Exhibit 10
MEMORANDUM OF UNDERSTANDING ("MEMORANDUM
OF UNDERSTANDING") ENTERED INTO AS OF THIS
23RD DAY OF JULY, 1998 WITH RESPECT TO
CONSENSUAL PLAN OF REORGANIZATION (THE "PLAN")
BY AND AMONG RAYTECH CORPORATION ("RAYTECH" OR THE "DEBTOR"),
THE OFFICIAL EQUITY COMMITTEE (THE "EQUITY COMMITTEE"),
THE OFFICIAL CREDITORS' COMMITTEE (THE "CREDITORS'
COMMITTEE"), THE GUARDIAN AD LITEM FOR FUTURE CLAIMANTS
(THE "FUTURES REPRESENTATIVE"), THE STATE OF CONNECTICUT,
DEPARTMENT OF ENVIRONMENTAL PROTECTION ("CONNECTICUT")
AND THE UNITED STATES DEPARTMENT OF JUSTICE, ENVIRONMENTAL
AND NATURAL RESOURCES DIVISION (THE "US")
I. GENERAL POINT
The parties hereto will utilize their best efforts to obtain
Bankruptcy Court approval of this Memorandum of
Understanding, but such approval shall not be a condition of
the parties' agreement hereto.
II. ECONOMIC TERMS
(a) All allowed administrative expense and priority claims
of Raytech shall be paid out of the Raytech estate upon
confirmation of the Plan or upon such other terms as may be
agreed to by and among any such particular claimant and the
parties hereto or as may be otherwise provided pursuant to
the Bankruptcy Code.
(b) General unsecured creditors, through the vehicle of a
trust (the "Trust") established pursuant to Section 524(g)
of the Bankruptcy Code, shall receive in the aggregate, (i)
90% of the equity in reorganized Raytech, and (ii) such
excess cash as is agreed upon by the Creditors' Committee
and the Debtor after consulting with the parties hereto and
with their financial advisors, as available and not
necessary to fund (a) administrative and priority claims and
(b) the ongoing business activities of reorganized Raytech.
All general unsecured claims including but not limited to
the present and future asbestos related claims and
governmental claims, shall be satisfied out of the
distribution(s) from the Trust. Any and all refunds of
taxes paid or net reductions in taxes owing which result
from deductions generated from transfers of the Raytech
equity to the Trust shall be deemed excess cash whenever
received and included in amounts received or to be received
by the Trust. In the event reorganized Raytech shall be
sold while it still has unused tax deductions, carrybacks or
carryforwards which would result in excess cash if and when
enjoyed, the component of the sales price representing the
present value of any such tax benefits shall be calculated
and allocated to the Trust (whether in cash or stock) before
the balance of the sales price is distributed to all equity
holders.
(c) Existing Raytech equity shall receive 10% of the equity
of reorganized Raytech.
(d) With respect to any shares that would be issued to
Xxxxx Xxxxx, Xxxxxxx Xxxxx, any person related to them, any
entity related to them, or any assignee of any such person
or entity, the parties will seek a prejudgment remedy and/or
such other order from the Bankruptcy Court pursuant to which
any such shares shall not be distributed until satisfaction
of any and all claims reorganized Raytech or the Trust may
have against Xxxxx Xxxxx, Xxxxxxx Xxxxx, their families and
related entities.
(e) The net recoveries from claims or any unsatisfied
claims to recover assets from Raymark Industries, Inc.
("Raymark") including any assets recovered from Xxxxx Xxxxx
and his family and other related entities or transferees
(collectively, the "Raymark Assets") shall be treated as
follows: To the extent that Raymark Assets (i) in the hands
of Raymark, were specifically for the benefit of personal
injury, property damage or government environmental claims,
such as insurance proceeds for their benefit, or (ii)
consist of real property which was environmentally
remediated by the federal, state, or any local governmental
entity such that the federal, state, or any local
governmental entity is entitled to a lien with respect to
such property under applicable law, such assets shall be
assigned to or prosecuted by or for the benefit of the
Trust. All other Raymark Assets shall be for the benefit of
the Raytech estate or reorganized Raytech, as the case may
be.
III. NON-ECONOMIC TERMS
(a) Raytech represents that it has given no release or
guaranty to Xxxxx Xxxxx or Xxxxxxx Xxxxx of claims by
Raytech.
(b) A claims bar date will be set for general unsecured
creditors other than holders of asbestos-related personal
injury and death claims. The parties hereto will all and
jointly advise the Bankruptcy Court that no claims bar date
other than for voting purposes is necessary for holders of
asbestos-related personal injury and death claims.
(c) The Creditors' Committee and the Debtor, after
consultation with the parties hereto, shall agree upon the
most appropriate and economic approach to claims with
respect to the existing Raytech and Raymark retirement and
health plans, as well as any unfunded benefits remaining
from any terminated pension plans, from the perspective of
the Raytech estate as a whole.
(d) Upon execution of the Memorandum of Understanding and
approval by the Bankruptcy Court thereof, the following will
occur:
Raytech will no longer seek to make severance
payments to Xxxxx Xxxxx and the parties hereto
will oppose any request for payment thereof.
Raytech and its subsidiaries will no longer seek
to make the note payments to Raymark and the
parties hereto will oppose any request for payment
thereof.
Raytech and the Equity Committee will join and/or
support the attempt by the Creditors' Committee
and the Futures Representative to bring the
Raymark stock and/or assets within the estate of
Raytech.
The parties hereto will use their best efforts to
have the Bankruptcy Court hold the existing
estimation proceedings with respect to the
asbestos related claims in abeyance pending
confirmation of the Plan, at which time these
proceedings will be dismissed.
The parties hereto will seek to obtain a
standstill with respect to the remedies action
appeal, pending confirmation of the Plan, at which
time the appeal will be dismissed.
(e) The Plan will provide that the Equity Committee shall
name one member to the board of directors of reorganized
Raytech who shall serve for a term of 3 years; provided,
however, that such term shall terminate in the event that
the Trust sells its entire interest in reorganized Raytech
and the purchaser or purchasers has offered to purchase the
remaining shares outstanding at the same price and on the
same terms and conditions as offered to the Trust. The Plan
will further provide that the Creditors' Committee, in
consultation with the Debtor, the Futures Representative,
Connecticut and the US, shall have the right to designate
the remaining members of the Board of Directors of
reorganized Raytech.
(f) The parties will jointly request that, as part of the
confirmation order, there be a finding to the effect that
while Raytech's liabilities appear to exceed the reasonable
value of its assets, the allocation of 10% of the equity to
the existing equity holders is fair and equitable by virtue
of the benefit to the estate in resolving complicated issues
without further costly and burdensome litigation and the
risks attendant thereto as well as the economic benefit to
Raytech of emerging from bankruptcy without further delay,
provided that such a finding shall not be a condition of the
parties' agreement hereto.
(g) The Plan will provide for indemnification by
reorganized Raytech of the members of the Equity Committee.
(h) This Memorandum of Understanding may be executed in
counterparts.
Raytech Corporation Guardian Ad Litem For the
Future Claimants
By:___________________________ By:__________________________
Its President and Chief
Executive Officer
Official Creditors' Committee State of Connecticut
of Raytech Corporation Department of Environmental
Protection
Xxxxxxx Xxxxxxxxxx
Attorney General
By:___________________________ By:__________________________
Its Chairman Xxxx X. Xxxxxx
Assistant Attorney General
Official Equity Committee of United States of America
Raytech Corporation Xxxx X. Xxxxxxxx
Assistant Attorney General
Environmental and Natural
Resources Division
United States Department
of Justice
By:___________________________
Its Chairman By:__________________________
Xxxxx X. Xxxxxxxx
Senior Attorney
Xxxxxxx X. Xxxxxxx
Trial Attorney
Environmental Enforcement
Section
U.S. Department of Justice
Xxxxxxx X. Xxxxxxxx
United States Attorney
District of Connecticut
By:__________________________
Xxxxxxx X. Xxxxxxx
