EXHIBIT 10.40
EXECUTION COPY
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") is entered into as of July
26, 2002, by and among The Xxxxxxxx Companies Inc. ("TWC", and, collectively
with its direct and indirect subsidiaries, the "TWC Entities"); Xxxxxxxx
Communications Group, Inc. ("WCG" and, collectively with its direct and indirect
subsidiaries, the "Company" or the "WCG Entities") and CG Austria, Inc. ("CG
Austria") each as a debtor and debtor in possession in cases commenced (the
"Chapter 11 Cases") under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court") the official committee of
unsecured creditors (the "Committee") appointed in the Chapter 11 Cases; and
Leucadia National Corporation ("Leucadia") (collectively, the "Parties").
WHEREAS, WCG was initially incorporated as a wholly-owned subsidiary of
TWC;
WHEREAS, in September 1999, WCG raised approximately $1.5 billion
through an initial public offering and certain private placements of WCG stock;
WHEREAS, on April 23, 2001, TWC distributed to its shareholders
substantially all of its remaining WCG stock pursuant to a tax-free spin-off
(the "Spin-Off");
WHEREAS, prior to the Spin-Off, WCG (i) issued certain unsecured senior
redeemable notes in the aggregate amount of $3 billion (the "Senior Redeemable
Notes"), approximately $2.45 billion of which is currently publicly held and
$550 million of which was acquired (and is currently held) by an indirect
wholly-owned subsidiary of WCG in September and October of 2001; (ii) guaranteed
the obligations of WCG's wholly-owned operating subsidiary and principal asset,
Xxxxxxxx Communications, LLC ("WCL"), under an Amended and Restated Credit
Agreement, dated as of September 8, 1999 (as subsequently amended and restated,
the "WCL Credit Agreement") (iii) issued a promissory note in the amount of $1.5
billion (the "Senior Reset Note") which was pledged to secure payment of $1.4
billion of notes that were issued by subsidiaries of WCG and guaranteed by TWC;
(iv) incurred obligations of approximately $120 million for various
administrative services that were provided by the TWC Entities prior to the
Spin-Off (the "Pre-Spin Services Claim") and (v) agreed to reimburse TWC for all
amounts paid by TWC in respect of WCL's $750 million lease of a portion of the
Company's fiber optic network (the "ADP Claim")
WHEREAS, in September 2001, following the Spin-Off, TWC provided
additional financing to the Company in the form of a sale/leaseback transaction
(the "Sale/Leaseback") pursuant to which the Company (i) sold to TWC its
headquarters building (the "Headquarters Building"), related real estate, and
certain ancillary assets for approximately $276 million in cash, and (ii) agreed
to lease that property back from TWC for periods ranging from three to ten
years;
WHEREAS, in the fourth quarter of 2001 and early 2002, as the financial
markets in general and the telecom market in particular experienced significant
deterioration, the Company began discussing a restructuring of its balance sheet
with the lenders (the "Lenders") under the WCL Credit Agreement with the goal of
reducing the overall leverage of the Company in order to enhance its financial
flexibility;
WHEREAS, in late February, 2002, certain holders of the Senior
Redeemable Notes formed an informal committee ( the "Ad Hoc Committee"),
retained legal and financial advisors, and began negotiating with WCG for a
comprehensive restructuring of WCG's balance sheet. In addition, the Ad
Hoc Committee's advisors commenced legal and financial diligence with respect to
both the Spin-Off and all other relationships and transactions between TWC and
the Company;
WHEREAS, the Ad Hoc Committee had informed the Company that it was
essential that a chapter 11 case be commenced within one year of the Spin-Off in
order to preserve all defenses and claims with respect to the Spin-Off and the
claims that TWC was asserting against the Company;
WHEREAS, the Lenders had asserted their right to set-off their debt
against WCG and WCL and such set-off against the Company's existing cash would
have threatened the future viability of the Company;
WHEREAS, certain members of the Ad Hoc Committee had prepared an
involuntary chapter 11 filing against the Company in order to prevent the
asserted set-off;
WHEREAS, all parties worked to negotiate the Restructuring Agreement in
order to prevent a set-off followed by extensive litigation or in the
alternative, an uncontrolled voluntary or involuntary chapter 11 case;
WHEREAS, it was not until 8:30 p.m. (EDT) on April 22, 2002 that the
Restructuring Agreement was finalized and signed by sufficient parties for it to
become effective thus averting both the threatened set-off and the involuntary
bankruptcy filing and facilitating the voluntary chapter 11 process for WCG only
obviating the necessity for a much more complex WCL bankruptcy case;
WHEREAS, following extensive negotiations among WCG, the Ad Hoc
Committee, and. the Lenders, those parties entered into a certain agreement
dated as of April 19, 2002 (the "Restructuring Agreement"), pursuant to which
the members of the Ad Hoc Committee and over 90% of the Lenders agreed to
support a chapter 11 plan for WCG that provided for (i) the conversion of all of
WCG's unsecured debt into the common stock of a reorganized WCG ("New WCG");
(ii) the prepayment of $450 million under the WCL Credit Agreement ($200 million
of which was paid upon execution of the Restructuring Agreement, $50 million of
which was paid on July 15, 2002, and $200 million of which must be paid as a
condition to consummation of WCG's chapter 11 plan) so that the Company's
obligations to the Lenders will be reduced to $525 million upon the completion
of the restructuring process; (iii) the continued operation of WCL outside of
bankruptcy, to minimize any negative impact of the Company's balance sheet
restructuring on WCL's customers, vendors, suppliers, employees, or the
communities in which WCL does business;
WHEREAS, the Restructuring Agreement requires, among other things, that
(i) WCG obtain $150 million in new capital (the "New Investment") to supplement
the Company's cash resources upon emergence from chapter Il, and (ii) the
Debtors have consummated their chapter 11 plan by October 15, 2002;
WHEREAS, on April 22, 2002, the Debtors commenced these chapter 11
cases for the purposes of restructuring their financial affairs on terms
consistent with the Restructuring Agreement;
WHEREAS, as of the petition date, the Company's (i) secured
indebtedness consisted of approximately $775 million owed to the Lenders under
the WCL Credit Agreement and (ii) funded unsecured indebtedness owed to third
parties totaled approximately $5.5 billion, including (a) approximately $2.45
billion account of the Senior Redeemable Notes; (b) $1.5 billion owed under the
Senior Reset Note; (c) approximately $750 million owed with respect to the ADP
Claim; (d) approximately $120 million owed with respect to the Pre-Spin Services
Claim; (e) various unliquidated obligations owed to TWC arising from certain
post-Spin-Off arrangements between the Company and TWC; and (1) approximately
$275 million owed to TWC under the Sale/Leaseback;
WHEREAS on May 1, 2002, the Committee was appointed (and was comprised
of a majority of members who were former members of the Ad Hoc Committee) and
retained the same legal and financial advisors as had been utilized by the Ad
Hoc Committee;
WHEREAS, TWC, on behalf of all of the TWC Entities, has asserted
various rights and claims against the Company, including, without limitation,
(i) not less than $2.3 billion in obligations owed by WCG as a consequence of
certain guarantees, services provided, and other financial accommodations,
including the Senior Reset Note, the ADP Claim, and Pre-Spin Services Claim; and
(ii) the right to act on defaults under the Sale/Leaseback that entitle TWC to
evict the Company from the Headquarters Building and repossess those premises
and other assets subject to the Sale/Leaseback
WHEREAS, the Committee has asserted that the Company and its creditors
may have various claims against TWC, and rights, remedies, defenses, and offsets
with respect to the claims asserted by TWC, which, if successful, could result
in a recovery against TWC or the reduction, disallowance, subordination,
recharacterization, or elimination of some or all of TWC's claims;
WHEREAS, the litigation of the disputes between and among the Company,
TWC, and the Committee would be complex and expensive and could delay or
otherwise impair the Debtors' ability to emerge from chapter 11 in a timely
fashion;
WHEREAS, Leucadia is willing to provide $150 million in new equity
capital to satisfy the requirement that the New Investment be obtained and, as
more fully set forth in the Leucadia Claims Purchase Agreement (as such term is
hereinafter defined), to purchase certain of TWC's claims for a cash payment of
$180 million to TWC, so that upon WCG's emergence from chapter 11, (i) TWC will
forego the distribution of the stock of New WCG (the "New WCG Common Stock") to
which TWC otherwise would be entitled on account of its claims against WCG, and
will release all claims and causes of action against the WCG Entities and the
WCG Indemnitees (as such term is hereinafter defined), except those arising
under the Plan and this Agreement; (ii) Leucadia will own 45% of the New Common
Stock; and (iii) WCG's unsecured creditors (other than TWC) will own the
remaining 55% of the New Common Stock (with Leucadia and the unsecured
creditors' ownership shares subject to dilution from the issuance of additional
shares of up to 2% of the New WCG Common Stock to support a portion of a
channeling injunction contained in the Plan (as such term is hereinafter
defined));
WHEREAS, Leucadia's willingness to make the New Investment and purchase
the TWC claims is conditioned on (i) the Parties' entry into, and the Bankruptcy
Court's approval of, this Agreement, which provides for the settlement of all
disputes between the Company, the Committee, and the TWC Entities, on the terms
and conditions set forth herein and in the related agreements annexed hereto and
made a part hereof; (ii) the implementation of the transactions contemplated
hereby (including the repurchase of the Headquarters Building and related assets
for $50 million in cash and a $100 million mortgage) and (iii) the confirmation
and consummation of the Plan, including the entry of a channeling injunction as
set forth herein;
WHEREAS, the Parties wish to settle and compromise the disputes and
issues between and among them on the terms set forth herein in order to avoid
the expense, delay, uncertainty, and risks of litigation, and to enable the New
Investment to be consummated so that the Debtors can emerge successfully from
chapter 11;
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be legally bound, hereby consent and
agree as follows:
I. TWC Settlement Transactions. Upon the occurrence of the
Plan Effective Date, and subject to the satisfaction or waiver of all conditions
thereto and the consummation of each of the transactions contemplated hereby,
all disputes and issues between the WCG Entities and the TWC Entities shall be
settled and compromised as follows:
(a) Treatment of the TWC Assigned Claims. The Causes of Action
arising under the Senior Reset Note, the ADP Claims, and the
Pre-Spin Services Claims (the "TWC Assigned Claims") shall be
treated as follows:
(i) The TWC Assigned Claims shall be Allowed Claims that are
valid and enforceable against WCG in an aggregate amount
equal to $2.36 billion and not subject to any defense,
offset, reduction, objection, subordination,
recharacterization, or any other Cause of Action that
would reduce, delay, or impede any right of the holder
thereof to receive distributions tinder the Plan on the
Plan Effective Date;
(ii) In accordance with the terms of the Leucadia Claims
Purchase Agreement, TWC shall sell, and Leucadia shall
purchase the TWC Assigned Claims in exchange for
Leucadia's payment to TWC of $180 million in Cash;
(iii) In respect of the TWC Assigned Claims, Leucadia shall
receive 24.55% of the New WCG Common Stock issued under
the Plan (subject to reduction to 23.55% by the issuance
of up to 2% of additional New WCG Common Stock to the
extent such stock is issued to holders of Liquidated
Securities Holder Claims from the Securities Holder
Channeling Fund pursuant to the Securities Holder
Channeling Fund Distribution Procedures) free and clear
of all liens, claims, encumbrances, and rights of any
third parties (the "Leucadia Claims Distribution") and
(iv) Except for the distribution of the Leucadia Claims
Distribution to Leucadia, all other Causes of Action
against the WCG Entities and the WCG Indemnitees in
respect of the TWC Assigned Claims shall be deemed to be
waived, released, and discharged, and TWC shall forego
the TWC Contributed Distribution for the benefit of
general unsecured creditors of WCG under the Plan (i.e.,
the holders of Allowed Class 5 Senior Redeemable Notes
Claims and Allowed Class 6 Other Unsecured Claims).
(b) The Building Purchase. In accordance with the Building
Purchase Agreement, WHBC shall transfer and convey the
Building Purchase Assets to WTC for (i) $50 million in Cash
(subject to an adjustment for certain unfunded obligations
owed by TWC as set forth in the Building Purchase Agreement),
and (ii) the execution and delivery of (A) a 10-year
promissory note made payable (with full recourse) by WTC and
New WCG (as co-makers) and guaranteed by WCL in the original
principal amount of $100 million (subject to reduction upon
certain Dispositions as provided in the Building Purchase
Agreement), with interest at the rate of 7% per annum and
principal to be amortized on the basis of a 30-year schedule,
such note to be in a form mutually agreed upon by the Debtors,
TWC, the Committee, and Leucadia (the "Building Purchase
Note") and (B) various documents, instruments, agreements and
mortgages granting to WHBC a first lien and security interest
in and to all Building Purchase Assets to secure payment of
the Building Purchase Note, all of which shall be in a form to
be mutually agreed upon by the Debtors, TWC, the Committee,
and Leucadia (the "Building Purchase Collateral Documents").
In connection with the closing of the Building Purchase
Agreement, the Lenders shall be granted a fully subordinated,
second priority lien on the Building Purchase Assets, the
terms of which shall be mutually agreed upon by the Debtors,
TWC, Leucadia, the Committee and the Administrative Agent (the
"Lender Second Mortgage").
(c) The TWC Continuing Contracts. The TWC Continuing Contracts and
all Causes of Action thereunder (the "TWC Continuing Contract
Claims") shall be treated as follows:
(i) Pursuant to section 365 of the Bankruptcy Code, WCG
shall assume and assign to New WCG, and CG Austria shall
assume, each TWC Continuing Contract to which it is a
party;
(ii) The applicable WCG Entities (other than WCG and CG
Austria) that are parties to any TWC Continuing Contract
shall reaffirm their obligations thereunder as of the
Plan Effective Date and, except as set forth in Section
1 (d)(iv) of this Agreement, all such obligations shall
be unaffected by the Chapter 11 Cases;
(iii) Any and all Causes of Action arising under the TWC
Continuing Contracts prior to the Plan Effective Date
shall be deemed to be satisfied, and all defaults
occurring prior to the Plan Effective Date, shall be
deemed to be cured, by the WCG Entities' payment in Cash
in full on the Plan Effective Date of the (A) amounts
set forth in Exhibit 6 hereto, if any, plus (B) any net
unpaid amounts that become due during the period from
June 30, 2002 through the Plan Effective Date; and
(iv) The TWC Continuing Contracts shall be modified as
described in Exhibit 6 hereto.
(d) Additional Settlement Transactions. The following additional
transactions shall occur:
(i) The Tax Sharing Agreement, dated September 30, 1999, by
and between TWC and WCG, as amended and restated from
time to time, shall be cancelled and all Causes of
Action arising thereunder among the TWC Entities, on the
one hand, and the WCG Entities, on the other hand, shall
be forever waived, released, and discharged;
(ii) WCG shall assume and assign to New WCG the agreement
attached hereto as Exhibit 7 setting forth the terms on
which TWC and New WCG (as successor to WCG) will
cooperate with each other regarding tax matters arising
on or prior to April 23, 2001 (the "Tax Cooperation
Agreement")
(iii) WCG shall assume and assign to New WCG the Trademark
License Agreement, dated April 23, 2001, by and between
TWC and WCG, providing that the rights of New WCG (as
successor to WCG) under the Trademark License Agreement
shall terminate on the second anniversary of the Plan
Effective Date (as amended by Exhibit 8 hereto, the
"License Amendment")
(iv) WCG shall assume and assign to New WCG the agreement
attached hereto as Exhibit 9 under which TWC is
assigning its rights with respect to the "WilTel"
trademark (the "WilTel Assignment")
(v) The Amended and Restated Indemnification Agreement,
dated April 23, 2001, by and between TWC and WCG, as
amended and restated from time to time, shall be
cancelled and all Causes of Action arising thereunder
among the TWC Entities, on the one hand, and the WCG
Entities, on the other hand, shall be forever waived,
released, and discharged;
(vi) WCG shall assume and assign to New WCG the agreement
attached hereto as Exhibit 10 setting forth the terms on
which New WCG (as successor to WCG) shall indemnify TWC
with respect to certain outstanding guarantees issued by
TWC in respect of certain obligations of the WCG
Entities (the "Guaranty Indemnification Agreement") and
(vii) WCG and/or New WCG, as applicable, shall execute and
deliver such consents and other documents or instruments
as shall be reasonably necessary to effect the
assignment of the Senior Reset Note to Leucadia as
contemplated by the Leucadia Claims Purchase Agreement.
(e) Mutual Releases. The following releases shall be exchanged and
become binding and effective:
(i) (A) Except for Causes of Action arising under this
Agreement, the TWC Continuing Contracts, the Plan, or
the Plan Documents, each TWC Released Party shall
forever waive, release, and discharge any and all Causes
of Action against any and all of the WCG Entities and
the WCG Indemnitees that are based in whole or in part
on any act, omission, event, condition, or thing in
existence or that occurred in whole or in part prior to
the Plan Effective Date, and (solely, with respect to
the WCG Indemnitees) arising out of or relating in any
way to a WCG indemnitee's relationship with, or
transactions involving a WCG Entity; and (B) TWC, on
behalf of itself and the other TWC Entities, (I)
represents that the TWC Entities have not sold,
conveyed, assigned, or in any other way transferred the
Causes of Action to be released in the immediately
preceding clause (l)(e)(i)(A); and (H) agrees that the
TWC Entities will not sell, convey, assign, or in any
other way transfer such Causes of Action prior to the
effectiveness of such releases.
(ii) (A) Except for Causes of Action arising under this
Agreement, the TWC Continuing Contracts, the Plan, or
the Plan Documents, the Committee, each WCG Entity, and
each WCG Indemnitee shall forever waive, release, and
discharge any and all Causes of Action against any and
all TWC Released Parties that is based in whole or in
part on any act, omission, event, condition, or thing in
existence or that occurred in whole or in part prior to
the Plan Effective Date and arising out of or relating
in anyway to a WCG Entity or its present or former
assets, or a TWC Released Party's relationship with, or
transactions involving a WCG Entity or its present or
former assets; and (B) WCG, on behalf of itself and the
other WCG Entities (1) represent that the WCG Entities
have not sold, conveyed, assigned, or in any other way
transferred the Causes of Action to be released in the
immediately preceding clause (1)(e)(ii)(A); and (II)
agree that the WCG Entities will not sell, convey,
assign, or in any other way transfer such Causes of
Action prior to the effectiveness of such releases.
2. The New Investment. Upon the occurrence of the Plan
Effective Date, and subject to the satisfaction or waiver of all conditions
thereto and the consummation of each of the transactions contemplated hereby,
Leucadia shall invest $150 million in Cash in New WCG and, in exchange
therefor, shall receive 20.45% of the New WCG Common Stock to be issued under
the Plan (the "Leucadia Investment Distribution") in accordance with the terms
of the Leucadia Investment Agreement. By signing below, the Committee hereby
agrees that the terms and conditions of the Leucadia Investment are acceptable
to the Committee for purposes of Section 11(a) of the Restructuring Agreement.
3. Treatment of Unsecured Claims. Upon the occurrence of the
Plan Effective Date, and subject to the satisfaction or waiver of all conditions
thereto and the consummation of each of the transactions contemplated hereby,
each holder of an Allowed Class 5 Senior Redeemable Notes Claim and a Class 6
Other. Unsecured Claims (other than the Senior Redeemable Notes acquired by CGI,
which shall be deemed cancelled under the Plan) shall receive a Pro Rata Share
of 55% of the New WCG Common Stock issued under the Plan (subject to reduction
to 51.3% by (a) the issuance of additional New WCG Common Stock to the extent
such stock is issued to holders of Liquidated Securities Holder Claims from the
Securities Holder Channeling Fund pursuant to the Securities Holder Channeling
Fund Distribution Procedures and (b) the issuance of New WCG Common Stock to
certain members of the Ad
Hoc Committee that executed the Restructuring Agreement) (the "Unsecured
Creditor Distribution").
4. Channeling Injunction. It is an essential element of, and a
condition to the effectiveness of, this Agreement and the Plan that the
Confirmation Order shall contain an injunction (the "Channeling Injunction")
(a) providing that (i) all Class 5/6 Channeled Actions shall be
channeled to and fully and completely satisfied as a result of
the TWC Contributed Distribution and the other consideration
provided by the TWC Entities hereunder; and (ii) all
Securities Holder Channeled Actions shall be channeled to and
fully and completely satisfied from the Securities Holder
Channeling Fund; and
(b) enjoining (except as may be required for recovery from
officer/director insurance policies of the Company) the
holders of Class 5/6 Channeled Actions and Securities Holder
Channeled Actions from:
(i) commencing, conducting or continuing in any manner,
directly or indirectly, any suit, action or other
proceeding of any kind against a TWC Settlement Releasee
or its direct or indirect successor in interest
(including, without limitation, all suits, actions, and
proceedings that are pending as of the Plan Effective
Date, which must be withdrawn or dismissed with
prejudice), except as may be set forth in the Securities
Holder Channeling Fund Distribution Procedures;
(ii) enforcing, levying, attaching, collecting or otherwise
recovering by any manner or means whether directly or
indirectly any judgment, award, decree or order against
a TWC Settlement Releasee or its assets or property, or
its direct or indirect successor in interest, or any
assets or property of such transferee or successor,
(iii) creating, perfecting or otherwise enforcing in any
manner, directly or indirectly, any lien against a TWC
Settlement Releasee or its assets or property, or its
indirect or indirect successors in interest, or any
assets or property of such transferee or successor,
(iv) asserting any set-off, right of subrogation or
recoupment of any kind, directly or indirectly against
any obligation due to a TWC Settlement Releasee or its
assets or property, or its direct or indirect successors
in interest, or any assets or property of such
transferee or successor; and
(v) proceeding in any manner that does not conform or comply
with the provisions of the Plan (including the
Securities Holder Channeling Fund Distribution
Procedures), the Approval Order or this Agreement.
5. The Settlement Motion: the Plan; TWC Approval Rights.
Promptly after the execution and delivery of this Agreement by the Parties, (a)
the Debtors and the Committee shall (i) file with the Bankruptcy Court a joint
motion seeking entry of the Approval Order, and (ii) use their commercially
reasonable efforts to obtain entry of the Approval Order, and (b) the Debtors,
the Committee, and Leucadia shall (i) file with the Bankruptcy Court the Plan,
and (ii) use their commercially reasonable efforts to confirm and consummate the
Plan. From and upon the execution of this Agreement, without the prior written
consent of TWC (a) the Plan may not be modified or amended (including, without
limitation, pursuant to Section 8.3 and 8.13 of the Plan), and (b) the
conditions to confirmation of the Plan and the occurrence of the Plan Effective
Date (including, without limitation, those conditions set forth in Article IV of
the Plan) may not be waived.
6. Committee Encouragement Efforts. The Committee shall use
commercially reasonable efforts to encourage holders of Claims in Classes 5 and
6 under the Plan to (a) support the Plan; (b) support, and not oppose, entry by
the Bankruptcy Court of the Approval Order; and (c) subject to the Bankruptcy
Court's entry of an order approving a disclosure statement with respect to the
Plan as containing "adequate information" as required by section 1125 of the
Bankruptcy Code, vote to accept the Plan.
7. Non-Interference. The Committee, Leucadia, and TWC shall
not (a) take any action that would delay entry of the Approval Order or the
confirmation and consummation of the Plan; (b) solicitor encourage offers or
proposals, or entertain or engage in discussions with respect to any unsolicited
offer or proposal, or enter into any agreements, arrangements, or understandings
relating to any other chapter 11 plan with respect to WCG or enter into any
transaction involving the WCG Entities or their assets that would reasonably be
expected to be inconsistent with this Agreement, the Plan, or the transactions
contemplated hereby; (c) consent to, support, or participate in any formulation
of a chapter 11 plan for WCG other than the Plan; (d) encourage or support in
any fashion any person to (i) object to the entry of the Approval Order, or (ii)
vote against or object to the Plan; or (e) take any action directly or
indirectly for the purpose of delaying, preventing, frustrating, or impeding
entry of the Approval Order, or acceptance, confirmation, and consummation of
the Plan; provided, however, nothing herein shall prevent the Committee from
taking such actions as it determines in good faith to be necessary under
applicable law to fulfill its fiduciary duties in the event it receives a Notice
Concerning Negotiations; provided further, that nothing herein shall prevent the
Committee from informing itself in connection with the good faith exercise of
its fiduciary duties. Leucadia and the Company each agrees to promptly give
written notice to the Committee with a copy to TWC (with such notice being
herein referred to as a "Notice Concerning Negotiations", and with the giving of
such notice being deemed not to be a breach of the Settlement Agreement or any
related agreement) in the event that, in its good faith judgment (i) the
negotiations with the Lenders to obtain their consents in connection with the
transactions contemplated by the Settlement Agreement and the Plan are unlikely
to be successful or (ii) neither the negotiations with SBC to obtain its
consent, nor the efforts to obtain a court order providing that SBC does not
have the right to terminate its agreements with the Company, in connection with
the transactions contemplated by the Settlement Agreement and the Plan is likely
to be successful.
8. TWC to Accept the Plan. Subject to the Bankruptcy Court's
entry of an order approving a disclosure statement with respect to the Plan as
containing "adequate information" as required by section 1125 of the Bankruptcy
Code, TWC shall vote the TWC Assigned Claims to accept the Plan.
9. Authority. Subject only to such approval of the Bankruptcy
Court as is required with respect to the Debtors entry herein, each signatory to
this Agreement warrants that it has the authority to execute this Agreement on
behalf of the Party noted; provided, however, that the Parties hereto
acknowledge that (a) the Company has not obtained such waivers or consents, if
any, that may be required under the WCL Credit Agreement to implement the
transactions contemplated by this Agreement; and (b) none of the Parties hereto
(including the Debtors) will assert or use this Agreement or its approval by the
Bankruptcy Court as waiving or otherwise annulling or satisfying any requirement
under the WCL Credit Agreement that such waivers or consents as are required to
implement the transactions contemplated by this Agreement be obtained.
10. Binding Effect Subject only to approval of the Bankruptcy
Court with respect to the Debtors' obligations under Section 1, the provisions
of this Agreement are binding on and inure to the benefit of the Parties to this
Agreement and to each Party's respective successors and assigns.
11. Fiduciary Duties. Based on the facts and circumstances
known to WCG and the
Committee as of the date hereof, WCG and the Committee acknowledge that their
entry into this Agreement and the consummation of the compromises and
settlements contemplated hereby are within the exercise of their respective
fiduciary duties. Notwithstanding the foregoing, nothing in this Agreement,
including in Sections 6 or 7 or in the preceding sentence, shall impair or
prevent the Debtors or the Committee from exercising their fiduciary duties and
taking such steps as each may determine in good faith to be necessary under
applicable law to fulfill such duties. Without limiting by implication the
generality of the forgoing, the Parties acknowledge that the Committee has
retained conflicts counsel to advise it with regard to certain issues, and that
the acknowledgment by the Committee in the next preceding sentence is qualified
to the extent of any contrary advice of such counsel with respect to such issues
and that the agreements of the Committee in Sections 6 and 7 of this Agreement
are subject to any actions which the Committee determines in good faith to be
necessary under applicable law to fulfill its fiduciary duties based on the
advice of such counsel with respect to such issues.
12. Governing Law: Jurisdiction. This Agreement will be
governed by the laws of the State of New York, without regard to its conflicts
of laws principles. Each of the Parties irrevocably (a) submits and consents in
advance to the exclusive jurisdiction of the Bankruptcy Court for the purpose of
any action or proceeding in which any WCG Entity is a party arising out of or
relating to this Agreement; (b) agrees that all claims in respect to such action
or proceeding may be heard and determined exclusively in such court; and (c)
waives any objection that such Party may have based upon lack of personal
jurisdiction, improper venue, or forum non conveniens. To the extent that any
action or proceeding among the Parties, other than a WCG Entity, arising out of
or relating to this Agreement is commenced, those Parties (and not the WCG
Entities) hereby irrevocably and unconditionally submit to the nonexclusive
jurisdiction of any New York State court or Federal court of the United States
of America sitting in New York City, and any appellate court from any thereof.
13. Entire Agreement This Agreement, the Exhibits hereto, and
the applicable provisions in the Plan constitute the complete and entire
agreement between the Parties with respect to the matters contained in this
Agreement, and supersedes all prior agreements, negotiations, and discussions
between the Parties, with respect thereto; provided, however, that nothing in
this Agreement shall (a) be deemed to have modified or superseded the TWC Plan
Support Agreement and the Restructuring Agreement; or (b) be a waiver or release
of any Party from any disclosure or other obligation or restriction regarding
the sale, purchase, assignment, or other trading in claims against any of the
WCG Entities, which must be the subject of a separate agreement and otherwise
conform to any orders that may be entered by the Bankruptcy Court.
14. Non-Reliance. Each of the Parties acknowledges that, in
entering into this Agreement, it is not relying upon any representations or
warranties made by anyone other than those terms and provisions expressly set
forth in this Agreement, the Exhibits hereto, and the applicable provisions in
the Plan.
15. Amendment. It is expressly understood and agreed that this
Agreement may not be altered, amended, waived, modified or otherwise changed in
any respect or particular whatsoever except by a writing duly executed by
authorized representatives of each of the Parties, and the Parties further
acknowledge and agree that they will make no claim at any time or place that
this Agreement has been orally supplemented, modified, or altered in any respect
whatsoever.
16. No Admissions. This Agreement shall in no event be
construed as or be deemed to be evidence of an admission or concession on the
part of the TWC Entities, the WCG Entities, or the WCG Indemnitees of any claim
or any fault or liability or damages whatsoever. Each of them denies any and all
wrongdoing or liability of any kind, and does not concede any infirmity in the
claims or defenses which it has asserted or would assert.
17. Termination. This Agreement and all of the provisions
hereof (and of the Approval Order), including, without limitation, the allowance
of the TWC Assigned Claims, shall terminate
(a) automatically if the Plan Effective Date has not occurred on
or before February 28, 2003; or
(b) by written notice of any Party to this Agreement to the other
Parties (i) if the Plan is withdrawn pursuant to Section 8.4
of the Plan; (ii) if confirmation of the Plan is denied by
Final Order, or (iii) if either of the Leucadia Investment
Agreement or the Leucadia Claims Purchase Agreement is
terminated by its terms.
Upon such termination, this Agreement shall be of no further force or effect,
nothing in this Agreement shall survive, and all matters, rights, and Causes of
Action between and among the Parties shall be restored as if they had not
negotiated and entered into this Agreement, it being understood that nothing in
this Section 17 is intended to nor shall it (i) alter the rights of the Parties
accruing under other agreements, including but not limited to the Leucadia
Investment Agreement and the Leucadia Claims Purchase Agreement (irrespective of
whether any such other agreements have also been terminated according to their
terms), or (ii) relieve any Party for any breach of this Agreement.
[Signature Pages Follow]
XXXXXXXX COMMUNICATIONS GROUP, INC. THE OFFICIAL COMMITTEE OF UNSECURED
CREDITORS
/s/ XXXXXX X. XXXXXX
By: Xxxxxx X. Xxxxxx
------------------------------------
By:
---------------------------------
ITS: PRESIDENT AND CEO Its:
--------------------------------
CG AUSTRIA, INC. LEUCADIA NATIONAL CORPORATION
/s/ XXXXXX X. XXXXXX
By: Xxxxxx X. Xxxxxx
------------------------------------
By:
---------------------------------
ITS: PRESIDENT & CEO ITS:
--------------------------------
THE XXXXXXXX COMPANIES, INC.
------------------------------------
By:
---------------------------------
Its:
--------------------------------
XXXXXXXX COMMUNICATIONS GROUP, INC. THE OFFICIAL COMMITTEE OF UNSECURED
CREDITORS BY: R(2) INVESTMENTS,
LPC;
BY: AMALGAMATED GADGET, L.P., AS
INVESTMENT MANAGER;
BY: SCEPTOR HOLDINGS, INC., ITS
----------------------------------- GENERAL PARTNER
BY: BY: /s/ XXXXX XXXXXXXXX
-------------------------------- Its: Chairperson
Its:
-------------------------------
CG AUSTRIA, INC. LEUCADIA NATIONAL CORPORATION
----------------------------------- ------------------------------------
By: By:
-------------------------------- ---------------------------------
Its: Its:
------------------------------- --------------------------------
THE XXXXXXXX COMPANIES, INC.
------------------------------------
By:
---------------------------------
Its:
--------------------------------
XXXXXXXX COMMUNICATIONS GROUP, INC. THE OFFICIAL COMMITTEE OF UNSECURED
CREDITORS
----------------------------------- ------------------------------------
By: By:
-------------------------------- ---------------------------------
Its: Its:
------------------------------- --------------------------------
CG AUSTRIA, INC. LEUCADIA NATIONAL CORPORATION
/s/ Xxxxxxx X. Xxxxxxxxx
----------------------------------- ------------------------------------
By: By: Xxxxxxx X. Xxxxxxxxx
--------------------------------
ITS: Its: Vice President
-------------------------------
THE XXXXXXXX COMPANIES, INC.
------------------------------------
By:
---------------------------------
Its:
--------------------------------
XXXXXXXX COMMUNICATIONS GROUP, INC. THE OFFICIAL COMMITTEE OF UNSECURED
CREDITORS
----------------------------------- ------------------------------------
By: By:
-------------------------------- ---------------------------------
Its: Its:
------------------------------- --------------------------------
CG AUSTRIA, INC. LEUCADIA NATIONAL CORPORATION
----------------------------------- ------------------------------------
By: By:
-------------------------------- ---------------------------------
Its: Its:
------------------------------- --------------------------------
THE XXXXXXXX COMPANIES, INC.
/s/ XXXX X. XxXXXXXX
By: XXXX X. XxXXXXXX
---------------------------------
Its: SENIOR VICE PRESIDENT -
FINANCE, CHIEF FINANCIAL OFFICER
Glossary of Settlement Agreement Defined Terms
Capitalized terms used in this Agreement herein shall have the meanings set
forth in the Plan, unless otherwise defined in the recitals to this Agreement or
as follows:
(a) "Agreement" means this Settlement Agreement and all agreements that
are Exhibits hereto.
(b) "Approval Order" means an order of the Bankruptcy Court, in form and
substance reasonably acceptable to the Parties, authorizing the
Debtors' entry into this Agreement and approving the settlements and
transactions contemplated hereby pursuant to Bankruptcy Rule 9019.
(c) "Building Purchase Agreement" means the agreement dated as of July
26, 2002, a true and correct copy of which is annexed hereto as
Exhibit 4, pursuant to which, as a component of the TWC Settlement,
WTC shall purchase, the Building Purchase Assets from WHBC.
(d) "Building Purchase Assets" means all of the real and personal
property being acquired by WTC pursuant to the Building Purchase
Agreement, including the Headquarters Building.
(e) "Building Purchase Collateral Documents" shall have the meaning set
forth in Section (l)(b) of this Agreement.
(f) "Building Purchase Note" shall have the meaning set forth in Section
(l)(b) of this Agreement.
(g) "Channeling Injunction" shall have the meaning set forth in Section
4 of this Agreement.
(h) "Class 5/6 Channeled Actions" means all Causes of Action of holders
of Class 5 Senior Redeemable Notes Claims and Class 6 Other
Unsecured Claims, acting in such capacity, against a TWC Releasee or
a WCG Indemnitee (except for Causes of Action to enforce any
obligation of a TWC Releasee or WCG Indemnitee under the Plan, a
Plan Document, or this Agreement) that is based in whole or in part
on any act, omission, event, condition, or thing in existence or
that occurred in whole or in part prior to the Plan Effective Date.
(i) "Guaranty Indemnification Agreement" shall have the meaning set
forth in Section (I)(d)(vi) of this Agreement.
(j) "Lender Second Mortgage" shall have the meaning set forth in Section
1(b) of this Agreement.
(k) "Leucadia Claims Purchase Agreement" means that certain Purchase and
Sale Agreement dated as of July 26, 2002, a true and correct copy of
which is annexed hereto as Exhibit 3, pursuant to which, as a
component of the TWC Settlement, Leucadia has agreed to purchase,
and TWC has agreed to sell, certain rights associated with the TWC
Assigned Claims for $180 million in Cash.
(1) "Leucadia Investment Agreement" means the agreement and all related
exhibits and agreements dated as of July 26, 2002, a true and
correct copy of which is annexed hereto as Exhibit 2, by and between
WCG, WCL, and Leucadia, pursuant to which, as a component of the TWC
Settlement, Leucadia shall make the New Investment.
(m) "Leucadia Claims Distribution" shall have the meaning set forth in
Section (1 )(a)(iii) of this Agreement.
(n) "Leucadia Investment Distribution" shall have the meaning set forth
in Section 2 of this Agreement.
(o) "License Amendment" shall have the meaning set forth in Section
(1)(d)(iii) of this Agreement.
(p) "Liquidated Securities Holder Claim" means a Securities Holder Claim
that becomes entitled to recovery from the Securities Holder
Channeling Fund pursuant to the Securities Holder Channeling Fund
Distribution Procedures.
(q) "Plan" means the First Amended Joint Chapter 11 Plan with Respect to
the Debtors, dated July 26, 2002, a true and correct copy of which
is attached hereto as Exhibit 1.
(r) "Plan Effective Date" means the date upon which the transactions
contemplated in the Plan are consummated, which shall be a Business
Day selected by the Debtors, with the consent of the Committee,
Leucadia, and TWC, after the first Business Day (i) which is ten
(10) days after the date the Confirmation Order has been entered,
(ii) on which the Confirmation Order is not stayed, and (iii) on
which all conditions to the entry of the Confirmation Order and the
occurrence of the Plan Effective Date have been satisfied or waived.
(s) "Proportional Share" means the proportion that the amount of an
Allowed Claim bears to the aggregate of all Allowed Claims in
Classes 4, 5, and 6 under the Plan.
(t) "SBC" means SBC Communications, Inc. and each of its direct and
indirect subsidiaries.
(u) "SBC Consent" means the consent by SBC to (a) the transactions
contemplated by the Leucadia Investment Agreement and the Leucadia
Claims Purchase Agreement; (b) the transactions contemplated by the
Plan; and (c) the Spin-Off, in form and substance reasonably
satisfactory to the Committee, Leucadia and WCG.
(v) "Securities Holder" means all current and former holders of
securities issued by the WCG Entities (and all options, agreements,
and derivatives thereof) acting in such capacity; provided, however,
that "Securities Holder" shall not include holders of Allowed Claims
in Classes 5 and 6 under the Plan, acting in such capacity.
(w) "Securities Holder Channeled Actions" means all Causes of Action of
a Securities Holder against a WCG Indemnitee that is based in whole
or in part on any act, omission, event, condition, or thing in
existence or that occurred in whole or in part prior to the Plan
Effective Date.
(x) "Securities Holder Channeling Fund" means (i) the right to receive
up to 2% of the New WCG Common Stock (on a fully-diluted basis), to
the extent that holders of Securities Holder Channeled Actions
become entitled to receive such stock pursuant to the Securities
Holder Channeling Fund Distribution Procedures; and/or (ii) such
recoveries that can be obtained from officer/director liability
insurance policies of the Company that cover officers and directors
of the Company or the Company's obligations to indemnify its
officers and directors.
(y) "Securities Holder Channeling Fund Distribution Procedures" means
those procedures set forth in a Plan Document for distributions from
the Securities Holder Channeling Fund providing,
among other things, that all recoveries from the Securities Holder
Channeling Fund shall be pro rata based on the ratio that a
particular Liquidated Securities Holder Action bears to all
Liquidated Securities Holder Actions.
(z) "Settlement Contracts" means the Building Purchase Agreement, the
Building Purchase Note, the Building Purchase Collateral Documents,
the License Amendment, the Tax Cooperation Agreement, the Guaranty
Indemnification Agreement, and the WilTel Assignment.
(aa) "Tax Cooperation Agreement" shall have the meaning set forth in
Section (1)(d)(ii) of this Agreement.
(bb) "TWC Assigned Claims" shall have the meaning set forth in Section
(l)(a) of this Agreement.
(cc) "TWC Continuing Contracts" means the contracts listed on Exhibit 5
and the contracts attached hereto as Exhibits 4, 6, 7, 8, 9, and 10.
(dd) "TWC Continuing Contract Claims" shall have the meaning set forth in
Section (l)(c) of this Agreement.
(ee) "TWC Contributed Distribution" means (i) the amount of New WCG
Common Stock TWC would otherwise be entitled to recover on account
of the face amount of the TWC Assigned Claims (i.e., the
Proportional Share attributable to the TWC Assigned Claims) minus
(ii) the Leucadia Claims Distribution.
(ff) "TWC Released Parties" means the TWC Entities and each of their
respective present and former directors, managers, officers,
employees, agents, attorneys, advisors and accountants, acting in
such capacity.
(gg) "TWC Settlement" means all of the compromises and transactions
contemplated by this Agreement.
(hh) "TWC Settlement Releasee" means a TWC Released Party or a WCG
Indemnitee, in each case as the context requires.
(ii) "Unsecured Creditor Distribution" shall have the meaning set forth
in Section 3 of this Agreement.
(jj) "WCG" shall have the meaning ascribed thereto in the opening
paragraph of this Agreement.
(kk) "WCG Entities" means WCG and each of its direct and indirect
subsidiaries.
(ll) "WCG Indemnitee" means each of the present and former directors,
managers, officers, employees, agents, attorneys, advisors, and
accountants of the WCG Entities, acting in such capacity, excluding
Persons who serve or served as officers of SBC Communications, Inc.,
or any of its subsidiaries, to the extent such Persons possessed
conflicts of interest with respect to the WCG Entities while acting
as directors of WCG in connection with the spin-off of WCG from TWC,
provided, however, that if the SBC Consent shall have been obtained,
then such officers of SBC shall be deemed to be WCG Indemnitees.
(mm) "WCL" means Xxxxxxxx Communications, LLC, a wholly-owned subsidiary
of WCG.
(nn) "WHBC" means Xxxxxxxx Headquarters Building Company, a wholly-owned
subsidiary of TWC.
(oo) "WilTel Assignment" shall have the meaning set forth in Section
(l)(d)(iv) of this Agreement.
(pp) "WTC" means Xxxxxxxx Technology Center, LLC, an indirect
wholly-owned subsidiary of WCG.
List of Exhibits to Settlement Agreement
Exhibit 1 -- First Amended Joint Chapter 11 Plan
Exhibit 2-- Leucadia Investment Agreement
Exhibit 3-- Leucadia Claims Purchase Agreement
Exhibit 4-- Building Purchase Agreement
Exhibit 5-- List of TWC Continuing Contracts
Exhibit 6-- Agreement for the Resolutions of Continuing Contract Disputes
Exhibit 7-- Tax Cooperation Agreement
Exhibit 8-- License Amendment
Exhibit 9 -- WilTel Assignment
Exhibit 10-- Guaranty Indemnification Agreement
