[LETTERHEAD OF SKADDEN, ARPS, SLATE, XXXXXXX & XXXX LLP]
February 25, 2008
VIA EMAIL AND COURIER
Xxxxxx X. Xxxxxx, Esq.
Partner
White & Case LLP
Wachovia Financial Center
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000-0000
RE: Delphi Corporation and its related Debtor and non-Debtor
subsidiaries and affiliates (collectively "Delphi") --
Investment Agreement with Plan Investors
Dear Xxx:
This is a supplement to our earlier letter dated February 20, 2008,
which responded to your letter to Delphi on behalf of the Plan Investors (other
than Xxxxxxx Xxxxx) dated February 13, 2008. This letter is written to (1)
confirm developments subsequent to our earlier response and (2) respond to your
second letter dated February 24, 2008, in which you allege on behalf of XXXX
that Xxxxxx's proposed exit financing package that was scheduled to be publicly
announced this morning "is non-compliant, and inconsistent, with the EPCA".
Capitalized terms in this letter have the same meaning as defined in the
February 20th response.
Xxxxxx X. Xxxxxx, Esq.
February 25, 2008
Page 2
Re-launching of Delphi's Exit Financing Facilities
Both Appaloosa and your firm (principally through Xxx Xxxxx and you)
have been briefed on several occasions regarding the timetable for the
re-launching of Delphi's exit financing facilities this week with GM's increased
participation. As both XXXX and you are aware from discussions with Xxxxxx's
representatives, Xxxxxx's lead arrangers believe that there is a reasonable
prospect of successfully completing the syndication of the exit financing over
the next several weeks and that the climate for auto sector syndications has
improved recently suggesting that time is of the essence in these turbulent
capital markets.
Both Xx. Xxxxx and you were provided under separate cover over the
weekend with copies of Delphi's press announcement which was scheduled to be
released this morning at 11:00 a.m. EST as well as the marketing materials that
were proposed to be made available to prospective lenders in connection with the
lender teleconference that was scheduled for tomorrow (Tuesday, February 26,
2008). Rather than provide any constructive comments on either document or make
any other proposal, XXXX asserted through your February 24, 2008 letter that the
proposed exit financing:
o is non-compliant, and inconsistent, with the EPCA,
including, among other provisions, sections 5(p) and 5(t) of
the EPCA; and
o is not the "Debt Financing" as contemplated by the EPCA.
In the letter, XXXX also reserved all of its rights and cautioned the Debtors
about their disclosure obligations to the proposed bank syndicate and under
applicable securities laws.
XXXX is a very sophisticated investor. XXXX surely understood and
intended that the delivery of the February 24, 2008 letter to Xxxxxx would
disrupt the re-launch of the exit financing and interfere with Xxxxxx's ability
to consummate the Plan, among other matters. As XXXX must expect, Xxxxxx does
not believe that it would be equitable or proper under the EPCA for XXXX
potentially to have the opportunity to consider the exercise of a termination
right under the EPCA if the Plan is somehow not consummated by March 31, 2008
when the actions of one or
Xxxxxx X. Xxxxxx, Esq.
February 25, 2008
Page 3
more of the Investors would be the direct or indirect cause of any inability by
Delphi to meet an EPCA condition.
Even though Delphi is compliant in all respects with the EPCA, XXXX's
contrary assertion, unless withdrawn by XXXX, would have to be publicly
disclosed in connection with the re-launch of the exit financing and in other
contexts including with respect to the planned filing with the SEC later this
week of Xxxxxx's amendment to the S-l registration statement for the rights
offerings. Because Delphi is compliant with the EPCA and XXXX and the other Plan
Investors will be obligated to close and fund the EPCA next month upon Delphi's
satisfaction of the closing conditions in the EPCA (each of which Xxxxxx
believes will be satisfied prior to the targeted March 28, 2008 closing), Xxxxxx
believes that the February 24, 2008 letter is a further example of the failure
of XXXX and the Investors to use their reasonable best efforts to take all
actions, and do all things, reasonably necessary, proper or advisable to
cooperate with the company and to consummate and make effective the transactions
as required by Section 6(d) of the EPCA.
Nevertheless, in order to mitigate any damage to the Debtors,
including any damage to the re-launching of the exit financing, Delphi has
postponed the press release and related calendar for at least one business day
to provide XXXX with the opportunity to withdraw the February 24, 2008 letter in
writing and to move forward in a cooperative fashion with the company and its
other stakeholders to procure the exit financing, close the EPCA and consummate
the Plan. Accordingly, Xxxxxx requests that XXXX withdraw the February 24, 2008
letter by 3:00 p.m. EST today. In the event that XXXX does not withdraw the
February 24, 2008 letter by that time, Delphi will communicate with Xxxxxxxx and
request a Xxxxxxxx conference for 1:30 p.m. EST tomorrow, Tuesday, February 26,
2008 or such other time tomorrow as is convenient to the Court. Delphi will ask
that Xxxxxxxx require that counsel and a principal for each Plan Investor
participate in the Xxxxxxxx conference. In the event that this matter cannot be
resolved consensually today or tomorrow, Delphi will ask the Bankruptcy Court to
schedule an expedited hearing on this matter later this week and judicially
determine that the proposed exit financing is in compliance with the EPCA.
As you know, Xxxxxx's representatives have worked diligently for many
weeks to resolve any obstacles to consummation of the Plan including developing
a viable exit financing solution. At each step, XXXX has been consulted and its
views have been factored into Delphi's considerations and actions. Xxxxxx's
board of directors, executive management team and advisors very much desire to
continue to work with XXXX and the other Investors on a fully consensual path
Xxxxxx X. Xxxxxx, Esq.
February 25, 2008
Page 4
which results in consummation of the Plan on or prior to March 28, 2008.
However, both to comply with their obligations under the EPCA and as fiduciaries
to their stakeholders, the Debtors are independently obliged to use their
reasonable best efforts to take all actions, and do all things, reasonably
necessary, proper or advisable to consummate and make effective the transactions
contemplated by the Plan including the EPCA.
Report on IRS/PBGC Waivers Extension Settlement
In the February 13, 2008 letter, you requested a status report with
respect to current discussions between Xxxxxx, the IRS and the PBGC concerning
Xxxxxx's January 31, 2008 request to extend the three pension waivers that
currently expire on February 29, 2008. Our February 20th response letter
included a written communication from the PBGC of that same date which was
appended as Exhibit B to the response. Subsequently, following the Xxxxxxxx
conference on February 21, 2008 in which the two of us both participated (along
with other representatives of the Debtors, Plan Investors, Statutory Committees,
GM and the PBGC), Delphi and the PBGC agreed to extend the waivers for 30 days
to March 31, 2008. In connection with the extension, Delphi will extend the
Letters of Credit currently outstanding from March 15, 2008 to April 15, 2008
and will increase the amount of the Letters of Credit by $10 million,
representing interest for one month (February 29 to March 31) on the missed
contributions. In anticipation of the receipt of the three formal waiver
extensions from the Internal Revenue Service later this week, Delphi will today
be presenting an order to show cause order to Xxxxxxxx for expedited approval of
the waiver extensions at the Delphi hearing previously scheduled for tomorrow,
February 26, 2007 at 10:00 a.m. EST.
Alleged Conduct of Plan Investors and/or Additional Plan Investors
As was discussed previously with you and with the Bankruptcy Court and
the parties participating in the Xxxxxxxx conference on February 21, 2008,
Xxxxxx has a fiduciary responsibility to evaluate information received by the
company which may materially affect the best interests of the company and its
stakeholders in the chapter 11 cases. As we reported to you in our February 20,
2008 response letter, credible information has recently come to Delphi's
attention that one or more Investors may have been trading and/or shorting one
or more of Delphi's outstanding public securities and may have engaged in
conduct that violates the EPCA and is detrimental to Delphi and its other
stakeholders in connection therewith. In our February 20, 2008 response letter,
we advised you that it was necessary that XXXX provide the following information
to the undersigned on
Xxxxxx X. Xxxxxx, Esq.
February 25, 2008
Page 5
behalf of the company by the close of business on Friday, February 22, 2008: (a)
a complete list of all Investors; (b) the name, address, telephone and email
contact information for the principal contact(s) at each such Investor; (c) a
copy of any written agreement between XXXX and any such Investor relating to
Delphi, its chapter 11 cases or the EPCA, and (d) a written statement
summarizing any knowledge that XXXX and/or its representatives has with respect
to the accuracy and/or credibility of the information described in the
immediately preceding paragraph or any similar matter.
As of this morning, the information requested from XXXX had not been
provided. Given the gravity of this information, if accurate, and considering
the Court's comments expressed during last week's Xxxxxxxx conference, Delphi
will have no alternative but to request the Court's assistance tomorrow in
obtaining the information requested from the Investors if the responsive
information is not received prior to that time. We know that XXXX and your firm
appreciate Delphi's responsibilities in these matters and look forward to your
immediate response.
Conclusion
As we communicated last week, the company believes that if the
Investors will proceed with their reasonable best efforts to take all actions,
and do all things, reasonably necessary, proper or advisable to cooperate with
the company and to consummate and make effective the transactions contemplated
by the EPCA that the Plan will become effective on or prior to March 31, 2008.
The company looks forward to working with XXXX and the remaining Investors to
meet this timetable over the next month.
Sincerely yours,
/s/ Xxxx Xx. Xxxxxx, Xx.
Xxxx Xx. Xxxxxx, Xx.
cc: Xx. Xxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx, Esq.
Xxxx X. Xxxxxxxx, Esq.
Xxxxxx X. Xxxxxxxxx, Esq.
Xxxx Xxxx Xxxxxxx, Esq.
Xxxxxxx Xxxxxxxxx, Esq.
