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EXHIBIT 10.5
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
In re: ) Jointly Administered
LOMAS FINANCIAL CORPORATION, )
LOMAS MORTGAGE USA, INC., ) Chapter 11 Case No.:
LOMAS INFORMATION SYSTEMS, INC., ) 95-1235 (PJW)
and LOMAS ADMINISTRATIVE )
SERVICES, INC., )
)
Debtors )
AGREEMENT BETWEEN
LMU STATUTORY CREDITORS' COMMITTEE
AND
LFC STATUTORY CREDITORS' COMMITTEE
IN RESPECT OF INTERCOMPANY CLAIMS
Recitals.
1. The statutory creditors' committee (the "LFC Committee") for Lomas
Financial Corporation, Lomas Information Systems, Inc., and Lomas
Administrative Services, Inc., chapter 11 debtors in possession (collectively,
and as reorganized, "LFC"), and the statutory creditors' committee (the "LMU
Committee") for Lomas Mortgage U.S.A., Inc., chapter 11 debtor in possession
(and as reorganized, "LMU"), were each authorized by order dated September ,
1996 to prosecute and to defend against claims of the respective estates of LFC
and LMU and their direct and indirect subsidiaries.
2. The respective LFC and LMU chapter 11 plans were confirmed on
October 4, 1996 and October 1, 1996 respectively. But, the pendency of the
intercompany
EXHIBIT A
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claims would delay substantially the ability of each estate to distribute to
its creditors substantial portions of its cash under its chapter 11 plan.
Additionally, the prosecution of the intercompany claims would entail
substantial time and expense for each estate.
3. Pursuant to the Bankruptcy Court's order dated September ,
1996, the LFC Committee and the LMU Committee have engaged in nonbinding
mediation under the auspices of Xxxxxxxxx Xxxxx X. Xxxxx (the "Mediator").
4. Bankers Trust Company is the indenture trustee on behalf of
the holders of the 9 3/4% senior notes due October 1, 1997 in the principal
amount of $150,000,000 (the "1997 Notes") and the 10 1/4% senior notes due
October 1, 2002, in the principal amount of $190,000,000 (the "2002 Notes", and
collectively with the 1997 Notes, the "Notes") issued under the indenture dated
October 1, 1992 (the "Indenture") between Lomas Mortgage USA, Inc. and Bankers
Trust Company. As indenture trustee, Bankers Trust Company serves on the LMU
Committee. The LFC Committee included in the mediation, in addition to the
claims of LMU against LFC, the claim of Bankers Trust Company, as indenture
trustee ("Bankers Trust"), against LFC (the "Trustee's LFC Claim").
5. Based on the Mediator's participation and the LFC Committee's
and the LMU Committee's respective due diligence, including the taking of over
20 Bankruptcy Rule 2004 examinations, the review of reports on intercompany
transactions prepared by Price Waterhouse LLP at a cost in excess of $1.5
million, and the analyses of the two statutory committees' respective legal and
financial experts, the LFC Committee and the LMU Committee settled the
intercompany claims on the terms and conditions
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herein. The parties weighed the probability of success and collection of their
various claims against the cost and delay of litigation in arriving at this
settlement.
Agreement:
In consideration of the mutual covenants below, the parties hereto
agree as follows:
1. Closing. All transfers and transactions herein shall take
place at a mutually acceptable time and place on or before the tenth business
day after entry of a final order by the Bankruptcy Court approving this
agreement, which order is not stayed, or such earlier date after entry of such
order which is mutually agreed to by the parties (the "Closing Date");
provided, however that the effective date of the LFC chapter 11 plan shall not
occur until the Closing Date shall have occurred, and provided further that the
immediately preceding clause shall not apply if the Closing Date shall not have
occurred on or before March 1, 1997. LMU shall not prosecute its administrative
claims against LFC unless the Closing Date fails to occur. All transfers shall
be of all the transferor's right, title, and interest, and shall be as is,
where is and without any representations and warranties.
2. Releases. LFC and all its direct and indirect subsidiaries
other than LMU and its direct and indirect subsidiaries, on the one hand, and
LMU and all its direct and indirect subsidiaries, on the other hand, shall
release each other from all claims whatsoever arising from facts, acts, or
omissions existing on or before August 31, 1996.
3. LMU Cash Payment. LMU shall pay to LFC $3,000,000.
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4. Trailer Park. LFC shall retain from the sale of the vacant land
at 0000 Xxxxx Xxxxx, Xxxxxx, Texas, the proceeds (of approximately $469,139)
held by LFC, Lomas Investment Properties, Inc., or any of their affiliates
(other than LMU) including actual interest earned thereon.
5. Campus Properties. LFC and LMU and/or their appropriate
subsidiaries shall transfer to LFC $1.3 million cash proceeds from the sale of
the Campus cash proceeds Properties and $161,500 cash proceeds from the sale of
furniture, fixtures, and equipment related thereto, and shall transfer to LMU
the balance of the proceeds from the Campus Properties and the furniture,
fixtures and equipment.
6. Prepetition Proceeds from Xxxxxx Xxxxx Property. LMU shall pay
or shall cause ST Lending, Inc. ("STL") to pay to LFC the actual net sale
proceeds STL received from the prepetition Xxxxxx Xxxxx property sale
(approximately $1.233 million) plus the actual amount STL collected
(approximately $776,000 of principal plus $20,000 interest) from the Xxxxxx
Xxxxx note receivable in the face amount of approximately $800,000.
7. Xxxxxx Xxxxx Proceeds at LLG. LFC shall retain all the proceeds
of sales of Xxxxxx Xxxxx properties owned or held by LLG Lands, Inc.
(approximately $3,107,862), including interest actually earned xxxxxxx.
8. Xxxxxx Xxxxx Real Property. LMU shall cause STL or the
appropriate affiliate to convey to LFC all STL's right, title, and interest in
and to that certain real property referred to in these chapter 11 cases as the
Xxxxxx Xxxxx Property.
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9. Conseco Tranche B Note. LMU shall cause that certain Conseco
Tranche B Note in the face amount of $15,000,000, dated November 27, 1990 (the
"Conseco Note") to be assigned to LFC. If JNL Acquisition Corporation ("JNL"),
an affiliate of Conseco Capital Partners, L.P., or any of its successors
dispute the assignment of the Conseco Note to LFC, LFC may enforce the Conseco
Note on behalf of and in the name of LMU and LFC shall be entitled, at its sole
expense, to all rights, benefits, and remedies under the Conseco Note and the
proceeds therefrom. LFC hereby indemnifies LMU for all costs, expenses,
judgments, and settlements LMU incurs as a result of claims related solely to
the Conseco Note asserted against LMU by the entities from whom payment of the
Conseco Note is sought; provided, however, that the amount of such indemnity
shall not exceed the amount requested on the Conseco Note.
10. Rabbi Trusts. Subject to the next sentence, LMU shall transfer
to LFC any and all record and beneficial ownership it has in the assets held by
Bankers Trust of the Southwest as rabbi trust arising from the Management
Security Plan and the Excess Benefits Plan (the "Rabbi Trusts"). At LFC's
written request, LMU shall assist LFC in the litigation, by attempting to
intervene or otherwise. LFC shall reimburse promptly LMU for all expenses,
after receipt of standard documentation relating thereto, including
professional fees, that LFC requests LMU to incur by requesting LMU's
assistance. If any request for reimbursement is not paid by LFC within ten
days after LMU has delivered its requests therefor with standard documentation,
LMU shall not be required to continue rendering any assistance under this
section without payment in
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advance for such assistance. If LMU is adjudged to hold any interests in the
Rabbi Trusts, LMU shall transfer such interests to LFC promptly after such
adjudication is final and no longer subject to appeal or certiorari proceeding.
11. LFC Executory Contracts. In the event that damage claims are
filed against LFC for those executory contracts set forth in the footnote
below(1), (the "Executory Contract Claims"), the following provisions shall
govern with respect to such contracts:
LFC shall contest such claims to the extent it determines
necessary:
i. To the extent Executory Contract Claims are allowed
against LFC, the respective attorneys for LFC and LMU
shall use their best efforts to determine whether any
portion of the required payment should be properly
made by LMU.
ii. If the attorneys do not agree then the Mediator shall
make a final, binding determination based on the same
standards a court of competent jurisdiction would
apply.
(1) LFC: AT&T Xxxxx Tower Lexis Nexis Xxxxxx Village
Xxxxxx Village
LAS: Business Interfors Danka Business Danka Industries
Danka/Toshiba Xerox
LIS: AT&T AT&T GE Capital MFS
MFS NTFC Capital Corp. RIS SWBT
TELCO Research
With respect to all of the foregoing, both LFC and LMU believe such
claims can no longer be timely asserted and, in any event, object to the
extent, validity, and priority of such claims when and if asserted against the
LFC and LMU estates.
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iii. If a determination is made that LMU has a
reimbursement obligation to LFC for up to the amount
LFC actually distributed to one or more claimants on
behalf of the Executory Contracts, then LMU shall
make the reimbursement to Lomas Financial Corporation
promptly following the Mediator's decision.
iv. Nothing herein shall restrict LFC or LMU from
opposing any claims by third parties on any grounds
whatsoever.
12. Administrative Claims.
i. Allocation. All expenses of LFC and LMU arising from
and after July 1, 1996 through and including the
effective date of the LFC Plan of Reorganization,
shall be paid by LFC and LMU (or reimbursed from one
estate to the other) based on the allocations
determined by KPMG Peat Marwick, except that the
parties shall direct KPMG Peat Marwick, Davis, Polk &
Xxxxxxxx LLP, and Young, Conaway, Stargatt & Xxxxxx
to allocate their own fees based on for which
particular debtor services are rendered, and Price
Waterhouse LLP shall be paid 50% by LFC and 50% by
LMU. LFC, LMU, the LFC Committee, and the LMU
Committee shall have no rights to challenge such
allocations; provided, however, that the parties
retain all rights to challenge the allowance of the
aggregate amounts of such fees.
ii. July - August 1996. LMU shall pay all fees allocated
to LFC as provided above which accrued during July
and August 1996 up to a maximum of $321,000. LFC
shall pay all other professional fees allocated to
LFC pursuant to the foregoing paragraph for the
months of July and August 1996 and shall reimburse
LMU
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for all such fees allocated to LFC that LMU has paid
or subsequently pays for such period in excess of
$321,000.
iii. Post-August 1996. For all periods after August 31,
1996 through and including the effective date of the
LFC Plan of Reorganization, LFC and LMU shall each
pay all its own expenses and its expense allocations
as computed pursuant to section 12i above. To the
extent, if any, that either LFC or LMU shall have
paid a portion of the other's expenses accrued on or
after September 1, 1996, the party for whom the
payments were made shall promptly reimburse the other
party for such payments.
iv. Post LFC Chapter 11 Plan Effective Date. LFC and LMU
shall each pay all their own expenses after the
effective date of the LFC Plan of Reorganization.
13. Claims Against Third Parties.
i. Proceeds. Upon final disposition of the claims, the
net proceeds of all claims against third parties,
designated as such in paragraph 19 of the LFC
confirmation order and in paragraph 20 of the LMU
confirmation order, shall be transferred to the
creditor trusts pursuant to the LFC and LMU
respective chapter 11 plans in a ratio of 60% to the
LFC creditor trust and 40% to the LMU creditor trust,
regardless of whether LFC or LMU owns the claims;
provided, however, that 100% of the proceeds of
claims for any nonfeasance or misfeasance in the
creation of, or the administration or potential
utilization of the proceeds of the Rabbi Trusts
shall belong solely to LFC. If a recovery from a
third party results in the third party having an
allowed claim against either LFC or LMU or their
subsidiaries, the 60:40 allocation set
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forth above shall be determined after subtracting the
amount LFC or LMU or their respective subsidiaries
must distribute in respect of the allowed claim and
paying the amount of such distribution to the entity
that must make the distribution.
ii. Expenses. LFC shall pay 60% of all expenses to
prosecute or settle such claims and LMU shall pay 40%
of such expenses. At the Closing Date, LFC and LMU or
the respective litigation trusts created under their
respective chapter 11 plans shall transfer $3.0
million and $2.0 million, respectively, to the
litigation trust. Of that amount, $1 million shall be
held in escrow by the Litigation Trustee pursuant to
a trust or escrow agreement approved by LFC and LMU.
All costs and expenses of pursuing claims for
nonfeasance or misfeasance in the creation of or the
administration or potential utilization of the
proceeds of the Rabbi Trust shall be borne solely by
the LFC creditor trust out of funds it supplies in
addition to the $3.0 million.
iii. Control. The LFC Committee and the LMU Committee
shall implement the a 50:50 sharing of control of the
prosecution of all claims by (a) agreeing on one
trustee of the single litigation trust to be created
by LFC and LMU and (b) providing in the agreement
appointing the trustee that the trustee shall grant
equal weight to the respective input from LFC
beneficiaries and LMU beneficiaries in respect of
which claims to pursue, how much to spend,
strategies, tactics, settlements, and other
decisions, notwithstanding the 60:40 distribution of
proceeds.
iv. Plan Amendments. The respective chapter 11 plans of
LFC and LMU shall be deemed amended to provide for
the creation of the foregoing litigation trust in
place of the trust(s) currently provided for in such
plans. To the extent necessary or
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desirable, LFC and LMU shall create separate litigation
trusts to hold their separate claims, with a single
trustee serving as trustee for both trusts subject
to the foregoing rules of expense, control and
distribution.
14. Asset Ownership.
i. Except for those assets whose legal and beneficial
ownership is expressly provided to be transferred under
this agreement, the intercompany account between LMU
and LFC which is released by this agreement, and LFC's
investment in LMU which was extinguished pursuant to
the LMU chapter 11 plan,
(1) LFC and its respective direct and indirect
subsidiaries (other than LMU and LMU's direct
and indirect subsidiaries) (the "LFC Group")
shall retain, free and clear of all claims by
LMU and LMU's direct and indirect subsidiaries
(the "LMU Group") all of the LFC Group's assets
included in the list attached hereto as schedule
1, the assets reflected in the consolidating
balance sheets and supporting "Detailed Adjusted
Balance Sheet" dated as of October 31, 1996
prepared from the books and records of the
consolidated enterprise (the "Asset Listing,"
annexed hereto as schedule 2) and the proceeds
thereof and LFC's creditors shall be the
beneficiaries of all assets transferred to the
creditor trust pursuant to LFC's joint chapter
11 plan, regardless of
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whether such assets were owned or held by
such entity at October 31, 1996; and
(2) the LMU Group shall retain, free and clear of
all claims by the LFC Group, all of the LMU
Group's assets reflected on schedule 3 (i.e.,
the consolidated balance sheet and the
"Detailed Adjusted Balance Sheet"), LMU's
overfunded pension plan, net operating loss
carryforwards, and insurance funds, proceeds,
and policies (which are not listed on
schedule 3) and the proceeds thereof and
LMU's creditors shall be the beneficiaries of
all assets transferred to the creditor trust
pursuant to LMU's chapter 11 plan, regardless
of whether such assets were owned or held by
such entity at October 31, 1996.
ii. To the extent LFC or LMU locates assets not included
on the attachments hereto, nothing herein shall
preclude them from marshaling such assets for their
estates. LFC and LMU shall undertake in good faith to
settle all disputes over which party is entitled to
such assets.
15. Conditions Precedent. This agreement shall not be binding
until:
i. Entry of a final order by the Bankruptcy Court that
is no longer subject to review or certiorari
proceedings, unless waived by the LFC Committee at
its sole discretion, dismissing the Trustee's LFC
Claim (subject to reinstatement if the approval of
this agreement is
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overturned and also the closing under paragraph 1
above has not occurred) and releasing Bankers Trust
from any liability in connection with the dismissal
of the Trustee's LFC Claim, on notice to all holders
of the Notes; and
ii. The Bankruptcy Court approves this agreement after
notice and a hearing.
16. Termination of Transaction Restrictions. Upon Bankruptcy Court
approval of this agreement, LFC, LMU, and all their respective subsidiaries
shall be entitled to transfer any and all of their assets without prior notice
to the other entities as currently required in the orders confirming chapter 11
plans for such entities.
17. Further Assurances. Each party shall sign such documents and
do such acts, including without limitation, the execution, delivery, and filing
as the case may be of all additional instruments and other documents, necessary
or desirable to carry out this agreement.
18. Whole Agreement. This agreement is the entire agreement
between the parties in respect of its subject matter. All other written and
oral statements and agreements with respect of the subject matter hereof are
merged herein,
19. Amendments. This agreement may only be amended in writings
signed by the party to be charged and approved by the Bankruptcy Court.
20. Limitations. Except as expressly provided herein, no party
waives or releases any rights or claims whatsoever. No statement made or act
taken by any
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party in respect of this agreement may be used by any party if this agreement
is not approved by the Bankruptcy Court.
21. No Third Party Beneficiaries. This agreement is solely for the
benefit of LFC and LMU (and their respective successors and assigns) on whose
behalf the parties hereto have entered into this agreement as authorized by the
Bankruptcy Court's order dated August ___, 1996, and is not for the benefit of
any other entities or persons. No other entity and no other person shall have
any rights under this agreement.
22. Governing Law, This agreement shall be governed by the laws of
the State of New York and the United States Bankruptcy Code.
23. Disputes. All disputes relating to this agreement shall be
resolved by the Bankruptcy Court without a jury.
Dated: New York, New York
January, 1997
LMU STATUTORY CREDITORS' LFC STATUTORY CREDITORS'
COMMITTEE, On Behalf of LMU COMMITTEE, On Behalf of LFC
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
-------------------------------- ---------------------------------
Chairman Chairman
SO ORDERED AND APPROVED on
January ___, 1997
United States Bankruptcy Judge
Wilmington, Delaware
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Schedule 1
a. All cash at LFC Corporate and Post-Reorganization LFC
Subsidiaries including:
x. Xxxxx Information Systems
ii. Lomas Housing Mgmt. (Treemont)
iii. Lomas Mgmt.
iv. Lomas Properties
v. LLG Lands
b. All Cash and Other Assets Expressly Transferred to LFC or
Deemed Property of LFC pursuant to the settlement agreement.
c. All Non-Cash Assets Held at LFC and its Post-Reorganization
Subsidiaries, including:
i. Investments:
(1) Vista Securities
(2) Investco I
(3) Investco II
(4) Triad Ventures
ii. Other Assets:
(1) RIS Note
(2) Assisted Care Business
(3) Management fees receivable from Treemont
(4) Rabbi Trust
(5) Dataplex prepaid services contract
(6) Unsold furniture, fixtures, and artwork, etc.
(7) Prepaid expenses (insurance, fees, taxes, etc.)
(8) Insurance funds and insurance proceeds and
policies
(9) Net proceeds of pension fund surplus of up to
$36,000 due LFC
iii. Accrued Investment Income
iv. LFC NOL's
v. Capstead Option Litigation
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SCHEDULE 2
LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES
(EXCLUDING NOMAS CORP. AND SUBSIDIARIES)
DETAILED ADJUSTED BALANCE SHEET
AS OF OCTOBER 31, 1996
(in thousands)
ASSETS
Cash and cash equivalents 9,144
Investments
Triad Ventures 2
Invesco Institutional Mortgage Funds 1,470
Excess Benefits - Rabbi Trust 646
MSP short term investments 7,708
Investment in LMU (126,101)
(116,275)
Receivalbles
Note receivable - RIS (net or reserves of $4,000) 4,000
Note receivable - Dataplex 17
Management fees from Treemont 363
Fixed asset sale proceeds - LMU 323
Accrued investment income - INVESCO 52
4,755
Unallocated allowance for losses (3,089)
Allowance for discontinued operations (future operating loss) (739)
Prepaid expenses and other assets
Prepaid insurance 550
Prepaid retainer fees 13
Prepaid airpassess - Dryer 18
Prepaid franchise taxes 3
584
(105,620)
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SCHEDULE 3
NOMAS CORP. AND SUBSIDIARIES
(INCLUDING INSURANCE SERVICES AND ST LENDING)
DETAILED ADJUSTED BALANCE SHEET
AS OF OCTOBER 31, 1996
(in thousands)
ASSETS
Cash and cash equivalents 203,846
Investments
Residual investment in CMO trust 1,599
Funds held in escrow per court order for building sale 11,501
Funds held in escrow per court order for furniture sales 977
Funds held in escrow per court order for RIS 11,602
Conseco franche B 3,373
Cash - to be released after serving transferred 283
Insurance premiums held in trust 1,128
30,463
Receivables
First Nationwide - sales proceeds 40,132
First Nationwide - transfer fees Phase I sale 3,809
First Nationwide - transfer fees Phase II sale 6,430
Miscellaneous receivalbes from FNMC - Excells recording fees 369
Note receivable - STL loans - net of reserves $429 1,185
Note receivable - Xxxxxx Plaza 2,008
Receivable - LLG Xxxxxx Xxxxx property 3,108
Receivable - Quality sale 491
Receivable - Disputed charges Xxxxxxx 51
Accrued interest - short term investments 36
Receivable from Lomas Properties (Trailer Park) 469
Receivable from LFC (fixed asset proceeds) 52
Receivable from LFC Rabbi Trust (Excess benefit payments) 160
Receivable from LFC (professional fees) 2,300
Receivable from LFC (officer's salaries) 368
Other miscellaneous receivables 4
Insurance - Agency premiums receivable 288
Insurance - Sub agents receivable (LRA) 244
Insurance - Direct bill commissions receivable 153
Insurance - North American 123
Insurance - Returned premium (American Bankers) (8)
Interco receivables (LFC) 1,395
63,167
Real estate owned (STL) - net of reserves $7,866 15,073
Allowance for losses - First Nationwide receivables (20,510)
Allowance for losses - Xxxxxx Plaza note receivable (511)
