Exhibit 99.1
STIPULATION OF SETTLEMENT
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This Stipulation by and between Xxxx X. Xxxxxxx, in his capacity as
the Chapter 7 Trustee (the "Trustee") of Trace International Holdings, Inc.
("Trace International") and Trace Foam Sub, Inc. ("Trace Foam Sub" and,
collectively with Trace International, the "Debtors") and The Bank of Nova
Scotia (the "Bank"), through their respective attorneys.
Background
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A. The Bank made loans and advances, and extended credit and
other financial accommodations to or for the benefit of (collectively, the "Pre-
Petition Loans"), Trace International and/or Trace Foam Sub pursuant to, or in
connection with, certain loan agreements and other documents (collectively, the
"Pre-Petition Loan Documents"). The Pre-Petition Loan Documents are more fully
described in the proof of claim filed by the Bank in the Debtors' bankruptcy
cases.
B. On July 21, 1999 (the "Petition Date") the Debtors filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court").
C. The Bank asserts that as of July 21, 1999 (the "Petition
Date"), the Debtors were, and still are, (i) in the case of Trace International,
indebted to the Bank in the aggregate principal amount of approximately
$156,699,707 in respect of Pre-Petition Loans plus approximately $10,685,894 in
unpaid interest thereon, (ii) in the case of Trace Foam Sub, indebted to the
Bank in the aggregate principal amount of approximately $26,669,951 in respect
of Pre-Petition Loans plus approximately $1,528,902 in unpaid interest thereon
and (iii) in the case of Trace International and Trace Foam Sub, indebted to the
Bank in respect of interest, fees, costs, expenses and other charges (including
without limitation attorneys' fees and expenses) owing pursuant to the
Pre-Petition Loan Documents in amounts to be determined.
D. The Bank asserts that pursuant to the Pre-Petition Loan
Documents, the Debtors were, and still are, indebted to the Bank in an amount to
be determined on account of interest, fees, costs, expenses and other charges
(including without limitation attorneys' fees and expenses) accrued subsequent
to the Petition Date. The claims described in paragraph C and this paragraph D
are hereinafter referred to collectively as the "Pre-Petition Bank Claims."
E. The Bank asserts that the Pre-Petition Bank Claims are
secured by liens and security interests in the collateral described in the
Pre-Petition Loan Documents (the "Pre-Petition Bank Collateral"), including
without limitation all of the Debtors' right, title and interest in and to
approximately (i) 3,993,110 shares of common stock of United Auto Group, Inc.,
(ii) 197,179 shares of common stock ("Foamex Common
Stock") of Foamex International, Inc. ("Foamex"), (iii) 1000 shares of common
stock of Trace Foam Sub and (iv) 2,057 shares of Series C preferred stock of CHF
Holdings, Inc.
F. Pursuant to that certain Option and Transfer Agreement
dated as of November 12, 1999, by and between Xxxxxxxxx, Lufkin & Xxxxxxxx, Inc.
("DLJ") and the Bank, the Bank has acquired all of DLJ's right, title and
interest in and to a loan by DLJ and/or affiliate(s) thereof to Trace Foam Sub
pursuant to a Customer Agreement between Xxxxxxxxx, Lufkin & Xxxxxxxx Securities
Corporation and Trace Foam Sub, and certain agreements, instruments and
documents related thereto (the "DLJ Transaction Documents" and, collectively
with the Pre-Petition Loan Documents, the "Pre-Petition Documents").
G. The Bank asserts that as of the Petition Date, Trace Foam
Sub was, and still is, (i) indebted to the Bank (as assignee of DLJ) in the
aggregate principal amount of approximately $35,976,427.60 (including interest
compounded in accordance with the DLJ Transaction Documents) and (ii) indebted
to the Bank (as assignee of DLJ) in respect of interest, fees, costs, expenses
and other charges (including without limitation (x) costs incurred in connection
with hedging and covering transactions and (y) attorneys' fees and expenses)
owing pursuant to the DLJ Transactions Documents in amounts to be determined.
H. The Bank asserts that pursuant to the DLJ Transaction
Documents, Trace Foam Sub was, and still is, indebted to the Bank (as assignee
of DLJ) in the aggregate amount of at least $3,000,000 on account of interest,
fees, costs, expenses and other charges (including without limitation attorneys'
fees and expenses) accrued subsequent to the Petition Date. The claims asserted
in paragraph G and this paragraph H are hereinafter referred to collectively as
the "Assigned Claims" and, collectively with the Pre-Petition Bank Claims, the
"Pre-Petition Claims."
I. The Bank asserts that the Assigned Claims are secured by
liens and security interests in the collateral described in the DLJ Transaction
Documents (collectively, with the Pre-Petition Bank Collateral, the
"Pre-Petition Collateral"), including without limitation all of Trace Foam Sub's
right, title and interest in and to 7,000,247 shares of Foamex Common Stock.
J. Pursuant to that certain Final Order Authorizing Debtor in
Possession to Obtain Post-Petition Financing pursuant to Section 364 of the
Bankruptcy Code and Granting Liens, Security Interests and Super-Priority
Claims, entered by the Bankruptcy Court on or about August 23, 1999 (the "DIP
Order"), the Bank made post-petition advances to Trace International, the
aggregate outstanding principal amount of which (together with accrued and
unpaid interest thereon and all fees and expenses incurred in connection
therewith) is $212,815 as of June 30, 2000 (the "DIP Claim", and collectively
with Pre-Petition Claims, the "Claims"). The DIP Claim is secured by liens on
assets of Trace International as described in the DIP Order (the "DIP
Collateral" and, collectively with the Pre-Petition Collateral, the
"Collateral").
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K. On or about January 24, 2000, the Court entered an "Order
Converting Cases Under Chapter 11 to Cases Under Chapter 7."
L. On or about January 25, 2000, the United States Trustee
appointed the Trustee as interim trustee for the Debtors' estates. Pursuant to
Section 702(d) of the Bankruptcy Code, the Trustee became the permanent trustee
at a meeting of creditors on March 6, 2000.
M. The Trustee has investigated the Pre-Petition Claims, the
liens asserted by the Bank in the Pre-Petition Collateral (the "Pre-Petition
Liens") and other aspects of the Bank's pre-petition relationship with the
Debtors, and the Trustee has raised certain issues relating thereto with the
Bank. The Trustee and the Bank have agreed to resolve such issues on the terms
set forth herein.
Terms and Conditions
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NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in reliance upon the mutual
undertakings of the parties hereto, the Trustee and the Bank hereby agree as
follows:
1. Release by Trustee. Effective as of the Effective Date (as
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hereinafter defined), the Trustee, on behalf of himself, the Debtors and
Debtors' respective estates, and any person or entity claiming by or through any
of them (collectively, the "Trustee Releasors") shall be deemed, automatically
and without necessity of further action by the Trustee Releasors, the Bank or
any other person or entity, to have released and discharged the Bank and all of
its present and former directors, managing directors, officers, employees,
agents, financial advisors, attorneys, administrators, successors and assigns
from all actions, causes of action, accounts, agreements, bonds, bills,
covenants, contracts, controversies, claims, damages, demands, debts, dues,
extents, executions, judgments, liabilities, obligations, promises, predicate
acts, reckonings, specialties, suits, defenses, sums of money, liens, security
interests, mortgages, trespasses and variances whatsoever, whether known or
unknown, in law, admiralty or equity, whether or not arising in or under or
related to the Debtors' Chapter 7 or Chapter 11 cases, which against any of them
the Trustee Releasors ever had or now has or have, for, upon, or by reason of
any matter, cause or thing whatsoever arising out of or under, connected to, or
in any way relating to the Pre-Petition Documents, the Collateral, the Claims,
the DIP Order or any aspect of the Bank's relationship with the Trustee
Releasors or any of them from the beginning of the world to the Effective Date,
but specifically excluding the Bank's performance of its obligations set forth
hereunder.
2. Release by Bank. Effective as of the Effective Date, the
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Bank, on behalf of itself and any person or entity claiming by or through the
Bank, shall be deemed to have released and discharged the Trustee, the Debtors
and the Debtors' respective estates and all of their respective present and
former directors, managing directors, officers, employees, agents, financial
advisors, attorneys, administrators, successors and
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assigns from all actions, causes of action, accounts, agreements, bonds, bills,
covenants, contracts, controversies, claims, damages, demands, debts, dues,
extents, executions, judgments, liabilities, obligations, promises, predicate
acts, reckonings, specialties, suits, defenses, sums of money, liens, security
interests, mortgages, trespasses and variances whatsoever, whether known or
unknown, in law, admiralty or equity, whether or not arising in or under or
related to the Debtors' Chapter 7 or Chapter 11 cases (collectively, the "Bank
Claims"), which against any of them the Bank ever had or now has or have, for,
upon, or by reason of any matter, cause or thing whatsoever arising out of or
under, connected to, or in any way relating to the Pre-Petition Documents, the
Collateral, the Claims, the DIP Order or any aspect of the Bank's relationship
with the Trustee, the Debtors or any of them from the beginning of the world to
the Effective Date, but specifically excluding (a) the Trustee's performance of
its obligations hereunder and (b) any and all rights of the Bank in connection
with the Pre-Petition Liens or the Pre-Petition Collateral (it being understood
and agreed that the foregoing release of Pre-Petition Claims shall not in any
way impair the Pre-Petition Liens or any rights of the Bank with respect
thereto, but shall only constitute a release of the Bank's deficiency claim, if
any, with respect to the Pre-Petition Claims (and the Pre-Petition Claims shall
continue to have recourse to the Pre-Petition Collateral notwithstanding such
release)).
3. Payment by Bank. On or as soon as practicable after the
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Effective Date, the Bank shall pay to the Trustee the amount of $137,185,
which payment shall be made by a check payable to "Xxxx X. Xxxxxxx as
chapter 7 trustee of the estates of Trace International Holdings, Inc., et
al."
4. Agreement as to Pre-Petition Collateral. Effective as of
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the Effective Date, and without limiting the generality of paragraphs 1 and 2
hereof, (a) the Bank shall immediately become the owner of the Pre-Petition
Collateral other than 5,697,426 shares of Foamex Common Stock (the "Excluded
Shares"), free and clear of all mortgages, liens, charges, restrictions,
security interests, adverse claims, pledges or demands whatsoever, as if the
Bank had validly foreclosed thereon in accordance with applicable law (without
necessity of seeking or obtaining relief from the Bankruptcy Court or taking any
other action whatsoever), (b) immediately following the exchange of 1,500,000
shares of Foamex Common Stock (which shares shall not include Excluded Shares)
for certain preferred stock of Foamex pursuant to an agreement between the Bank
and Foamex or as otherwise determined by the Bank in a written notice to the
Trustee if such agreement has terminated by its terms, the Bank shall become the
owner of the Excluded Shares, free and clear of all mortgages, liens, charges,
restrictions, security interests, adverse claims, pledges or demands whatsoever,
as if the Bank had validly foreclosed thereon in accordance with applicable law
(without necessity of seeking or obtaining relief from the Bankruptcy Court or
taking any other action whatsoever), (c) all rights of the Trustee Releasors
with respect to the Pre-Petition Collateral shall terminate and (d) the Trustee
shall take all action reasonably requested by the Bank to confirm and reflect
such ownership and termination.
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5. Upon Receipt by the Trustee of the Settlement Payment
pursuant to paragraph 3 hereof, the Trustee will segregate $137,500 in an
account (the"Segrageted Account") in the name of the Trustee, but for the direct
benefit of Xxxxxxxxxxxx xxxx & Xxxxxxxxx ("Xxxxxxxxxxxx"), the Debtors' Chapter
11 counsel. The funds in the Segregated Account (the "Segregated Funds") shall
be applied to Sonnenschein's fees and expenses, if any, allowed by the
Bankruptcy court for Sonnenschein's representation of the Debtors in their
Chapter 11 cases (collectively, the "Allowed Xxxxxxxxxxxx Xxxx"). The Trustee
shall maintain the $137,500 in the Segregated Account until Sonnenschein's fees
and expenses are allowed by the Bankruptcy Court, at which time such funds, upon
the request of Sonnenschein, shall be promptly paid by the Trustee to
Sonnenschein upon entry of a final order of the Bankruptcy Court approving such
fees and expenses subject to the terms and conditions herein. Any excess of the
Allowed Sonnenschein Fees over the Segregated Funds shall constitute allowed
Chapter 11 administrative claims and shall be treated as such in accordance with
applicable provisions of the Bankruptcy Code. Any excess of the Segregated
Funds over the Allowed Sonnenschein Fees shall revert to the Debtors' Chapter 7
estate, free and clear of any claim or interest of Sonnenschein or any other
person or entity. Sonnenschein hereby withdraws its objection to this
Stipulation and, effective upon the Effective Date, releases and discharges the
Trustee, the Bank and their respective present and former directors, officers,
employees, agents, financial advisors, attorneys, administrators, successors and
assigns from any and all claims under the DIP Order, including without
limitation paragraph 9 thereof. Sonnenschein shall be deemed to be a party to
this Stipulation for purposes of enforcing its rights, and fulfilling its
obligations, under this paragraph 5.
6. Miscellaneous.
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The Trustee shall promptly attempt to obtain Bankruptcy Court
approval of this Stipulation pursuant to an order in form and substance
reasonably satisfactory to the Bank (an "Approval Order"). The parties agree
that the Approval Order may be this Stipulation as "So Ordered" by the
Bankruptcy Court on the signature pages hereof.
As used herein, "Effective Date" means the first business
day on which the Approval Order becomes a final, non-appealable order.
This Bankruptcy Court shall have continuing jurisdiction to enforce
this Stipulation and to determine any and all disputes arising hereunder or
related hereto.
This Stipulation constitutes the entire understanding among the
parties hereto with respect to the subject matter hereof, and this Stipulation
may not be changed, modified or altered in any manner except in writing, signed
by both parties.
Except as expressly set forth herein, nothing in this Stipulation
shall constitute or be deemed to be an admission by any party of liability or as
an acknowledgement of the truth of any allegation asserted by the parties.
The Background is incorporated into and is a part of this
Stipulation.
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This Stipulation shall be governed by, and construed and enforced in
accordance with, the laws of the state of New York (excluding conflicts of laws)
and by the applicable provisions of the Bankruptcy Code.
7. This Stipulation may be executed in a number of counterparts
and all such counterparts shall be taken to be one agreement.
8. The notice provided in connection witht he motion seeking
approval of this Stipulation and Order by the Bankruptcy
Court is sufficient under the Federal Rules of Bankruptcy
Procedure and Local Rules of this district.
Dated: New York, New York
October 13, 2000
XXXXXXX, XXXXXX & KAPLOWITZ LLP WACHTELL, LIPTON, ROSEN, & XXXX
Attorneys for the Trustee Attorneys for The Bank of Nova Scotia
By: /s/ Xxxxxx Xxxxx
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Xxxxxx X. Xxxxx (HDJ-4652)
A Member of the Firm By: /s/ Xxxxxxx X. Xxxxx
000 Xxxx 00xx Xxxxxx -----------------------------
Xxx Xxxx, Xxx Xxxx 00000-0000 Xxxxxxx X. Xxxxx (RGM-0698)
(000) 000-0000 A Member of the Firm
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
XXXXXXXXXXXX XXXX &
XXXXXXXXX
By: /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
A Partner of the Firm
1221 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
000-000-0000
SO ORDERED:
/s/ XXXXXX X. XXXXXXXXX
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Xxxxxx X. Xxxxxxxxx
Chief United States Bankruptcy Judge
Dated:New York, New York
October 16 , 2000
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