AGREEMENT
NOVEMBER 19, 1998
This document sets forth an agreement (this "Agreement") between Xxxxxx
Services Corp. ("PSC") on behalf of itself and each of its affiliates
(collectively, "Affiliates"), Foothill Partners III, L.P. ("Foothill"), American
Real Estate Holdings, L.P. ("AREH") and High River Limited Partnership ("High
River"), regarding the terms and conditions for a prepackaged plan of
reorganization for PSC and its Affiliates (the "Plan"), pursuant to which a
restructuring of PSC and its Affiliates will be accomplished, and related
agreements. For purposes of this Agreement, the term "Existing Secured Lenders"
means the lender parties to the existing Credit Agreement (the "Existing Credit
Agreement") dated as of August 11, 1997 among PSC; Xxxxxx Services (Delaware),
Inc.; Canadian Imperial Bank of Commerce ("CIBC"), as Administrative Agent;
Bankers Trust Company ("BTCo"), as Syndication Agent; CIBC and BTCo, as
Co-Arrangers; Dresdner Bank Canada and Dresdner Bank AG New York Branch, as
Documentation Agent; and the various lenders from time to time parties thereto,
including all amendments and modifications thereto. For purposes of this
Agreement, the term "Majority Existing Secured Lenders" means, collectively,
holders of not less than two-thirds (2/3) of the outstanding indebtedness under
the Existing Credit Agreement.
WHEREFORE, for good and valuable consideration, the adequacy, sufficiency
and receipt of which is hereby acknowledged, PSC, High River, AREH and Foothill
agree as follows:
Principal Economic Terms of Plan:
Subject to an adjustment mechanism (limited solely to an
adjustment of the percentage of reorganized PSC common stock
to be distributed to existing PSC shareholders)to be
mutually agreed upon by the parties hereto in the event that
assets of PSC or its Affiliates are sold and the proceeds
thereof used to repay indebtedness under the Existing Credit
Agreement prior to the consummation of the Plan, existing
PSC shareholders will receive a pro rata share of 10% of
reorganized PSC's common stock and the Existing Secured
Lenders will receive a pro rata share of 90% of reorganized
PSC's common stock; PROVIDED HOWEVER that in no event shall
existing PSC shareholders receive more than 15% of
reorganized PSC's common stock in aggregate.
Reorganized PSC will have aggregate pro forma debt of $300
million, excluding Unimpaired Debt as defined below (the
"New Notes"), which will have terms and conditions mutually
acceptable to PSC and the Majority Existing Secured Lenders
(including Foothill, AREH and High River). $200 million of
the New Notes will be secured by a first priority lien on
all assets of PSC and its Affiliates and will be
distributed, on a pro rata basis, to the Existing Secured
Lenders. $100 million of the New Notes will be unsecured and
will be distributed in full and final settlement of
non-ordinary course liabilities, direct and indirect, of PSC
and its Affiliates (other than claims of the Existing
Secured Lenders).
Liabilities and accruals of PSC and its Affiliates incurred
in the ordinary course of business will be unimpaired
("Unimpaired Liabilities").
Other Plan Provisions:
All other provisions of the Plan and any related documents
and agreements, which shall not be inconsistent with the
terms and conditions of this Agreement, shall be reasonably
acceptable to PSC, the Majority Existing Secured Lenders and
High River, AREH and Foothill.
Plan Timetable:
PSC and, if necessary, certain Affiliates to be mutually
determined by PSC and the Majority Existing Secured Lenders,
will commence, in a venue mutually agreeable to PSC and the
Majority Existing Secured Lenders, voluntary insolvency
proceedings (the "Cases"), including the filing of the Plan
and accompanying disclosure statement (the "Disclosure
Statement"), not later than February 28, 1999.
The Disclosure Statement shall be approved by the court
presiding over the Cases (the "Court") not later than April
15, 1999.
The Court shall confirm the Plan not later than June 30,
1999.
The Plan shall become effective not later than July 30,
1999.
Standstill and Efforts to Consummate:
Subject to the provisions of subparts (a) and (d) under the
heading "Termination Event" below, each of High River,
Foothill and AREH hereby agrees that neither they, nor any
of their respective affiliates, officers, directors,
partners or agents shall (a) commence any involuntary
insolvency proceeding against PSC or any of its Affiliates
under the laws of the United States, Canada or any other
country or any state or province, (b) except to the extent
that PSC or any of its Affiliates are the subject of any
insolvency proceeding, initiate any legal action against PSC
or any of its Affiliates with respect to any claims against
or interests in PSC or any of its Affiliates or (c) take or
encourage any other party to take any action inconsistent
with (a) or (b) above (including without limitation giving
any direction to the agent for the Existing Credit
Agreement), unless and until a Termination Event (defined
below) occurs.
Each of High River, AREH and Foothill hereby agrees, and
agrees to cause any affiliate that holds or may hereafter
hold PSC debt, to enter into the Lock-Up Agreement (defined
below) on or before December 15, 1998.
Each of High River, AREH and Foothill agrees that it shall
not sell, assign or otherwise transfer any indebtedness of
PSC to any other person or entity unless such person or
entity agrees in writing to be bound by the terms and
conditions of this Agreement as if such person or entity
were a signatory hereto.
Subject to the terms and conditions hereof, until the
occurrence of a Termination Event, PSC shall take all
reasonable actions to seek to effectuate the transactions
set forth herein.
Termination Event:
This Agreement and the obligations of the parties hereto
shall expire upon the earliest to occur of the following
(each a "Termination Event"); PROVIDED, HOWEVER, that PSC's
obligations set forth under the heading "Board of Director
Changes" below shall survive any Termination Event:
(a) failure of PSC and the Majority Existing Secured Lenders
(including High River, AREH and Foothill) to enter into a
binding agreement consistent with the terms and conditions
of this Agreement ("Lock-Up Agreement"), on or before
December 15, 1998, pursuant to which the Majority Existing
Secured Lenders agree to vote for the Plan. The Lock-Up
Agreement shall be in form and substance mutually acceptable
to PSC and the Majority Existing Secured Lenders (including
High River, AREH and Foothill);
(b) failure of PSC to meet any of the deadlines set forth
under "Plan Timetable" above;
(c) failure of PSC to satisfy its obligations set forth
under the heading "Board of Director Changes" below (which
failure may be enforced by injunctive action despite the
occurrence of a Termination Event) or the failure of PSC's
shareholders to elect the New Directors (defined below) to
the Board; and
(d) PSC seeking to implement an Alternative Transaction that
has been approved by the Majority Existing Secured Lenders
but has not been approved by High River, AREH and Foothill.
Alternative Transactions:
Notwithstanding anything in this Agreement to the contrary,
PSC maintains at all times (both before and after execution
of the Lock-Up Agreement and the filing of the Plan) the
right to pursue, negotiate with any third party, and seek to
implement, any potential transaction that restructures
substantially all of PSC and its Affiliates' debt and equity
and that PSC believes, in its reasonable discretion, may
result in a more favorable outcome to PSC and its
stakeholders (an "Alternative Transaction") than the
transactions set forth in this Agreement or the Plan. If PSC
determines that any Alternative Transaction may result in a
more favorable outcome to PSC and its stakeholders than the
transactions set forth in this Agreement or the Plan, PSC
shall have the right to present such Alternative Transaction
to the Existing Secured Lenders for their consideration;
PROVIDED, HOWEVER, that PSC shall not seek to effectuate any
Alternative Transaction that does not pay the claims of the
Existing Secured Lenders in full in cash or that has not
been approved by the Majority Existing Secured Lenders in
their reasonable discretion.
Board of Director Changes:
Upon the execution of this Agreement, High River, AREH and
Foothill jointly shall have the right to designate a total
of two (2) persons to serve on PSC's Board of Directors, one
of whom must be a Canadian resident and one of whom must be
a United States resident (collectively, the "New
Directors"). In addition, the New Directors shall be
nominated by PSC management for re-election to the Board at
any PSC shareholders meeting that is conducted between the
date hereof and the earlier to occur of (x) the effective
date of the Plan or any Alternative Transaction (approved by
the Majority Existing Secured Lenders), (y) a breach of this
Agreement by High River, AREH or Foothill and (z) such date
as High River, AREH and Foothill, collectively, hold less
than $50.0 million in principal amount of indebtedness owing
by PSC. The New Directors shall serve on PSC's Board until
the earlier of (a) the designation of a new Board of
Directors, if any, pursuant to the Plan or an Alternative
Transaction (approved by the Majority Existing Secured
Lenders), (b) such date as High River, AREH and Foothill,
collectively, hold less than $50.0 million in principal
amount of indebtedness owing by PSC and (c) a breach of this
Agreement by High River, AREH or Foothill. As promptly as
practicable after the designation of the New Directors, PSC
shall, in good faith, take all appropriate corporate
governance actions to effectuate the addition of the New
Directors to the Board of Directors, and will thereafter
take all appropriate action to effectuate the replacement by
High River, AREH and Foothill of any one or more New
Directors as may be required due to death, resignation or
other inability to serve. At no time hereafter shall PSC or
any of its Affiliates take or cause to be taken any action
to change the ratio of all Directors to New Directors on
PSC's Board.
Search Committee:
Immediately following the appointment of the New Directors,
a special committee of the Board shall be formed (consisting
of no more than 3 Directors, one of whom shall be a New
Director) for the purpose of commencing a search for a
permanent CEO for PSC.
Governing Law and Enforcement:
This Agreement shall be governed by the laws of the State of
Delaware, without giving effect to choice of law provisions
thereunder.
The parties hereto acknowledge that monetary damages may not
provide a sufficient remedy for a breach of this Agreement,
and thus hereby consent to the entry of equitable remedies
including injunctive relief and consent to the jurisdiction
of the Federal District Court in Delaware.
Public Announcements:
The parties hereto agree that all public announcements of
the entry into or the terms and conditions of this Agreement
shall be mutually acceptable to each of them; PROVIDED,
HOWEVER, that if agreement among such parties cannot be
reached, each of them may issue any statement or make any
announcement it deems necessary or appropriate. It is
understood that on the date hereof, PSC intends to announce
a letter of intent among PSC, Xxxxx Enterprises LLC and
another third party.
Agreed, acknowledged and accepted as of the date first written above:
XXXXXX SERVICES CORP.
By:
Its:
Agreed, acknowledged and accepted as of the date first written above:
FOOTHILL PARTNERS III, L.P.
By:
Its: Managing General Partner
AMERICAN REAL ESTATE HOLDINGS, L.P.
By: American Property Investors, Inc.
Its: General Partner
By:
Its:
HIGH RIVER LIMITED PARTNERSHIP
By: Riverdale L.L.C.
Its: General Partner
By:
Its:
