In re Scotia Development Term Sheet Regarding Global Settlement and Plan Support May 1, 2008
Exhibit
10.1
In
re Scotia Development
Term
Sheet Regarding Global Settlement and Plan Support
May 1,
2008
The
signatories to this Term Sheet (the “Agreement”) hereby acknowledge their
agreement on the terms set forth herein, which agreement shall be further set
forth into definitive documentation mutually acceptable to the
Parties. Notwithstanding the forgoing, this Agreement is binding on
the Parties.
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Parties
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· Mendocino
Redwood Company, LLC (“MRC”)
· Marathon
Structured Finance Fund L.P. (“Marathon”)
· MAXXAM
Inc. (“MAXXAM”), MAXXAM Group Inc. (“MGI”), and MAXXAM Group Holdings,
Inc.
(“MGHI”, and together with MAXXAM and MGI, the “MAXXAM
Entities”)
· The
Pacific Lumber Company, Scotia Development LLC, Xxxxx Lumber Co., Inc.,
Salmon Creek LLC,
and Scotia Inn Inc. (collectively, the “Palco Debtors”)
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Terms
of
Amended
MRC/Marathon Plan
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MRC
and Marathon agree to amend the terms of the First Amended Joint Plan of
Reorganization for the Debtors Proposed by Mendocino Redwood Company, LLC
and Marathon Structured Finance Fund L.P., to, among other things,
accomplish the items listed on the attached Exhibit A (as such plan may be
further modified, amended or superseded; provided however, that
(i) any material modifications or amendments to the MRC/Marathon Plan or
(ii) any modifications or amendments to the MRC/Marathon Plan that
adversely affect the Palco Debtors or the MAXXAM Entities must be
consented to by the MAXXAM Entities and the Palco Debtors, such consent
not to be unreasonable withheld (the “MRC/Marathon
Plan”).
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Concessions by the MAXXAM
Entities
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Support
of MRC/Marathon Plan
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MAXXAM
Entities will:
· immediately
withdrawal as co-proponent of any plan of reorganization (including all
related amendments,
supplements, and predecessor plans) in any of the bankruptcy cases of the
Palco Debtors or Scopac
(collectively, the “Debtors”), including, but not limited to the following
plans:
o First
Alternative Plan of Reorganization for the Palco Debtors [Docket Entry
2209];
o First
Alternative Plan of Reorganization for Scotia Pacific Co. LLC [Docket
Entry 2502]; and
o Plan
Proponents’ Third Amended Joint Plan of Reorganization for the Debtors
[Docket Entry 2507].
· immediately
withdrawal of (i) any objections filed by the MAXXAM Entities against the
MRC/Marathon Plan
and (ii) any proffers by the MAXXAM Entities filed, offered, or adduced in
support of any plan other than the MRC/Marathon Plan.
· Effective
immediately, agree not to provide or assist any of the Debtors with exit
financing or post-confirmation
investments in connection with any plan of reorganization in any of
the Debtors’ Reorganization Cases;
· Express
support for and use best efforts to defend the MRC/Marathon Plan;
and
· Use
best efforts to oppose any competing plans.
For
avoidance of any doubt, none of the MAXXAM Entities shall be a plan
proponent of the MRC/Marathon Plan.
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Tax
Considerations
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· XXXXXX
agrees to indemnify, release and hold harmless MRC, Marathon, Newco,
Townco and any and all
of
their affiliates (collectively, the “Tax Indemnified Parties”) for all
claims by whomever asserted arising from
or consisting of claims for federal, state or local income taxes,
including alternative minimum taxes and claims
related thereto, plus any and all losses, claims, costs, legal fees,
penalties and interest and other liabilities, including
without limitation, any obligation to reimburse any of the Debtors’
bankruptcy estates on account of any of the foregoing,
all as it relates to taxes of the Debtors, for all periods (past, present,
and future);
· In
the event any such taxes are asserted against any of the Tax Indemnified
Parties, the Tax Indemnified Parties agree they
will not compromise, settle or pay such liability without the written
consent of MAXXAM, unless MAXXAM shall at any
time fail to defend, indemnify, release and hold harmless such
entities. XXXXXX’s unwillingness to compromise, settle
or pay any asserted taxes will in no way relieve MAXXAM of its obligation
to indemnify, release, hold harmless or defend
any of the Tax Indemnified Parties; and
· The
indemnity obligations provided herein arise upon receipt of written notice
from any of the Tax Indemnified Parties
providing notice of a request for payment from a taxing authority or any
third party, including the Debtors, for any taxes
of the Debtors as described above.
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Release
and Covenant Not to Sue with Respect to MRC
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Effective
immediately, each of the MAXXAM Entities on behalf of themselves, their
predecessors, successors, and assigns, hereby fully and completely
releases MRC and its affiliates, and each of their respective officers,
directors and professionals from all liability and covenants not to sue
regarding (i) any and all prepetition and postpetition claims, causes of
action, suits, debts, obligations, xxxxxxxxxxx, demands, losses, costs,
and expenses of any kind, character, or nature whatsoever, known or
unknown, fixed or contingent (the “Released Claims”), that the MAXXAM
Entities may have or claim as of the date hereof and (ii) any and all
Released Claims relating to any of the Debtors or their respective
bankruptcy cases that may arise at any time in the future; provided however, that
nothing herein shall release any claims or obligations arising under this
Agreement.
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Release
and Covenant Not to Sue with Respect to Marathon
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Effective
immediately, each of the MAXXAM Entities on behalf of themselves, their
predecessors, successors, and assigns, hereby fully and completely
releases Marathon and its affiliates, and each of their respective
officers, directors and professionals of liability and covenants not to
sue regarding (i) any and all Released Claims that the MAXXAM Entities may
have or claim as of the date hereof and (ii) any and all Released Claims
relating to any of the Debtors or their respective bankruptcy cases that
may arise at any time in the future; provided however, that
nothing herein shall release any claims or obligations arising under this
Agreement; provided
further that such releases and covenants by and on behalf of the
MAXXAM Entities shall not apply to any cause of action for any fraud,
gross negligence or willful misconduct perpetrated against the MAXXAM
Entities; provided,
further that the MAXXAM Entities represent and warrant that they
are not aware of and have no reason to believe that there is any basis
for, and have no intention to assert, any cause of action for any such
fraud, gross negligence or willful misconduct
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Release
and Covenant Not to Sue with Respect to Palco Debtors
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Effective
upon entry of an order by the Bankruptcy Court approving this term of this
Agreement, each of the MAXXAM Entities on behalf of themselves, their
predecessors, successors, and assigns, fully and completely releases each
of the Palco Debtors and each of their respective officers, directors and
professionals from liability and covenants not to sue regarding (i) any
and all Released Claims that the MAXXAM Entities may have or claim as of
the date hereof and (ii) any and all Released Claims relating to any of
the Debtors or their respective bankruptcy cases that may arise at any
time in the future; provided however, that
nothing herein shall release any claims or obligations arising under this
Agreement.
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Concessions by the Palco
Debtors
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Support
of MRC/Marathon Plan
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Palco
Debtors will:
· immediately
withdraw as co-proponents of any plan of reorganization (including all
related amendments, supplements,
and predecessor plans) in any of the Debtors’ bankruptcy cases, including,
but not limited to the following plans:
o First
Alternative Plan of Reorganization for Scotia Pacific Co. LLC [Docket
Entry 2502]; and
o Plan
Proponents’ Third Amended Joint Plan of Reorganization for the Debtors
[Docket Entry 2507].
· immediately
withdraw the First Alternative Plan of Reorganization for the Palco
Debtors [Docket Entry 2209];
· to
the extent permitted by the bankruptcy court, immediately withdraw (i) all
objections filed by the Palco Debtors against
the MRC/Marathon Plan and (ii) all proffers by the Palco Debtors filed,
offered, or adduced in support of any plan, other
than the MRC/Marathon Plan.
· agree
not to provide or assist any of the Debtors with exit financing or
post-confirmation investments in connection with
any plan of reorganization in any of the Debtors’ reorganization
cases;
· express
support for and use best efforts to defend the MRC/Marathon Plan;
and
· use
best efforts to oppose any competing plans.
For
avoidance of any doubt, none of the Palco Debtors shall be a plan
proponent of the MRC/Marathon Plan.
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Releases
and Covenants Not to Sue
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Effective
upon the later to occur of (i) approval of the Settlement Motion and (ii)
the effective date of the MRC/Marathon Plan, each of the Palco Debtors on
behalf of themselves, their respective estates, their predecessors,
successors, and assigns, fully and completely releases MRC, Marathon, the
MAXXAM Entities, and each of the other Palco Debtors, and each of the
foregoing’s respective officers, directors and professionals from
liability and covenants not to sue regarding (i) any and all Released
Claims that the Palco Debtors may have or claim as of the date hereof and
(ii) any and all Released Claims relating to any of the Debtors or their
respective bankruptcy cases that may arise at any time in the future;
provided however,
that nothing herein shall release any claims or obligations arising under
this Agreement; (specific language to be this broad or as broad as the
court will allow).
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Concessions by MRC and
Marathon
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Amended
Plan
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File
amended plan not later than 3:00 p.m. on May 2, 2008.
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Lumber
Purchases
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Mirada
shall, as soon as practical, but in no event later than six weeks from the
date hereof, choose to require Newco or MRC to purchase the lumber listed
on the attached Exhibit B (the “Mirada Lumber”) at the MFP lumber price;
provided,
however, that nothing herein shall restrict Xxxxxx’s ability to
sell any portion of the Mirada Lumber to other entities at any
time.
On
the effective date of the MRC/Marathon Plan, MRC shall (i) with
respect to any lumber not sold within six weeks, pay the difference
between the Mirada price and the MFP price set forth on Exhibit B, and
(ii) with respect to any portion of the Mirada Lumber that was sold,
pay Mirada an amount equal to the difference between such sale proceeds or
MFP lumber price set forth on Exhibit B, whichever is higher, and the
Mirada price set forth on Exhibit B.
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Palco
Retirement Plan
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Upon
the effective date of the MRC/Marathon Plan, and pursuant to Article 6.5
of the MRC/Marathon Plan, Newco will assume the Palco Retirement
Plan; provided, however, that
in the event that the MRC/Marathon Plan becomes effective and is
subsequently overturned and unwound on appeal, this provision will have no
effect.
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Cash
Payment
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MRC
shall pay MAXXAM $2.25 million in cash upon approval by the Court of a
settlement based on the terms herein pursuant to a final non-appealable
order and upon effectiveness of the MRC/Marathon Plan and refundable in
the event that such plan becomes effective and is overturned and unwound
on appeal.
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Professional
Fees
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Subject
to the occurrence of the effective date of the MRC/Marathon Plan, MRC and
Marathon represent that, with respect to professionals fees incurred by
the Palco Debtors to-date, they have reviewed such fees, have no
objections to any such fees, and have no intent to object to future
reasonable fees incurred by the Palco Debtors that are consistent with
this Agreement.
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Release
and Covenant Not to Sue with Respect to MAXXAM
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Release by MRC
Effective
immediately, MRC on behalf of itself, its predecessors, successors, and
assigns, fully and completely releases the MAXXAM Entities and each of
their respective officers, directors and professionals from liability and
covenants not to sue regarding (i) any and all Released Claims that MRC
may have or claim as of the date hereof and (ii) any and all Released
Claims relating to any of the Debtors or their respective bankruptcy cases
that may arise at any time in the future; provided however, that
nothing herein shall release any claims or obligations arising under this
Agreement.
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Release by Marathon
Effective
immediately, Marathon on behalf of itself, its predecessors, successors,
and assigns, fully and completely releases each of the MAXXAM Entities and
each of their respective officers, directors and professionals from
liability and covenants not to sue regarding (i) any and all Released
Claims that Marathon may have or claim as of the date hereof and (ii) any
and all Released Claims relating to any of the Debtors or their respective
bankruptcy cases that may arise at any time in the future; provided however, that
nothing herein shall release any claims or obligations arising under this
Agreement; provided,
further, that such releases and covenants by and on behalf of
Marathon shall not apply to any cause of action for any fraud, gross
negligence or willful misconduct perpetrated against Marathon; provided, further that
Marathon represents and warrants that it is not aware of and has no reason
to believe that there is any basis for, and has no intention to assert,
any cause of action for any such fraud, gross negligence or willful
misconduct; provided
further that Marathon covenants not to assign or otherwise transfer
any claim against any of the MAXXAM Entities that is not released by this
Agreement.
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Release
and Covenant Not to Sue with Respect to Palco Debtors
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Release by MRC
Effective
upon the later to occur of (i) approval of the Settlement Motion and (ii)
the effective date of the MRC/Marathon Plan, MRC on behalf of itself, its
predecessors, successors, and assigns, fully and completely releases the
Palco Debtors, and each of their respective officers, directors and
professionals from liability and covenants not to sue regarding (i) any
and all Released Claims that MRC may have or claim as of the date hereof
and (ii) any and all Released Claims relating to any of the Debtors or
their respective bankruptcy cases that may arise at any time in the
future; provided
however, that nothing herein shall release any claims or
obligations arising under this Agreement.
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Release by Marathon
Effective
upon the later to occur of (i) approval of the Settlement Motion and (ii)
the effective date of the MRC/Marathon Plan, Marathon on behalf of itself,
its predecessors, successors, and assigns, fully and completely releases
each of the Palco Debtors, and each of their respective officers,
directors and professionals from liability and covenants not to sue
regarding (i) any and all Released Claims that Marathon may have or claim
as of the date hereof and (ii) any and all Released Claims relating to any
of the Debtors or their respective bankruptcy cases that may arise at any
time in the future; provided however, that
nothing herein shall release any claims or obligations arising under this
Agreement; provided, further, that
such releases and covenants by and on behalf of Marathon shall not apply
to any cause of action for any fraud, gross negligence or willful
misconduct perpetrated against Marathon; provided further that
Marathon represents and warrants that it is not aware of and has no reason
to believe that there is any basis for, and has no intention to assert,
any cause of action for any such fraud, gross negligence or willful
misconduct; provided
further that Marathon covenants not to assign or otherwise transfer
any claim against any of the Palco Debtors that is not released by this
Agreement.
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Approval by the Bankruptcy
Court
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Settlement
Motion
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As
soon as practical, the parties to this Agreement shall file a joint motion
pursuant to Fed. R. Bankr. P. 9019 seeking bankruptcy court approval of
the concessions made by the Palco Debtors in this Agreement (the
“Settlement Motion”).
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Timing
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The
parties shall seek to have the Settlement Motion heard and approved on a
parallel track with the MRC/Marathon Plan such that an order approving the
Settlement Motion is entered contemporaneously with an order confirming
the MRC/Marathon Plan.
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Support
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MRC
and Marathon agree to use their best efforts to support the Settlement
Motion and to have the Settlement Motion approved on the timeline
described above.
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Miscellaneous Provisions
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Cooperation:
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The
MAXXAM Entities and the Palco Debtors agree to fully cooperate with MRC
and Marathon in connection with matters arising during the bankruptcy
cases.
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Waiver
of California Civil Code § 1542 and Similar Laws.
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The
parties hereto, and each of them, understand and acknowledge that there
are laws which may invalidate releases of claims which are unknown to
them. Each of the parties hereto expressly acknowledges and
agrees that they are hereby waiving and relinquishing any and all rights
which they have or might have against the parties released by them
pursuant to this Agreement; including but not limited to (and without
acknowledging that the California Civil Code is applicable to this
Agreement) any and all rights under § 1542 of the California Civil
Code. That statute reads as follows:
A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OF OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR
HER SETTLEMENT WITH THE DEBTOR.
In
connection with such waiver and relinquishment, the parties hereto, and
each of them, hereby acknowledge that they are aware that they may later
discover facts in addition to or different from those which they currently
know or believe to be true with respect to the subject matters of this
Agreement, but that it is the intention of each of them to hereby fully,
finally, and forever release all of the matters and claims identified in
the release contained herein which now exist, may exist, or previously
existed between them, or any of them, and each and any of the parties
released by this Agreement, whether known or unknown, suspected or
unsuspected. In furtherance of such intent, the release in this
Agreement shall be and remain in effect as a full and complete release,
notwithstanding the discovery or existence of such additional or different
facts by the parties, or any of them, or by any person acting on any of
their respective behalves.
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Effective
Date
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Unless
otherwise expressly provided in this Agreement, all terms and provisions
herein shall be effective upon execution.
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Advice
of Counsel
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The
parties acknowledge that they have read and considered this Agreement
carefully, that it was negotiated by their attorneys with their express
approval, that they have discussed it in detail with their attorneys, that
they have been given a reasonable period of time (as long as they deemed
necessary) to consider this Agreement before signing, that they fully
understand the extent and impact of its provisions, and that they have
executed it knowingly and voluntarily and without any coercion, undue
influence, threat, or intimidation of any kind
whatsoever.
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No
Presumption Against Drafter
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This
Agreement has been drafted through a cooperative effort of all parties,
and no party shall be considered the drafter of this Agreement so as to
give rise to any presumption or convention regarding construction of this
document. The parties further acknowledge that they have had
input into the drafting of this Agreement and that any construction this
Agreement shall not be construed for or against any party, but rather
shall be given a fair and reasonable interpretation, based on the plain
language of the Agreement and the expressed intent of the
parties. The parties expressly waive the benefits of any rule
of construction, statutory or otherwise, that in cases of uncertainty the
language of a contract should be interpreted most strongly against its
drafter.
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Counterparts
and Signatures
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This
Agreement may be executed in one or more counterparts for the convenience
of the parties hereto, all of which together shall constitute one and the
same instrument. Facsimile signatures, or signatures
transferred in pdf format, shall be treated as original signatures for all
purposes.
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Revocation
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The
parties acknowledge that this Agreement may not be
revoked.
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Jurisdiction
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The
Bankruptcy Court shall retain exclusive jurisdiction over the subject
matter of this Agreement to resolve all disputes relating thereto and to
enforce the terms set forth herein, absent an agreement of the parties to
the contrary. In addition, the parties agree that venue with
respect to releases and the tax indemnity agreement shall be at some other
mutually agreeable venue.
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Choice
of Law
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This
Agreement shall, in all respects, be governed by and interpreted in
accordance with the laws of the state of New York.
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No
Admission of Liability
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It
is understood and agreed by the parties that this Agreement represents a
settlement and compromise of disputed claims and neither this Agreement
itself, any of the payments or covenants described herein, nor anything
else connected with this Agreement is to be construed as an admission of
liability, but is entered into to buy the peace of the
parties. Neither this
Agreement nor anything contained within it shall be admissible in any
proceeding as evidence of liability or wrongdoing on the part of either
party. However, this Agreement may be introduced in any
proceeding instituted to enforce its terms.
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Subsequent
Documentation
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Parties
agree to use their reasonable best efforts to further set forth this
Agreement in definitive documentation mutually acceptable to the Parties
by May 30, 2008. Notwithstanding the forgoing, this Agreement
is binding on the Parties.
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[Signatures
on Following Page]
IN
WITNESS WHEREOF, the parties hereto have caused this agreement to be duly
executed as of the day and year first above written.
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Marathon
Structured Finance Fund L.P.
By: /s/ Xxxxx
Xxxxxxx
Name: Xxxxx
Xxxxxxx
Title: CIO
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Mendocino
Redwood Company, LLC
By: /s/ Xxxxxxxxx X. Xxxx Xx.
Name: Xxxxxxxxx X. Xxxx
Xx.
Title: Chairman of the Board
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By: /s/ X. Xxxxx
Xxxxxxx
Name: X. Xxxxx
Xxxxxxx
Title: Vice President,
Finance
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The
Pacific Lumber Company
Debtor
in Possession
By: /s/ Xxxxxx X. X’Xxxxx
Name:
Title:
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MAXXAM
Group Holdings, Inc.
Debtor
in Possession
By: /s/ X. Xxxxx
Xxxxxxx
Name: X. Xxxxx
Xxxxxxx
Title:
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Xxxxx
Xxxxxx Company
Debtor
in Possession
By: /s/ Xxxxxx X. X’Xxxxx
Name:
Title:
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MAXXAM
Group Inc.
Debtor
in Possession
By: /s/ X. Xxxxx
Xxxxxxx
Name: X. Xxxxx
Xxxxxxx
Title:
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Salmon
Creek LLC
Debtor
in Possession
By: /s/ Xxxxxx X. X’Xxxxx
Name:
Title:
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Scotia
Development LLC
Debtor
in Possession
By: /s/ Xxxxxx X. X’Xxxxx
Name:
Title:
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Scotia
Inn Inc.
Debtor
in Possession
By: /s/ Xxxxxx X. X’Xxxxx
Name:
Title:
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Exhibit
A
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·
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Elimination
of the New Timber Notes;
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·
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Amend
treatment for Holders of Scopac Timber Note Secured Claims to provide for
cash payment of not less than $520 million on the effective date of the
MRC/Marathon Plan;
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·
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Modify
existing “New Timber Note Adjustment” to reflect elimination of New Timber
Notes and to remove the Tax Claims portion of such remaining
adjustment;
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·
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Pursuant
to Article 6.5 of the Plan, Newco will assume the Palco Retirement Plan
under the MRC/Marathon Plan; and
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·
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On
the effective date of the MRC/Marathon Plan, Newco will receive an equity
capital contribution of not less than $200
million.
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DAL02:513628.4
