IN RE FV STEEL WIRE COMPANY (Bankr.E.D.Wis. 2005)

Case No. 04-22421-SVK (Jointly Administered).United States Bankruptcy Court, E.D. Wisconsin.
June 24, 2005.

ORDER APPROVING SETTLEMENT AGREEMENT AND AUTHORIZING SETTLEMENT OF INTERCOMPANY CLAIM PURSUANT TO FED.R.BANKR.P. 9019
SUSAN KELLEY, Bankruptcy Judge

Upon the motion (the “Intercompany 9019 Motion”)[2] of Keystone Consolidated Industries, Inc., debtor and debtor-in-possession (“Keystone”) in these jointly administered cases seeking an Order Approving Settlement Agreement And Authorizing Settlement Of Intercompany Claim Pursuant To Fed.R.Bankr.P. 9019; and it appearing that this Court has jurisdiction over these matters pursuant to 28 U.S.C. §§ 157 and 1334; and it appearing that these proceedings are

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core proceedings pursuant to 28 U.S.C. § 157(b)(2); and it appearing that venue of these proceedings and this Motion are proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409; and adequate notice of the Motion having been given; and it appearing that no other notice need be given; the only objection that was filed having been withdrawn, and after due deliberation and sufficient cause appearing therefor, it is hereby

ORDERED that the relief requested in the Intercompany 9019 Motion is granted in its entirety; and it is further

ORDERED that the Intercompany Settlement Agreement, as attached hereto as Exhibit A is approved;

ORDERED that the intercompany claims by Sherman Wire against Keystone, on one hand, and by Keystone against Sherman Wire on the other, shall be Allowed in the amounts and on the terms and conditions set forth in the Intercompany Settlement Agreement; and it is further

ORDERED that Keystone and Sherman Wire are authorized and empowered to take all actions and execute such other documents as may be necessary to implement the relief granted herein; and it is further

ORDERED that this Court shall retain jurisdiction to hear and determine all matters arising from the implementation of this Order.

Exhibit A SETTLEMENT AGREEMENT
This Settlement Agreement (this “Agreement“) is entered into by and between Keystone Consolidated Industries, Inc., a Delaware corporation (“Keystone”), and Sherman Wire Company (f/k/a DeSoto, Inc.), a Delaware corporation (“Sherman Wire”), each a debtor and debtor-in-possession in the Chapter 11 Cases (defined below).[1]

The effective date of this Agreement shall be the date on which it is approved by the United States Bankruptcy Court for the Eastern District of Wisconsin (the “Bankruptcy Court“).

RECITALS
WHEREAS, on February 26, 2004, FV Steel and Wire Company, Keystone and four of their direct and indirect affiliates, including Sherman Wire (collectively, the “Debtors”), filed voluntary petitions for relief (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) with the Bankruptcy Court; and

WHEREAS, the Debtors are continuing to operate their businesses and manage their properties as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code; and

WHEREAS, on or about May 3, 2004, Keystone filed its schedules of assets and liabilities, including on such schedules an approximately Eighty Six Million and No/100s U.S. Dollar ($86,000,000.00) unsecured claim of Sherman Wire (the “Claim”); and

WHEREAS, on or about September 20, 2004, Keystone filed Debtor Keystone Consolidated Industries, Inc.’s Objection to Inter-Company Claim of Debtor Sherman Wire Company f/k/a DeSoto, Inc.; and

WHEREAS, on or about October 12, 2004, Sherman Wire filed the Response of Sherman Wire Company f/k/a DeSoto, Inc. to Debtor Keystone Consolidated Industries, Inc.’s Objection to Inter-Company Claim of Debtor Sherman Wire Company f/k/a DeSoto, Inc; and

WHEREAS, Keystone and Sherman Wire, in order to avoid protracted and expensive litigation, desire to formally resolve, compromise and settle their differences;

WHEREAS, by entering into this Agreement, neither party admits nor denies any claim, defense or position asserted with respect to the Claim; and

WHEREAS, this Agreement involves a compromise of the parties’ respective legal positions and does not necessarily reflect the views of either party as to its rights and obligations or other matters resolved by or outside the Agreement.

DEFINITIONS
Solely for purposes of the Agreement, the following terms shall be defined as set forth herein:

1. “Released Claims” shall mean any and all actual or potential, past, present or future, known or unknown, accrued or unaccrued, anticipated or unanticipated, asserted or unasserted actions, causes of action, suits, complaints, claims, judgments, counterclaims, cross-claims, third-party claims, third-party complaints, legal proceedings of any kind or administrative proceedings of any kind that either Sherman Wire has against Keystone or Keystone has against Sherman Wire that would have or should have existed as of the date of this Agreement; provided,however, that the Released Claims shall not include any Class B-5 Old Equity Interests held by Keystone and shall not affect any distributions in satisfaction thereof that Keystone may receive or be entitled to receive pursuant to the Plan; providedfurther that the Released Claims shall not include any amounts arising from postpetition intercompany trade, service and similar payables incurred in the ordinary course of business (the “Post-Petition Intercompany Payables“) owed from the Petition Date through and including the date hereof by: (i) Sherman Wire to Keystone; and (ii) by Keystone to Sherman Wire; and providedstill further, the Released Claims shall not include any intercompany trade, service and similar payables incurred in the ordinary course of business from the date hereof through and including the Effective Date of the Plan (the “Pre-Effective Date Intercompany Payables“) by: (i) Sherman Wire to Keystone; and (ii) by Keystone to Sherman Wire. No claims of any kind are reserved, except for the terms and obligations set forth herein.

2. “Sherman Wire Liquidating Trust” shall mean the trust to be established pursuant to the Plan to: (a) receive and dispose of in a commercially reasonable manner the assets of the Reorganized Debtors that are unnecessary to maintain the business of Sherman Wire on a reorganized basis for the benefit of the holders of allowed claims against, and allowed interests in, Sherman Wire (collectively, the “SW Claimants“); and (b) distribute the proceeds of the sale of such assets to the SW Claimants, from which such SW Claimants shall receive recovery against their allowed claims and interests.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Keystone and Sherman Wire agree, subject to approval of the Bankruptcy Court, as follows:

1. AGREEMENT REGARDING CLAIM. Keystone shall allow a single general unsecured claim against the estate of Keystone in favor of Sherman Wire in an amount equal to Two Million, Two Hundred Fifty Thousand and No/100s U.S. Dollars ($2,250,000.00) (the “Base Claim“). The Base Claim shall be adjusted in the following manner:

a. If the aggregate amount of allowed general unsecured claims against the estate of Keystone, including the Base Claim, is greater than or equal to Sixty Eight Million and No/100s U.S. Dollars ($68,000,000.00), then the Base Claim shall be reduced to such amount so that the aggregate amount of allowed general unsecured claims, including the Base Claim, equals Sixty Eight Million and No/100s U.S. Dollars ($68,000,000.00); provided, however, that in no event shall the Base Claim be reduced to an amount less than One Million and No/100s U.S. Dollars ($1,000,000.00).
b. The resulting claim, after the initial adjustment required by section 1.a. above, shall be referred to as the “Maximum Claim;” provided, however, that in any event, the Maximum Claim shall not exceed Two Million, Two Hundred Fifty Thousand and No/100s U.S. Dollars ($2,250,000.00).
c. The Maximum Claim shall be subject to adjustment on account of the value of distributions to holders of allowed general unsecured claims against Sherman Wire as a result of either of the two scenarios below:
i. If, without any distribution on account of the Maximum Claim, the value of distributions to holders of allowed general unsecured claims against the estate of Sherman Wire, is equal to or greater than eight-five percent (85%) of their respective allowed claims, then the Maximum Claim shall be reduced to Zero and No/100s U.S. Dollars ($0.00); or
ii. If, without any distribution on account of the Maximum Claim, the value of distributions to holders of allowed general unsecured claims against the estate of Sherman Wire is less than eighty five percent (85%) of their respective allowed claims, then the Maximum Claim shall be reduced to the lesser of: (A) the Maximum Claim; or (B) the amount of an allowed general unsecured claim against the estate of Keystone necessary to result in a recovery to holders of allowed general unsecured claims against the estate of Sherman Wire of eighty five percent (85%) of their respective allowed claims.
d. The resulting claim, after the additional adjustment required by section 1.c.i or 1.c.ii above, shall be referred to as the “Allowed Claim.”
e. Distributions on account of the Allowed Claim shall be held pursuant to the terms of the Plan until such time as the amount of the Allowed Claim can be determined with precision. After the aggregate amount of allowed general unsecured claims against the respective estates of Keystone and Sherman Wire are known, the parties shall negotiate in good faith to determine the amount of the Allowed Claim in an expeditious manner. In the event of a dispute regarding the amount of the Allowed Claim or the distribution on account thereof, the parties shall seek Bankruptcy Court resolution thereof.

2. RELEASE. In consideration for the payments set forth in this Agreement, and for the other promises herein, and except with respect to the representations, warranties and promises contained in this Agreement, Sherman Wire hereby fully and forever releases and discharges Keystone from all Released Claims and Keystone hereby fully and forever releases and discharges Sherman Wire from all Released Claims; provided, however,
that this Release and this Agreement shall not release Sherman Wire from any (i) obligations it may have to Keystone on account of Keystone’s Class B-5 Old Equity Interests; and (ii) distributions in satisfaction thereof pursuant to the Plan; andprovided further that this Release shall not affect the accrual and payment of the Post-Petition Intercompany Payables or the Pre-Effective Date Intercompany Payables. The parties hereby covenant not to sue each other with respect to the same;provided, however, that this release shall not be construed as releasing any of the representations, warranties or promises by Keystone or Sherman Wire in this Agreement.

3. BANKRUPTCY COURT APPROVAL. This Agreement is subject to approval of the Bankruptcy Court. The parties agree to use commercially reasonable efforts to obtain approval of the Bankruptcy Court. In the event that the Bankruptcy Court declines to approve this Agreement, neither this Agreement nor any part thereof may be used by any party for any purpose.

4. NO THIRD PARTY BENEFICIARY. This Agreement is intended to confer rights and benefits only on the parties to this Agreement and is not intended to confer any right or benefit upon any other person or entity. No person or entity other than the parties to this Agreement shall have any legally enforceable right under this Agreement. All rights or actions for any breach of this Agreement are hereby reserved only for the parties hereto.

5. FUTURE COOPERATION. Keystone and Sherman Wire each agree to cooperate and to execute such additional documents and instruments and to perform such additional acts as the other party may reasonably request, which may be necessary or appropriate to effectuate, consummate, or perform any of the terms, provisions or conditions of this Agreement.

6. DRAFTING. Keystone and Sherman Wire represent and acknowledge that they both have participated in the preparation and drafting of this Agreement and have each given their approval to all of the language contained in this Agreement. Keystone and Sherman Wire expressly agree and acknowledge that if either party later claims that there is an ambiguity in the language of this Agreement, there shall be no presumption that such ambiguity be construed for or against either party hereto.

7. AGREEMENTS IN WRITING. This Agreement may be amended only by a writing signed by or on behalf of each party hereto, and this provision cannot be orally waived.

8. CORPORATE AUTHORIZATIONS. Subject to approval of the Bankruptcy Court, Keystone and Sherman Wire both represent, acknowledge and warrant that they have taken or will take all necessary corporate and legal action required to duly approve the making and performance of this Agreement and that no further action is necessary after execution to make this Agreement binding and legally enforceable. Keystone and Sherman Wire further represent and warrant that the making and performance of this Agreement will not violate any of their respective articles of incorporation or by-laws or any other contract or agreement.

9. SUCCESSORS. Keystone and Sherman Wire agree that all terms of this Agreement shall be binding upon them, their respective legal representatives, predecessors, successors and assigns.

10. NON-WAIVER. No delay in exercising, and no failure to exercise, any right under this Agreement shall impair such right or be construed to be a waiver of any breach of or default under this Agreement. Any single or partial exercise of any such right shall not preclude any other or further exercise of any other right under this Agreement.

11. SEVERABILITY. Should any portion of this Agreement be invalidated or deemed unenforceable as contrary to law or public policy or otherwise declared null and void by any court or tribunal having jurisdiction, the remainder of this Agreement shall remain in full force and effect.

12. DUPLICATE ORIGINALS. This Agreement shall be executed in two (2) duplicate originals, with Keystone to retain one (1) original and Sherman Wire to retain one (1) original.

13. NOTICE. All written notices required herein or related hereto shall be sent to the following via facsimile and registered mail:

Keystone: Keystone Consolidated Industries, Inc. 5430 LBJ Freeway, Suite 1740 Three Lincoln Centre Dallas, Texas 75240 Phone: (972) 450-4293 Facsimile: (972) 448-1408 Attn: Bert Downing, Jr.
With a copy to: Kirkland Ellis LLP 200 East Randolph Drive Chicago, Illinois 60601 Phone: (312) 861-2000 Facsimile: (312) 861-2200 Attn: David L. Eaton, Esq. Anne Huber, Esq. Roger J. Higgins, Esq.
Sherman Wire: Sherman Wire Company (f/k/a DeSoto, Inc.) 5430 LBJ Freeway, Suite 1740 Three Lincoln Centre Dallas, Texas 75240 Phone: (972) 450-4293 Facsimile: (972) 448-1408 Attn: Bert Downing, Jr.
With a copy to: Vedder, Price, Kaufman Kammholz, P.C. 222 North LaSalle Street Chicago, Illinois 60601 Phone: (312) 609-7646 Facsimile: (312) 609-5005 Attn: Douglas J. Lipke, Esq. Allyson B. Russo, Esq.

14. DURATION. The representations, warranties, agreements and promises made by each party to this Agreement and contained herein shall survive the execution of this Agreement.

15. COSTS AND ATTORNEYS FEES. The parties hereto acknowledge and agree that each of them shall be compensated and reimbursed for their costs, expenses and attorneys fees arising out of or in connection with these Chapter 11 Cases, the negotiation, drafting and execution of this Agreement, and all matters arising out of or connected therewith, in accordance with the procedures for compensation and reimbursement established by the Bankruptcy Court in these Chapter 11 Cases.

16. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed one and the same instrument. This Agreement is not and shall not be effective, however, unless and until each party executes the original or a counterpart.

17. ENTIRE AGREEMENT. The parties represent, warrant and agree that no promise or agreement not expressed herein has been made to them, that this Agreement contains the entire Agreement between the parties, that this Agreement supersedes any and all prior agreements or understandings between the parties and that the terms of this Agreement are contractual and not a mere recital. The parties further represent, warrant and agree that in executing this Agreement, no party is relying on any statement or representation made by the other party, or the other party’s representatives concerning the subject matter, basis or effect of this Agreement other than as set forth herein; and that each party is relying solely on its own judgment and knowledge.

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