Exhibit 99.2
LOCKUP AGREEMENT
This Lockup Agreement (together with exhibits, annexes, and
attachments hereto, this "Agreement"), dated as of February 15, 2002, is entered
into by and among Verado Holdings, Inc. ("Verado") and Verado, Inc.
(collectively, together with Verado, the "Debtors") and each of the undersigned
holders (each a "Signing Noteholder" and collectively, the "Signing Noteholder
Group") of Verado's 13% Senior Discount Notes due 2008 (the "Notes"). The
Signing Noteholder Group, the Debtors and any subsequent person that becomes a
party hereto in accordance with the terms hereof are referred to herein as the
"Parties."
RECITALS
WHEREAS, as of the date hereof, the members of the Signing Noteholder
Group are the beneficial owners of or manage accounts for the beneficial owners
of Notes holding not less than 66 2/3% of the aggregate face amount of the Notes
outstanding;
WHEREAS, the Debtors and the Signing Noteholder Group have reached an
agreement on the principal terms of a proposed liquidation of the Debtors and
their affiliates on the terms and conditions set forth in this Agreement.
WHEREAS, the Debtors, together with one or more of their
subsidiaries, intend to solicit votes (the "Solicitation") on a proposed
pre-negotiated chapter 11 plan of liquidation (the "Plan"), which will
incorporate the terms and conditions set forth in the term sheet attached hereto
as Exhibit A (the "Term Sheet"), which Plan, together with all exhibits thereto,
as amended by written approval of the Parties, shall be in form and substance
reasonably satisfactory to the Signing Noteholder Group and its counsel (the
"Acceptable Plan");
WHEREAS, the Debtors intend, as soon as reasonably practicable
following the commencement of voluntary bankruptcy cases (the "Liquidation
Cases") under chapter 11 of title 11 of the United States Code (the "Bankruptcy
Code") in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"), to commence the Solicitation and the receipt of sufficient
votes to enable the Bankruptcy Court to confirm the Acceptable Plan pursuant to
section 1129 of the Bankruptcy Code;
WHEREAS, each of the Debtors intends to file the Acceptable Plan with
the Bankruptcy Court, subject to the terms and conditions of this Agreement; and
WHEREAS, each Debtor intends to use its reasonable best efforts to
obtain Bankruptcy Court approval of the Acceptable Plan in accordance with the
Bankruptcy Code and on terms consistent with this Agreement and each Signing
Noteholder intends to use its reasonable best efforts to cooperate in that
regard.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
1. Confirmation of the Acceptable Plan. The Debtors shall use their
reasonable best efforts to obtain confirmation of the Acceptable Plan as soon as
reasonably practicable following the commencement of the Liquidation Cases in
accordance with the Bankruptcy Code and on terms consistent with this Agreement,
and the Signing Noteholder Group shall cooperate to the best of its ability in
that regard. The Debtors and the Signing Noteholder Group shall take all
reasonable necessary and appropriate actions to achieve confirmation of the
Acceptable Plan.
2. Amendments and Modifications. Each of the parties hereto agrees to
negotiate in good faith all amendments and modifications to the Acceptable Plan
as reasonably necessary and appropriate to obtain Bankruptcy Court confirmation
of the Acceptable Plan pursuant to a final order of the Bankruptcy Court.
3. Support of the Liquidation; Additional Covenants. During the term
of this Agreement, (a) neither the Debtors nor any of the Signing Noteholders
will (i) object to confirmation of the Acceptable Plan or otherwise commence any
proceeding to oppose or alter the Acceptable Plan, the related disclosure
statement, the Bankruptcy Court motions to be prepared in connection therewith,
or any other documents or agreements to be executed or implemented in connection
therewith, or otherwise contemplated by, this Agreement, each of which documents
and agreements shall be consistent in all material respects with this Agreement
and reasonably satisfactory to the Signing Noteholder Group (collectively, the
"Liquidation Documents"), (ii) vote for, consent to, support or participate in
the formulation of any plan of liquidation other than the Acceptable Plan, (iii)
directly or indirectly seek, solicit, support or encourage any plan other than
the Acceptable Plan, or any sale, proposal or offer of dissolution, winding up,
liquidation, merger, reorganization or restructuring of the Debtors or any of
their respective subsidiaries that reasonably could be expected to prevent,
delay or impede the successful implementation of the liquidation as contemplated
by the Acceptable Plan and the Liquidation Documents, (iv) object to the related
disclosure statement or the solicitation of consents to the Acceptable Plan, or
(v) take any other action not required by law that is inconsistent with, or that
would materially delay, confirmation or consummation of, the Acceptable Plan;
and (b) each Signing Noteholder (i) agrees to vote its claims arising from the
Notes ("Note Claims") to accept the Acceptable Plan, (ii) consents to the
treatment of the Signing Noteholders' Note Claims, including the distributions
to be made in satisfaction thereof, as set forth in the Term Sheet, and (iii)
shall not directly or indirectly sell, assign, hypothecate, grant an option on,
or otherwise dispose of (each, a "transfer") any of the Note Claims held by such
Signing Noteholder on the date hereof; provided, however, that any Signing
Noteholder may transfer any of such claims to an entity that agrees in writing
to be bound by the terms of this Agreement, and if such transfer is to occur
prior to the deadline established in the disclosure statement for casting votes
on the Plan, such Signing Noteholder executes and delivers to the Debtors'
voting agent, in accordance with the voting procedures established in such
disclosure statement, an irrevocable ballot to accept the Plan; provided,
however, that the obligations of the Signing Noteholder Group and each Signing
Noteholder under this Agreement shall not be interpreted as to require such
parties to act in a manner that is not consistent with any of their fiduciary
duties under applicable law.
4. Forbearance. For a period (the "Forbearance Period") commencing on
the Effective Date (as defined in Section 9 hereof) until the occurrence of a
Termination Event, each of the Signing Noteholders hereby agrees to forbear from
the exercise of any rights or remedies it may have (including, without
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limitation, by instructing the Indenture Trustee to refrain from taking action
on its behalf) under the Indenture Agreement, dated as of April 13, 1998, by and
between Firstworld Communications, Inc. and The Bank of New York, as Indenture
Trustee, as amended, applicable law or otherwise with respect to any default
existing as of the date hereof arising out of the Agreements.
5. Exculpation. Each of the Signing Noteholders and the Debtors
hereby agree, subject to the terms and conditions set forth herein, that none of
the Debtors, the subsidiaries of the Debtors, the Signing Noteholder Group or
any of their respective members, officers, directors, employees, advisors,
professionals or agents shall have or incur any liability to any party hereto
for any act or omission in connection with, related to, or arising out of, the
Liquidation Cases, the pursuit of confirmation of the Acceptable Plan, the
consummation of the Acceptable Plan or the administration of the Acceptable Plan
or the property to be distributed under the Acceptable Plan, or any payments
made to any current employees or former employees of the Debtors in accordance
with the Term Sheet, except for willful misconduct and gross negligence, and, in
all respects, the Debtors, the subsidiaries of the Debtors, the Signing
Noteholder Group and each of their respective members, officers, directors,
employees, advisors, professionals and agents shall be entitled to rely upon the
advice of counsel with respect to their duties and responsibilities under the
Acceptable Plan.
6. Termination of Agreement. This Agreement shall terminate and all
of the obligations of the Parties shall be of no further force or effect in the
event that any of the following occurs (each, a "Termination Event"):
(a) immediately and automatically upon the giving of
written notice of termination by the Signing Noteholder Group to the
Debtors, provided that none of the Signing Noteholders have failed to
perform, in any material respect, any of their obligations hereunder,
if:
(i) the Liquidation Cases to implement the liquidation
proposed in this Agreement shall not have been commenced
by February 15, 2002;
(ii) the Plan and related disclosure statement (the
"Disclosure Statement") each in a form reasonably
satisfactory to the Signing Noteholder Group shall not
have been filed by February 22, 2002;
(iii) the Disclosure Statement or a version thereof
that is not materially inconsistent with the terms set
forth in the Term Sheet shall not have been approved by
the Bankruptcy Court within 60 days after the commencement
of the Liquidation Cases;
(iv) the Plan is not confirmed within 100 days after
the Commencement of the Liquidation Cases;
(v) the Plan shall not have become effective within
120 days after the commencement of the Liquidation Cases;
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(vi) there shall be any material modification to, or
severance of any provision of, the Plan that is materially
inconsistent with the terms and conditions set for the in
the Term Sheet; or
(i) an order is entered and has not been reconsidered or
vacated within 30 days that has the practical effect of
preventing confirmation of the Plan within 120 days of the
commencement of the Liquidation Cases; or
(b) five business days after the receipt of written notice
of termination by the Debtors from the Signing Noteholder Group or
receipt by the Signing Noteholder Group of written notice of
termination from the Debtors that such Party has failed to perform,
in any material respect, any of its obligations hereunder and such
failure remains uncured at the conclusion of such five-business-day
period, in which case this Agreement shall thereupon terminate; or
(c) immediately, upon
(i) the conversion of any Liquidation Cases to a case
under chapter 7 of the Bankruptcy Code
(ii) the appointment of a trustee or receiver; or
(iii) the effective date of the Plan.
7. Specific Performance. Subject to the obligation contained in
Section 3, it is understood and agreed by each of the Parties hereto that money
damages would not be a sufficient remedy for any material breach of any
provision of this Agreement by any Party and each non-breaching Party shall be
entitled to the sole and exclusive remedy of specific performance and injunctive
or other equitable relief as a remedy for any such breach, without the necessity
of securing or posting a bond or other security in connection with such remedy.
8. Representations and Warranties. Each of the Parties represents and
warrants to each of the other Parties that the following statements are true,
correct and complete as of the date hereof:
(a) Power and Authority. It has all requisite power and
authority to enter into this Agreement and to carry out the
transactions contemplated by, and perform its respective obligations
under, this Agreement;
(b) Authorization. The execution and delivery of this
Agreement and the performance of its obligations hereunder have been
duly authorized by all necessary action on its part;
(c) No Conflicts. The execution, delivery and performance
by it of this Agreement do not and shall not (i) violate any
provision of law, rule or regulation applicable to it or any of its
subsidiaries or its certificate of incorporation or by-laws or those
of any of its subsidiaries or (ii) conflict with, result in a breach
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of or constitute (with due notice or lapse of time or both) a default
under any material contractual obligation to which it or any of its
subsidiaries is a party or under its certificate of incorporation or
by-laws or other organizational documents;
(d) Governmental Consents. The execution, delivery and
performance by it of this Agreement do not and shall not require any
registration or filing with, consent or approval of, or notice to, or
other action to, with or by, any Federal, state or other governmental
authority or regulatory body;
(e) Binding Obligation. This Agreement is the legally
valid and binding obligation of it, enforceable against it in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability; and
(f) Signing Noteholders. Each of the Signing Noteholders
represents and warrants that the principal amount of Notes held by
such Signing Noteholder as set forth on the signature page of such
Signing Noteholder is an accurate amount.
9. Effectiveness; Amendments. This Agreement shall become effective
and binding (the "Effective Date") on the Parties only when a counterpart
signature page to this Agreement has been executed and delivered by each and
every Party. This Agreement may not be modified, amended or supplemented with
respect to a Party except in a writing signed by each and every Party.
10. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without regard to any conflicts of law provision that would require the
application of the law of any other jurisdiction. By its execution and delivery
of this Agreement, each of the Parties hereto hereby irrevocably and
unconditionally agrees for itself that the Bankruptcy Court shall have exclusive
jurisdiction of all matters directly arising out of this Agreement.
11. Notices. All notices and consents hereunder shall be in writing
and shall be deemed to have been duly given upon receipt if personally delivered
by courier service, messenger, telecopy, or by certified or registered mail,
postage prepaid return receipt requested, to the following addresses, or such
other addresses as may be furnished hereafter by notice in writing, to the
following parties:
If to any one Signing Noteholder, to:
the address indicated on Exhibit B attached hereto
With a copy to:
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Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx
If to the Signing Noteholder Group, to:
Each of the addresses indicated in Exhibit B attached
hereto
With a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx
If to the Debtors or any one Debtor, to:
Verado Holdings, Inc.
0000 Xxxxxxxxx Xxxxx Xxxx.
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Simeon Gold
12. Representation by Counsel. Each Party acknowledges that it has
been represented by counsel in connection with this Agreement and the
transactions contemplated by this Agreement. Accordingly, any rule of law or any
legal decision that would provide any Party with a defense to the enforcement of
the terms of this Agreement against such Party based upon lack of legal counsel,
shall have no application and is expressly waived.
13. Consideration. It is hereby acknowledged by the Parties that,
other than the agreements, covenants, representations and warranties of the
Parties, as more particularly set forth herein, no consideration shall be due or
paid to the Debtors for their agreement to file and use their reasonable best
efforts to obtain approval for the Acceptable Plan and related disclosure
statement in accordance with the terms and conditions of this Agreement.
14. Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not affect the
interpretation hereof.
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15. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of the Parties and their respective permitted successors,
assigns, heirs, executors, administrators and representatives.
16. Several, Not Joint, Obligations. The agreements, representations
and obligations of the Parties under this Agreement are, in all respects,
several and not joint.
17. Prior Negotiations. This Agreement supersedes all prior
negotiations with respect to the subject matter hereof but shall not supersede
the Plan or the Acceptable Plan.
18. Counterparts. This Agreement may be executed in one or more
counterparts and by facsimile, each of which shall be deemed an original and all
of which shall constitute one and the same Agreement.
19. No Third-Party Beneficiaries. Unless expressly stated herein,
this Agreement shall be solely for the benefit of the Parties, and no other
person or entity shall be a third party beneficiary hereof.
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EXHIBIT A
VERADO HOLDINGS, INC.
TERM SHEET
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STRUCTURE Verado Holdings, Inc. ("Verado
Holdings") and its subsidiaries
(collectively with Verado Holdings,
"Verado") shall immediately pursue a
liquidation of Verado's assets. The
liquidation will continue after
Verado commences cases (the
"Liquidation Cases") under chapter
11 of title 11 of the United States
Code. The net proceeds of the
liquidation of Verado's assets shall
be distributed through a
pre-negotiated chapter 11 plan of
liquidation.
I. DISTRIBUTION OF NET PROCEEDS OF VERADO 90% of Verado Net Proceeds to be
distributed pro rata to holders (the
"Noteholders") of the 13% Senior
Discount Notes (the "Notes") and to
holders of other unsecured claims
against Verado (the "Unsecured
Creditors").
10% of Verado Net Proceeds to be
distributed pro rata to holders of
Verado common stock ("Equity
Holders").
In the event an insufficient number
Unsecured Creditors vote to approve
the plan of liquidation, then the
Noteholders will be placed in a
separate subclass from the Unsecured
Creditors and 10% of the Verado Net
Proceeds allocable to the
Noteholders will instead be
distributed to Equity Holders.
"Verado Net Proceeds" shall mean (a)
all cash held by Verado and (b) the
proceeds of the sales or
dispositions of Verado's assets,
less (x) the cost of the sales or
dispositions of Verado's assets and
(y) the costs of administering the
Liquidation Cases.
EXCULPATIONS, RELEASES AND INDEMNIFICATIONS Customary exculpations and releases
of Verado Holdings and each of its
controlled subsidiaries, their
directors, officers, agents and the
members of the Unofficial Committee
of Noteholders and their agents to
the extent approved by the
Bankruptcy Court, and
indemnifications of Verado's past
and present directors, officers and
employees to be satisfied solely
from coverage as afforded under any
applicable director, officer and
corporation liability insurance
policies of Verado in effect as of
the petition date, up to the limit
thereof, and to the extent approved
by the Bankruptcy Court, together
with $25 million in extension
coverage and "tail coverage" to
insure against indemnifiable or
covered claims, which will cost
Verado no more than $1,500,000 (with
any additional cost, which shall not
exceed $250,000, not to be paid from
the distribution to the Noteholders
and Unsecured Creditors, but instead
deducted dollar-for-dollar from the
first distribution to the Equity
Holders and distributed to the
Noteholders and Unsecured
Creditors).
INTERIM INDENTURE RELIEF Noteholders agree to forbearance set
forth in the Lockup Agreement.
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EMPLOYEE ARRANGEMENTS o Senior Management. Two amended
employment agreements superseding
any prior arrangements for the CFO
and General Counsel, in accordance
with terms set forth on Annex I,
which shall include one year
severance and a liquidation
incentive bonus opportunity. CFO and
General Counsel to waive any and all
claims based upon superseded
employment agreements and Verado to
waive any and all claims based upon
such superseded employment
agreements and any payments made
thereunder.
o Other Employees. Three employees,
in addition to the CFO and General
Counsel, critical to the liquidation
process will participate in the
incentive bonus referenced above.
Remaining employees will be eligible
for a minimum of 8 weeks severance
pay (see Annex II). All employees
will be entitled to a pay-out of
accrued paid time off ("PTO"). Terms
of the employee arrangements are
summarized in Annex II attached
hereto. Employee compensation,
severance, and PTO will be given
post-petition administrative claim
treatment.
o Indemnification. An
indemnification agreement will be
entered into to cover liability, if
any, of officers and directors of
Verado under the Colorado Wage Act
resulting from potential employee
related liabilities up to a maximum
of $350,000. $350,000 shall be
escrowed to be used solely to cover
any such indemnity obligation for
Colorado Wage Act claims and to
settle any claim of any former or
present employees of Verado as the
officers and directors of Verado
deem, in their sole discretion, as
appropriate.
LIQUIDATION ADVISOR Xxxxxxx & Marsal, Inc. to assist
Verado Holdings in the liquidation
process and to be compensated by
Verado Holdings.
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LOCKUP AGREEMENT The Lockup Agreement to be entered
into by the Noteholders holding not
less than 66 2/3% of the aggregate
face amount of the Notes
outstanding.
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