Exhibit 10 (1)
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (this "Agreement") is made this fifth day of
May, 2005, by and between Kiel Bros. Oil Company, Inc. ("Kiel Bros.") and KP
Oil, Inc. ("KP Oil" and, together with Kiel Bros., the "Debtors"), on the one
hand, and HomeFederal Bank ("HomeFederal", and, together with the Debtors, the
"Parties," or each a "Party"), on the other hand.
RECITALS
General Background
1. On June 15, 2004 (the "Petition Date"), each of the Debtors filed a
voluntary petition for relief under chapter 11 of the United States Bankruptcy
Code, 11 U.S.C. ss. 101 et seq., as amended (the "Bankruptcy Code") in the
United States Bankruptcy Court for the Southern District of Indiana,
Indianapolis Division (the "Court"). Debtors continue to operate their
businesses and manage their properties as debtors in possession pursuant to
sections 1107(a) and 1108 of the Bankruptcy Code.
2. On or about January 12, 2001, KP executed a note (the "First Note")
in favor of HomeFederal in the principal amount of $15,000,000. In order to
secure the obligations under the First Note, KP on or about January 12, 2001
executed twenty-one mortgages (collectively, the "First Note Mortgages") in
favor of HomeFederal, granting HomeFederal a mortgage lien and security interest
in fifty-four convenience store/gas station locations situated in twenty-one
counties in three states. On or about September 14, 2001, KP executed a note
(the "Second Note") in favor of HomeFederal in the principal amount of
$912,000.00. In order to secure the obligations under the First Note and the
Second Note, KP on or about September 14, 2001 executed a mortgage (the "Single
Mortgage") in favor of HomeFederal, granting HomeFederal a mortgage lien and
security interest in a single convenience store/gas station location situated in
Lexington, Fayette County, Kentucky. The First Note and the Second Note are
hereinafter referred to as the "Notes", and the First Note Mortgage and the
Single Mortgage are hereinafter referred to as the "Mortgages."
3. Xxxxxxxx Xxxx is a guarantor on several obligations of the Debtors,
including amounts owed by the Debtors to XxXxxx Company, Inc. ("McLane"), BP
Products North America, Inc. ("BP"), HomeFederal") and Farmers Bank.
The Dispute
4. On or about January 20, 2005, HomeFederal filed its Motion For Order
Compelling Immediate Payment Of HomeFederal Bank's Secured [sic] (the "Valuation
Motion"). Certain parties objected to the Valuation Motion on the grounds that
it was procedurally defective, taking the position that the full relief sought
by HomeFederal could only be obtained by adversary proceeding. Consequently,
HomeFederal on February 22, 2005, filed its Complaint To Determine Validity,
Priority And Extent of Liens, And For Payment Of Secured Claim (the "Lien
Adversary"). The Valuation Motion and Lien Adversary were set for a consolidated
hearing/trial to begin on April 6, 2005.
5. On March 24, 2005, the Debtors filed their Objection To Motion For
Order Compelling Immediate Payment Of HomeFederal Bank's Secured [sic] (the
"Valuation Objection"), and their Answer To Complaint To Determine Validity,
Priority And Extent of Liens, And For Payment Of Secured Claim (the "Lien
Adversary Answer").
6. By way of the Valuation Motion and Lien Adversary, HomeFederal
sought a determination that it had a valid, perfected, first priority mortgage
lien and security interest in and to the property of the Debtors encumbered by
the Mortgages, the value of which exceeded the amount of the HomeFederal claim,
including postpetition interest, costs, and other charges. The Debtors, by way
of the Valuation Objection and Lien Adversary Answer, did not dispute the
validity, perfection and priority of certain mortgages and security interests
attaching to certain property of KP, but did dispute that any mortgage lien or
security interest claimed by HomeFederal attached to any property interest of
Kiel Bros., and further took the position that the value of the property to
which the HomeFederal mortgage lien and security interest did attach was
significantly less than the amount of the HomeFederal claim, such that
HomeFederal was an undersecured creditor, and not entitled to postpetition
interest, costs and other charges.
7. Counsel for the Debtors and HomeFederal have met and conferred in
good faith concerning the disposition of the HomeFederal claims and contentions
described in the recitals above (the "HomeFederal Claims") and desire to avoid
the costs and uncertainty of litigation under the terms of this Agreement.
THE AGREEMENT
NOW, THEREFORE, in consideration of the mutual releases set forth
herein, , the allowance and payment of a secured claim in favor of HomeFederal
against the Debtors in a discounted amount, the assignment by HomeFederal of any
right of distribution on its deficiency claim, and other good and valuable
consideration for the various covenants and understandings set forth in this
Agreement, the receipt and adequacy of which is hereby acknowledged, the Parties
agree as follows:
1. Valuation of Collateral. The Debtors and HomeFederal agree that the
value of the property, real and personal, encumbered by the Mortgages (excluding
only the Debtors' corporate headquarters in Columbus, Indiana) determined under
Section 506(a) of the Bankruptcy Code, is $12.5 million.
2. HomeFederal's Allowed Claims. HomeFederal shall be allowed the
following claims:
(a) HomeFederal shall have a secured, prepetition claim
against the Debtors in the total amount of $12,500,000; and
(b) HomeFederal shall have an unsecured, pre-petition
deficiency claim against the Debtors in the total amount of
$2,167,252.00.
3. Disposition of Allowed Claims. The HomeFederal allowed claims shall be
paid, treated, or assigned as follows:
(a) The Debtors shall pay to HomeFederal the amount of
$12,500,000.00 in full satisfaction the HomeFederal allowed secured,
pre-petition claim, on or within three (3) business days following the Effective
Date (as defined in Paragraph 5);
(b) HomeFederal assigns to the Debtors and their respective
estates its (i) mortgage liens on Store Nos. X-00, X-00, X-00, xxx X-000, and
(ii) any right that HomeFederal has to receive a distribution on or with respect
to the HomeFederal allowed unsecured, pre-petition deficiency claim (the
"Assigned Claims"); and
(c) HomeFederal (and the Debtors with respect to the Assigned
Claims) waive, and release BP from, the enforcement of any subordination
agreement between HomeFederal and BP.
4. Dismissal of Adversary Proceeding. HomeFederal shall, within three
(3) business days of the Effective Date, dismiss its claims asserted in the
Lien Adversary.
5. Mutual Releases. Except for such obligations, rights or claims as
may be created by, preserved, assigned or arise out of the terms and conditions
of this Agreement, upon the satisfaction of the conditions set forth in section
5 of the Agreement, HomeFederal, on the one hand, and Debtors, on the other
hand, hereby mutually release, discharge and acquit each other, as well as,
to the extent applicable, their respective employees, agents, heirs,
beneficiaries, administrators, representatives, executors, parents,
subsidiaries, affiliates and their successors and assigns (the "Released
Parties"), from any and all claims, demands, costs, contracts, liabilities,
objections, actions, and causes of action of any nature, whether in law or in
equity, whether known or unknown, whether suspected or unsuspected, that the
Parties ever had, now have, or may claim to have against each other of any type,
nature or description, that in any way arise out of, or are related to, or are
connected with Debtors' bankruptcy cases that have been or could have been
asserted by the Parties including without limitation, by the Debtors, any
of the Debtors' claims under chapter 5 of the Bankruptcy Code.
6. Effectiveness of Agreement. This Agreement shall not become effective
until the later of: (a) the entry of a final order of the Court approving this
Agreement; (b) the execution by HomeFederal and delivery to Xxxxxxxx Xxxx of a
release of any HomeFederal claim against Xxxxxxxx Xxxx; and (c) the entry of
final orders approving the proposed settlements between (i) the Debtors and BP;
(ii) the Debtors and McLane: and (iii) the Debtors and Xxxxxxxx Xxxx, Xxxxxxxx
Xxxx and Xxxxx Xxxxxx (the "Shareholders"), as such settlements have or may be
modified without objection by HomeFederal at or prior to the scheduled hearing
to approve such settlements (the "Effective Date"). In the event that each of
the events described in this paragraph 3 do not occur by May 30, 2005, this
Agreement shall be null and void.
7. Understanding and Counsel. The Parties represent and warrant that (a)
they have read and understand the terms of this Agreement, (b) they have been
represented by counsel with respect to this Agreement, and all matters covered
by and relating to it, and (c) they have entered into this Agreement for reasons
of their own and not based upon representations of any other Party.
8. Legal Fees and Costs. Each of the Parties shall pay its own respective
costs and attorneys' fees.
9. Headings. All headings and captions in this Agreement are for
convenience only and shall not be interpreted to enlarge or restrict the
provisions of the Agreement.
10. Jurisdiction. By this Agreement, each of the Parties submits to the
jurisdiction of the Bankruptcy Court for any action to enforce or interpret this
Agreement.
11. Representation and Warranties. The undersigned represent and warrant
that they are duly authorized to execute this Agreement on behalf of the Parties
hereto. The Parties agree and represent that they have not assigned or conveyed
any of the claims or rights referenced in this Agreement in any manner to any
other Person and that each holds the rights and claims which are retained,
assigned, or released in this Agreement. The Parties agree that they have and
will not assign or convey any of the claims or rights referenced in this
Agreement in any manner to any other Person except as provided in this
Agreement.
12. Entire Agreement. This Agreement constitutes the entire agreement
between and among the Parties concerning the subject matter hereof, and there
are no other understandings, representations, or agreements, oral or otherwise,
between and among the Parties concerning the subject matter of this Agreement it
being understood that the Agreement memorialized herein is subject to Court
approval of settlements between (i) the Debtors and BP; (ii) the Debtors and
McLane; and (iii) the Debtors and the Shareholders, as such settlements or may
be modified without objection by HomeFederal at or prior to the scheduled
hearing to approve such settlements.
13. Amendments; Modifications; Waiver. This Agreement may not be modified,
superseded, terminated, or amended and no provision hereto may be waived except
by (i) a writing making specific reference hereto signed by the Parties and
approved by the Court or (ii) a final Order of the Court.
14. Binding Effect. The terms and acknowledgements set forth in this
Agreement shall be binding upon the Parties and shall inure to the benefit of
the Parties, and their respective successors, assigns, heirs, executors,
administrators, and representatives.
15. Participation in Drafting. Each Party has participated in, or
contributed to, the drafting and preparation of this Agreement. In any
construction of this Agreement, the provisions shall not be construed for, or
against, any Party, but shall be construed according to their plain meaning.
16. Further Necessary Actions. To the extent that any document is required
to be executed by any Party to effectuate the purposes of this Agreement, the
Party will execute and deliver such document or document to the requesting
Party.
17. Action to Enforce. Should any action be brought by one of the Parties
to enforce any provision of this Agreement, the non-prevailing party to such
action shall reimburse the prevailing party for all reasonable attorneys' fees
and court costs and other expenses incurred by the prevailing party in said
action to enforce.
18. Counterparts. This Agreement (and any amendments, modifications or
waivers in respect hereof) may be executed by facsimile in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
19. Construction: As used herein, the plural shall include the singular,
and the singular shall include the plural, unless the context or intent
indicates to the contrary. "Person" shall include natural persons, corporations,
partnerships, and/or any other entity which by law is treated as or has the
rights of a natural person and, where applicable, its past, present and future
officers, directors, employees, agents, administrators, beneficiaries, heirs,
executors, representatives, administrators, parents, subsidiaries, affiliates
and their successors and assigns.
20. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Indiana.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the day and year set forth above.
KIEL BROS. OIL COMPANY, INC.
By: /s/ Xxxxx X. Roll
Its: President
KP OIL, INC.
By: /s/ Xxxxx X. Roll
Its: President
HOMEFEDERAL BANK
By: /s/ Xxxxxxx X. Xxxxxx
Its: Executive Vice President
