Case No. 01-41593-293, Adv. Proc. Nos. 03-4099-293 through 03-4103-293, Adv. Pro. Nos. 03-4577-293, 03-4662-293 member case.United States Bankruptcy Court, E.D. Missouri, Eastern Division.
May 26, 2005
Frank S. Moseley, Benjamin S. Kaminetzky, DAVIS POLK
WARDWELL, New York, New York, Attorneys for WCAS CAPITAL PARTNERS II, L.P., WELSH, CARSON, ANDERSON STOWE VI, L.P., WELSH, CARSON, ANDERSON, STOWE VII, L.P., WELSH, CARSON, ANDERSON
STOWE VIII, L.P., WELSH, CARSON, ANDERSON STOWE IX, L.P., WCA MANAGEMENT CORPORATION, WCAS MANAGEMEN T CORPORATION, THOMAS E. McINERNEY, and PATRICK J. WELSH, and DAVIS POLK WARDWELL.
David B. Goroff, Bruce W. Doughty, FOLEY LARDNER LLP, Chicago, Illinois, Attorneys for SCOTT P. PELTZ, NOT INDIVIDUALLY BUT SOLELY IN HIS CAPACITY AS CHAPTER 11 PLAN ADMINISTRATOR FOR THE ESTATE OF BIS ADMINISTRATION, INC., F/K/A BRIDGE INFORMATION SYSTEMS, INC., ET AL.
STIPULATION AND ORDER WITH RESPECT TO THE THE PLAN ADMINISTRATOR (ON BEHALF OF THE DEBTORS), THE WELSH CARSON PARTIES, AND DAVIS POLK WARDWELL (A) SETTLING ALL CLAIMS AND CONTROVERSIES, (B) PROVIDING FOR RELEASE, AND (C) DISMISSING WITH PREJUDICE ADV. PROCEEDING NOS. 03-4099-293 THROUGH 03-4103-293, 03-4577-293, AND 04-4002-293
DAVID McDONALD, Chief Judge, Bankruptcy
Scott P. Peltz, solely as Chapter 11 Plan Administrator (the “Plan Administrator”) for the Estates of BIS Administration, Inc. (the “Parent Estate”) and certain of its subsidiaries (together, the “Debtors”),[1] and WCAS Capital Partners II, L.P., Welsh, Carson, Anderson Stowe VI, L.P., Welsh, Carson, Anderson, Stowe VII, L.P., Welsh, Carson, Anderson
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Stowe VIII, L.P., Welsh, Carson, Anderson Stowe IX, L.P., WCA Management Corporation, WCAS Management Corporation, Thomas E. McInerney, and Patrick J. Welsh (together, the “Welsh Carson Parties”), and Davis Polk Wardwell (“DPW,” and together with the Plan Administrator (on behalf of the Debtors) and the Welsh Carson Parties, the “Stipulating Parties”) hereby stipulate and agree as follows:
WHEREAS, on February 15, 2001, the Debtors filed with this Court voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code (the “Code”), 11 U.S.C. § 101, et seq. (the “Bankruptcy Proceeding”); and
WHEREAS, on February 5, 2003, the Plan Administrator filed in the Bankruptcy Proceeding five related adversary proceedings against various of the Welsh Carson Parties captioned Peltz v.Welsh, Carson, Anderson Stowe VI, L.P., Adv. Proceeding No. 03-4102-293, Peltz v. Welsh, Carson, Anderson Stowe VII,L.P., Adv. Proceeding No. 03-4099-293, Peltz v. Welsh, Carson,Anderson Stowe VIII, L.P., Adv. Proceeding No. 03-4103-293,Peltz v. WCAS Capital Partners II, L.P., Adv. Proceeding No. 03-4100-293, and Peltz v. WCA Management Corporation (f/k/a WCASManagement Corporation), Adv. Proceeding No. 03-4101-293 (together, the “Preference Adversaries”), to recover certain payments made by the Debtors to various of the Welsh Carson Parties in the year before the Debtors’ bankruptcy as avoidable preferences within the meaning of 11 U.S.C. § 547 based on,inter alia, the Plan Administrator’s contention that the Welsh Carson Parties controlled the Debtors and thus were “insiders” within the meaning of 11 U.S.C. § 547(b)(4)(B) and that therefore a year-long preference period applied (rather than the 90-day preference period applicable to non-insiders); and
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WHEREAS, document requests, interrogatories, and requests for admission were exchanged, documents were produced, expert reports and rebuttal reports on solvency, ordinary course, and the value of the June 2000 “call options” were issued, depositions of party, thirdparty, and expert witnesses were conducted, a motion for partial summary judgment on subsequent new value was submitted on July 10, 2003 and decided on July 6, 2004, a second motion for partial summary judgment on solvency (the “Second Summary Judgment Motion”) was submitted on February 28, 2005, and trial was scheduled for April 11, 2005 in the Preference Adversaries (the “Preference Adversaries Trial”); and
WHEREAS, on August 28, 2002, Highland Capital Management, L.P., Pamco Cayman, Ltd., ML CBO IV (Cayman) Ltd., Highland Legacy Limited, KZH Highland-2 LLC, KZH Pamco LLC, SRV-Highland, Inc., and Gleneagles Trading LLC (together, with all affiliates, “Highland”) commenced an action against various of the Welsh Carson Parties, among others, captioned Highland CapitalManagement, L.P., et al. v. Welsh, Carson, Anderson Stowe, etal., Case No. 02-07933, in the District Court of Dallas County, Texas (the “Highland Proceeding”), alleging that such Welsh Carson Parties used their alleged control over the Debtors to transfer stock in Savvis Communications Corporation (“Savvis”) from the Debtors to certain of the Welsh Carson Parties, and to cause the Debtors to make payments to Savvis that otherwise would have gone to the Debtors’ creditors, and that such Welsh Carson Parties made fraudulent and negligent misrepresentations regarding the Debtors’ financial condition in the year prior to their bankruptcy; and
WHEREAS, on September 27, 2002, the Highland Proceeding was removed to the United States District Court for the Northern District of Texas; and
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WHEREAS, on June 25, 2003, the Highland Proceeding was transferred to this Court; and
WHEREAS, on November 2, 2004, the Highland Proceeding was consolidated with a related declaratory judgment action filed by various of the Welsh Carson Parties under Adv. Proceeding No. 03-4577-293 (such consolidated actions are the “Alleged Breach of Duty Adversaries”), and the Plan Administrator joined the Alleged Breach of Duty Adversaries to assert that Highland’s claims against such Welsh Carson Parties belong to the Debtors’ estates, and that if the facts alleged by Highland are true, the Plan Administrator has standing to sue such Welsh Carson Parties for various claims, including claims advanced by Highland as well as additional claims, including claims for alleged breach of fiduciary duty; and
WHEREAS, document requests and interrogatories were excha nged, and documents were produced in the Alleged Breach of Duty Adversaries, and the parties have agreed that discovery taken in the Preference Adversaries can be used in the Alleged Breach of Duty Adversaries; and
WHEREAS, pursuant to an Order of this Court, entered on March 23, 2001, all proofs of claim against the Debtors were required to be filed on or before June 29, 2001; and
WHEREAS, on June 29, 2001, various of the Welsh Carson Parties filed Proof of Claim No. 1442 in the amount of $398,085,262.60 in Case No. 01-41593-293 in the Bankruptcy Proceeding (the “Welsh Carson Proof of Claim”); and
WHEREAS, on June 29, 2001, DPW filed Proof of Claim No. 1441 in the amount of $146,228.01 in Case No. 01-41593-293 in the Bankruptcy Proceeding (the “DPW Proof of Claim,” and together with the Welsh Carson Proof of Claim, the “Proofs of Claim”); and
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WHEREAS, the Debtors’ Second Amended Joint Plan of Liquidation dated January 8, 2002 (the “Plan”) was confirmed, after hearing, by Order of this Court on February 13, 2002 (the “Confirmation Order”); and
WHEREAS, on March 25, 2002, the Plan Administrator was appointed as Chapter 11 Plan Administrator for the Debtors, pursuant to (i) Article VI of the Plan, (ii) the Plan Administrator Agreement, which is attached to the Plan as Exhibit A (the “Plan Administrator Agreement”), and (iii) the Confirmation Order; and
WHEREAS, the Plan Administrator works in consultation with a Plan Committee created under the Plan (the “Bridge Plan Committee”); and
WHEREAS, on August 11, 2003, the Plan Administrator filed an objection to the DPW Proof of Claim, asserting various grounds for disallowing that Proof of Claim (the “Plan Administrator’s DPW Objection”), and DPW responded to that Objection on September 12, 2003; and
WHEREAS, on August 14, 2003, the Plan Administrator filed an objection to the Welsh Carson Proof of Claim, asserting various grounds for disallowing that Proof of Claim (the “Plan Administrator’s Welsh Carson Objection,” and together with the Plan Administrator’s DPW Objection, the “Plan Administrator’s Objections”), and various Welsh Carson Parties responded to that Objection on September 12, 2003; and
WHEREAS, on January 9, 2004, the Plan Administrator filed in the Bankruptcy Proceeding an adversary proceeding against DPW captioned Peltz v. Davis Polk Wardwell, Adv. Proceeding No. 04-4002-293, to recover payments of $392,464.25 made by the Debtors to DPW in the 90 days before the Debtors’ bankruptcy as avoidable preferences within the meaning
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of 11 U.S.C. § 547 (the “DPW Adversary,” and together with the Preference Adversaries and the Alleged Breach of Duty Adversaries, the “Litigations”); and
WHEREAS, on February 28, 2005, various of the Welsh Carson Parties filed a motion pursuant to 11 U.S.C. § 1142, seeking certain information from the Plan Administrator (the “1142 Motion,” and together with the Second Summary Judgment Motion, the “Welsh Carson Motions”); and
WHEREAS, on March 10, 2005, the Plan Administrator filed a response in opposition to the 1142 Motion; and
WHEREAS, on March 14, 2005, various of the Welsh Carson Parties and the Plan Administrator informed the Court’s clerk that they had reached a settlement, and that, pending the completion of documentation of such settlement and the entry of this Stipulation and Order, they had agreed to stay further work on the Welsh Carson Motions and pre-trial preparation for the Litigations, and to stay the Preference Adversaries Trial which had been scheduled to begin on April 11, 2005; and
WHEREAS, nothing in this Stipulation and Order is intended to be or should be construed as an admission or finding of liability of any kind; the Welsh Carson Parties enter into this Stipulation and Order solely to avoid the costs and uncertainties of further litigation and do not believe that they have any liability for the claims asserted in the Litigations; and
WHEREAS, the Welsh Carson Parties and DPW expressly acknowledge (the “Acknowledgment”) that the Allowed Claims (as defined and described in Paragraph 4 of this Stipulation and Order) are pre-petition, unsecured, non-priority claims solely against the Parent Estate, and are not and in no way constitute any other type of claim, including without limitation any claim under Section 503 of the Code (11 U.S.C. § 503) (“Section 503”); and
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WHEREAS, the Plan Administrator has informed the Welsh Carson Parties and DPW and the Welsh Carson Parties and DPW expressly acknowledge that to date there has been no distribution of any sort out of the Parent Estate to unsecured creditors under the Plan, that based on current projections and forecasts, the Plan Administrator does not intend to make any such distribution, and that the funds from the Settlement Payment (as defined and described in Paragraph 7 of this Stip ulation and Order) do not modify the aforementioned projections and forecasts and will therefore provide no current basis for such a distribution; and
WHEREAS, nothing in this Stipulation and Order amends, modifies, changes, waives, or otherwise affects the Plan or the Plan Administrator Agreement; and
WHEREAS, for the reasons stated in the Rule 9019 motion (the “9019 Motion”) accompanying this Stipulation and Order, including the avoidance of the burdens and uncertainties of further litigation and the promotion of the best interests of the Debtors’ estates, the Stipulating Parties wish and have agreed to fully and finally settle, compromise, or otherwise resolve all issues between and among the Stipulating Parties relating directly or indirectly to the Litigations, the Proofs of Claim, the Plan Administrator’s Objections, and the Welsh Carson Motions in the manner set forth and subject to the terms and conditions in this Stipulation and Order; and
WHEREAS, this Court has jurisdiction over these cases under 28 U.S.C. § 1334(b); this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2); due and adequate notice has been given to all parties entitled thereto, and no other or further notice is necessary or required; this Court has reviewed the 9019 Motion and has considered the representations of counsel regarding the relief requested therein; and the relief requested in the 9019 Motion is necessary and in the best interest of the Debtors’ estates.
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NOW, THEREFORE, IT IS HEREBY STIPULATED, CONSENTED, AGREED,ORDERED, ADJUDGED AND DECREED THAT:
1. As reflected in this Court’s order dated May 23, 2005, the 9019 Motion is granted in all respects.
2. As reflected in this Court’s Order dated May 23, 2005, the Alleged Breach of Duty of Adversaries are dismissed with prejudice. In additional, all other Litigations are each dismissed with prejudice.
3. The Welsh Carson Motions are each withdrawn.
4. The Proofs of Claim are allowed against the Parent Estate in Case No. 01-41593-293 in the Bankruptcy Proceeding as, but only as, pre-petition, unsecured, non-priority claims solely against the Parent Estate, and not as any other type of claim, including without limitation any claim under Section 503, and subject to the Acknowledgment described herein (the “Allowed Claims”).
5. The Plan Administrator’s Objections are withdrawn.
6. Nothing in this Stipulation and Order amends, modifies, changes, waives, or otherwise affects the Plan or the Plan Administrator Agreement.
7. Within ten (10) business days after both this Stipulation and Order and the Court’s Order dated May 23, 2005 (together the “Orders”) becomes “Final”,[2] the Welsh Carson Parties shall pay $9,000,000 (nine million U.S. dollars) to the Plan Administrator (the “Settlement Payment”) by wire transfer to an account designated by the Plan Administrator,
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pursuant to wire instructions that the Plan Administrator shall furnish in writing to the undersigned counsel for the Welsh Carson Parties (or, if such counsel no longer represents the Welsh Carson Parties, to any of the Welsh Carson Parties).
8. Except for the Settlement Payment and except as otherwise expressly provided in this Stipulation and Order, in addition to the effect of Paragraph 2 of this Stipulation and Order, each of the Welsh Carson Parties and DPW, any predecessors and successors past and present, and any present or former, direct or indirect, parent, subsidiary, division or affiliate of any of the Welsh Carson Parties or DPW, and any of the present or former stockholders, officers, directors, trustees, receivers, board members, members, partners (whether general, limited, or otherwise in nature), employers, employees, agents, associates, subrogees, representatives, professionals, advisors, experts (including without limitation such experts’ companies, firms, and other entities of employment) solely with respect to retention for the Litigations, or insurers solely for purposes of the Litigations of each of the Welsh Carson Parties or DPW, and any past, present, or future investment partnerships or limited liability companies managed by or affiliated with WCA Management Corporation, WCAS Management Corporation, or their successors, and any of the legal representatives of each of the Welsh Carson Parties and DPW, and the heirs, executors, administrators, purchasers and assigns of each of the Welsh Carson Parties and DPW, are released and forever discharged from all manner of claims, demands, actions, suits, causes of action (whether class, individual or otherwise in nature), damages whenever inc urred, obligations, indemnities, promises, losses, liens, equitable relief, setoffs, accounts, bonds, bills, specialties, covenants, contributions, debts, counterclaims, disputes, rights, controversies, and liabilities of any nature whatsoever, including without limitation costs, expenses, penalties, and attorneys’ fees, that are known or unknown, suspected or unsuspected, liquid or indefinite, fixed
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or contingent, matured or unmatured, raised or not raised, direct or indirect, hidden or concealed, in law or equity, that the Debtors, the Plan Administrator (in both his official and individual capacities and his firm, company, or other entity of employment), and any of their past, present, or future officers, directors, stockholders, partners, agents, employees, legal representatives, trustees, plan administrators, committees appointed pursuant to 11 U.S.C. § 1102 or otherwise (including without limitation, the Bridge Plan Committee (as a whole and each of its members in their respective official and individual capacities and their respective firms, companies, or other entities of employment)), insurers solely for purposes of the Litigations, parents, associates, affiliates, subsidiaries, creditors (including, without limitation, Highland), heirs, executors, administrators, purchasers, predecessors, successors and assigns, whether directly, representatively, derivatively or in any other capacity, ever owned, held, or had, now own, hold, or have, may have owned, held, or had, or hereafter can shall or may own, hold, or have, from the beginning of time until the date of this Stipulation and Order, relating to the Debtors including without limitation, any claims, demands, actions, suits, causes of action, damages or liabilities related in any manner to preference cla ims, avoidance actions, fraudulent misrepresentation, negligent misrepresentation, tortious interference with contract (or any conspiracy to commit tortious interference with contract, or any aiding and abetting of tortious interference with contract), common law or statutory fraud (or any conspiracy to commit common law or statutory fraud, or any aiding and abetting of common law or statutory fraud), fraudulent transfer, breach of fiduciary duty, breach of contract, business interruption, lender liability, deepening insolvency, business defamation, piercing the corporate veil, aiding and abetting liability, conspiracy, or any other causes of action that may reasonably be inferred from the allegations in any pleading, motion, or any other paper filed in the Litigations.
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9. Except as expressly provided in this Stipulation and Order, each of the Welsh Carson Parties and DPW, on its own behalf and the behalf of its respective predecessors and successors, and of its and its predecessors’ and successors’ respective past and present, direct and indirect, parents, subsidiaries, divisions, affiliates, stockholders, officers, directors, trustees, plan administrators, committees appointed pursuant to 11 U.S.C. § 1102, receivers, board members, members, partners (whether general, limited, or otherwise in nature), employers, employees, associates, subrogees, agents, accountants, experts (including without limitation such experts’ companies, firms, and other entities of employment) solely with respect to retention for the Litigations, representatives, professionals, financial and other advisors, consultants, insurers solely for purposes of the Litigations, attorneys and other legal representatives, heirs, executors, estates, administrators, purchasers, and assigns, and of any past, present, or future investment partnerships or limited liability companies managed by or affiliated with WCA Management Corporation, WCAS Management Corporation, or their successors (together, the “Welsh and DPW Releasors”), releases and forever discharges each of the Plan Administrator (in both his official and individual capacities and his firm, company, or other entity of employment), the Debtors, the Bridge Plan Committee (as a whole and each of its members in their respective official and individual capacities and their respective firms, companies, or other entities of employment), each of such Plan Administrator’s, Debtors’, and Committee’s respective attorneys and other legal representatives, financial advisors, accountants, and other professio nals (together, such Plan Administrator, Debtors, Committee, attorneys and other legal representatives, financial advisors, accountants, and other professionals are the “Plan Administrator Parties”), each of the Plan Administrator Parties’ respective predecessors and successors, and each of such Parties’ and such predecessors’ and successors’ respective past and
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present, direct and indirect, parents, subsidiaries, divisions, affiliates, stockholders, officers, directors, trustees, receivers, board members, members, partners (whether general, limited, or otherwise in nature), employers, employees, associates, subrogees, insurers solely for purposes of the Litigations, agents, representatives, professionals, experts (including without limitation such experts’ companies, firms, and other entities of employment) solely with respect to retention for the Litigations, heirs, executors, administrators, purchasers, and assigns, from any and all manner of claims, demands, actions, suits, causes of action (whether class, individual or otherwise in nature), damages whenever incurred, obligations, indemnities, promises, losses, liens, equitable relief, setoffs, accounts, bonds, bills, specialties, covenants, contributions, debts, counterclaims, disputes, rights, controversies, and liabilities of any nature whatsoever, including without limitation costs, expenses, penalties, and attorneys’ fees, that are known or unknown, suspected or unsuspected, liquid or indefinite, fixed or contingent, matured or unmatured, raised or not raised, direct or indirect, hidden or concealed, in law or equity, that whether directly, representatively, derivatively or in any other capacity, any one or more (including all) of the Welsh Carson Parties, DPW, and the other Welsh and DPW Releasors have ever owned, held, or had, now own, hold, or have, may have owned, held, or had, or hereafter can shall or may own, hold, or have, from the beginning of time until the date of this Stipulation and Order, in any way relating to the Plan Administrator, the Debtors, the Bridge Plan Committee, the Bankruptcy Proceeding, the Litigations, the Plan Administrator’s Objections, or the Welsh Carson Motions.
10. This Stipulation and Order constitutes the entire agreement and understanding of the Stipulating Parties regarding the Stipulation and Order and the subject matter thereof. The terms set forth in this Stipulation and Order are part of a comprehensive compromise and each element is an integral aspect of the agreed settlement and is non-severable.
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11. This Stipulation and Order was negotiated at arm’s-length and was mutually drafted by the Stipulating Parties. None of the Stipulating Parties is to be considered the drafter of this Stipulation and Order or any provision hereof for the purpose of any statute, case law, rule, or doctrine of interpretation or construction that would or might cause any ambiguity or uncertainty in a provision of this Stipulation and Order to be construed against the drafter hereof.
12. Neither this Stipulation and Order, nor the compromise and settlement provided for herein, nor any statement made, action taken, or documents prepared in connection with the negotiation, execution, or implementation of this Stipulation and Order, constitutes, is to be deemed, construed, or offered as, or is intended to constitute or be deemed, construed, or offered as, evidence of any admission by any of the Stipulating Parties, any Debtor, or the Bridge Plan Committee of any liability or basis of liability.
13. Nothing in this Stipulation and Order releases or discharges the rights of the Stipulating Parties to enforce the provisions of this Stipulation and Order, or to bring claims, actions, demands, or causes of action of any kind resulting from any breach of or other dispute concerning the interpretation, administration, or enforcement of this Stipulation and Order.
14. Each of the Stipulating Parties: (a) has read this Stipulation and Order carefully; (b) understands that this Stipulation and Order contains binding provisions and releases; (c) has had a sufficient opportunity to consult and has consulted with his or its own legal counsel and such experts and consultants as he or it deems appropriate regarding the terms of, and whether he or it should enter into, this Stipulation and Order; (d) is entering into this Stipulation and Order freely and voluntarily, without any threat, duress, or coercion whatsoever, and with full knowledge of its legal consequences; (e) is not relying on any representation of another Stipulating Party except as may be expressly stated in this Stipulation and Order; and (f) has
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vested the person executing and delivering this Stipulation and Order on his or its behalf with all requisite and proper authority from him or it to perform such execution and delivery and therefore to bind him or it to this Stipulation and Order.
15. This Stipulation and Order may be executed in counterparts and delivered by facsimile, in which case this Stipulation and Order shall include each such executed and delivered counterpart, each of which shall be deemed to be a part of a single original instrument.
16. The Stipulating Parties shall execute any and all further documents and take any and all reasonable actions as may be reasonably necessary or reasonably desirable to carry out or give effect to the provisions of this Stipulation and Order.
17. No breach of any provision of this Stipulation and Order may be waived unless such waiver is in writing and signed by the Stipulating Party or Stipulating Parties so waiving or by his, its, or their respective authorized agent(s) or representative(s). The waiver of a breach of any provision of this Stipulation and Order shall not be deemed to be a waiver of any other provision of this Stipulation and Order.
18. All words or terms used in this Stipulation and Order, regardless of the number or gender in which they are used, are deemed to include any other number and any other gender as the context may require.
19. The Court shall retain jurisdiction over the Stipulating Parties and all parties to any one or more (including all) of the Litigations with respect to any disputes arising from or other actions to interpret, administer, or enforce the terms and provisions of this Stipulation and Order.