Contract
Exhibit 99.1
CHAPTER
11 SETTLEMENT AGREEMENT
This
Settlement Agreement (this “Agreement”) is made as of this
10th
day of July, 2008 by and among Reunion Industries, Inc. (as debtor and
debtor-in-possession in the Reunion Bankruptcy (as defined in Section 1)), Steel
Partners, LLC, Steel Partners, II L.P., WebFinancial Corporation, and U.S. Bank
(as defined below). This Agreement is intended to fully, finally and
forever resolve, discharge and settle the Released Claims (as defined in Section
1) by and among the parties hereto and their respective successors, heirs,
representatives and assigns, upon and subject to the terms and conditions
contained in this Agreement.
I.
DEFINITIONS
As used
in this Agreement, the following terms have the following meanings:
“Affiliate” means with respect
to a specified Person, any other Person who or which directly or indirectly
through one or more intermediaries controls or is controlled by or is under
common control with such Person, and without limiting the generality of the
foregoing, includes (a) any Person who or which owns or holds five percent (5%)
or more of any class of Voting Stock of such Person or other equity interests in
such Persons, (b) any Persons of whom or which such Person beneficially owns or
holds five percent (5%) or more of any class of Voting Stock or in whom or which
such Person beneficially owns or holds five percent (5% or more of the equity
interests and (c) any director, manager (if such Person is a limited liability
company), officer or general partners of such Person. For purposes of
this definition, the term “control” (including with correlative meanings, the
terms “controlled by” and “under common control with”), as used with respect to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of Voting Stock, by agreement or otherwise.
“Agreement” means this
agreement or stipulation.
“Amended Guaranty” means the
Amended and Restated Guaranty dated December 3, 2003 made and given by Xxxxxxx
in favor of LCC with respect to the Amended Note and subsequently
assigned by LCC to Steel Partners. The Amended Guaranty superseded
and replaced the Original Guaranty.
“Amended Note” means the
Amended and Restated Senior Subordinated Secured Promissory Note in the
principal amount of $3,500,000 issued by Debtor to LCC and subsequently assigned
to LCC by Steel Partners. The Amended Note superseded and
replaced the Original Note.
“Amended Security Agreement”
means the Amended and Restated Security Agreement dated December 3, 2003
between Debtor and LCC and subsequently assigned by LCC to Steel
Partners. The Amended Security Agreement superseded and replaced the
Original Security Agreement.
“Assignments of Leases and Rents”
means the several Assignments of Leases and Rents made or given by Debtor
to LCC on or about December 3, 2003 and subsequently assigned by LCC to Steel
Partners with respect to Debtor’s real properties to secure, among other things,
Debtor’s obligations under the Amended Note.
“Xxxxxxx” means Xxxxxxx X.
Xxxxxxx, an individual residing at 0 Xxxx Xxxx Xxxxx, Xxxxxxxxxx, XX
00000.
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“Bankruptcy Code” means Title
11 of the United States Code, as now in effect or hereafter
amended.
“Bankruptcy Court” means the
United States Bankruptcy Court for the District of Connecticut presiding over
the Reunion Bankruptcy.
“Capital Stock” means, with
respect to any Person, any and all shares, interests, participations or other
equivalents (however designated) of such Person’s capital stock or partnership,
limited liability company or other equity interests at any time outstanding, and
any and all rights, warrants or options exchangeable for a convertible into such
capital stock or other interests
“Claim” means a claim, as that
term is defined in section 101(5) of the Bankruptcy Code, asserted against
Debtor, which is evidenced by a timely proof of claim or application for
compensation or reimbursement which is allowed by the Bankruptcy Court, or which
otherwise appears in the Schedules filed by Debtor in the Reunion Bankruptcy (if
a proof of claim was not filed with respect to such right), including, but not
limited to (a) any right to payment or return of property from Debtor, whether
or not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured, or (b) any right to an equitable remedy for breach of performance
if such breach gives rise to a right of payment from Debtor, whether or not such
right to an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.
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“Consent Solicitation” means
Debtor’s Notice of Consent Solicitation dated November 20, 2003 in respect of
and relating to the Indenture and the Senior Notes.
“Debtor” means Reunion
Industries, Inc., a Delaware corporation as debtor and debtor-in-possession in
the Reunion Bankruptcy under the Bankruptcy Code.
“Debtor Obligations” means all
liabilities and obligations, if any, of Debtor, whether fixed or
contingent, under or relating to the Transaction Documents and/or the
transactions relating thereto or contemplated thereby.
“Entity” means a person (as
defined in Bankruptcy Code section 101(41)), estate, trust, governmental unit
(as defined in Bankruptcy Code section 101(27)), and the United States
Trustee.
“Final” means (i) the
expiration of the time for filing a notice of appeal to review a judgment or
order without such a notice of appeal having been filed, or (ii) if such a
notice of appeal is filed, the date that any such appeal (or further appeal, as
permitted by law) is dismissed or the underlying judgment or order is affirmed
and the time for filing a notice of any further appeal or review of such
dismissal or affirmance has expired without a notice of appeal or request for
review having been timely filed.
“First Web Warrant”
means the Warrant dated January 14, 2005 issued by Debtor to Web, which
granted to Web the right to purchase 375,000 shares of Reunion Common Stock,
subject to adjustment pursuant to the anti-dilution provisions
thereof.
“including” means
including without limitation.
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“Indenture” means the
Indenture dated as of May 1, 2003 between Debtor (as successor by merger to
Chatwins Group, Inc.), as issuer, and U.S. Bank, as successor trustee, as
amended and modified by, among other things, the Consent
Solicitation.
“Junior Participation Interest”
means the junior participation interest in the Wachovia
Loans.
“LCC” means LC Capital Master
Fund, Ltd., a corporation organized under the laws of the Cayman Islands with
its principal place of business located at 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx
Xxxx, XX 00000.
“List” is defined in Section
2.9(g).
“May Payment” means the wire
transfer payment made by Debtor to U.S. Bank on or about May 16, 2008 in the sum
of $30,441,861.11 in respect to the Senior Notes.
“Mortgages” means the
several mortgages and deeds of trust granted by Debtor to LCC on or about
December 3, 2003 on Debtor’s real properties to secure, among other things,
Debtor’s obligations under the Amended Note, but only to the extent not
heretofore discharged in fact or by operation of law or court
order. The Mortgages were subsequently assigned by LCC to Steel
Partners.
“New York Lawsuit” means the
civil action filed by Steel Partners against Debtor, which is pending in the
Supreme Court for New York County, New York, Index No. 602823/07, including all
claims, counterclaims and defenses raised in such action.
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“Original Guaranty” means the
Guaranty dated August 11, 2003 made and given by Xxxxxxx in favor of LCC with
respect to the Original Note.
“Other Released Debtor
Parties” means (i) all Affiliates of Debtor, including all of its present
and former officers, directors, employees, stockholders and subsidiaries
(including Xxxxxxx as an officer, director and stockholder of Debtor and as a
guarantor under the Original Guaranty and the Amended Guaranty) and (ii) all
present and former agents and attorneys of Debtor)
“Other Released Web Parties”
means (i) all Affiliates of the Web Parties, including all of their respective
present and former officers, directors, managers, employees, stockholders,
members, partners and subsidiaries and (ii) all present and former agents and
attorneys of the Web Parties. For the avoidance of doubt, it is acknowledged and
agreed that LCC is not included in Other Released Web Parties.
“Original Note” means the
Senior Subordinated Secured Promissory Note dated August 11, 2003 in the
principal amount of $2,500,000 issued by Debtor to LCC.
“Original Security Agreement”
means the Security Agreement dated August 11, 2003 by and between Debtor
and LCC.
“Parties” means, collectively,
Debtor, U.S. Bank and the Web Parties.
“Partners LLC” means Steel
Partners LLC, a Delaware limited liability company with its principal place of
business located at 000 Xxxxxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, XX 00000.
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“Person” means a natural
person, individual, corporation, partnership, limited partnership, limited
liability partnership, limited liability company, association, joint venture,
joint stock company, estate, legal representative, trust, unincorporated
association, government or any political subdivision or agency thereof, and any
business or legal entity and their spouses, heirs, executors, administrators,
predecessors, successors, representatives, or assigns.
“Pittsburgh Lawsuit” means the
civil action filed by Debtor against LCC and the Web Parties, which is pending
in the Court of Common Pleas for Allegheny County, Pennsylvania, Case. No.
GD-07-020238, including all claims, counterclaims and defenses raised in such
action.
“Releases” is defined in
Section 2.12
“Release Effective Date” means
(a) for purposes of Sections 2.2 through 2.7 and 2.10 through 2.15, and for
purpose of the definition of the term Released Claims, the date on which the
Settlement Order, if entered, becomes Final, and (b) for all other purposes, the
earlier of (i) the date on which the Settlement Order becomes Final or (ii) the
date of entry of the Settlement Order if the Bankruptcy Court authorizes therein
that the ten day stay contemplated by Fed.R.Bankr.P. 6004(h) shall not apply to
the Settlement Order and that such order shall be effective and enforceable
immediately upon entry, in either case provided that no stay of the Settlement
Order shall be in effect.
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“Released Claims” means and
includes any and all actions, causes of action, complaints, liabilities,
obligations, suits, damages, costs, expenses, rights, debts, dues, sums of
money, accounts, reckonings, claims and/or demands of any kind or nature
whatsoever, including Unknown Claims, matured or unmatured, liquidated or
unliquidated, existing or later acquired, accrued or unaccrued, known or
unknown, suspected or unsuspected, contingent or non-contingent, recourse or
non-recourse, whether or not asserted, threatened, alleged or litigated, at law,
equity or otherwise, including subrogation claims and claims for contribution or
equitable indemnification, or for costs, expenses (including, without
limitation, amounts paid in settlement) and attorney’s fees, claims for
negligence, gross negligence, breach of duty of care and/or breach of duty of
loyalty, tortious interference, negligent interference, fraudulent transfer or
conveyance, unfair competition, breach of express or implied covenants or any
other federal, state, or local statute, common law, rule or regulation, that now
exist or heretofore existed or hereafter exist on the Release Effective Date
that have been or could have been asserted in the Reunion Bankruptcy, the
Pittsburgh Lawsuit, the New York Lawsuit or any other forum (i) by Debtor
against any or all of the Web Parties and/or against any of the Other Released
Web Parties, or (ii) by any or all of the Web Parties against Debtor and/or
against any of the Other Released Debtor Parties, to the extent that the
foregoing in any manner consist of, arise out of, are based upon, relate to, or
are in connection with the Transaction Documents, the Debtor Obligations, the
transactions relating to or contemplated by the Transaction Documents, the
Wachovia Financing Agreements, the Wachovia Loans, the Junior Participation
Interest, the Senior Notes Warrants, the subject matter of the New York Lawsuit,
the subject matter of the Pittsburgh Lawsuit, the Indenture, the Senior Notes,
or any equity interest in Debtor, including Reunion Common Stock and the Web
Warrants. Notwithstanding anything herein to
the contrary, it is acknowledged and agreed that “Released Claims” shall
not include any claims to enforce the
terms of this Agreement, including the entitlement, if any, of holders of Senior
Notes or of U.S. Bank to any payments later determined or agreed to be due from
Debtor to U.S. Bank, as trustee under the Indenture, and relating to the Senior
Notes or liens and security interests securing the same.
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“Reunion Bankruptcy” means the
Chapter 11 Case commenced by Debtor on November 26, 2007 and pending before the
Bankruptcy Court as Case No. 07-50727 (AHWS).
“Reunion Common Stock” means
the common stock of Debtor, par value of $0.01 per share.
“Second Web Warrant”
means the Warrant dated July 12, 2005 issued by Debtor to Web, which
granted to Web the right to purchase 387,500 shares of Reunion Common Stock,
subject to adjustment pursuant to the anti-dilution provisions
thereof.
“Senior Notes” means the
Senior Notes and Senior Exchange Notes, as amended, that were issued by Debtor
pursuant to the Indenture, irrespective of whether the original Senior Notes
were restructured pursuant to the Consent Solicitation.
“Senior Notes Payment” is
defined in Section 2.8(a).
“Senior Notes Warrants” means
warrants to purchase shares of Reunion Common Stock that were issued by Debtor
to certain holders of Senior Notes pursuant to the Consent
Solicitation.
“Settlement Motion” is
defined in Section 2.1.
“Settlement Payment” is
defined in Section 2.2.
“Settlement Order” is defined
in Section 2.1.
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“Steel Partners” means Steel
Partners II L.P., a Delaware limited partnership with its principal place of
business located at 000 Xxxxxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, XX 00000.
“Transaction Documents”
means collectively the Original Note, the Amended Note, the Original
Security Agreement, the Amended Security Agreement the Mortgages, the
Assignments of Leases and Rents, the Web Warrants, the Original Guaranty, the
Amended Guaranty and all other agreements, documents and instruments executed
any time relating in any manner to the foregoing.
“U.S. Bank” means U.S. Bank
National Association, solely as successor trustee under the Indenture, and not
in its individual capacity, except as provided in Section 2.8(e) and
(g).
“Unknown Claims” means any
claims which the releasor does not know or suspect existed in his, her or its
favor at the time of the Release, which, if known by the releasor, might have
affected settlement with and release of the releasee(s), or might have affected
the releasor’s decision not to object to this settlement. It is the
intention of the releasors in executing this Agreement that it will deprive them
of all such claims, demands or causes of action and prevent them from asserting
same against the releasees.
“Voting Stock” means, with
respect to any Person, (a) one (1) or more classes of Capital Stock of such
Person having general voting power to elect at least a majority of the board of
directors, managers, trustees or general partners of such Person, irrespective
of whether at the time Capital Stock or other class or classes have or might
have voting power by reason of the happening of any contingency and (b) any
Capital Stock of such Person convertible or exchangeable without restriction at
the option of the holder thereof into Capital Stock of such Person described in
clause (a) of this definition.
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“Wachovia” means Wachovia
Bank, National Association, as successor to Congress Financial
Corporation.
“Wachovia Financing Agreements”
means the Loan and Security Agreement dated December 3, 2003 between
Debtor and Wachovia, as amended.
“Wachovia Loans” means the
loans and advances made by Wachovia to Debtor pursuant to the Wachovia Financing
Agreements or otherwise.
“Web” means WebFinancial
Corporation, a Delaware corporation with its principal place of business located
at 000 Xxxxxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, XX.
“Web Parties” means
collectively Partners LLC, Steel Partners and Web
“Web Warrants” means
collectively the First Web Warrant, the Second Web Warrant and all Senior Notes
Warrants, if any, of which Web or any other Web Party or any Other Released Web
Party is the beneficial owner.
II. TERMS
OF STIPULATION AND AGREEMENT OF SETTLEMENT
NOW,
THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the Parties that the
Released Claims and any Unknown Claims shall be finally and fully compromised,
settled and released, subject to the terms and conditions of this Agreement, as
follows:
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2.1 Settlement
Hearing. As promptly as possible after execution of this
Agreement, Debtor shall submit this Agreement to the Bankruptcy Court as a
settlement under Federal Rule of Bankruptcy Procedure 9019 and seek by motion
(the “Settlement
Motion”) entry of an order approving the settlement provided for herein,
including the terms set forth in the attached EXHIBIT A (the “Settlement Order”). In connection
therewith, Debtor shall use its best efforts (i) to obtain a court order
shortening the time of notice of the hearing on the Settlement Motion and (ii)
to secure a court ruling that Fed.R.Bankr.P. 6004(h) shall not apply to the
Settlement Order. Both the Settlement Motion and the Settlement Order
shall be in form and substance satisfactory to each of the Parties.
2.2 The Settlement
Payment. On or prior to the fifth (5th) business day after the
Release Effective Date, Web shall pay Debtor the sum of five hundred thousand
dollars ($500,000) (the “Settlement
Payment”). Such payment shall be made by wire transfer of
funds to Debtor’s account in accordance with the following wire transfer
instructions or such other wire transfer instructions as may be provided by
Debtor to Steel Partners in writing:
Bank: PNC
Bank, Pittsburgh, PA
ABA
No.:
Beneficiary
Name: Reunion Industries, Inc.
Beneficiary
Account No.:
2.3 Surrender of Shares; Cancellation of
Warrants. On or prior to the fifth (5th)
business day after the Release Effective Date, the Web Parties shall do the
following:
(a) To
the extent not heretofore delivered to Debtor, Web shall deliver to Debtor the
originals of the Web Warrants marked “CANCELLED” or, in the alternative, shall
execute such documents as Debtor shall reasonably require to accomplish a like
result in the absence of Web’s ability to locate all or any of the Web
Warrants.
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(b) The
Web Parties shall deliver to Debtor certificates representing all of the shares
of Reunion Common Stock owned beneficially or of record by the Web Parties, or
any of them, and/or their respective Affiliates, together with duly executed
stock powers (with medallion signature guarantee affixed thereto), transferring
all such shares to Debtor. To the extent that actual certificates do
not exist or cannot readily be located, the Web Parties shall take such
substitute action to effect delivery or surrender of the Reunion Common Stock as
shall be reasonably satisfactory to Debtor.
(c) Steel
Partners shall deliver to Debtor the originals of the Original Note (marked
“CANCELLED”), the Amended Note (marked “PAID IN FULL”), the Original Guaranty
(marked “CANCELLED”) and the Amended Guaranty (marked “TERMINATED”), or in the
alternative shall execute such documents as Debtor shall reasonably require to
accomplish a like result in the absence of Steel Partners’ ability to locate all
or any of the same.
2.4 Waiver of Attorney’s Fees and
Other Costs. Each of the
Web Parties hereby waives and agrees not to assert against Debtor in the Reunion
Bankruptcy or any other forum any and all claims to be reimbursed for attorney’s
fees and/or other costs and expenses incurred by them or any of them at any
time, whether prior to, on or after the date hereof, relating to or arising
under the Transaction Documents, the transactions governed thereby, the Debtor
Obligations, the Wachovia Financing Agreements, the Wachovia Loans, the Junior
Participation Interest, the New York Lawsuit, the Pittsburgh Lawsuit, Reunion
Bankruptcy, the Senior Notes or the Indenture.
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2.5 Dismissal of
Lawsuits. As promptly as possible after the Release Effective
Date (i) Debtor shall cause the Pittsburgh Lawsuit to be dismissed or
discontinued with prejudice as against the Web Parties and (ii) Steel Partners
and Debtor shall cause the New York Lawsuit (including the counterclaims filed
by Debtor therein) to be dismissed or discontinued with
prejudice. The Parties shall cooperate with each other to effect such
dismissals or discontinuances, including signing stipulations, if necessary, and
in each case the pleadings to be filed shall be in form and substance
satisfactory to counsel to each of the Parties to the particular action
(collectively, the “Dismissal
Pleadings”). All Dismissal Pleadings shall be drafted and
signed by the relevant parties prior to entry of the Settlement
Order. Debtor shall not be obligated to cause the Pittsburgh Lawsuit
to be dismissed as against LCC, and Debtor expressly reserves the right to
prosecute the Pittsburgh Lawsuit against LCC.
2.6 Xxxxxxx Release. In
consideration of the waiver of attorney’s fees and other costs by each of the
Web Parties and for other valuable consideration, Debtor shall cause its
President, Xxxxxxx X. Xxxxxxx, to deliver, on or prior to the fifth (5th)
business day after the Release Effective Date, a general release to the Web
Parties and the Other Released Web Parties, in the form attached hereto as EXHIBIT B.
2.7 Release of
Liens. On the Release Effective Date, all liens, charges,
mortgages and other security interests of the Web Parties, or any of them, in or
on the assets of Debtor shall automatically terminate and be of no further force
or effect. From time to time after the Release Effective Date, at the
written request of Debtor, the Web Parties shall execute and deliver to Debtor
such documents, in recordable form, as may be necessary or appropriate to
release and terminate, as of record, all security interests (including those
evidenced or granted by the Amended Security Agreement, the Mortgages and
Assignments of Leases and Rents) in the assets of Debtor that secure the Debtor
Obligations or any other obligations of Debtor to any of the Web Parties,
provided, however, that in the case of the Mortgages and Assignments of Leases
and Rents, (i) it shall be the primary responsibility of Debtor to determine
what is of record that requires such action, and (ii) Debtor’s counsel shall
draft the appropriate papers in the first instance, taking responsibility for
their form. In addition, Steel Partners hereby authorizes Debtor,
after the Release Effective Date, to file all such termination statements and
other documents with the applicable governmental offices as may be necessary or
appropriate to terminate and release, as of record, all UCC Financing Statements
and other documents relating to the security interests of LCC and/or Steel
Partners in the assets of Debtor that were granted pursuant to the Original
Security Agreement or the Amended Security Agreement.
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2.8 Concerning
the Senior Notes.
(a) On
or prior to the second (2nd)
business day after the Release Effective Date, Debtor shall make an additional
payment on the Senior Notes (the “Senior Notes
Payment”). The amount of the Senior Notes Payment shall be the
sum of (i) $9,228,222.02 (being the total amount of principal and interest that
the Debtor contends, and admits, it owes thereon through June 30, 2008 after
giving effect to the May Payment) plus (ii) the product obtained by multiplying
$1,141.97 (per diem interest as calculated by Debtor) by the number of days
elapsed from June 30, 2008 to the date of the Senior Notes
Payment. U.S. Bank and the Web Parties differ with Debtor as to the
total amount owed on the Senior Notes through June 30, 2008 and on the amount of
the per diem interest thereon payable thereafter. Such difference is
not intended to be resolved, settled or compromised in this Agreement, but
instead shall be resolved by separate agreement of all the Parties or, failing
that, by the Bankruptcy Court upon pleadings to that effect initially being
filed by any of Debtor, U.S. Bank or Web. Under no circumstances
shall the disagreement among the Parties concerning the amount due on the Senior
Notes be resolved, or sought to be resolved, in a plan of
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reorganization
absent consent by all of the Parties. Debtor expressly reserves the
right to take the position in the Reunion Bankruptcy (or on any appeal) that the
Senior Notes Payment, when made, will constitute payment in full of all
principal and accrued interest on the Senior Notes, and for purposes of
clarification Debtor shall not contend that as of June 30, 2008 it owes less
than $9,228,222.02. Debtor acknowledges that U.S. Bank and Web shall
be entitled to assert a contrary position without any limitation as to the
number or type of issues accounting for the disagreement of the Parties on the
amount due.
(b) On
or prior to the second (2nd)
business day following the Release Effective Date, Debtor shall pay U.S. Bank
the total sum of $185,155.51 for its fees and expenses (including attorney’s
fees) incurred by U.S. Bank through July 8, 2008 (with respect to attorney’s
fees and related disbursements) and July 31, 2008 (with respect to all other
fees, charges and expenses) in connection with the Senior Notes and
the Indenture. Debtor shall make this payment along with the Senior
Notes Payment as one wire transfer to U.S. Bank, as provided below.
(c) Debtor
acknowledges that U.S. Bank will incur further fees and expenses (including
attorney’s fees) (together, the “Fees”) in administering the
Indenture and in litigating the amount due on the Senior Notes after the date in
subparagraph (b) above. Periodically, but not more often than
monthly, U.S. Bank may notify Debtor in writing of the Fees it has incurred
since its last notice, accompanied by information reasonably apprising Debtor of
the details of the Fees, including redacted invoices from its
counsel. Debtor shall have ten (10) calendar days thereafter to
advise U.S. Bank as to any part of the respective Fees which it believes are
unreasonable (the ”Challenged
Fees”). In respect to each such notification of Fees, Reunion
shall promptly pay U.S. Bank all Fees that are not timely Challenged
Fees. In respect to timely Challenged Fees, either U.S. Bank or
Reunion may submit
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the
dispute to the Bankruptcy Court for resolution, but U.S. Bank shall not be
required to do so in the form of a fee application that would normally apply to
a court-approved functionary, the purpose being to allow for resolution of the
dispute in the most expeditious and least expensive manner. If U.S.
Bank submits any dispute as to Challenged Fees to the Bankruptcy Court for
resolution, such submission shall include sufficient detail concerning the
Challenged Fees to enable the Bankruptcy Court to determine whether the same are
reasonable and to resolve the dispute. To the extent that any
Challenged Fees are thereafter approved by the Bankruptcy Court, Debtor shall
pay them forthwith.
(d) Any
funds due U.S. Bank hereunder, from time to time, shall be made by wire transfer
instructions as may be provided by U.S. Bank to Debtor in writing.
(e) Debtor
acknowledges and agrees that, from and after the Release Effective Date, neither
(i) the Senior Notes Payment, (ii) the May Payment, nor (iii) any payment of
Fees or approved Challenged Fees will be subject to adjustment or disgorgement
of any sort from U.S. Bank, individually or as trustee under the Indenture, or
from any Senior Noteholder, in either case as a result of the Bankruptcy Court’s
Order dated May 16, 2008 and captioned Order Granting Motion For Authority To
Pay Portion Of Secured Claims Asserted Against Estate, or
otherwise.
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(f) In
order to protect U.S. Bank and the Senior Noteholders in respect to amounts that
may become due them, directly or indirectly, as a result of future incurred Fees
or Debtor’s required payment of additional sums on the Senior Notes (including
future interest on the Senior Notes that may arise), if at all, Debtor shall
maintain not less than the sum of $1,500,000 in a segregated, special purpose
interest bearing account (the “Account”) in its name, which
Account may be used to pay Fees and amounts, if any, that may be agreed or
determined to be due on the Senior Notes after the Release Effective
Date, provided, however, that (i) the Account may not be adversely affected by
any plan of reorganization in the Reunion Bankruptcy or conversion of Debtor’s
case to one under Chapter 7, (ii) by order of the Bankruptcy Court, or by
agreement of the Parties, the Account may be decreased or increased in order to
continue to serve the purposes stated above as circumstances may warrant, and
(iii) Debtor’s general obligations under this Agreement shall not be limited to
the Account, the purpose of the Account being solely security for
payment. The priority for payment by U.S. Bank of funds from the
Account shall be as set forth in Section 6.10 of the Indenture. The
Account shall be separate from all other bank accounts of Debtor, but Debtor may
fund the deposit in the Account by transferring to the Account $1,500,000 from
the bank account in which Debtor maintains the proceeds from the sale of its CP
Industries division that was completed in April, 2008
(g) U.S.
Bank acknowledges that the Web Parties are entering into this Agreement, in
part, upon the representation that Web, the holder of certain Senior Notes,
shall, with the other holders of Senior Notes, receive payment on such Notes
promptly after the Release Effective Date and the payment by Debtor of the
Senior Notes Payment. U.S. Bank therefore agrees that within no later
than two business days of its receipt of the Senior Notes Payment, or as soon as
possible thereafter should such payment be prevented by circumstances beyond the
control of U.S. Bank, it shall distribute to the holder or holders of
record of the Senior Notes, which the parties understand include Depository
Trust Company (with respect to the Senior Notes), the total of (i) the Senior
Notes Payment plus (ii) the May Payment and all interest earned thereon,
pursuant to an allocation and distribution schedule to be prepared with all
deliberate speed and be mutually agreeable to Web and U.S. Bank, provided,
however, that with respect only to any interest earned on the May Payment that
is not accessible to U.S. Bank on the date of such distribution, U.S. Bank shall
distribute such interest and any further interest that may accrue to such holder
or holders of record within two business days of such interest becoming
accessible, or as soon as possible thereafter should such payment be prevented
by circumstances beyond the control of U.S. Bank.
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(h) Nothing
in this Agreement is intended to or shall adversely affect U.S. Bank’s
continuing lien in assets of Debtor or in stock pledged in connection with the
Indenture.
2.9 Representations, Warranties,
Covenants and Acknowledgements of the Web Parties. The Web
Parties hereby represent, warrant, covenant and acknowledge to and with Debtor
as follows:
(a) As
of December 29, 2006 LCC transferred and assigned to Steel Partners all of LCC’s
right, title and interest in, to and under (i) the Transaction Documents and
(ii) LCC’s Junior Participation Interest.
(b) Steel
Partners is, and at all times through the Release Effective Date will be, the sole
outright owner of all right, title and interest in and under each of the Amended
Note, the Amended Security Agreement, the Amended Guaranty, the Mortgages and
the Assignments of Leases and Rents, free and clear of all liens, claims and
interests of any other Person.
19
(c) Web
is, and at all times through the Release Effective Date will be, the sole
outright owner of the Web Warrants, free and clear of all liens, claims and
interests of any Person.
(d) The
Web Parties and their Affiliates are, and at all times through the Release
Effective Date will be, the sole, outright owners, respectively, of the shares
of Reunion Common Stock and the Senior Notes Warrants, if any, to be shown on
the List, free and clear of all liens, claims and interests of any other
Person. Such shares and Senior Notes Warrants, if any, constitute,
and on the Release Effective Date will constitute, all of the shares of Reunion
Common Stock and Senior Notes Warrants owned by the Web Parties and/or their
Affiliates.
(e) None
of the Web Parties or their Affiliates (i) has sold, pledged or otherwise
transferred any shares of Reunion Common Stock or Web Warrants, or any interest
therein, since December 31, 2007 and (ii) will not sell, pledge or otherwise
transfer any shares of Reunion Common Stock or Web Warrants, or any interest
therein, prior to completion of the performance of their obligations under this
Agreement.
(f) The
entire principal of and all accrued interest under the Amended Note has been
paid in full.
(g) Not
later than July 15, 2008 the Web Parties shall provide to Debtor a list in
writing identifying all of the shares of Reunion Common Stock and Senior Notes
Warrants, if any, owned beneficially or of record by them, or any of them,
and/or their respective Affiliates (the “List”).
20
2.10 Termination of Transaction
Documents. On the Release Effective Date, all rights and
obligations of the Parties under the Transaction Documents shall terminate
automatically.
2.11 Withdrawal of Proofs of
Claim. Upon payment of the Senior Notes Payment, all proofs of
claim filed by any of the Web Parties in the Reunion Bankruptcy shall be deemed
withdrawn without further action of the respective claimant, provided, however,
that nothing in this paragraph is intended to, or shall, adversely affect the
proof or proofs of claim filed by U.S. Bank on behalf of the Senior Noteholders
under the Indenture.
2.12 Releases. Subject
to Section 2.14, on the Release Effective Date (i) Debtor shall be deemed to
have released, relinquished and discharged, fully, finally and forever, all
Released Claims that Debtor has, had or may have against the Web
Parties and the Other Released Web Parties and (ii) the Web Parties
shall be deemed to have released, relinquished and discharged, fully, finally
and forever, all Released Claims that any of the Web Parties has, had or may
have against Debtor and the Other Released Debtor Parties. The
releases provided for in the preceding sentence are referred to in this
Agreement as the “Releases.” No
separate documentation shall be necessary to reflect the Releases, other than
this Agreement. Each or any of the Parties may hereafter discover
facts in addition to or different from those which it now knows or believes to
be true with respect to the claims released pursuant to this Section 2.12, but
each hereby stipulates and agrees that, upon the Release Effective Date and by
operation of this Agreement, it shall be deemed to have fully, finally, and
forever settled and released any and all Released Claims, as and to the extent
provided above in this Section 2.12, without regard to the subsequent discovery
or existence of different or additional facts. The foregoing waiver
was bargained for and is a key element of the settlements provided for in this
Agreement.
21
2.13 No
Investments. Each of the Web Parties on the one hand and
Debtor on the other covenants and agrees to and with the other not to, and to
cause their or its Affiliates not to, purchase, hold or otherwise acquire any
debt or equity securities of Debtor, as to the Web Parties and their Affiliates,
and Web, as to Debtor and its Affiliates, for a period of twenty (20) years
commencing on the fifth (5th)
business day after the Release Effective Date. In the event of any
breach or threatened breach of this Section 2.13, Debtor or Web, as the case may
be, shall be entitled to obtain an injunction or other equitable relief
restraining such breach or threatened breach (it being agreed that monetary
damages would be difficult to ascertain and would not provide an adequate
remedy), in addition to any remedies that otherwise may be available to Debtor
or Web, as the case may be, at law.
2.14 Indemnification. Notwithstanding
anything in this Agreement to the contrary, including the Releases, from and
after the Release Effective Date Debtor shall indemnify, defend and hold the Web
Parties and the Other Released Web Parties (each, an “Indemnified Person”) harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, judgments, costs, charges, expenses and disbursements (including
reasonable attorney’s fees) of any kind or nature whatsoever which may at any
time hereafter (including after payment of the Senior Notes) be suffered or
incurred by such Indemnified Person in connection with any claim, action or suit
first asserted or commenced against such Indemnified Person after the date
hereof based upon or relating to the Transaction Documents, the Debtor
Obligations, the transactions relating to or contemplated by the Transaction
22
Documents,
the Wachovia Financing Agreements, the Wachovia Loans, the Junior Participation
Interest, the Senior Notes Warrants currently or formerly held by such
Indemnified Person, the subject matter of the New York Lawsuit, the subject
matter of the Pittsburgh Lawsuit, the Indenture, the Senior Notes currently or
formerly held by such Indemnified Person, or any equity interest in Debtor
currently or formerly held by such Indemnified Person, including Reunion Common
Stock and the Web Warrants (all of the foregoing collectively, the “Indemnified Liabilities”);
provided, however, that Debtor shall have no obligation under this Section 2.14
to any Indemnified Person with respect to Indemnified Liabilities to the extent
resulting from (i) claims, actions or suits by LCC, its successors and assigns,
Affiliates or any partner, stockholder or equity holder or investor therein,
(ii) claims, actions or suits by U.S. Bank, its successors or assigns, (iii)
claims, actions or suits by current or former holders of Senior Notes, not
otherwise Other Released Debtor Parties, to the extent such claims arise solely
from the claimant’s sale of Senior Notes to, or purchase of Senior Notes from,
any such Indemnified Person, (iv) claims, actions or suits for taxes, (v)
violations of federal or state securities laws or laws relating to criminal
activity by such Indemnified Person, (vi) the gross negligence or willful
misconduct of such Indemnified Person, (vii) claims, actions or suits against
such Indemnified Person by any other Indemnified Person or by any Affiliate,
partner, stockholder, other equity holder or investor of or in any Indemnified
Person, (viii) claims, actions or suits by Wachovia, its successors and assigns,
(ix) actions, and only to the extent of such actions, taken by or on the part of
such Indemnified Person by its authorized agents or attorneys on or after the
date hereof, other than (a) in responding in good faith to claims made against
such Person, or (b) taking positions in the Reunion Bankruptcy as to matters
remaining that might affect such Person, including approval of this Agreement,
the Senior Notes or the Indenture, (x) settlements made by such Indemnified
Person without the written consent of Debtor or its authorized agents or
attorneys, such consent not to be unreasonably withheld, and (xi) claims,
actions or suits, the existence of which would constitute a breach of the
representation and warranty set forth in the next sentence. The Web
Parties represent and warrant to Debtor that, to the knowledge of the Web
Parties, there are no threatened claims, actions or suits against any
Indemnified Party by any Person who or which is not Debtor or an Other Released
Debtor Party or Parties, or any Affiliate, partner, stockholder, other equity
holder or investor of or in any such Person, that could result in the existence
or creation of Indemnified Liabilities or a claim being made by an Indemnified
Party against Debtor under this Section 2.14.
23
2.15 Failure of Conditions. The
Settlement provided for herein is conditioned upon (a) each and every obligation
in sections 2.1 through 2.12 having occurred or been performed, as the case may
be, in all material respects, by the Party or Parties charged with doing so,
including (i) U.S. Bank and Web having reached written agreement prior to the
Release Effective Date as to the allocation and distribution schedule addressed
in Section 2.8(g) above, (b) the Dismissal Pleadings having in form and content
been agreed to, and executed, by both Reunion and the Web Parties prior to entry
of the Settlement Order, and (c) the Release Effective Date having occurred by
August 15, 2008; provided, however, that the
foregoing dates in subclauses (b) and (c) above may be extended if Reunion and
the Web Parties agree to such extension in writing. If any of the
foregoing conditions is not satisfied, then, in such case, this Agreement and
all of the obligations, agreements, covenants and commitments of the Parties
hereunder may be terminated in writing by any Party adversely affected by the
failure of such condition within five (5) business days of such failure both
having arisen and becoming known to such Party and, without limitation, the
Releases shall not be or become effective and the Parties shall be restored to
the status quo as of the date of this Agreement, including the return to the
payor of any monies that have been paid, if at all, pursuant to this
Agreement.
24
2.16 Miscellaneous
Provisions.
(a) The
Parties to this Agreement (i) acknowledge that it is their intent to consummate
this Agreement and (ii) agree to cooperate to the extent necessary to effectuate
and implement all terms and conditions of this Agreement and to exercise their
best efforts to accomplish the terms and conditions of this Agreement and (iii)
agree, without further consideration, to execute or cause to be executed, and to
deliver to legal counsel for the respective parties, any other documents and to
take and/or cause to be taken any other action as may be reasonably necessary to
effectuate this Agreement.
(b) THE
PARTIES TO THIS AGREEMENT FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED BY
LEGAL COUNSEL OF THEIR OWN CHOICE THROUGHOUT ALL OF THE NEGOTIATIONS PRECEDING
THE EXECUTION OF THIS AGREEMENT AND IN CONNECTION WITH THE PREPARATION OF THIS
AGREEMENT, AND THIS AGREEMENT IS ENTERED INTO AFTER THEY HAVE HAD A FULL
OPPORTUNITY TO EVALUATE THE MERITS OF ALL RELEASED CLAIMS.
(c) Neither
this Agreement nor the settlement contained herein, nor any act performed,
document executed, or statement made pursuant to or in support of or in
furtherance of this Agreement or the settlement: (i) is or may be
deemed to be or may be used as an admission of, or evidence of, the validity of
any Released Claim, or of any wrongdoing or liability of any of the Parties; or
(ii) is or may be deemed to be or may be used as an admission of, or evidence
of, any fault or omission of any of the Parties in any civil,
bankruptcy, criminal or administrative proceeding in any court, administrative
agency or other tribunal; or (iii) is or may be deemed to be or may be used as
an admission, or evidence of, the invalidity of any Released Claims or of any
limitations on the amount of damages resulting from or recoverable as a result
of any Released Claim. The Parties may file this Agreement in any
other action that may be brought against them in order to support a defense or
counterclaim based on principles of res judicata, collateral estoppel, release,
accord and satisfaction, good faith settlement, judgment bar or reduction or any
theory of claim preclusion or issue preclusion or similar defense or
counterclaim. The Parties may file this Agreement in any proceeding
brought to enforce any of its terms, and Debtor may file this Agreement in the
Bankruptcy Court to obtain the court orders required by this
Agreement.
25
(d) This
Agreement may not be amended or otherwise modified except by a written agreement
executed by the Party to be charged with the amendment or other modification or
such Party’s successor in interest. Any such amendment or
modification shall be effective only upon the entry of all necessary approvals
and an order of the Bankruptcy Court.
(e) All
notices, requests, demands and other communications which are required or may be
given under this Agreement shall be in writing and shall be deemed to have been
duly given if transmitted by telecopier with receipt acknowledged, or upon
delivery, if delivered personally or by recognized commercial courier with
receipt acknowledged, or upon the expiration of 72 hours after mailing, if
mailed by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
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|
(i)
|
If
to Debtor, at:
|
26
Reunion
Industries, Inc.
00
Xxxxxxx Xxxxxx – Suite 1400
Xxxxxxxxxx,
XX 00000
Attention: Xxxxxxx
X. Xxxxxxx, President
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
With a copy
to:
Xxxx and
Xxxxx, P.C.
000 Xxxx
Xxxxxx, 00xx
Xxxxx
Xxxxxxxx,
XX 00000
Attention: Xxxx
Xxxxx, Esq.
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
|
|
(ii)
|
If
to the Web Parties, at:
|
Steel
Partners, LLC
000
Xxxxxxx Xxxxxx – 32nd
Floor
New York,
NY 10022
Attention: Xxxx
XxXxxxxx
Telephone: (000
000-0000
Facsimile: (000)
000-0000
27
With a copy
to:
Xxxxxx
& Xxxxxxxxxx LLP
Xxxxx
Xxxxxx Xxxxx
Xxxxxx,
XX 00000
Attention: Xxxxxx
X. Xxxxxxx, Esq.
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
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|
(iii)
|
If
to U.S. Bank, at:
|
U.S.
Bank, National Association
Corporate
Trust Services
0000
Xxxxx Xxxxxx, 0xx
Xxxxx
Xxxxxxx,
XX 00000
Attention: Xxxxx
Xxxxxx, Vice President
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
With a copy
to:
Xxxxxxx
& Xxxxxxx LLP
Xxx
Xxxxxxxxxxxx Xxxxx
Xxxxxxxx,
XX 00000
Attention:
Xxxxxxxx X. XxXxxxx, Esq.
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
(f) This
Agreement constitutes the entire agreement among the Parties with respect to the
subject matter hereof, and no representations, warranties, or inducements have
been made to any Party concerning this Agreement, other than the
representations, warranties, and covenants contained and memorialized
herein. Each Party to this Agreement, other than U.S. Bank, shall
bear its own attorney’s fees and costs in connection with the negotiation,
preparation, execution and performance of its obligations under the
Agreement.
(g) Each
Person executing this Agreement on behalf of a Party hereto warrants that such
Person has full power and authority to execute this Agreement and to legally
bind his or her respective principal, subject only to approval of the Bankruptcy
Court.
(h) This
Agreement may be executed in one or more counterparts and signatures by
facsimile shall be valid and enforceable. All executed counterparts
and each of them shall be deemed to be one and the same instrument.
(i) This
Agreement shall be binding upon and shall inure to the benefit of the Parties
and their respective successors and assigns. The Other Released
Debtor Parties and the Other Released Web Parties are intended to be third-party
beneficiaries of the Releases.
28
(j) The
Bankruptcy Court shall retain jurisdiction with respect to implementation,
construction and enforcement of the terms of this Agreement, insofar as such
terms concern the rights and obligations of Debtor.
(k) The
rights and obligations of the parties under this Agreement shall be construed
and enforced in accordance with the internal laws of the State of Connecticut,
without giving effect to its conflicts of law provisions.
(l) The
language of this Agreement is a result of the negotiations of the parties to the
extent that no one party has drafted the Agreement and no presumptions shall
arise from the drafting of the language of the Agreement.
(SIGNATURE
PAGE FOLLOWS)
29
IN
WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to be
executed as of the date first above are written.
|
REUNION
INDUSTRIES, INC.,
as
debtor and debtor-in-possession
|
STEEL
PARTNERS, LLC
|
||||
|
By:
|
By:
|
||||
|
Xxxxxxx X.
Xxxxxxx
|
Name:
|
||||
|
President
|
Title:
|
||||
|
STEEL
PARTNERS II, L.P.
|
|||||
|
By:
|
|||||
|
Name:
|
|||||
|
Title:
|
|||||
|
WEBFINANCIAL
CORPORATION
|
|||||
|
By:
|
|||||
|
Name:
|
|||||
|
Title:
|
|||||
|
U.
S. BANK, NATIONAL ASSOCIATION
Solely
as Trustee except as otherwise provided
|
|||||
|
By:
|
|||||
|
Name:
|
|||||
|
Title:
|
|||||
Exhibits
| Exhibit A | Bankruptcy Court Settlement Order |
| Exhibit B | Form of Release |
EXHIBIT
A
BANKRUPTCY
COURT SETTLEMENT ORDER
The
Settlement Order shall contain language approving this Agreement including some
or all of the following:
Findings:
The settlement is fair and equitable
and in the best interests of the Estate;
The settlement is within the range of
reasonableness when compared to the prospect of complex, protracted and
expensive litigation with uncertain benefits compared to the
settlement;
The settlement resulted from
arms-length bargaining;
The settlement is supported by
creditors representing substantially all of the allowed claims against the
estate;
Notice of the settlement was reasonable
and sufficient.
Ordered:
The settlement is
approved;
All objections to the settlement are
overruled;
The terms of the Settlement Agreement
are approved and are binding upon the parties thereto who are hereby directed to
implement their provisions;
EXHIBIT
B
RELEASE
The
within Release shall be governed by and construed in accordance with the laws of
the State of Connecticut and is intended to take effect as a sealed
instrument.
All words
or terms that are capitalized in this Release shall have the meanings attributed
to them in that certain Chapter 11 Settlement Agreement made as of July ______,
2008 by and among Reunion Industries, Inc., Steel Partners, LLC, Steel Partners,
II L.P., WebFinancial Corporation and U.S. Bank, National Association filed in
the Chapter 11 proceeding of Reunion Industries, Inc., Case Xx. 00-00000 (XXXX),
Xxxxxx Xxxxxx Bankruptcy Court for the District of Connecticut.
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WITNESSED
BY:
|
||||
|
Print
Name:
|
||||
|
Print
Name:
|
||||
