Case No. 02 B 12059, (Jointly Administered).United States Bankruptcy Court, N.D. Illinois, Eastern Division.
September 24, 2004
AMENDED ORDER APPROVING COMPROMISE AND AUTHORIZING THE POST-CONFIRMATION COMMITTEE TO ENTER INTO SETTLEMENT AGREEMENT WITH NORWOOD OPERATING COMPANY D/B/A NORWOOD PROMOTIONAL PRODUCTS, A WHOLLY OWNED SUBSIDIARY OF NORWOOD PROMOTIONAL PRODUCTS, INC.
CAROL DOYLE, Bankruptcy Judge
This cause coming to be heard upon the Motion for Order Pursuant to Federal Rule of Bankruptcy Procedure 9019 Approving a Compromise Between the Post-Confirmation Committee and Norwood Operating Company, d/b/a Norwood Promotional Products, a wholly owned subsidiary of Norwood Promotional Products, Inc. (the “Motion”);[1] due and proper notice of the Motion having been given and no further notice being necessary under the circumstances; any objections to the Motion having been withdrawn or overruled; the Court having jurisdiction over the Motion and the parties; good cause having been shown for the relief sought in the Motion; the Court finding that the Motion is a core proceeding within the meaning of 28 U.S.C. § 157; the Court finding that the terms and conditions of the Settlement Agreement are fair and reasonable and in the best interests of the Debtors, their estates, their creditors and other parties-in-interest; and the Court being fully advised in the premises; IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT:
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1. The Motion is granted and approved in its entirety.
2. The Settlement Agreement attached hereto as Exhibit A is approved in its entirety.
3. The Post-Confirmation Committee is authorized to execute the Settlement Agreement.
4. The Post-Confirmation Committee is authorized to take any and all actions necessary or appropriate to perform, consummate, and implement the terms and conditions of the Settlement Agreement.
5. Notwithstanding anything to the contrary in the bankruptcy rules, this Order is a final order and is effective immediately.
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SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release (together, the “Agreement”) is made and entered into this ____ day of __________, 2004, by and between the Official Committee of Unsecured Creditors for HA2003, Inc., et al., formerly known as HA-LO Industries, Inc. (“Committee”), for and on behalf of Ha-Lo Industries, Inc. (“Ha-Lo”) and Lee Wayne Corporation (“Lee Wayne”), (and together with Starbelly.com, Inc., Ha-Lo and Lee Wayne, the “Debtors”), and Norwood Operating Company d/b/a Norwood Promotional Products, a wholly owned subsidiary of Norwood Promotional Products, Inc. (hereinafter, “Transferee”).
RECITALS WHEREAS, on July 30, 2001 (the “Petition Date”), the Debtors commenced their respective reorganization cases (the “Bankruptcy Cases”) by filing voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. §§ 101, etseq. (the “Bankruptcy Code”), in the United States Bankruptcy Court for the District of Delaware;
WHEREAS, the Committee was appointed by the office of the United States Trustee for the District of Delaware on August 20, 2001 and Transferee was designated to serve on the Committee;
WHEREAS, on March 19, 2002, the Bankruptcy Cases were transferred from the District of Delaware to the Northern District of Illinois, Eastern Division (the “Court”) and are being jointly administered under case no. 02 B 12059;
WHEREAS, on May 28, 2003, the Court entered the Order Granting Motion of Official Committee of Unsecured Creditors of Ha-Lo Industries, Inc., et al., for Authority to Commence and Prosecute Certain Causes of Action on Behalf of Debtors’ Estates (the “Preference Order”). Pursuant to the Preference Order, the Committee is authorized, on behalf of and for the benefit of
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the Debtors’ estates, to investigate, commence, prosecute, and/or compromise potential fraudulent and preferential transfers from the Debtors to certain individuals and entities;
WHEREAS, on June 16, 2003, the Court entered the Order Granting Joint Motion of the Official Committee of Unsecured Creditors of HA2003, Inc., Formerly Known as Ha-Lo Industries, Inc., et al., and the Debtors to Establish Certain Procedures for Settlement of Avoidance Actions, for Approval of Proposed Demand Letter, and For Other Relief (the “Preference Procedures Order”). Among other things, the Preference Procedures Order authorizes the Committee to offer a discount in the form of a 20% reduction in the net preference where the transferee repays the preference within a specified period of time (the “Discount”);
WHEREAS, the Committee has alleged that the Debtors’ books and records reflect that within the 90-day period prior to the Petition Date, the Debtors transferred property of the Debtors to Transferee (the “Transfers”), on account of an antecedent debt(s) owing from Debtor to Transferee, which sum constituted more than Transferee would have received in a Chapter 7 liquidation;
WHEREAS, the Committee sent letters to Transferee seeking to recover the Transfers, less a credit for certain defenses and a Discount, where applicable, pursuant to Sections 547 550 of the Bankruptcy Code (the “Demand Letters”);
WHEREAS, the Committee has filed adversary complaints (the “Complaints”) against the Transferee seeking to avoid and recover the Transfers pursuant to Sections 547 and 550 of the Bankruptcy Code. The Complaints are presently pending in the Bankruptcy Cases. The following Complaints were filed against Transferee: Norwood Promotional Products, Inc. d/b/a Advertising Unlimited (03 A 02794); Norwood Promotional Products, Inc. d/b/a Air-Tex/Duratee (03 A 02676); Norwood Promotional Products, Inc. d/b/a BTS (03 A 02669);
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Norwood Promotional Products, Inc. d/b/a Janesville Group (03 A 02666); Norwood Promotional Products, Inc. d/b/a Key Industries (03 A 02662); Norwood Promotional Products, Inc. d/b/a Norwood Collection (03 A 02625); Norwood Promotional Products, Inc. d/b/a Radio Cap (03 A 02622); Norwood Promotional Products, Inc. d/b/a Tee Off (03 A 02620); Norwood Promotional Products, Inc. d/b/a Wesburn (03 A 02615); and Souvenir, Inc. (03 A 03297);
WHEREAS, on January 28, 2004, the Court entered an Order Confirming Second Amended Plan of Reorganization (Liquidating) of HA2003, Inc. F/K/A HA-LO Industries, Inc., LW2003, Inc. F/K/A Lee Wayne Corporation and Starbelly.com, Inc. as Proposed by the Debtors and Debtors-in-Possession and the Official Committee of Unsecured Creditors Dated as of October 30, 2003 (the “Plan”). The Plan provides, among other things, that the Committee has the authority to investigate, commence, prosecute and/or compromise the claim or claims asserted in the Adversary Proceeding;
WHEREAS, the Plan provides for the transfer of all the assets of the Debtors, including the claims contained in the Adversary Proceeding, to the HA2003 Creditor Trust;
WHEREAS, the Transferee has denied liability for the repayment of the total amount of the Transfers and has asserted new value and/or ordinary course of business defenses to the estates’ recovery of the Transfers;
WHEREAS, the Committee and Transferee desire to avoid the uncertainties and expense of litigation and to settle and compromise on the terms set forth below any and all claims that the Committee has or may have against Transferee without admitting any liability therefor;
WHEREAS, the Transferee has agreed to pay the sum of $190,000.00, in full and final settlement of its alleged liability for the avoidance and recovery of the Transfers alleged in the Complaints (the “Settlement Amount”);
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WHEREAS, the Committee and Transferee have selected and/or have had the opportunity to consult with counsel of their respective choice in connection with the matters raised in the Demand Letters, the Complaints and this Agreement;
WHEREAS, each of the parties to this Agreement agrees to bear its own costs and expenses, including attorneys’ fees, arising out of the matters raised in the Demand Letters, the Complaints and this Agreement;
NOW, THEREFORE, in consideration of the premises aforesaid and the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Committee and Transferee hereby agree as follows:
1. Recitals Incorporated. The recitals and prefatory phrases and paragraphs set forth above are hereby incorporated in full, and made a part of, this Agreement.
2. Settlement Payment. Transferee agrees to tender to the undersigned counsel certified or bank checks totaling the Settlement Amount in four equal installments of $47,500.00, each to be made payable to “HA2003 Creditor Trust.” The first installment of the Settlement Amount shall be received by the Committee by 5:00 p.m. on the eleventh day following the date an order approving this Agreement is entered by the Court. Each of the remaining three installments of the Settlement Amount shall be received by the Committee by 5:00 p.m. on the same day of the month for each of the following three months.
3. Default. Transferee shall be deemed to have defaulted under the terms of this Agreement if the payment of each of the installments of the Settlement Amount required hereunder is not received by the Committee by 5:00 p.m. on the scheduled payment date contained in Paragraph 2 of this Agreement (“Default”).
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4. Remedies Upon Default. Should Transferee fail to cure a Default within ten (10) business days of the date that a payment is due hereunder, Transferee agrees: (a) to the entry of a judgment against it (the “Judgment”) and in favor of the Committee in the full amount requested in the Complaints, less any payment(s) already made to the Committee, plus any attorneys’ fees and costs incurred by the Committee in enforcing this Agreement and pursuing the Judgment; provided, however, that Transferee shall have thirty (30) days to satisfy the Judgment for the Settlement Amount (less any payment(s) already made to the Committee) plus: (i) a penalty equal to ten percent (10%) of the Settlement Amount (less any payment(s) already made to the Committee); and (ii) any attorneys’ fees and costs incurred by the Committee in obtaining the Judgment; and (b) any amounts due and owing by Transferee under the terms of this Agreement may be set off against any distributions. Transferee would otherwise be entitled to receive in connection with any and all claims filed against the Debtors’ estates by Transferee.
5. Proof of Claim. Transferee shall not file an additional proof of claim against any of the Debtor’s estates for any amount related to, or arising from, the payment of the Settlement Amount. Notwithstanding the foregoing, nothing in this paragraph 5 shall be deemed to constitute a waiver of any and all claims otherwise filed against the Debtors’ estates by Transferee.
6. Dismissal of Complaints. Upon receipt in good funds of the Settlement Amount, the Committee shall take appropriate steps to dismiss the Complaints with prejudice.
7. Mutual Release. In consideration for the receipt in good funds of the Settlement Amount, the Committee, the Debtors and the HA2003 Creditor Trust, on the one hand, and the Transferee, on the other hand, hereby release and discharge each other and their respective members, principals, agents, accountants, attorneys, employers, representatives, subsidiaries,
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affiliated entities, successors, assigns, officers and directors, as applicable, from any and all claims and causes of action that they may have against each other related to, or arising from, the Transfers, the collection of Transfers, the Complaints, or the payment of the Settlement Amount, except for any cause of action arising from breach of this Agreement.
8. Representations and Warranties. It is acknowledged that each party has read this Agreement and has consulted counsel, or knowingly chose not to consult counsel, before executing same; each party has relied upon his or her own judgment and/or that of his or her counsel in executing this Agreement and has not relied on or been induced by any representation, statement or act by any other party which is not referred to in this instrument; each party enters into the Agreement voluntarily, with full knowledge of its significance; and the Agreement is in all respects complete and final.
9. Court Approval and Jurisdiction. The Committee and Transferee agree and acknowledge that the validity and enforceability of this Agreement is contingent on the Court’s approval. Accordingly, the Committee shall file a motion with the Court to procure the Court’s approval of this Agreement. This Agreement shall be construed and governed by the laws of the State of Illinois and the Court shall have jurisdiction over this Agreement and the parties.
10. Amendment of Agreement. This Agreement shall not be amended except by a writing signed by all of the parties hereto.
11. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
12. Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto as to the subject matter hereof. The undersigned acknowledge that there are no communications or oral understandings contrary, different, or that in any way restrict, this
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Agreement, and that all prior agreements or understandings within the scope of the subject matter of this Agreement are, upon the execution and delivery of this Agreement, superseded, null and void.
13. Execution by Facsimile Signatures and in Counterparts.
The parties agree that facsimile signatures shall have the same force and effect as original signatures. This Agreement may be executed in one or more counterparts, each counterpart to be considered an original portion of this Agreement.
14. No Assignment. Each of the parties to this Agreement represents and warrants that no claim or cause of action that is the subject of, or related to, the Transfers or this Agreement has been assigned, transferred to, or resides in any other person or entity, whether by agreement or operation of law or otherwise, including through an assignment or transfer pursuant to any right or claim of subrogation.
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NORWOOD OPERATING COMPANY THE OFFICIAL COMMITTEE OF D/B/A NORWOOD.PROMOTIONAL UNSECURED CREDITORS FOR PRODUCTS, A WHOLLY OWNED HA2003, INC., FORMERLY KNOWN SUBSIDIARY OF NORWOOD AS HA-LO INDUSTRIES, INC. PROMOTIONAL PRODUCTS INC.