PulpCo Business net debt will not exceed $25
million and subsidiaries holding pulp assets will not sell any pulp
assets outside of the ordinary course of business prior to the
Effective Date beyond anything contemplated in SCI's business plan.
On the Effective Date, the PulpCo Business will be sold to a third
party. The sales proceeds (the "Proceeds") means the net cash and/or
other consideration acceptable to the Ad Hoc Committee, in each case
received in connection with the sale of the PulpCo Business. For the
purposes hereof, "net" means, without limitation, net of all fees and
expenses associated with the sale, the amount of funded debt of the
PulpCo Business repaid with the consideration received, and a provision
for taxes or alternative minimum taxes, if any.
All petrochemicals assets will be retained by Reorganized SCI. SCI's
acrylic fibers business will either be retained by Reorganized SCI,
transferred to a third party (possibly for little or no consideration)
or converted to a Chapter 7 liquidation, depending on further review of
the available options and subject to approval by Resurgence and the
Unsecured Creditors Committee.
2. At or prior to the Effective Date, $80 million will be set aside from
the Proceeds and advanced to Reorganized SCI. In consideration of the
foregoing advance, Reorganized SCI will issue new notes (the "New SCI
Notes") to the Secured Noteholders (subject to adjustment under
paragraph 4), with the following terms:
35
Principal: $80 million
Maturity: 5 years
Interest: Payable semi-annually in arrears
Annual Rate: 10% if cash or 13-3/8% if paid-in-kind at
Reorganized SCI's sole option, subject to the
PIK Period provision below
PIK Period: First 24 months at the option of
Reorganized SCI; provided that Reorganized SCI
will make interest payments in cash if after any
such payment Reorganized SCI would have excess
cash of more than $15 million beyond its budgeted
requirements
Security: Subject to any existing liens, first liens on
Texas City fixed assets
Covenants: No dividends to be paid from Reorganized SCI
while the New SCI Notes are outstanding. Other
covenants consistent with usual and customary
covenants of typical secured indebtedness
including, without limitation, covenants
regarding capital expenditures (which will not be
inconsistent with Reorganized SCI's business
plan) and use of proceeds from asset sales.
The balance of the Proceeds will be paid to the Secured Noteholders
subject to the provisions of paragraph 4 and being limited to the
Secured Noteholders Claim (as defined in paragraph 3).
3. For purposes of this Term Sheet, the term "Shortfall" means the amount
by which the sum of the principal of the existing 12-3/8% Senior
Secured Notes ($295,000,000), plus all accrued pre petition interest
($18,253,125) and all accrued post petition interest (including
interest on interest to be calculated in accordance with the Indenture)
at a 12-3/8% rate to the Effective Date (the "Secured Noteholders
Claim"), exceeds the Proceeds.
4. If there is a Shortfall, the amount of the New SCI Notes will be
increased by the Shortfall. If the Proceeds exceed the Secured
Noteholders Claim (any such excess, "Excess Proceeds"), (i) the first
$80 million of such Excess Proceeds shall be distributed to the Secured
Noteholders, (ii) the original principal amount of New SCI Notes to be
issued by Reorganized SCI under paragraph 2 shall be reduced by an
amount equal to the amount distributed to the Secured Noteholders
pursuant to clause (i), (iii) Reorganized SCI shall issue new notes to
the unsecured creditors of Debtors other than Holdings (the "UC Notes")
having an original principal amount equal to such reduction, and (iv)
to the extent Excess Proceeds exceed $80 million, such amount shall be
distributed to the unsecured creditors. The UC Notes shall generally
have the same terms and conditions as the New SCI Notes as agreed to by
the Ad Hoc Committee and the Unsecured Creditors Committee; provided,
however, that the UC Notes shall be expressly subordinated in right of
payment to the New SCI Notes and shall be secured by liens junior to
all liens securing the New SCI Notes on terms acceptable to the Ad Hoc
Committee in its sole discretion.
5. Unsecured creditors of Debtors other than Holdings will receive (i) any
amounts payable to them under paragraph 4, (ii) 11.7% of the common
equity of Reorganized SCI issued and outstanding as of the Effective
Date (assuming conversion of all Convertible Preferred (as defined
below) into common equity), (iii) warrants for 15% of the fully diluted
common equity of Reorganized SCI as of the Effective Date (including
the maximum number of shares issuable under the management incentive
plan) and (iv) the right to subscribe for a portion of the Equity
Investment (as defined below) pursuant to paragraph 6. The warrants
will have a strike price based on $260 million total equity value and a
six-year expiration. The Holdings' 13 1/2% Senior Discount Notes due
2008 (the "Senior Discount Notes") and old equity will be cancelled;
provided, however, that the holders of the Senior Discount Notes will
receive 1.3% of the common equity of Reorganized SCI. Securities issued
to unsecured creditors under the plan will have no restrictions on
resale other than as may be imposed by applicable law. During the
period of 18 months after the Effective Date, the Company will cause
the Common Stock to be registered under Section 12(g) and will timely
file all required reports under Section 13 of the Securities Exchange
Act of 1934. Resurgence will have normal and customary demand
registration rights and other holders of more than 5% of the fully
diluted Common Stock will have normal and customary piggy back rights.
6. Reorganized SCI will receive $60 million of new equity capital on the
Effective Date (the "Equity Investment"). Unsecured creditors will have
the right to subscribe for up to $30 million of the Equity Investment.
Reorganized SCI shall issue 43.5% of the common equity of Reorganized
SCI
36
issued and outstanding as of the Effective Date (assuming the
conversion of all Convertible Preferred into common equity) in exchange
for the $30 million. Resurgence and/or funds managed by Resurgence will
invest the remaining $30 million of the Equity Investment in exchange
for $30 million of liquidation preference convertible preferred stock
of Reorganized SCI (the "Convertible Preferred"). The Convertible
Preferred will be initially convertible into 43.5% of the common equity
of Reorganized SCI issued and outstanding as of the Effective Date
(assuming the conversion of all Convertible Preferred into common
equity), and will have a 4% per quarter dividend payable in kind
quarterly in arrears. Resurgence and/or funds managed by Resurgence
will underwrite the entire Equity Investment.
Resurgence and/or funds managed by Resurgence will execute a tag-along
agreement pursuant to which it agrees to allow the participation of the
equity issued to the unsecured creditors pursuant to paragraph 5
(including warrants) in any sale or proposed sale of more than 50% of
the equity of Reorganized SCI (assuming the conversion of all
Convertible Preferred into common equity), on a pro rata basis and on
the same economic terms.
7. Administrative claims will not exceed $40 million (other than normal
post-petition trade payables that will be assumed by the respective
companies owing them), unless otherwise approved by Resurgence, and the
Plan will require payment of the professional fees and reasonable
expenses incurred by (i) the Ad Hoc Committee for Xxxxxxxx Xxxxx Xxxxxx
& Zukin ("Xxxxxxxx Xxxxx"), Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP, and
Floyd, Isgur, Xxxx & Warhlich, P.C. consistent with the engagement
letters executed by the members of the Ad Hoc Committee, (ii) the
professional fees, expenses and costs of the Indenture Trustee (or any
successor Indenture Trustee) for SCI's 12-3/8% Senior Secured Notes up
to $1.4 million in the aggregate from the Debtors' Estates (the Plan
will not limit the rights of such Indenture Trustee under the Indenture
from recovering professional fees, expenses and costs of the Indenture
Trustee in excess of $1.4 million from sources other than the Debtors'
Estates); and (iii) the professional fees, expenses and costs of the
Indenture Trustee (s) for the 11 1/4% and 11 3/4% notes of SCI and the
Indenture Trustee for the Senior Discount Notes up to $325,000 in the
aggregate from the Debtors' Estates, provided, however, such amount may
be increased if a plan is non-consensual or the Effective Date is later
than March 1, 2003 (in any event, the Plan will not limit the right of
such Indenture Trustees from recovering in excess of an aggregate of
$325,000 from sources other than the Debtors' Estates). So long as this
Term Sheet is effective, neither SCI nor the Unsecured Creditors
Committee will commence any action or proceeding challenging (i) the
validity or priority of the liens securing the claims of the Secured
Noteholders or (ii) the priority and allowability of the claims of the
Secured Noteholders, and the Unsecured Creditors Committee will hold
any existing action in abeyance.
8. Resurgence will have the right to designate a percentage of the Board
members of Reorganized SCI equivalent to its percentage ownership of
the outstanding voting stock of Reorganized SCI; provided, however,
that for so long as Resurgence owns at least 35% of the outstanding
voting stock of Reorganized SCI, Resurgence will be entitled to appoint
a majority of the directors of Reorganized SCI. The unsecured
creditors, through the Unsecured Creditors Committee, will have the
right to appoint one director to the board of Reorganized SCI in
conjunction with confirmation of the Plan which director shall serve a
two-year term. So long as the New SCI Notes are outstanding, the Ad Hoc
Committee will have the right to appoint one director of Reorganized
SCI.
9. Customary releases to current officers and directors, and as to former
officers and directors as Resurgence, the Unsecured Creditors Committee
and SCI may mutually agree. Standard exculpation provisions.
10. Except as SCI and Resurgence may mutually agree in the Definitive
Agreement (defined below), all of SCI's existing plans, programs and
policies benefiting SCI's current and former employees ("Existing -
Plans") will be assumed in connection with the reorganization of SCI;
provided, however, that the assumption of any Existing Plan will not
impair or infringe upon the right of Reorganized SCI to thereafter
terminate or modify the same in accordance with the provisions
37
thereof, and provided further, that if Resurgence notifies SCI prior to
September 13, 2002 that Resurgence desires for SCI to reject, terminate
or modify any Existing Plan in connection with the reorganization of
SCI and if SCI thereafter informs Resurgence by September 20, 2002 that
it is unwilling to take the desired action, then Resurgence shall be
entitled to terminate its obligations under this Term Sheet by giving
prompt written notice to the other parties. Notwithstanding the
foregoing, nothing herein shall prevent Resurgence at any time prior to
the Effective Date from suggesting revisions to the Existing Plans
based on prudent business considerations and if such suggestions are
made SCI will consider such suggestions in good faith. Subject to the
foregoing, Resurgence will have control over executory contract issues
of SCI.
11. As soon as practicable, SCI and Resurgence shall enter into a
definitive agreement (the "Definitive Agreement") based on and
reflecting the terms of this Term Sheet. Subsequently, a second amended
Plan will be filed by as soon as practicable, and the confirmation of
such Plan shall have occurred by the later of December 4, 2002 or such
date as soon thereafter as possible that accommodates the schedule of
the Bankruptcy Court, subject to extension by mutual agreement. The
amended Plan and all documentation will be satisfactory in form and
substance to SCI, the Ad Hoc Committee, the Unsecured Creditors
Committee and Resurgence, with typical confirmation and effective date
conditions. The amended Plan will contain an agreed upon procedure to
estimate contingent claims, allowing for a prompt issuance of stock to
allowed unsecured claims.
12. The obligations of Resurgence and the Secured Noteholders under this
Term Sheet and the Definitive Agreement shall not be subject to any due
diligence or other material and non-customary conditions; provided,
however, that Resurgence's obligations shall be subject to customary
closing conditions, including a material adverse change condition for
the period beginning when the Definitive Agreement is signed and ending
on the date on which the Plan is confirmed. For purposes hereof, a
"material adverse change" shall mean any material adverse change in the
business or financial condition of SCI (excluding the pulp chemical
business) since the date of the execution of the Definitive Agreement,
excluding any change (i) resulting from general economic conditions or
the execution of this Term Sheet or the Definitive Agreement or (ii)
that affects the chemicals industry as a whole.
13. Subject to court approval, Resurgence will be reimbursed by SCI for all
reasonable out-of-pocket expenses as incurred in connection with its
due diligence (including up to $250,000 as provided for in that certain
letter from SCI to Resurgence dated May 13, 2002), and Resurgence will
be entitled to a break-up fee of $3 million cash, plus reimbursement
for all out-of-pocket expenses in connection with Plan (the "Break-Up
Fee"), payable by wire transfer of same day funds, if (a) Resurgence
executes the Definitive Agreement and (b) thereafter, SCI files a plan
or disclosure statement that does not include Resurgence as the sole
new money underwriter ("Alternative Plan"). In addition, subject to
court approval, Resurgence will be reimbursed by SCI for any
out-of-pocket fees incurred in connection with the sale of the PulpCo
Business. All Resurgence's out of pocket expenses to be reimbursed will
not exceed $2,000,000 in the event the Break-Up Fee is payable.
14. Concurrently with the execution of this Term Sheet, lock-up agreements
will be entered into by Resurgence, and members of the Ad Hoc Committee
and the Unsecured Creditors Committee (other than Indenture Trustees
and trade creditors) substantially in the form annexed hereto. SCI,
Resurgence, the Ad Hoc Committee and the Unsecured Creditors Committee
agree to hold information about the specific principal amount of
securities of SCI owned by each signatory to the lock-up agreements in
confidence and will not disclose such specific information to third
parties. Notwithstanding the foregoing, Resurgence and SCI will be
permitted to disclose the aggregate securities held by all signatories
thereto. Subject to applicable fiduciary duties, SCI, Resurgence, the
Ad Hoc Committee and the Unsecured Creditors Committee will not,
directly or indirectly, solicit or knowingly encourage the initiation
of (including by way of furnishing information) any inquiries or
proposals regarding any transaction that if consummated would
constitute an Alternative Plan or support or accept an Alternative
Plan; provided that they may answer questions in response to
unsolicited inquiries. If the Plan is not confirmed within the
38
timetable set forth in paragraph 11 or if SCI is required to pay
Resurgence the Break-Up Fee described in paragraph 13, the restrictions
in this paragraph will terminate.
15. The Ad Hoc Committee will use their reasonable best efforts to issue
written directions to the Indenture Trustee to hold the DIP proceedings
in abeyance, and if necessary, follow the procedures for the removal
and replacement of the Indenture Trustee, provided however, that the Ad
Hoc Committee will not be obliged to initiate any judicial or
administrative proceeding to enforce any rights or powers under the
Indenture or otherwise to comply with the terms of this provision. The
Indenture Trustee for the Secured Noteholders, SCI, Resurgence, and the
Unsecured Creditors Committee may rely upon instructions from 50% in
principal amount of the Secured Noteholders executing this Agreement,
or their transferees, to make any amendments to or to take any action
or give any consent on behalf of the Ad Hoc Committee with respect to
this Term Sheet.
AGREED AND ACKNOWLEDGED
ON THIS DAY OF SEPTEMBER, 2002:
-----
STERLING CHEMICALS HOLDINGS, INC.
By:
--------------------------------------
Name:
Title:
STERLING CHEMICALS, INC.
By:
--------------------------------------
Name:
Title:
39
Term Sheet for Proposed Plan of Reorganization (the "Plan") of Sterling
Chemicals Holdings, Inc. ("Holdings") and certain of its subsidiaries
dated as of September 4, 2002 among Resurgence Asset Management, L.L.C.
("Resurgence"), the Ad Hoc Committee (the "Ad Hoc Committee") of Holders of
12-3/8% Senior Secured Notes ("Secured Noteholders"), the Official Committee
of Unsecured Creditors (the "Unsecured Creditors Committee") and Sterling
Chemicals, Inc. ("SCI")
AGREED AND ACKNOWLEDGED
ON THIS DAY OF SEPTEMBER, 2002:
-----
RESURGENCE ASSET MANAGEMENT, L.L.C.,
ON BEHALF OF ITSELF AND ITS AFFILIATED FUNDS
By:
--------------------------------------
Name:
Title:
40
Term Sheet for Proposed Plan of Reorganization (the "Plan") of Sterling
Chemicals Holdings, Inc. ("Holdings") and certain of its subsidiaries
dated as of September 4, 2002 among Resurgence Asset Management, L.L.C.
("Resurgence"), the Ad Hoc Committee (the "Ad Hoc Committee") of Holders of
12-3/8% Senior Secured Notes ("Secured Noteholders"), the Official Committee
of Unsecured Creditors (the "Unsecured Creditors Committee") and Sterling
Chemicals, Inc. ("SCI")
AGREED AND ACKNOWLEDGED
ON THIS DAY OF SEPTEMBER, 2002:
-----
OFFICIAL COMMITTEE OF
UNSECURED CREDITORS
By:
--------------------------------------
Name:
Title:
41
SCHEDULE I
[SCHEDULE OF LITIGATION]
42
